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Strategy Management Project Report On Tata Steel
Strategy Management Project Report On Tata Steel
Strategy Management Project Report On Tata Steel
STRATEGY MANAGEMENT
PROJECT REPORT
On
TATA STEEL
Submitted on:
December 06, 2010
Submitted by:
WMP 5003 (Alok Sawalia)
WMP 5009 (Ankur Khullar)
WMP 5023 (Gaurav Katyal)
WMP 5024 (Gurudutt Virmani)
WMP 5026 (Kanika Bijlani)
WMP 5056 (Sudhakar Y)
2 TATA Steel: Strategy Analysis by Group 3
Contents
1. Introduction.....................................................................................4
1.1 Industry Definition......................................................................................... 4
1.2 Indian Steel Industry...................................................................................... 4
2. Market Dynamics..............................................................................5
2.1 Market Overview............................................................................................ 5
2.2 Market Trends................................................................................................ 5
2.3 Key Drivers.................................................................................................... 6
2.4 Major Issues and Implications........................................................................6
3. Vision and Mission statement of Tata Steel.........................................6
3.1 Vision.......................................................................................................... 6
3.2 Mission........................................................................................................ 6
4. Financial Ratio Analysis of Tata steel (Is the Firm successful?)............7
4.1 Asset Turnover Ratio................................................................................... 7
4.2 Interest Coverage Ratio..............................................................................8
4.3 Profit Before Interest Depreciation And Tax Margin.....................................8
4.4 Adjusted Profit After Tax Margin..................................................................9
4.5 Return On Capital Employed.......................................................................9
4.6 Return On Net Worth................................................................................. 10
5. PEST Analysis.................................................................................11
5.1 External Environment Analysis For Tata Steel Using Pest Framework.......12
6. SWOT Analysis................................................................................14
6.1. Strengths.................................................................................................. 14
6.2 Weaknesses.............................................................................................. 15
6.3 Opportunities............................................................................................ 15
6.4 Threats..................................................................................................... 16
7. Porter Five Forces Model.................................................................17
8. Identifying Core Competencies and Competitive Advantage using
Value Chain Analysis.............................................................................23
8.1 Primary activities (with respect to Tata Steel Limited)..............................24
8.2 Support activities: (With respect To Tata Steel Limited)............................27
8.3 Core Competencies of Tata Steel Limited on the Basis of Value Chain
Analysis.............................................................................................................. 29
3 TATA Steel: Strategy Analysis by Group 3
8.4 Competitive Advantages of Tata Steel Limited on the Basis of Value Chain
Analysis.............................................................................................................. 30
8.4.1 VRIO Framework.................................................................................... 30
9. Identifying Critical Success Factors..................................................31
10. Current Strategy of TATA Steel.........................................................33
11. Conclusion......................................................................................33
12. References.....................................................................................34
1. Introduction
4 TATA Steel: Strategy Analysis by Group 3
The Indian steel industry comprises producers of finished steel, semi-finished steel,
stainless steel and pig iron. The private sector controls almost two-thirds of the steel
market, while the public sector producers have the remaining one-third market share.
Led by strong demand for autos and engineering services, the domestic steel
demand in India remains robust, as per Moody's sectoral analysis on Asia's steel
sector. According to the analysis, the outlook for the domestic operating
environment is positive, driven by robust growth in infrastructure, autos and
construction and constrains on additional supply by 2011.
Recently, Mr Virbhadra Singh, Minister for Steel, said that India will become the
world's second-largest steel producer by 2012, with a capacity of 124 million
tonnes (MT) as part of the push being given to assist overall infrastructure
development.
1.2.2 Production
India's steel production during 2009-10 was 64.88 million tonne (MT), up 11 per
cent from a year ago, according to Mr A Sai Pratap, Minister of State for Steel.
During the second quarter ended September 2010, steel majors Tata Steel and Steel
Authority of India Ltd (SAIL) reported a high growth in steel sales. SAIL
registered sales of 3.17 MT in the period under review, while Tata Steel's total
sales for the quarter stood at 1.66 MT which is around 14 per cent higher than the
corresponding quarter last year.
