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2011MBA SM MP1 Name Anisha, Roll No 11021E0101, Topic Tatasteel
2011MBA SM MP1 Name Anisha, Roll No 11021E0101, Topic Tatasteel
SUBMITTED TO: BRIG (DR) RAJ KUMAR PROGRAMME DIRECTOR-SMS/SENIOR PROFESSOR SMS, JNTUK.
TABLE OF CONTENTS
S.NO 1 2 3 4 5 6 7 8 9 10 11 PARTICULARS Industry structure Company profile Vision and mission PEST analysis SWOT analysis Porters 5 forces analysis Mergers and acquisitions Current strategy Financial highlights 2011-12 conclusion bibliography PG.NO 3 5 5 6 7 8 9 10 10 11 12
1. INDUSTRY STRUCTURE:
1.1 Global Steel Industry: Overall the global steel industry witnessed steady growth during 2011. The growth in global steel demand was driven by increased demand from key steel end-user industries including Infrastructure, construction and automotive, especially in the emerging markets; in spite of financial turbulence in the Eurozone, weak private demand in the United States and events in Japan and the Middle East. In 2011, the global steel demand is estimated to have increased by 6% to reach a new high of 1,373 million tonnes, 13% above the pre-crisis levels in 2007. Growth was led by the emerging economies, notably China (6% up) and India (4% up), where new demand records were set. In the developed economies, demand levels remained 15-25% below 2007 levels. Europe saw steel demand increase by 5% and North America by 9% in 2011, but steel demand in Japan fell by 3%, as the impact of the earthquake and subsequent tsunami was felt on the manufacturing activity. The growth in 2011 can be segregated in two halves. In the first half of 2011, global steel consumption grew relatively faster, underpinned by infrastructure construction and manufacturing activity. In the second half of 2011, steel consumption was lower than in the first half due to moderate economic growth in China, the United States and Europe. In 2011, global steel output reached 1.5 billion tonnes, an increase of 7% compared to 2010 and a new record for world crude steel production. All major steel producing countries apart from Japan and Spain showed growth in 2011. Growth was particularly strong in Turkey, South Korea and Italy. Looking ahead, global steel market developments are likely to remain generally positive, but with lower growth in 2012 compared to 2011. In the first few months of 2012, apparent steel demand remained muted due to the uncertain economic climate. For 2012 as a whole, global steel demand is forecast to grow by a further 4% to reach 1,422 million tonnes. China, India and other emerging markets will continue to drive demand but recent market developments suggest likely slackening of demand. This is primarily due to the recent changes in the monetary policy in China to reduce bank credit and improve asset quality as well as lower growth forecast in India. While USA and Japan is expected to continue it's recovery, steel demand in Europe is expected to fall by 1%. The following table shows the crude steel production volume of the top ten steel producing nations: Figures in million tonnes Rank Country 1 China 2 Japan 3 United States 4 India 5 Russia 6 South Korea
1.2 Steel Industry in India: India improved its ranking to become the 4th largest producer of crude steel in the world during 2011 after China, Japan and the USA. The countrys production grew by around 6% in 2011 over 2010. The trend of crude steel production in India is shown in the following chart:
Source: World Steel Association There has been a diversification in the product mix of the steel industry in India towards sophisticated value added steel used in the automotive sector, heavy machinery and physical infrastructure. In 2011, the industry was faced with stiff challenges due to rising inflationary pressures and deteriorating global growth conditions. The multiple hikes in interest rates by the central bank also impacted the industrys growth in rate sensitive key user industries. The production of flat products and long products of major Indian companies is estimated to have grown by around 7.5% and 4.5% respectively during Financial Year 2011-12 when compared with the previous financial year. Steel consumption of Flat products and Long products in Financial Year 2011-12 grew by 2.3% and 5.8% respectively. Flat product exports grew by 23% and Long product exports increased to 279k tonnes in Financial Year 2011-12 compared to 155k tonnes in Financial Year 2010-11. There was a reduction in the import of Flat and Long Products by 5% and 8% respectively. The steel prices during Financial Year 2011-12 have increased from the average prices prevailing in the previous financial year driven by increase in the input costs and improvement in demand.
