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Tata Steelium Case Study
Tata Steelium Case Study
Case Analysis I
Pratik Modi Ramendra Singh
Assistant Professor of Marketing Assistant Professor of Marketing
Institute of Rural Management Anand (IRMA) Indian Institute of Management Calcutta
e-mail: pratik@irma.ac.in e-mail: ramendra@iimcal.ac.in
C an Tata Steelium do an Intel with cars? Imagine buying a car one day that has a
‘Tata Steelium inside’ label on it. More importantly, should you as a customer
care about an intermediate (steel) brand? Tata Steelium brand shows a way forward
for commodity manufacturers to create value for its customers, and also for its cus-
tomers’ customers.
The case on Tata Steelium is an excellent example of how companies can success-
fully create brands in the business markets, and leverage its brand positioning to
create, deliver, and communicate value to its end customers, channel members, and
shareholders. The case also clearly exemplifies that B2B firms can come out of the
spiraling commodization of products in the Indian market. Sooner than later we
may witness many other B2B and industrial firms from India creating more value
for its customers by successfully branding commodities such as cement, chemicals,
power, and even services.
The Tata Steelium case also shows that brand building goes hand in hand with build-
ing long-term relationship with customers, channel members, and shareholders (al-
though shareholders are not explicitly emphasized in the case). B2B brands are a
symbol of holistic value for its customers. However, building brands in business
markets is more complex and time-consuming since value is often misunderstood
as price, especially for commodities such as steel. Value, as captured by Tata Steelium,
The cuurent issue of
however, goes much beyond price, and instead comes as a package to the consum-
Vikalpa has published a
Case titled, TATA Steelium
ers consisting of components such as product availability, continuous and high lev-
– A Success Story in B2B els of service to customers, product and service-level customization, and healthy
Branding. This Diagnoses long-term relationship with customers that are embedded in the DNA of the brand.
features analyses of the As this case clearly illustrates, value in business markets needs to be captured and
Case by Pratik Modi, communicated very clearly, otherwise it does not get across to the customers and
Ramendra Singh, Indu Rao, consumers. Customer service and long-term customer relationship are two strong
Jaydeep Mukherjee, Sujoy pillars from which value is derived by customers. This value when co-created with
Bhattacharya and Seema.
customers is further enhanced.
128 DIAGNOSES
tail market as an organization moves away from insti- Distributors’/Dealers’ Loyalty
tutional to retail market. In a market where there is little The second concern facing the organization, as men-
performance/technical difference between the products tioned in the Case, is that of preventing the distribu-
of two organizations, branding becomes a major differe- tors/dealers from dropping off and/or stopping them
ntiator and a source of sustainable competitive advan- from selling competitors’ products. TATA Steelium
tage for the organization. Retail buyers lack financial brand distributors handle the brand exclusively because
strength and expert knowledge of institutional buyers, of its service proposition requirements. With the immi-
which reduce their risk-bearing capacity considerably. nent competition, there is likelihood that some of the
A strong brand, such as TATA, inspires trust, respect, distributors/dealers may drop off and/or start stock-
and quality perceptions with the Indian consumers. The ing the competitors’ products for turnover considera-
brand TATA Steelium creates value for the retail cus- tions. This is a relatively exaggerated concern in the Case.
tomers as it provides benefits of brand recognition and Distributorship/Dealership of TATA Steelium is valu-
consistent quality assurance. These benefits reduce able to the channel partners for economic as well as non-
search cost and perceived risk for the retail customers economic reasons. The company has been selective in
for which they are willing to pay premium over other choosing its distributors. It has consistently invested in
alternatives. The strong service component added to the developing its distributor/dealer network over the years
TATA Steelium brand further fortifies it by creating a as well as the capabilities of the distributors/dealers
very attractive value proposition for the retail custom- through various support programmes such as profes-
ers. Thus, the two factors – brand and service – create a sional training, implementation of quality management
leadership position for TATA Steelium in the market. and automation systems, which has created some sort
of lock-in between the company and the channel part-
Should the Brand Premium be Reduced? ners. The attractiveness for distributors/dealers in do-
The imminent competition from other big players and ing business with TATA goes beyond monetary margins
likely poaching of the price-sensitive distributors/deal- earned by them. The support, service culture, and treat-
ers may be an argument in favour of reducing the brand ment that the channel partners get from TATA Steel are
premium of TATA Steelium. However, the right ques- a big motivating factor for doing business with them.