Meanwhile, JSW Steel's production during the quarter grew by 8 per cent to 3.14
MT on the back of a steady rise in demand.
1.2.3 Consumption
The domestic steel consumption grew by 9.8 per cent to 29.82 MT during April-
September 2010 over the year-ago period, on the back of steady demand from
sectors like automobile and consumer durables. As per the provisional data from
the Ministry of Steel, consumption was at 27.15 MT in the same period a year ago.
In September 2010, steel consumption rose 4.1 per cent to 4.72 MT, against 4.53
MT in the year-ago period.
5 TATA Steel: Strategy Analysis by Group 3
1.2.4 Investments
A host of steel companies have lined up major investment proposals. Furthermore,
with an expanding consumer market, the Indian steel industry is likely to receive
huge domestic and foreign investments.
The domestic steel sector has attracted a staggering investment of about US$ 238
billion, according to Mr A Sai Prathap, Minister of State for Steel. This consists of
nearly 222 MoUs signed between the investors and various state governments
mostly in the states of Orissa, Jharkhand, Chhattisgarh and West Bengal.
Tata Steel plans to invest US$ 226.17 million to commission its proposed
ferroalloys plant and bar mill at its industrial park at Gopalpur and a greenfield
steel plant at Kalinga Nagar.
Essar Steel plans to expand its exclusive steel showrooms, Hypermart and retail
outlet, Expressmart in Madhya Pradesh.
JSW Steel plans to invest US$ 17 billion over the next 10 years to ramp up
capacity from 7.8 million tonne per annum (MTPA) to 32 mtpa through greenfield
and brownfield projects.
Jindal Steel has completed the acquisition of Oman-based Shadeed Iron and Steel
Co LLC for US$ 464 million.
Japan's Nippon Steel will begin a manufacturing operation in India making steel
pipes for use in automobiles and plans to invest US$ 37 million on production and
sales operations.
2. Market Dynamics
2.1 Market Overview
India occupied the eighth position in terms of worldwide crude steel output. Indias
per capita steel consumption is low at 30 kg compared to global standards for
developed countries at 400 to 500 kg.
3.2 Mission
Consistent with the vision and values of the founder Jamsetji Tata, Tata Steel strives
to strengthen Indias industrial base through the effective utilization of staff and
materials. The means envisaged to achieve this are high technology and
productivity, consistent with modern management practices.
Tata Steel recognizes that while honesty and integrity are the essential ingredients of
a strong and stable enterprise, profitability provides the main spark for economic
activity.
Overall, the Company seeks to scale the heights of excellence in all that it does in an
atmosphere free from fear, and thereby reaffirms its faith in democratic values.
7 TATA Steel: Strategy Analysis by Group 3
1.6
1.4
1.2
0.8
Steel Industry
0.6 Tata Steel
0.4
0.2
0
8 TATA Steel: Strategy Analysis by Group 3
35
30
25
20
Steel Industry
15
Tata Steel
10
45
40
35
30
25
Steel Industry
20
Tata Steel
15
10
0
9 TATA Steel: Strategy Analysis by Group 3
25
20
15
10
Steel Industry
Tata Steel
5
-5
-10
70
60
50
40
Steel Industry
30
Tata Steel
20
10
0
10 TATA Steel: Strategy Analysis by Group 3
70
60
50
40
Steel Industry
30
Tata Steel
20
10
0
11 TATA Steel: Strategy Analysis by Group 3
5. PEST Analysis
Before creating business strategy or when evaluating existing ones it is important to 'scan'
the external environment (general environment). This can be done using PEST analysis,
i.e. an investigation of the Political, Economic, Social, Technological and Legal
influences on a business.
Political factors include areas such as tax policy, labor law, environmental law, trade
restrictions, tariffs, and political stability. All these factors significantly impact the
way in which the business will operate and formulate its strategy.
