Академический Документы
Профессиональный Документы
Культура Документы
Krishna Sil
UM15088
Preeti Patnaik
UM15097
Trisha Anand
UM15120
Varanasi Arjun
UM15121
Yasasvi Santosh K
UM15123
Contents
1
Executive Summary............................................................................................................................................................... 5
Industry Overview.................................................................................................................................................................. 6
2.1
2.2
2.3
2.4
Industry Benchmarks....................................................................................................................................................... 9
2.5
2.6
PESTEL Analysis............................................................................................................................................................. 14
2.7
2.8
2.9
Competitive Landscape................................................................................................................................................. 24
Company Overview.............................................................................................................................................................. 30
3.1
Company background.................................................................................................................................................... 30
3.2
3.3
3.4
3.5
3.6
3.7
3rd Generation Balanced Scorecard (Amalgamation of 1st Generation BSC and Activity System Map)........................41
3.8
SWOT Analysis............................................................................................................................................................... 43
3.9
3.9.1
3.9.2
Portfolio Analysis........................................................................................................................................................... 45
4.1.1
4.2
4.3
Re-imagining the Organization with the transformed business model or Use-case based on SMAC and IOE................50
4.3.1
4.3.2
4.3.3
4.3.4
Reimagining Workplaces........................................................................................................................................ 51
4.3.5
Reimagining Channels............................................................................................................................................. 51
1 Executive Summary
Past few years have been demotivating for the domestic steel industry in India. While the target set for 2030 is
300MT, industry is facing major capacity underutilization. This is expected to be a consequence of the business cycle
that the steel industry is prone to. In addition to this, the dumping of steel by foreign players in domestic ground is
also adding to our woes.
According to the Steel Ministry's Joint Plant Committee (JPC), production of crude steel during April - December 2015
has been stagnant, growing at 0.9% compared to the same period last year, to 67 mt. The industry has also been
facing a surge in imports which grew by nearly 30%.
Tata Steel has been performing rather well given the market conditions. The fact that they can charge a premium on
a few branded products, gives them a huge benefit while compared to other players. Consistent performance has led
to shareholders faith. They are expected to grow in the encouraging future market demand scenario.
The Union Budget 2016 has shown huge promise with inclusion of domestic steel sector in campaigns like Make in
India and Smart cities. Major steel stocks like Tata Steel, SAIL and JSW Steel gained with the finance minister Arun
Jaitley announcing higher investment on infrastructure. While Tata Steel was up 1.99%, Steel Authority of India Ltd
(SAIL) gained 2.16% and JSW Steel jumped 1.54% on the BSE.
As the business cycles and anti-dumping measures by Govt. fall in place, the industry is expected to grow. All major
players have been planning on capacity enhancement and opening of new plants. The Union budget also has shown
steps of encouragement to the sector. This is bound to increase the share prices and hence the market caps of the
steel firms. As the industry will become highly competitive, players will have to be on toes to be in the market.
2 Industry Overview
2.1 Nature and Size of the Industry
History and Evolution of the industry
The steel industry is the foundation industry of any economy especially in developing
countries whose material intensity is likely to increase significantly in the future for
infrastructure investment and growth in the manufacturing sector. Steel is crucial to the
development of any modern economy and is considered to be the backbone of human
civilization. The level of per capita consumption of steel is treated as an important
index of the level of socioeconomic development and living standards of the people in
any country. Tata Steel was established by Indian Parsi businessman Jamshetji
Nusserwanji Tata in 1907 (he died in 1904, before the project was completed). Steel
was the first core sector that was freed from License Regime (1990-91) and pricing and
distribution controls. The Indian steel industry began expanding into Europe in the 21st
century. In January 2007 India's Tata Steel made a successful $11.3 billion offer to buy
European steel maker Corus Group. New Industrial Policy adopted by the Government
has opened the Steel sector for private investment and exempted it from compulsory
licensing. Import of foreign technology, FDI and other initiatives have given impetus to
the private participation. A number of new/green-field steel plants have come up using
modern, state of the art technologies.
than 2 per cent growth last year, due to improving economic activity, as per E&Y's
'Global Steel 2015-16' report
Stage in the Industry Life cycle
The Steel Industry highly depends on the business cycles. The demand is directly
dependent upon how the global economy is performing- recession or boom in critical
which effects expenditure in areas like construction, automobiles etc. By and large the
steel industry as a whole is a mature industry, individual companies within it might be
in the growth phase. Global player continue to vie for a greater share of an otherwise
stagnant market. Also with steel being a critical raw material, the industry will always
remain on the higher end of the S-Curve in the maturity phase. As steel sector has
been suffering from over capacity and slow demand rise, there is a need to innovate
and be more proactive than reactive. This might involve usage of new technology for
lower cost and viable substitutes which might shift the position of the industry on the S
Curve towards the Take-Off Stage. The outlook for steel industry is on the brighter side
with demand being spurred by the emerging economies and there is scope for the
industry to perform better.