tion to ask is, ‘whether the brand premium charged is TATA’s reputation as an ethical and socially responsi-
commensurate with the additional value delivered to ble organization plays important role here, as the dis-
the customers?’ If the brand premium is disproportion- tributors/dealers would want to be seen associated with
ately high to the value delivered to the customers, then such a reputed organization. In terms of monetary ben-
there is some justification for reducing the premium. The efits, the higher premium charged for TATA Steelium
case depicts that the service component and the brand also benefits the distributor/dealer network that earns
is valued by the class of customers who have been re- higher margins in turn. TATA Steelium also gets them
warding the company with their loyalty and premium. repeat business from loyal customers which effectively
Moreover, TATA Steelium volumes have shown decent reduce their cost of doing business. And a small per-
growth over the past years which could be a testimony centage of the channel turnover could be healthy for the
of its relevance and value for the market (as it emerges company.
from Tables 2 and 5 in the Case). May be, the company
should try to gather more evidences related to the per- The issue of starting a new venture of manufacturing
and marketing its own range of steel furniture using
ceived value of TATA Steelium before considering any
Steelium is framed wrongly here. The new venture into
reduction in premium. In fact, the premium reduction
steel furniture is proposed with the objective of provid-
may erode the brand equity of TATA Steelium and cre-
ing distributors/dealers with an opportunity to earn an
ate dissonance amongst its loyal customer base who
would feel cheated all along. Increasing the service additional income and thereby reducing their risk of
standards to the next level could also help justify the getting dropped off. This logic is akin to a tail wagging
premium with the customers. TATA Steelium must en- the dog. It is far more logical to focus on helping the
sure that they move forward from the tonnage-driven channel partners increase their turnover from the exist-
culture to a value-driven culture. ing business by providing them additional support and
Case Analysis II
Indu Rao
Associate Professor
CEPT University, Ahmedabad
e-mail: indu.rao@cept.ac.in
130 DIAGNOSES
cial presence in over 50 countries. It has several national tition in industries and the phenomenon was also ob-
and international recognitions and awards to its credit. served in the steel industry in India. Identifying this op-
In 2002, the company embarked upon an aggressive ex- portunity where a growing number of small steel
pansion strategy of venturing into new and attractive consumers were willing to pay a higher price for the
businesses, continuing to be the lowest cost producer of perceived value of product, better materials and serv-
steel and enhancing value creating partnerships with ice, Tata Steel conducted an intensive market research
customers and suppliers for sustainable growth. The first to understand the market behaviour and consumer
strategic goal was to move from commodities to brands; needs. Value proposition for some customers meant as-
and after a marketing study followed by a technical fea- sured availability, for others customization of size, and
sibility study, Tata Steelium was launched in 2003. for still others dealing with a professional organization
besides ensuring their own company image and profit-
The Context of the Launch of Tata Steelium ability. For Tata steel, it was about achieving target prof-
Traditionally, steel items were viewed as raw material itability besides popularity and penetration into the
but consumers were increasingly becoming quality con- untapped segments of the market.
scious and looked for assurance of quality and perceived
value. In a fragmented steel market with consumers like
Branding Strategy
auto industry, appliances, panel, furniture, etc., the mar- While Tata Steelium inherited the brand value from its
ket was equally divided in volume between a few large name, the challenge was to achieve B2B branding by de-
customers and a large number of small customers, served commoditizing steel and the company did well to adopt
by several distributors, wholesalers, and retailers. There a branding strategy focused on building relationships
was a growing demand for high end cold rolled steel with the distribution channels and communicating about
(CRS) but supply was inadequate. In addition, Tata Steel its product and service strategy to a large number of
already had the capacity to manufacture hot rolled steel small customers of CRS through its network of distribu-
which could go as an input for manufacturing CRS. tors and dealers while a few institutional customers were
serviced directly by its sales force.