Economic factors include economic growth, interest rates, exchange rates and the
inflation rate. These factors have major impacts on how businesses operate and make
decisions. For example, interest rates affect a firm's cost of capital and therefore to
what extent a business grows and expands. Exchange rates affect the costs of
exporting goods and the supply and price of imported goods in an economy
Social factors include the cultural aspects and include health consciousness,
population growth rate, age distribution, career attitudes and emphasis on safety.
Trends in social factors affect the demand for a company's products and how that
company operates. For example, an aging population may imply a smaller and less-
willing workforce (thus increasing the cost of labor).
External External factors Affecting Tata Steel. Business Implications For Tata
Factors Steel.
Political 1. National steel policy 2005 1. Huge Scope for expansion
targets the steel production of in India with possible
100 million tonnes by 2019- government support.
2020
2. Upper cap on the export of steel. 2. Limits the scope of steel
3. Imposition of Export tax on export.
steel (10%)
4. Low import tariffs leading to 3. Reduces the profitability of
cheap imports. exports.
5. Stringent labor laws. 4. Threat of foreign
competition.
6. High political intervention, red
tapes, bureaucracy, corruption. 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) .
Economic 1. High GDP growth rate (8-9%). 1. Huge scope for expansion,
scope for adding capacity as
more steel consumption will
2. April-December 2009-10 steel happen as the economy
industries experienced 4% grows.
growth compared to the same 2. Higher growth of the
period last year. industry means more profits
3. Low cost of capital in the for Tata steel.
country.
3. Easy funding available for
4. The exchange rate of the Indian any kind of growth, R&D or
rupee vs dollar has been more or expansion plans.
less stable and in an acceptable 4. Predictable exports profit no
range over the past years. surprises in terms of
reduction in export profits
due to sudden change in the
13 TATA Steel: Strategy Analysis by Group 3
exchange rates.
6. SWOT Analysis
We have used this tool to do an internal analysis of the firms (strengths and weaknesses);
also we have analyzed the external industry environment by looking at the opportunities and
threats.
6.1. Strengths
Definition: characteristics of the business or team that give it an advantage over others in the
industry.
Tata Steels Indian operations are self-sufficient in the case of its major raw material iron
ore through its captive mines
Tata has a strong retail and distribution network in India and SE Asia. Tata is a major
supplier to the Indian auto industry and the demand for value added steel products is
growing in this market
15 TATA Steel: Strategy Analysis by Group 3
Tata Steel addresses the risk of cyclicality of the Steel industry by maintaining rich
product mix and higher value added products whose volatility is lower.
Corus acquisition brings Tata Steel 19 million tonne of capacity at once and at a cost,
which is roughly little more than half the cost of the Greenfield site.
It gives the steel major access to very matured and developed markets in Europe where it
can go downstream much more than in a developing country like India and even to some
extent China.
Highly diversified (2nd most geographically diversified steel producer).
Large Size (The worlds 10th largest steel company).
One of the worlds lowest cost producers of steel which means it is highly competitive
when it comes to pricing.
Employee strength over about 34000.
Huge product portfolio with products catering to following industries: construction,
Automotive, Aerospace, Materials handling, Rail, Engineering, Ship Building,
Packaging, Security and Defense.
Strong R & D department which help Tata steel stay ahead of competition. Research &
Development (R&D) activity within the Tata Steel Group takes place in 5 major centres
namely, the Ijmuiden Technology Centre (the Netherlands), the Swinden Technology
Centre (United Kingdom), the Teesside Technology Centre (United Kingdom), the
Automotive Engineering Group (United Kingdom) and the Jamshedpur R&D Centre
(India).
Over 100 years of experience in the steel industry.
Large Asset Base.
Value chain efficiencies as compared to other competitors.
Number of green field projects already lined up .