Indias crude steel capacity reached 109.85 Million Tonnes (MT) out of which Tata Steel
produced 26.20 million tonnes in 2014-15 and an overall growth of 7.4 per cent.
Production of crude steel grew by 8.9 per cent to 88. 98 MT. Total finished steel
production for sale increased by 5.1 per cent to 92.16 MT. Consumption of total finished
steel increased 3.9 per cent to 76.99 MT. India produced 7.34 MT of steel in the month
of September 2015, which was nearly equal to the country's steel production in
September 2014. All major steel producers had a marginal surplus barring the US which
showed a deficit of 16 million tonnes.
In 2014, the world crude steel production reached 1665 million tonnes (mt) and
showed a growth of 1% over 2013. China remained the worlds largest crude steel
producer in 2014 (823 mt) followed by Japan (110.7 mt), the USA (88.2 mt) and India
(86.5 mt) at the 4 th position. WSA has projected Indian steel demand to grow by 6.2%
in 2015 and by 7.3% in 2016 as compared to global steel use growth of 0.5% and 1.4%
respectively. Chinese steel use is projected to decline in both these years by 0.5%.
Rationale
Infrastructure spending
India lacks basic infrastructure amenities. The government has announced its intent
to improve this. A lot of key projects, like high-speed railways linking major cities,
highway construction, and housing for all citizens, have been planned by the new
government.
The current GDP per capita (PPP) in India is only $5,350. This is more than 70% of
Chinas. India has been on a rising trajectory. Rising income increases the demand for
automobiles and other appliances. This in turn increases demand for steel.
Urbanization
Rising incomes and better job opportunities mean people are moving to cities. This is
leading to demand for housing, which increases steel consumption.
Rationale
Higher Annual Net Income After Taxes(ANIAT) over Cost of Capital, High dividend and
Capital Appreciation, Cost-cutting efforts, Domestic market growth, Expanding
capacity, "Pricing Power" with large buyers, Threat from nearby competitors.
Reduced Cash Operating costs, Liability for retired workers, Suitable location to procure
raw materials, a good number of Alliances, mergers, acquisitions and jvs, Product
quality, Skilled and productive workforce and Efficient leveraging of maximum
value/benefit of CSR and its cost
Category
Industry Level
(National)
Activity Ratios
Indicator
Market Leader
2011-12
2012-13
2013-14
2011-12
2012-13
2013-14
2014-15 (till
Q3)
114894
119792
135990
76,315.18
81,121.1
9
87,274.7
7
92,874.14
Size as % of
GDP
1.69
1.8
.406
.432
.46
.49
Inventory
turnover
5.73
6.72
7.89
5.31
5.76
5.7
5.74
Receivables
turnover
10.56
9.01
8.11
5.31
5.76
5.7
5.74
Payables
turnover
4.87
6.83
8.76
8.95
9.33
9.91
9.52
Asset
turnover
0.73
0.81
0.82
1.42
1.42
1.44
1.28
Market Size
Category
Liquidity Ratios
Solvency Ratios
Profitability Ratios
Indicator
Market Leader
2011-12
2012-13
2013-14
2011-12
2012-13
2013-14
2014-15 (till
Q3)
Current ratio
0.71
0.6
0.3
1.13
0.99
0.86
1.01
Quick ratio
0.34
0.23
0.20
0.74
0.69
0.65
.62
Cash ratio
NA
NA
NA
NA
NA
NA
NA
Debt-toassets ratio
0.33
0.35
0.33
0.31047
0.31942
0.29936
0.28221
Debt-tocapital ratio
0.47
0.49
0.48
1.23
1.68
1.74
2.28
Debt-toequity ratio
0.43
0.58
0.61
1.23
1.68
1.74
2.28
Interest
coverage
ratio
8.69
5.36
4.38
NA
NA
NA
NA
Gross profit
margin
0.06
0.06
0.1
5.94
5.00
7.11
4.72
Operating
profit margin
0.09
0.02
0.005
9.34
9.14
11.04
8.98