Leading manufacturers focused on a few large consum-
ers while the rest remained neglected. The small con- As the Tata group is known for its impeccable quality
sumers did not have direct access to the manufacturer and adherence to commitments, the small consumers
and relied on intermediaries for both price and grade of achieved “peace of mind in purchase and consumption
supply of steel. The company tried to understand the of CRS” through the brand name, Tata Steelium. Leve-
expectations of and difficulties faced by the large number raging on the existing production capabilities and
of small consumers. As it was not possible to reach them strength of the distribution network, Tata Steel worked
through the company sales force, Tata steel decided to on creating value relationships with its distributors who
sell CRS as a brand name hoping that the brand slogan were asked to exclusively deal in Tata Steelium and
and communications could perhaps penetrate through trained to provide excellent service support system to
the layers of distribution channel and reach the target the end consumer. In a period of four years, a large cus-
consumer. The branding strategy focused on building tomer base was developed, 80 per cent of which were
relationships with the distributors and dealers by em- served directly through distributors and the remaining
powering the members of its distribution channel, edu- through distributor-dealer network. A well-placed
cating and training them about the product and service branding strategy could take the brand to widely dis-
aspects of the brand, and offering value added services persed customers as well as attract capable intermedi-
to consumers. The world’s first branded cold rolled steel aries, indispensable in such case, and propagate
(CRS) was called Tata Steelium. congruent messages to all in the retail segment. The
emphasis was on relationship building with distribu-
Value Proposition tors and providing superior services to customers be-
The developing countries have increasingly seen a shift sides providing a product with excellent functional
from price-based competitition to quality-based compe- quality.
132 DIAGNOSES
prices and through fixed charges for standard process- in preparing itself to face them. Due to large focus on
ing. infrastructure development in the country, domestic
demand of steel has a large potential for growth. With
“Tata steel’s world class facilities and state of the art limited production capacity within the country and an
production processes ensure superior properties like
attractive market for investment, entry of foreign play-
formability and unbeatable flatness.” The company in-
ers like POSCO and Mittal Steel with international ex-
variably asserts the quality of its brand, not through tra-
perience of selling CRS of superior quality with extra-
ditional advertising methods but by sending customized ordinary support services, is inevitable. Expansion strat-
direct mails, brochures, and information to customers egies of the few domestic competitors like SAIL, Essar,
through distributors. The company organizes regular and Jindal are also likely to intensify competition. The
meetings for distributors and dealers and customers; dis- distributors and dealers are in any case entrepreneurs
tributors in turn are encouraged to do so for their cus- in their own capacities and have now been trained pro-
tomers. It also provides support for recruitment and fessionally by Tata Steel; it may not be possible to con-
development of salespersons of the distributors to help
trol their activities if they decide to deal with the
develop a consistent brand culture. The company de-
competitors’ products.
cided on selective distribution in each major location
based on consumption pattern and strategic business The Way Ahead
volume. A website for the Tata Steelium Parivar helps
develop community feeling. An elaborate procedure for Since Tata Steelium was the first to penetrate the rela-
selection of distributors is in place for ensuring high tively unorganized market and has earned the loyalty
market reputation, premium business location, and su- of its customers and built relationships with distribu-
perior capabilities to serve customers. Further attempts tors, it holds an advantage vis-a-vis its competitors. The
are made towards improvement of capabilities of deal- branding strategy adopted to promote Tata Steelium is
ers on a continuous basis. likely to have a long lasting positive impact on brand
equity and market share of Tata Steel. Several alterna-
Inventory management, human resource development tives are possible. The advantage of having an integrated
initiatives, key account management processes, evalua- steel plant is its core competency and the company may
tion and performance incentives work for better effi- opt for forward integration by manufacturing some end
ciency and monitoring of the supply chain. The company user products. Limited capacity of the plant and a sin-
not only does evaluation of performance of distributors gle location of manufacturing have been identified as
through customer surveys and other scorecards, it also constraints to meet future demand and geographic reach.
helps them improve and provide superior service thus, Manufacturing facilities at new geographical locations
developing strong relationship with the channel mem- in India and overseas can be explored to expand the pro-
bers. duction capacity in order to meet the demand and lev-
erage on the existing brand reputation of Tata Steelium.