1. 6 million tonne plant in Orissa (India)
2. 12 million tonne in Jharkhand (India)
3. 5 million tonne in Chhattisgarh (India)
4. 3-million tonne plant in Iran
5. 2.4-million tonne plant in Bangladesh
6. 5 million tonne capacity expansion at Jamshedpur (India)
6.2 Weaknesses
Corus was thrice as big as Tata hence there is short term operational issues till the
synergies of the takeover kick in.
6.3 Opportunities
Consistent growth rate could take tata-corus to 4th place within the next 3-4 years.
Exposure to 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.
6.4 Threats
Definition: External elements in the environment that could cause trouble for the business.
Dumping by competitors.
Potential risk in the area of plant expansion in India, especially with Greenfield projects,
which have a longer gestation period because of possible delays that may arise on issues
of land, rehabilitation, forestry and environment.
The steel industry is subject to cyclical swings arising from factors such as excess
capacity, regional demand & supply imbalances and volatile swings in market demand.
The inherent risks of periodic overheating that continued rapid growth can unleash.
Threats of new entrants: the willingness and ability of firms to enter a particular
industry depends on the barriers to entry. Such barriers include; capital requirements,
economies of scale, government policy & product differentiation.
Intensity of rivalry among existing competitors
The bargaining power of suppliers
The threat of substitute products
The bargaining power of buyers
Tata Steel has already made sufficient efforts to safeguard itself in this regard. It has a
lineup of Greenfield projects which it plans to establish not only in domestic markets
18 TATA Steel: Strategy Analysis by Group 3
(Jharkhand, Orissa &Chhattisgarh but also internationally (Bangladesh, Iran & Vietnam).
Besides, it has already completed its expansion capacity of its existing plant from 5 mtpa
to 6.8 mtpa at Jamshedpur with an investment of Rs 5,000 crore, while it is in the process
of expanding the capacity from 6.8 mtpa to 10 mtpa with an estimated investment of Rs
15,000 crore. The company has invested Rs 8,000 crore out it and it expects to achieve10
mtpa capacity by 2011-12. It would prove to be very difficult for any new entrant to come
up with such huge investment outlays.
Economies of scale: As far as the sector forces go, scale of operation does matter.
Benefits of economies of scale are derived in the form of lower costs, R& D expenses
and better bargaining power while sourcing raw materials.
Tata Steel being an integrated steel company has its own mines for key raw materials
such as iron ore and coal and this protects them for the potential threat for new entrants to
a significant extent. Tata Steel owns raw material assets such as coal and limestone mines
through joint ventures or completely, with the assets spread across countries such as
Australia, Oman and Mozambique.
Government Policy: The government has a favorable policy for steel manufacturers.
However, there are certain discrepancies involved in allocation of iron ore mines and land
acquisitions. Furthermore, the regulatory clearances and other issues are some of the
major problems for the new entrants.
Tata Steel being a century old company under the flagship Tata Sons which is known for
its Corporate Social Responsibility already enjoys a respectable position in front of the
Indian Government. The Jharkhand government on May 24th 2009 has granted a
prospecting license (PL) to Tata Steel for the Ankua iron ore mines. A senior company
official said that Tata Steel has been allocated 1,800 hectares for prospecting in the Ankua
area. Another 10,000 acres of land will be allocated to them for their project in Ranchi.
Product differentiation: Steel has very low barriers in terms of product differentiation
as it doesnt fall into the luxury or specialty goods and thus does not have any substantial
price difference. However, Tata Steel still enjoys a premium for their products because of
its quality and its brand value created more than 100years back. Tata Steel has introduced
brands like Tata Steelium (the world's first branded Cold Rolled Steel), Tata Shaktee
(Galvanized Corrugated Sheets), Tata Tiscon (re-bars), Tata Bearings, Tata Agrico (hand
tools and implements), Tata Wiron (galvanized wire products), Tata Pipes (pipes for
construction) and Tata Structura (contemporary construction material).Apart from these
product brands, the company also has in its folds a service brand called steel junction.
19 TATA Steel: Strategy Analysis by Group 3
Currently two Global Steel majors namely Arcelor- Mittal, which is the worlds largest I
and POSCO, are posed to be the biggest threat as they plan to enter the Indian Steel
Industry very soon.