Net profit
margin
10.51
7.54
7.53
4.05
-5.23
2.41
-2.81
10
Category
Valuation Ratios or
Price Ratios
Valuation Ratios or
Price Ratios
Valuation Ratios or
Price Ratios
Indicator
Market Leader
2011-12
2012-13
2013-14
2011-12
2012-13
2013-14
2014-15 (till
Q3)
Return on
assets (ROA)
3.487
3.92
3.487
438.79
351.85
417.33
322.79
Return on
equity (ROE)
17.58
12.22
1.957
86.37
167.68
88.86
53.37
Price to
Earnings
(P/E)
11.1
12.7
13.89
7.85801
10.9047
9.5365
10.3529
PEG Ratio =
(P/E Ratio) /
Projected
Annual
Growth in
Earnings per
Share
NA
NA
NA
NA
NA
NA
NA
Price to Cash
Flow
NA
NA
NA
NA
NA
NA
NA
Price to Book
(P/B)
0.65
0.59
0.95
1.234782
1.615632
1.508638
2.12646
Price to
Sales
NA
NA
NA
NA
NA
NA
NA
11
Category
Competitive Ratios
Indicator
Market Leader
2011-12
2012-13
2013-14
2011-12
2012-13
2013-14
2014-15 (till
Q3)
Dividend
Yield
2.11
3.18
2.76
120
80
100
80
Dividend
Pay-out Ratio
23.19
37.94
31.06
13.63
-67.68
11.14
46.63
Enterprise
8.30
value(market
capitalisatio
n plus debt
minus cash)/
EBITDA
10.5
12.31
NA
NA
NA
NA
Staff
Turnover or
Industry
Attrition Rate
NA
NA
NA
NA
NA
NA
NA
Staff Cost/
Salary as
percentage
of Sales
0.168
0.190
0.198
NA
NA
NA
NA
Operating
Expenses as
percentage
of Sales
0.85
0.81
0.88
0.66652
0.71932
0.69644
0.7783
12
Category
Indicator
Market Leader
2011-12
2012-13
2013-14
2011-12
Depreciation
as
percentage
of Sales
3.89%
4.24%
4.73%
0.03393
0.04294
0.04624
0.04781
Fixed Assets
to Sales
Revenue
1.060
0.999
0.879
2.24897
2.12362
2.09237
2.22267
Advertising
as
percentage
of Sales
2012-13
2013-14
2014-15 (till
Q3)
13
2013-14
5.45
2014-15
9.32
2013-14
5.98
2014-15
5.59
Description
Rationale
Continuous infrastructural
development bound to decrease
costs
14
Economic
Analysts
predict tough
2016 for the
steel industry
worldwide but
expect India to
15
remain more
profitable than
its Asian peers.
Social
Technological
Environmental
Tatas have
been known to
be ethical and
socially active.
They have
been proemployees and
industry
analysts
attribute their
success to the
same
Although Tata
Steel is one of
the most
modern steelmakers in India,
they are still
behind the
state-of-art
practices.
16
17
Description
Buyer Power
Although, steel
industrys
products
are
used
in
the
wide range of
industry,
the
number
of
suppliers
is
comparatively
low.
The
products
are
more or less
standardized
hence
the
prices
are
competitive.
Only few can
claim premium
like TATA Steel
on account of
its brand image
earned over the
years and as
they
have
branded
products
like
Tiscon
and
Switching Costs
differentiated products
Availability of information
Rationale
The bargaining power of buyers is
high due to various factors.
First, there is low level of product
differentiation thus low switching cost for
buyers. Competition is basically on price.
Second, there are many manufacturers in the
market thus buyers have many choices.
Third, due to cyclical demand for steel, there
tend to be (sometimes) oversupply and this
gives additional bargaining power to
buyers. Bargaining power of suppliers is
also high due to scarcity of raw materials
especially scrap metals whereby suppliers
are raising the price.
18
Shaktee
Supplier Power
Existing Competition
The
bargaining
power
of
suppliers
is
low for the
fully
integrated
steel plants of
Tata
Steel
mostly
have
captive
mines of key
raw material
like iron ore
coal.
This
takes
away
supplier power
to a great deal
It is medium in
the domestic
steel industry
as demand
still exceeds
19
the supply.