Corporate actions are consistent with brand values.
In order to overcome constraints due to limited capac-
Functional quality, distribution capabilities, and cus-
ity, the company may also look at alternatives of out-
tomer intimacy deliver value proposition. “Fair and pro-
sourcing some part of manufacturing with sufficient
fessional treatment, a caring parent company, complete
quality control.
peace of mind in dealing or using the brand” deliver
premium. Social grouping, raised customer service ex- Investing on relationships and building a culture of trust
pectations, perception of brand as a means to increase and social groupings are very important in the present
profitability, and growth are all a result of intense and uncertain environment and it may not be desirable to
active relationship fostered over the years. cut down on them. It may be useful to focus on the gov-
ernance structures of the vertical supply chain as well
The Challenge as involve in alternative brand advertising. It has been
Although Tata Steelium succeeded in establishing itself illustrated in literature how governance of vertical chains
as a brand in just four years across various segments of may constrain the set of branding strategies (Ghosh and
the CRS market, it is proactive in analysing threats and John, 1999). In addition, competition pushes agents to-
REFERENCES
Barcala, M F and Diaz, M G (2006). “Brand Equity in the Euro- Issue), 131-145.
pean Fruit and Vegetable Sector: A Transaction Cost Nickerson, J A and Silverman, B S (2003). “Why Firms Want
Approach,” International Journal of Research in Marketing, to Organize Efficiently and What Keeps Them from Do-
23(1), 31-44. ing So?” Administrative Science Quarterly, 48(3), 433-465.
Barzel, Y (1982). “Measurement Cost and the Organization of Williamson, O E (1991). “Comparative Economic Organiza-
Markets,” Journal of Law and Economics, 25(1), 27-48. tion: The Analysis of Discrete Structural Alternatives,”
Ghosh, M and John, G (1999). “Governance Value Analysis Administrative Science Quarterly, 36(2), 269-296.
and Marketing Strategy,” Journal of Marketing, 63(Special
134 DIAGNOSES
The Key Challenges To what extent were the business consumers influenced
The future would bring in competition for Steelium from by the emotive characteristics of brands? How did buy-
the major players which would put pressure on the ing centre participants vary in the degree to which they
margin. The market share would definitely go down as were influenced by emotive elements of brand value?
Steelium would have limited production capacity while What was the relevance of the brand building exercise
the market was expected to grow. In the overall value of Tata Steelium for its target market?
proposition (Figure 11), the part which was within the
full control of Tata Steel was its excellent functional qual- The Analysis
ity. Dream customer service and customer intimacy as Buyers process information from marketing communi-
envisaged in the value proposition was company-driven cations either ‘centrally’ or ‘peripherally’. Highly in-
but distributor-delivered and hence open to greater com- volved and motivated buyers take the ‘central’ route
petitive threats. The competitive advantage which is with particular attention paid to the core elements of
mostly from distributors is not really very difficult to the promotional message, such as product quality, func-
replicate in case of strong competitors with deep pock- tions, and price. Persuasion is achieved through strong,
ets. How to address this aspect was a key issue. rational arguments. If a buyer is not strongly motivated
or involved, it is suggested that he should process per-
Also, the production constraint was likely to create a
suasive communication messages through a ‘peripheral’
situation of shortage of “Steelium.” One of the choices
route, with more attention paid to contextual informa-
the Steelium marketing team would have to make was
tion that taps their emotional drives such as visual im-
whether to supply all distributors a rationed quantity
agery, the salesperson’s appearance or the presentation
of Steelium or stop supplies to some of the distributors
of product information. Attitudes formed via the cen-
of Steelium to fully supply the rest. The first option was
tral route are assumed to be stronger, less resistant to
likely to be difficult to justify and hence Steelium dis-
change, and more predictive of future behaviour than
tributors would be required to specifically focus on the
attitudes resulting from peripheral route processing. This
select set of CRS consumers who were most appropri-
does not mean that marketers need to focus only on cen-
ate for them. How to select the specific Steelium con-
trally created attitudes, as research has indicated that
sumers who were likely to provide the highest price
peripherally formed attitudes could determine the choice
premium in the long run?