Competition: High
The steel industry is truly global in terms of competition with large producing countries like
China significantly influencing global prices through aggressive exports. Steel, being a
commodity it is, branding is not common and there is little differentiation between competing
products.
The 4 major domestic rivals are SAIL, JSW, ISPAT & ESSAR STEEL. Rest all are smallish mills
which together accounts for 30 % of the total market share. The market shares of the 5 major
players in the Indian Steel Industry are:
Competition Analysis
Concentration Ratio:
The four firm concentration ratio of the Iron and Steel industry is 71%
This implies that there is oligopoly in the industry as it is dominated by few major
players. Major percentage of the market output is generated by the 4 largest firms in
the industry
All the major domestic competitors like SAIL, ESSAR, JSW, JSPL have announced
massive expansion plans recently:
o SAIL has announced that it will achieve production capacity of 40 Million Tons
by 2020.
o JSW plans to expand its production to 32 Million Tons by 2020
20 TATA Steel: Strategy Analysis by Group 3
o Other players such as JSPL, ESSAR have similar production expansion plans
which will contribute in overall achievement of 200 Million Tons steel production
by the year 2020.
Herfindahl Index:
The Herfindahl index, also known as the Herfindahl-Hirschman index or HHI, is a measure
of the size of the firms in relationship to the industry and an indicator of the amount of
competition amongst them. It is an economic concept but widely applied in competition law
and antitrust. It is defined as the sum of squares of the market shares of each individual firm.
As such, it can range from 0 to 1moving from a very large amount of very small firms to a
single monopolistic producer. Decreases in the Herfindahl index indicate a loss of pricing
power and an increase in competition, whereas increases imply the opposite.
Value of Herfindahl index for Indian Steel industry is 0.2470
It implies that the competition in the steel industry is medium to high and high
concentration.
In order to safeguard itself from the high bargaining power of the buyers, Tata Steel has
forayed much earlier into the strategy of Backward Integration. Ownership of raw
materials and a continuous improvement in production have been the key to Tata Steels
profitability. In fact weve believed in owning raw materials for the past 100 years, said
managing director B Muthuraman while elaborating on the century-old companys
performance.
Tata Steel and state-owned SAIL have largely been able to withstand raw material price
fluctuations due to captive iron ore mines. Tata Steel is also one of the least cost markers
of steel in the world. Other private steel companies, hit by steep iron ore and coal prices,
have passed on the hikes to the customers, prompting the government to clamp down on
price increases to control inflation.
The company is dependent on imports for a major portion of its raw material iron ore
and coking coal requirements. Tata Steel is self-sufficient to the extent of 25 per cent
for iron ore needs. With supplies coming in from its mines at New Millennium
Corporation in Canada and potentially from the Ivory Coastover a longer term, its iron
ore security would gradually increase to around 62 per cent by 2015. Overall, raw
material security would reach 50 per cent by 2015 and go up to about 60 per cent by
2018.
It is also evaluating several other mineral projects in Brazil and Australia
Progressing towards the goal of achieving logistics control,Tata NYK Shipping Pte Ltd,
the Singapore-based joint venture (50:50) between Tata Steel and Nippon Yusen
Kabushiki Kaisha (NYK Line), a Japanese shipping major has entered into a long-term
charter for eight supramax/panamax vessels and orders have been placed for building two
new supramax vessels. The joint venture was floated to handle ocean transportation of
bulk cargoes such as coal, iron ore, limestone as well as finished steel, both imports and
exports, not only for Tata Steel but also for others including other Tata Group companies.
To achieve coal security by way of imports, the company has formed a joint venture with
an Australian company for producing coal in Mozambique, acquired strategic interest of
five per cent with 20 per cent off take-rights in the coal mining project in Australia in
partnership with several other foreign companies and formed a 50:50 joint venture with
Steel Authority of India Ltd (SAIL).