India is a net
importer of
steel.
However, a
threat from
dumping of
cheaper
products from
foreign players
does exist.
Threat to new
entrants
The threat to
new entrants is
moderate. This
depends to a
great extent on
the four policies
mentioned.
These four
policies also
define
o Jindal (Hisar)
o Visa Steel
o Manaksia Steels
Unlisted
Capital Requirement
Economies of scale
Government Policy
Product differentiation
20
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.
21
Effect of
Complementors
The price of
steel cans is
constrained by
the price of
glass bottles,
aluminium
cans, and
plastic
containers.
These
containers are
substitutes, yet
they are not
rivals in the
same
industries.
Buyers propensity to
substitutes
Coke
Limestone
22
Name
Market
Cap.
Sales
Capacity
JSW Steel
27,639.71
46,087.32
14300000
Tata Steel
24,965.09
41,785.00
29000000
SAIL
14,828.59
45,710.78
15400000
Jindal (Hisar)
669.28
7,401.44
8000000
Visa Steel
152.35
922.16
465,000
23
Capacity wise, Tata Steel is the largest private player as represented by the size of the bubble
Market cap wise, Tata Steel and JSW Steel are quite competitive and lie on the upper end
Sales wise, all 3 i.e. SAIL, Tata Steel and JSW Steel are competitive as per the latest information
MEASURE
Tata
Steel
SAIL
JSW
Jindal
Steel
Essar
Steel
Norm
al
ratios
7.5
31.58
%
24.00
%
34.62
%
29.63
%
WEIGHTED
24
MEASURE
WEIG
HT
Tata Steel
SAIL
JSW
Jindal Steel
Essar Steel
RATIN SCOR RATIN SCOR RATIN SCOR RATIN SCOR RATIN SCOR
G
E
G
E
G
E
G
E
G
E
0.50
9
4.5
9
4.5
6.5
3.25
3
1.5
1
0.25
0.25
2.25
7.5
1.875
1.75
1.5
0.15
1.35
1.75
0.6
0.6
0.3
0.10
0.8
2.5
8.9
12.25
8.225
5.85
3.05
Long Products
- Sections
- Special Profiles
- Rail- Wires
- Wire Rod
- Speciality Steels and Bar
- Plates
- Rebars
Construction Products
- Structural Steel
- Floors
- Walls
- Roofs
- Modular
Regions
India
Europe
25
- Building Components
Details
End-user Segments
Strength of Steel
Automobile Sector
Construction Industry
Individual Customers
High
High
Low
26
Formability
Resistance to corrosion
High
Automobile Sector
Automobile Sector
Construction Sector
High
27
Price/Value
Individual Customers
B2B Clients
High
High
On Time Supply
B2B clients
Low
28
projects.
Budgetary proposals will help the industry meet its growth target and reach its full potential
However, doubling of Clean Energy Cess from Rs 200 to 400 per ton would further increase the input cost for
domestic producers
"The domestic steel industry will continue to play an important role to the Government of India's schemes of
'Make in India' and 'Smart cities' as it is a key material supplier to the allied industries.
Outlay for the road and rail projects amounting to about Rs 1.8 lakh crore would boost the ailing steel
industry by inducing steel demand,
29
However, the industry has been bogged down by a deluge of imports and predatory pricing over the last 18
months.
Long term measures to create a level playing field are required to firewall the domestic steel industry
from global overcapacity and dumping
3 Company Overview
3.1 Company background
Tata Steel Group is one of the top 10 global steel companies with an annual crude steel capacity of over 29 million tonnes per
annum. It was established in 1907 as Asia's 1st integrated private sector steel company. It is now world's second-most
geographically-diversified steel producer, with operations in 26 countries and a commercial presence in over 50 countries.
The Tata Steel Group, with a turnover of Rupees 1, 48,614 crores in the financial year 2014, has over 80,000 employees
across 5 continents and is a Fortune 500 company. Backed by 100 glorious years of experience in steel making, Tata Steel is
the worlds sixth largest steel company with an existing annual crude steel production capacity of 30 Million Tonnes Per
Annum (MTPA).
It was the vision of Jamsetji Nusserwanji Tata that on February 27, 1908, the 1st stake was driven into the soil of Sakchi. His
vision helped Tata Steel overcome several periods of adversity and strive to improve against all odds.