2. COMPANY PROFILE
Tata Steel has always believed that the principle of mutual benefit - between countries, corporations, customers, employees and communities - is the most effective route to profitable and sustainable growth. Established in 1907, Tata Steel is among the top ten global steel companies with an annual crude steel capacity of over 28 million tonnes per annum (mtpa). It is now one of the world's most geographically-diversified steel producers, with operations in 26 countries and a commercial presence in over 50 countries. The Tata Steel Group, with a turnover of US$ 26.13 billion in FY 2011- 2012, has over 81,000 employees across five continents and is a Fortune 500 company. Tata Steels vision is to be the worlds steel industry benchmark through the excellence of its people, its innovative approach and overall conduct. Underpinning this vision is a performance culture committed to aspiration targets, safety and social responsibility, continuous improvement, openness and transparency. Tata Steels larger production facilities include those in India, the UK, the Netherlands, Thailand, Singapore, China and Australia. Operating companies within the Group include Tata Steel Limited (India), Tata Steel Europe Limited (formerly Corus), NatSteel, and Tata Steel Thailand (formerly Millennium Steel). Products: Hot and cold rolled coils sheets Wire and rods Construction bars Pipes Structural forging quality steel
External factors Affecting Tata Steel. 1. National steel policy 2005 targets the steel production of 100 million tonnes by 20192020 2. Upper cap on the export of steel. 3. Imposition of Export tax on steel (10%) 4. Low import tariffs leading to cheap imports. 5. Stringent labor laws.
Business Implications For Tata Steel. 1. Huge Scope for expansion in India with possible government support. 2. Limits the scope of steel export. 3. Reduces the profitability of exports. 4. Threat of foreign competition. 5. Cannot reduce manpower easily in lean times, strong unions. 6. Doing business can be difficult in such environment, there can be restriction in acquisition of resources (land, coal mines etc) . 1. Huge scope for expansion, scope for adding capacity as more steel consumption will happen as the economy grows. 2. Higher growth of the industry means more profits for Tata steel. 3. Easy funding available for any kind of growth, R&D or expansion plans. 4. Predictable exports profit no surprises in terms of reduction in export profits due to sudden change in the exchange rates. 1. Easy availability of cheap labor.
Economic
2. April-December 2009-10 steel industries experienced 4% growth compared to the same period last year. 3. Low cost of capital in the country. 4. The exchange rate of the Indian rupee vs dollar has been more or less stable and in an acceptable range over the past years. Social 1. India is a young country with a large percentage of young working population. 2. Low Literacy rate.(about 65%,2001 census) 3. Urban India growing at a fast rate. 4. Large rural sector. 5. Growing awareness towards
2. Skilled labor not easily available. 3. Scope for expansion. 4. Scope for expanding into rural India. 5. Better utilization of
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environment issues.
6. Higher disposable income Technological 1. Shift in focus towards use of cleaner technologies.
resources, use of renewable resources, reduction in co2 emission, can give competitive advantage. 6. Scope for growing profits. 1. Must invest in R&D to achieve more and more in this area, can be a differentiation strategy. 2. Can attain Higher profits, they are already low cost players can improve on that further, failure to continue innovation in this area can give a lead to competition. 3. This is a source of competitive advantage, if not acted upon it can threaten their market share. 4. Leads to more efficient operations, source of competitive advantage
4.High attrition rate 1. Newer technologies- The Corex process, The Hismelt process, Direct iron ore smelting 3. Acquisition of coal blocks in Asia, Africa etc. 4.competitive position if the company 5.Opportunities in the field Opportunity 6. Opportunities for demand of higher prices 1. Rising coking coal prices 2. India is plagued with violent agitation against land acquisition 3. Government & regulatory norms Threats 4. International competition
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10. CONCLUSION The opportunities that came up from the SWOT analysis are: Untapped foreign markets. Low per capita steel consumption within the country. Consolidation of coal mining and steel industry. Unexplored rural markets within India. Growing Domestic demand of steel. Low cost of export market penetration.
If we look at the above points and their current strategy in parallel, it looks that Tata Steel is looking to exploit all the available opportunities while maintaining focus on their key strengths. Their strategy has focus on capacity expansion and adding more value to their products . It is notable that their strategic intent has always been in line with the vision and mission statement of the company .They have always looked to expand ,improve their processes through continuous R & D ,Added new products ,Added in Markets and have been very involved in various CSR programs. One thing that Tata Steel Group as a whole needs to take care of is the high debt on their balance sheet post the Corus acquisition ,Although it is understandable that just after the acquisition there was a global recession which resulted in a dip in the demand for Tata-steel and hence lower profits.
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11.REFERENCES
http://tatasteel.com/ http://steel.nic.in/ http://www.provenmodels.com/26/value-chain-analysis/michael-e.-porter/ http://www.thetimes100.co.uk/theory/theory--slept-analysis--235.php http://en.wikipedia.org/wiki/PEST_analysis http://www.renewal.eu.com/resources/Renewal_Pestle_Analysis.pdf http://www.learnmarketing.net/pestanalysis.htm http://www.researchandmarkets.com/reportinfo.asp?report_id=245787&t=t&cat_id= http://www.csc.com.tw/csc_e/pd/prs.htm http://www.tradechakra.com/indian-economy/industries/steel-industry.html http://www.indiaenvironmentportal.org.in/files/Domestic%20climate%20policy%20f or%20the%20Indian%20steel%20sector.pdf http://www.iloveindia.com/population-of-india/literacy-rate.html http://www.indianetzone.com/25/distribution_population_urban_rural_india.htm http://www.capitaline.com
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