For limestone, Tata Steel has entered into a joint venture with the Al Bahja Group of
Oman for a 70 per cent stake. The joint venture will undertake mining of limestone in the
Uyun region in Salalah province of Oman.
By undertaking such long term strategies to increase its raw material security, Tata Steel
is making it difficult for the suppliers of raw material to bargain exorbitant prices.
22 TATA Steel: Strategy Analysis by Group 3
Value Chain Analysis helps identify a firm's core competencies and distinguish those
activities that drive competitive advantage. Keeping this in mind we will try to study the
Core Competencies and Competitive Advantage of Tata Steel Limited under the
framework of value chain.
The dispatch from Ores Mines and Quarries (OMQ) Division to the Steel Works was
11.08 million tonnes and registered a substantial increase of 18% as compared to the
dispatch of 9.42 million tonnes in FY 09.
In Year 2009-2010 Focused campaign launched to improve the safety in the area of
Material handling.
Measures to reduce the inventory levels drastically in order to free up working capital
which could be used in other investment opportunities.
25 TATA Steel: Strategy Analysis by Group 3
The inventory management at Tata Steel is efficient and proper verification processes
are in place as suggested by the following excerpt from the annual report 2009-2010.
The following are the auditors comments.
In line with the Groups vision of achieving 0.4 Lost Time Injury Frequency Rate
(LTIFR) by 2012, there was a significant improvement in Tata Steel Indias safety
performance in FY 10 with a 30% reduction in LTIFR as compared to the previous
years. Against a plan of 0.6 LTIFR in FY 10, the actual LTIFR dropped to 0.56 in
this period due to implementation of many process related safety initiatives.
The Company achieved best ever production of hot metal (7.23 million tonnes), crude
steel (6.56 million tonnes) and saleable steel (6.44 million tonnes) registering an
impressive increase of 16% for hot metal and crude steel production and an increase
of 20% for saleable steel production. The newly commissioned H Blast Furnace
achieved a remarkable milestone by producing 3.07 million tonnes in the first full
year of its operation registering an impressive increase of 23% as compared to its
rated capacity of 2.5 million tonnes.
Large number of Downstream businesses which keep their production in sync with
the steel production and drive the profits of the company very well.Eg Downstream
Businesses, such as Tubes and Wires performed very well in the second half of the
year 2009-2010
Tata Steel Processing and Distribution Limited (erstwhile Tata Ryerson Limited)
became a 100% subsidiary of Tata Steel Ltd. w.e.f. July 2009. The company with a
steel processing capacity of around 2 million tonnes with 5 steel processing centres
across India, is the largest steel service centre in the country. During the financial year
2009-10, the company recorded an all time high tolling and distribution volume of
around 1.4 million tonnes 27% higher than that of last year and recording the highest
profit t before tax in its history of operations.
Tata has a strong retail and distribution network in India and SE Asia. Tata is a major
supplier to the Indian auto industry and the demand for value added steel products is
growing in this market
Created a single global strategic marketing team with a goal to become the best
supplier to best customer and deliver profitable growth. Around 100 people across
TSEs sales & marketing team worked on the first phase which was completed in
February 2010.Subsequent phases are now in progress, which include developing 3 to
5 year plans for each sector, identifying initiatives for executing these plans,
identifying quick wins and developing a customer satisfaction tool. Product
catalogues have been developed and high-level metrics have been defined.
Health and Safety continues to be one of the prime drivers of the Corporate Vision of
your Company. The Tata Steel Group lays significant emphasis on sustainable Health
& Safety performance as it has a direct impact on performance. The Company is
continuing its Safety Excellence Journey with a philosophy that Safety is a Line
Management function and all injuries can be prevented. Health and Safety is
28 TATA Steel: Strategy Analysis by Group 3
reviewed at all Board meetings of Tata Steel with a Health, Safety & Environment
Committee established to carry out more detailed reviews.
Highly Qualified management headed By Ratan N Tata gives Tata steel a leading
edge over its competitors.