Tata Steel`s Jamshedpur Works has a crude steel production capacity of 6.8 MTPA which is slated to increase to 10 MTPA by
2010. The Company also has proposed 3 Greenfield steel projects in the states of Jharkhand, Orissa and Chhattisgarh in India
with additional capacity of 23 MTPA and a Greenfield project in Vietnam.
Tata Steel has created a manufacturing and marketing network in Europe, South-East Asia and the pacificrim countries.
Corus, which manufactured over 20 MTPA of steel in the year 2008, has operations in the United Kingdom, the Netherlands,
Germany, France, Norway and, Belgium.
30
Tata Steel Thailand is the largest producer of long-steel product in Thailand. It has a manufacturing capacity of 1.7 MTPA. Tata
Steel has proposed a 0.5 MTPA mini blast furnace project in Thailand. NatSteel Holdings produces around 2 MTPA of steel
products across its regional operations in 7 countries.
The iron ore mines and collieries in India give the company another advantage in raw material sourcing. Tata Steel is also
striving towards raw materials security through joint ventures in Thailand, Australia, Mozambique, Ivory Coast and, Oman.
Tata Steel has signed an agreement with SAIL (Steel Authority of India Limited) to establish a 50:50 joint venture company for
coal mining in India. Tata Steel has also bought 19.9% stake in New Millennium Capital Corporation (Canada) for iron ore
mining.
In Tamil Nadu(India), exploration of opportunities in titanium dioxide business, ferrochrome plant in South Africa and setting
up of a deep sea port in coastal Odisha (India) are integral to the Growth and Globalization objective of Tata Steel.
Tata Steel India is the 1st integrated steel company in the world, outside Japan, to be awarded the Deming Application Prize
2008 for excellence in Total Quality Management.
31
32
In October 2015 the UK's Caparo Industries also went into administration. Cheap Chinese steel imports, high energy costs, a
strong pound, and other cost burdens [e.g. excessive business rates] were cited as the main reasons for these closures.
2015: December 2015, Tata announced that it had exclusive talks with Greybull Capital to sell a number of plants including its
steelworks in Scunthorpe and also mills at Dalzell and Clydebridge in Scotland.
2016: Announces 700 job losses at Port Talbot in South Wales.
33
Conduct:
By providing a safe workplace, respecting the environment, caring for its communities and demonstrating high ethical
standards.
3.3.2 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.
34
Various initiatives in Thailand include tighter working capital management; increasing proportion of rebar sales in regional
areas; developing differentiated products and services; an increase in volume of downstream products; completion of
Procurement Excellence Project along with Renoir.
NatSteel is countering Chinese slowdown by sourcing billets at competitive prices and addressing pressure on margins with
a two pronged strategy:
- Enhancing value to customers by moving towards 100% value-added products. The Singapore downstream sales grew 3.7%.
It continues to enhance its downstream products and services offering to create further value. The introduction of a new
Carpet Reinforcement product is an example.
- Growing its downstream business in Xiamen (China), Johor Bahru (Malaysia), as well as set up a new JV in Hong Kong;
expand its rebar/wire rod exports into higher margin regions to maximize profitability.
Automotive
Construction
Consumer Goods
Aerospace
35
5.
6.
7.
Energy
Defence and Nuclear Equipment
Ship and Railways building
1. Automotive:
The automotive sector accounts for roughly 16% of all European steel consumption, and for a rapidly growing proportion of
steel demand in India and other developing countries. Steel makes up more than half the weight of a car and is used not only
for the body and chassis but also the powertrain, gearbox, wheels and tyres.
Products:
Main Brands: Galvano Galvatite HyPerform - advanced Dual Phase steels MagiZinc Auto Precision Tubes Vegter Model
Vegter Lite Ymagine Ympress Tata Wiron Tata Bearings Tenform
2. Construction:
From helping to build the worlds most impressive buildings to providing the metal and expertise for infrastructure projects,
Tata Steel has the products and services to meet the needs and standards of the global construction sector. The construction
industry is Tata Steels largest single market globally, and produces an extensive and innovative range of steel construction
products and systems, all manufactured to the same high quality. Tata Steel offers a range of products and systems that can
be segmented according to their primary function the structural Main Brands:
Advance Structural sections, Aquatite ,Bor Lor Sor ,Catnic Celsius 355 Colorcoat HPS200 Ultra, Colorcoat Prisma ,
Colorcoat Urban ,ComFlor, Confidex Contiflo Durbar Hybox Infire Kalzip ,MagiZinc, Slimdek Strongbox
Tata Shaktee, Tata Tiscon ,Tata Tubes, Tata Structura, Tata Wiron
3. Consumer Goods:
36
Tata Steel manufactures and processes steel for a wide range of customers across the Consumer Goods sector worldwide.
