5 PORTER’S ANALYSIS

ENTRY BARRIERS: HIGH

The entry barriers posed by Tata Steel to other potential entrants can be explained by the
following criteria:
 Capital Requirements: Tata Steel had put forth enough effort to protect itself in this area. It
has a number of Greenfield projects in the works, which it intends to launch not only in India
(Jharkhand, Orissa, and Chhattisgarh), but also abroad (Bangladesh, Iran & Vietnam). In
addition, it has already completed an investment of Rs 5,000 crore to expand the capacity of
its existing plant in Jamshedpur from 5 million to 6.8 million tonne per annum, and it is in
the process of expanding the capacity from 6.8 million to 10 million tonne per annum with
an estimated investment of Rs 15,000 crore. It would prove to be very difficult for any new
entrant to come up with such huge investment outlays .
 Economies of scale: Tata Steel being an integrated steel company has its own mines for key
raw materials such as iron ore and coal that protects them from potential threat of 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’s policy: Tata Steel is noted for its Corporate Social Responsibility. It is owned
by Tata Sons. Regarding their Corporate Governance, they already have a respectable
position in front of the Indian government.
 Product Differentiation: Because of its quality and brand value established over a century
ago, Tata Steel still commands a premium for its products. Tata Steel has introduced brands
such as 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 (galvanised wire products), Tata Pipes (construction pipes), and
Tata Structura (structural steel) (contemporary construction material). Aside from these
product names, the corporation also has a service brand named "steel junction" inside its
folds.

COMPETITON: HIGH
In terms of rivalry, the steel business is genuinely global, with large producing countries like China
exerting significant influence on world prices through aggressive exports. SAIL, JSW, ISPAT, and
ESSAR STEEL are the four biggest domestic competitors, with the rest being tiny mills that account
for 30% of the total market share.

Two global steel companies, Arcelor-Mittal, the world's largest, and POSCO, are currently posing the
greatest danger, since they seek to enter the Indian steel industry very soon.
BARGAINING POWER OF SUPPLIERS: LOW
For fully integrated steel factories, such as Tata Steel, supplier bargaining power is limited because
they own mines of essential raw materials such as iron ore coal. Those who are non-integrated or
semi-integrated, on the other hand, must rely on their suppliers, such as SAIL, which imports coking
coal.

BHP Billiton, CVRD, and Rio Tinto, the world's top three mining conglomerates, supply approximately
two-thirds of the processed iron ore to steel mills and wield enormous bargaining leverage. NMDC is
also a key supplier to standalone and non-integrated steel plants in India.
Tata Steel embarked on the 'Backward Integration' strategy far earlier in order to protect itself from
the customers' considerable bargaining strength.

THREAT OF SUBSTITUTES: HIGH

Plastics and composites are posing a threat to Indian steel in one of its most important markets: the
car industry. Aluminum is the other material that has the potential to overtake steel in the vehicle
industry right now. Aluminum is perhaps the most appealing alternative to stainless steel. In order to
avoid losing business to non-ferrous or carbon steel products, stainless steel manufacturers are
offering a variety of options to their clients. Lower-nickel duplex grades and ferritic varieties are
examples of such choices. Meanwhile, nickel price swings will continue to cause challenges for the
stainless steel industry around the world.

Steel has already been phased out of a number of high-volume uses, including railway sleepers (RCC
sleepers), large diameter water pipes (RCC pipes), small diameter pipes (PVC pipes), and home water
tanks (PVC tanks). In the manufacturing of autos and consumer durables, the substitution is more
common.

BARGAINING POWER OF BUYERS: MIXED

Automobiles, oil and gas, shipping, consumer durables, and power generation are some of the
primary steel consuming sectors with strong bargaining strength and attractive deals. Small and
retail consumers, on the other hand, who are dispersed and consume a substantial portion of the
market, do not benefit from these advantages.