Corporate Sustainability at Tata Steel has always meant focusing on the environment,
people and society. The Company carries out its business activities in ways that seek
to enhance the Earths resources rather than deplete them, thereby helping create a
sustainable world for future generations to inherit. This is achieved by focusing on a
number of initiatives and principles that are consistently applied across the Group.
The following steps are taken in the human resources front to ensure that the
Company in India can continuously cater to the changing business adversities and
opportunities.
1. Leadership development and succession planning.
2. Career planning and job rotation.
3. Customer orientation -Employee Contact Program has been initiated and
reviewed on a monthly basis to improve on the HR connect with the Line
functioning.
4. Learning and development process through 70:20:10 where 70 per cent of
learning & development takes place from real life and on-the job experiences,
tasks, problem solving and self study; 20 per cent takes place through
coaching, mentoring, technical discussions, shadowing, working under
guidance by superiors or experts while 10 per cent of the learning comes from
formal class room training.
5. E-learning 137 e-learning modules have been developed indigenously to
impart computer literacy classes to 11,000 employees during the fi nancial
year 2009-10. More than 3,300 employees have been provided basic Hindi
literacy and 28 e-learning centres have been opened in various locations of the
Company in India and around 300 PCs have been provided for these e-
Learning centres.
The group empowers people to make decisions about their own jobs, the culture
values are that the people are not penalized for failures they should be educated and
led them to continuous improvement.
8.2.3 Technology development: (Research & development, IT, product and Process
development)
29 TATA Steel: Strategy Analysis by Group 3
The Jamshedpur R&D centre in India was established in 1937 and is one of the oldest
industrial R&D centres in the country. Since its inception, it has played a pivotal role
in the development of steel products and process routes that have given the Company
a competitive advantage in local and global markets.
Four research groups are actively engaged in developing new products and processes
for all businesses.
8.3 Core Competencies of Tata Steel Limited on the Basis of Value Chain
Analysis
Low cost manufacturing of steel.
30 TATA Steel: Strategy Analysis by Group 3
Ability to acquire resources/raw material and feed the other industries such as steel
and automobile.
This is a Customer and Market Oriented corporate, listens to the customers And place
excellent emphasis to deliver quality, reliability and high level of service.
High productivity through the people, by giving them liberty and encouraging
entrepreneurship.
Operating Efficiencies
Given the industry characteristics of underlying pricing volatility, limited producer
pricing power, sensitivity to underlying economic conditions, and a relatively high fixed-
cost base, particularly at the integrated producers; elements that are within a company's
ability to manage, such as cost structure and operating efficiency, are important
considerations in the rating analysis.
Diverse product mix & proportion of value added products
Access to raw materials at low costs
Proximity to inputs and market
Financial structure
Ability to export
Differentiation through technical specifications & service quality
service quality
The current financial structure of Tata Steel is not favorable as it had taken up huge loans to
finance its acquisition of the Corus group. TATA Steel was able to buy Corus at eight billion US
dollars which made the deal to be fixed at 455 pence per share which needed to be paid in cash
by the TATA Steel to the shareholders of Corus. This deal was a highly expensive one and Tata
Steel is trying to reduce the debt each year.
The recovery of TATA steel from the debt would have been faster had there been no global
recession. The immediate impact of this recession on the steel industry was the sharp decline in
volume due to the lack of credit among customers. As a consequence steel prices across the
world declined significantly.
The current strategy directly quoted from the annual report of 2009-2010:
Right now the Companys key priority is to execute the 3 million tonne expansion project at
Jamshedpur. When completed in the third quarter of the financial year 2011-12, this project will
enhance the capacity of the Indian operations to 10 mtpa. In addition, the Company is focusing
on several downstream facilities that are being set up in coated and packaging products, which
are consistent with the Companys long-term strategy to increase the ratio of value-added
products in its output. The Company continues to pursue its long-term strategy to build
Greenfield capacity in India, including in Orissa.
11. Conclusion
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.
12. References
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=
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