The product and service solutions vary: from hot rolled coil through to high-gloss pre-finished steel perforated blanks. These
products are primarily used in domestic appliances, lighting, furniture and office equipment, racking and shelving, battery
cases, bake-ware, enamel-coated applications and decorative pre-finished metals. Customers in this sector want a variety of
quality products often tailored individually to their specifications from a single point of contact; reliability and flexibility in
supply and service; innovation, and technical support to provide them with differentiation and competitive advantage.
Products:
Advantica Galvano HIBRITE HILAN MagiZinc Motiva NICOR Tata Steelium Tata Wiron Ymagine
4. Engineering:
General Engineering Tata Steel manufactures a range of steel products, encompassing hot rolled and cold rolled sheets, wire
rod and wire, sections, plate, bearings and tubes, which serve a multitude of small and medium-sized engineering companies
in Europe, India and South East Asia.
A variety of high-quality agricultural implements marketed as Tata Agrico are widely used throughout rural India. Similarly a
range of wire products has many applications in farming and fencing. Engineering Services, Plant & Equipment Multidisciplinary engineering expertise relating to the design, manufacture and supply of high- precision equipment is offered to
various industry sectors.
.
Products:
Celsius355 Galvano Hybox 355 Tata Steelium Tata Wiron Tata Bearing.
The most important brands under Steel Products are -
Tata Shaktee - Tata Steels most important brand in the field of Galvanised Corrugated Sheets
Tata Tiscon - First Thermo Mechanically Treated (TMT) Rebar in India
Tata Steelium Worlds 1st branded Cold Rolled Steel (CRS)
Tata Astrum - Best-in-class Hot Rolled Sheets (HRS) & Coils offered by Tata steel
Tata Structura - Lightweight Hollow Steel Sections that ensure high durability
GalvanoTM - Galvanised Plain Steel Sheet and Coils with superior corrosion resistance properties
37
Tata Pipes - Commercial tubes mainly used for carrying liquids and low pressure gases
Tata Precision Tubes - Robust precision tubes catering to automotive, boiler and general engineering segments
Tata Automotive Steels - Products ranging from strips to tubes, and welded blanks to automotive(advanced) steels
-Typically, Tatas business competes on the basis of their available tangible and intangible resources and the skills. The skill
resources are in essence the groups core competences. It is said that at corporate or strategic levels of management the
core competencies are difficult to manage The Tatas Core Strategies of exploiting its resources and competence to meet the
challenge of external environment are somehow similar to the dimensions of business excellence. The dimensions relates to
the pattern in the sequence of strategic action taken by the group. The group built their strengths and core competences and
never diversifies far away from these. The senior management has a clear understanding of their business as well as micro
and macro environment. The Groups knowledge and experience provides the basics of their management intuition and
credibility. They only do what they know and avoid what they dont.
- If we take the example of TATA Steel, the group sticks to the steel industry as the main aim of strategic development to
achieve cost leadership.
-The group actively is a Customer and Market Oriented corporate, listens to the customers and place excellent emphasis to
deliver quality, reliability and high level of service.
-Tata sets very high standard in these regards and ensures their achievement through reward system that includes emotional
rewards. The strategic approach is to involve the customers.
- The other value drivers of the group to successfully exploit the resources are the productivity through the people and liberty
and entrepreneurship.
38
- 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.
- The group also express concern for the feeling of their employees and try to foster attitude in which people perceive
themselves as belonging to an extended family.
Today TATA Steel has a more aggressive strategy with an eye on the global map and a new path of expansion to become a
benchmark in the global steel industry and that is through JVs and M&As.
NAT Steel
Millenium Steel
Corus Steel
Key
Activities
Mining
Extraction
Manufacturing
Customising
Value
Trusted Brand
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Propositions
Customer
Relationship
s
Strong Base
Value Driven
Employee Friendly
practises
Customer
Segments
Automotive
Construction
Consumer Goods
Aerospace
Rail and Ship building
Defence purposes
Access to Raw Material
Strategic Alliances
Skilled Manpower
Key
Resources
40
Channels
Cost
Structure
Revenue
Streams
Steel Tubes
Alloys
Sale of Minerals & Bearings
Sale of power and water.