when brands are viewed as essentially similar or when
A few questions that were raised regarding the customer the market lacks a leading brand.
relationship and service for Steelium, needed to be re-
solved. Was service actually creating sufficient value for The greatest opportunities for enduring brand success
the consumers or was it the superioriority of the prod- emerge when you are able to orchestrate the range of
uct? Was the claimed better service provided by Steelium experiences around your brand in a way that puts your
benchmarked against the major national competitors or brand more in a personal and emotional space. This hap-
the reference set consisted of only the existing suppliers pens only when the promise of a brand rises above the
of CRS? Were isolated interviews adequate or the more merely functional and tangible attributes or character-
quantitative measures of customer satisfaction required istics and incorporates some relevant feeling and emo-
to reflect the ground reality? Should customer satisfac- tion. Competitors can match functions and features but
tion be checked by surveying the existing customers or they just cannot easily match the promise and delivery
also include customers who did not use Tata Steelium? of a personal, emotional and special experience.
Was there a real brand Steelium or was it just the Tata
Research on brand communities indicates that members
brand which was delivering the goods along with the
of a brand community tend to avoid discussing the mer-
product benefits of good quality CRS? All these would
its and use of products from rival brands in favour of
possibly help in resolving the dilemma whether better
products from the preferred brand. Instead, members
service was capable of producing price premium for
of brand communities tend to emphasize the merits of
Steelium compared to the other big competitors who
products from the preferred brand and focus on dispar-
were likely to enter the market with their high quality
aging information about products from rival brands. As
CRS products?
136 DIAGNOSES
REFERENCES
Keller, K L and Lehmann, D R (2006). “Brands and Branding: Advertising, 38(2), Summer, 21-35.
Research Findings and Future Priorities,” Marketing Sci- Thompson, Scott A and Sinha, Rajiv K (2008). “Brand Com-
ence, 25(6), November-December, 740-759. munities and New Product Adoption: The Influence and
Sekar Raju, H; Rao, Unnava and Montgomery, Nicole Votolato Limits of Oppositional Loyalty,” Journal of Marketing, 72
(2009). “The Moderating Effect Of Brand Commitment (November), 65-80.
On The Evaluation Of Competitive Brands,” Journal of
Case Analysis IV
Sujoy Bhattacharya Seema
Assistant Professor Independent Management Consultant
Vinod Gupta School of Management, IIT-Kharagpur e-mail: seema_pandey_19@rediffmail.com
e-mail: sujoybtc@vgsom.iitkgp.ernet.in
138 DIAGNOSES
would be largely lost. Hence this option is not recom- recommended as it would allow the distributors/deal-
mended. ers opportunities for growth and higher turnover
thereby strengthening distributor loyalty.
Initiating a New Venture of Steel Furniture
The major challenge would be for the distributors and
CONCLUSION
dealers to serve a different set of customers and be sub- STEELIUM enjoys market leadership in India. To retain
jected to a different set of guidelines. The stylish yet af- its leadership position, it needs to recognize customer
fordable high quality steel furniture using STEELIUM perceived value as the source of its competitive advan-
would give distributors opportunities for higher turno- tage. This would stand the brand in good stead as MNCs
ver and growth. This would further cement the relation- would bring in functional quality and excellent distri-
ship of the brand with the distributors. However, bution and even compete at the level of intangibles.
support by TATA STEEL towards helping distributors Hence customer perceived value enhancement through
and dealers in setting up of manufacturing facilities competence building for the service-conscious segment
would be required. Also new learning and skills would in areas of customer intimacy and relationships is the
be required to understand the customers, competitors, way forward. This added with increased capacity would
and collaborators. Capacity addition would have to be prepare the Brand STEELIUM to take on the competi-
pursued to set up this parallel business. This option is tors, both Indian and MNCs, in the coming future.
— Kevin Keller