3.7 3rd Generation Balanced Scorecard (Amalgamation of 1st Generation BSC and Activity System Map)
Financial:
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Customer:
-
Adoption of TATA Business Excellence Model (Malcolm Balbridge Model) gives strategic direction and
process improvement.
Well defined TQM Standard for controlling defects and improving quality. Statistical Process Control measures
in check.
Some of the key themes through which quality is controlled are: Throughput, Value in Use, Energy Efficiency,
Logistics and Supply chain.
Adoption of National Voluntary Guidelines to ensure transparency, ethics and care for community.
Presence of four R&D centers across India to promote cutting edge technology and product variation.
TATA Steel Group Process Improvement Techniques deployment for continuous process improvement.
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Growth of company has been slow due to recent global slowdown owing to Subprime Crisis. Effected by
economic cycles.
WEAKNESS
Value Chain, Distribution, Macro
Environment.
THREAT
Free Market, Globalisation, Economic
Cycles- recession in global economy, rising
coal prices.
A SWOT analysis is important for Tata Steel to evaluate its current position and formulate strategies to tackle its
competitors.
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MEASURE
WEIGHT
Tata Steel
RATING
0.50
0.25
0.15
SAIL
JSW
SCORE RATING
SCORE RATING
SCORE
9
4.5
9
4.5
6.5
3.25
9
2.25
8
2
7.5
1.875
9
1.35
7
1.75
4
0.6
44
0.10
0.8
8.9
4
12.25
2.5
8.225
Tata Steel
Limited
Bhusan
Steel
Ispat
Industries]
JSW Steel
Jindal St &
Pwr
Welspun
Gujarat
Adhunik
Metaliks
60,303.84
23,093.28
2,635
2,078.08
8,949.82
29,260
2,320.29
508
8,920.63
4,802.14
1,119.95
1,123.55
3,573.61
1,781.07
1,456.63
258.97
18.16
23.43
10.09
0.41
14.92
22.79
8.7
7.96
45
Steel Group has placed a continuous emphasis on improving its processes, so as to consistently increase
efficiencies, enhance quality and thereby achieving better performance benchmarks in all its areas of operations.
Tatas first brand building endeavours have always been directed at building assurance, reliability and value
creation for products in every segment.
There are twelve market sectors in which all the TATA steel products are divided. These sectors include
construction, automotive, consumer goods, energy and power, agriculture, lifting and excavating, engineering,
packaging, aerospace, shipbuilding, rail, defence and security.
BCG Matrix of the products is:
STARS
QUESTION MARKS
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CASH COWS
Steel division
The steel division without doubt
places itself in the cash cow
section due to continued revenue
returns and churn cycles
DOGS
No products
As on date, all products of
TATA Steel have a good
market share and hence none
of them fall into Dogs
category. But recent economic
recession in China has
impacted the commodity
market as a whole and hence the picture may
change in the near term, but the Moodys rating
after the Union Budget on 29th February, gave a
positive outlook for Indian steel industry as a
whole.
Growth Areas
Domestic Consumption:
Domestic consumption is
expected to grow at 5.3%
in 2016.
Growth of Automobile
and Construction
Sector.
The per capita
consumption of steel
in India would move
from the level of 57.8
kgs in 2013 to 175
47
48
Growth in developing
countries: The construction
sector is in boom in South
East Asia with the demand
increasing by around 15 MT
per annum in the last 5
years. It needs to provide
differentiated products so
as to carve a special
market for itself as well as
to have better margins.
Potential Benefits to be
achieved
Rewards
Risks
Contributions in
infrastructure, construction
and automobile sectors.
Revival of European
markets will help Tata Steel
to consolidate its position
in the European market.
52% of its revenue comes
from Europe.
Reduction of costs,
Economic value addition,
Technology transfer /
upgradation through
mergers and acquisitions
and entering new markets
Increased Revenue from
Better profit realisations
foreign business and be
due to cost effective
among the top 5 steel
production.
producers
Tax benefits for new plants
Global steel over capacity Adverse movements in
and macro environment is credit rating and level of
million tonnes.
With more emphasis on
manufacturing and Make
In India, Tata Steel will be
involved in providing
intermediate raw materials
for the Automobile,
construction sectors, steel
intensive capital goods.
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expansion projects,
restructuring.
4.3 Re-imagining the Organization with the transformed business model or Use-case based on SMAC and
IOE
4.3.1 Reimagining Business Processes
With Tata Steel in the United Kingdom moving to a single SAP-based ERP system from multiple ERP systems, it
became feasible to create a genuine UK-wide procurement organisation. The vision was to extend the scope for
buyers to manage merchants and negotiate national deals. Previously, assembling data from multiple legacy
systems across the group had been a labour-intensive and error-prone process. Successfully rationalise the
master data, reducing 850,000 spare part items in the UK to 300,000, with consequent economies in purchasing
with the help of this SAP project. A single SAP based ERP system will help reduce the processing time in many
steps, thereby improving the operational efficiency of the firm. The success of UK can be leveraged upon and
similar practice with the necessary modifications can be followed in India so as to ensure success.
4.3.2 Reimagining Customer Segments
In todays increasingly complex competitive environment, organizations have to constantly strive and come up
with unique offerings that create value for the customers. They need to organize and cross-pollinate the
available resources for achieving more growth through better innovation, searching for new business
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opportunities across customer segments and leveraging strengths within the organization. This has created a
greater need for collaboration, which can offer win-win solutions to both - the customers and organizations.
Companies can no more afford to work in proverbial silos - wherein organizations are misaligned in their
direction and focus. The business process enables to get a customer perspective and thus linking all processes
internally as well as with the customers.
4.3.3 Reimagining Products & Services
Tata Steel must venture into a strategy of continuously developing new products to gain a competitive edge over
competition. In Europe, it has focussed on product innovations with more differentiated products. Globally
marketing efforts must be redesigned to target customer segments so as to focus on the whole product
package. Branding will help products find increasing market acceptance. Innovations such as Silent Track, NestIn,
Superlinks, BH260, BH300 are steps in the right path of creating differentiated products so as to gain market share
and also earn the required profit margins. A constant effort at developing innovative technologies and design
solutions will help transform processes, improve inefficiencies, and enhance customer experience.
4.3.4 Reimagining Workplaces
Mergers and Acquisitions, takeovers etc. have helped Tata Steel gain the technological competence. Also, since
each of these companies had a specialized set of products/core competencies, it will help Tata Steel to bring these
products to newer markets and also it will gain access to international markets. With takeovers, there is a change
in the management and hence, the workplace atmosphere changes. Because of the changing work environments
in different countries and the problems that may arise out of it, care needs to be taken that all the necessary
precautions are taken so that a smooth transition and a conducive work environment is created.
4.3.5 Reimagining Channels
Although TATA Steel touches the lives of millions on a daily basis yet the ordinary person is not a consumer. Steel
effectively works on a B2B model and hence leveraging social media as a means to market is challenging.
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However the Social Effectiveness Index (SEI) developed by the Blue Ocean Strategy firm shows TATA Steel to be
amongst the most active organisations on the social media platform.
TATA Steel began its Facebook initiative in 2010 with a view to provide information on the companys activities and
on the product portfolio. However today TATA Steel uses this medium to interact with the consumers, be it for ideas
for better products or making people a part of its community based initiatives (CSR events). The entire endeavour
is to harbour a culture of continuous learning and feedback and to harness the power of social media in the same.
The above images show the Facebook page of Tata Steel which shows on the cover page the various landmarks
where Tata Steel has been used. An effective marketing and brand building strategy which showcases the wide
usage of Tata Steels products in places of national importance. Facebook initiative is instrumental in the Tata group
as no other company uses Facebook at a product level such as used by TISCON. As also visible in the image above
Tata Steel seeks to communicate its values and vision and how the events it organises are in resonance with those.
Some of the objectives are achieved through other means as well:
- Sharing and dissemination of information: Blogs, Wikipedia, YouTube, Facebook
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Employee Engagement is done through internal blogging sessions. Helps in ideation and innovation.
Apart from driving brand awareness campaigns through social media marketing for developing an effective sales
pitch, Tata Steel is increasingly making use of Social media and analytics to connect with its customers. Social
media platforms have become an integral part of its corporate communications. It has begun reaching out to social
networking websites to spread its messages on environmental awareness across the country. This message has
received wide acclaim and was successful in reaching to a wide audience due to a high octane social
campaign. YouTube is also being used very effectively wherein the company processes, developments etc. are
shared to the public so as to build the brand image.
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