THE TEAM Section B | GROUP 7

Krishna Sil

UM15088

Preeti Patnaik

UM15097

Trisha Anand

UM15120

Varanasi Arjun

UM15121

Yasasvi Santosh K

UM15123

Strategic Analysis of TATA STEEL

Submitted To:
Prof. Brajaraj Mohanty

Contents
1

Executive Summary............................................................................................................................................................... 5

Industry Overview.................................................................................................................................................................. 6
2.1

Nature and Size of the Industry....................................................................................................................................... 6

2.2

Key Growth drivers for the Industry................................................................................................................................. 8

2.3

Identification of Critical Success Factors (CSF)................................................................................................................ 8

2.4

Industry Benchmarks....................................................................................................................................................... 9

2.5

Import and Export Scenario in Indian Steel sector......................................................................................................... 14

2.6

PESTEL Analysis............................................................................................................................................................. 14

2.7

Porters Five Forces Analysis.......................................................................................................................................... 18

2.8

Strategic Group Mapping............................................................................................................................................... 23

2.9

Competitive Landscape................................................................................................................................................. 24

2.10 Market Segmentation.................................................................................................................................................... 25

2.11 Buying Criteria Analysis of the Industry......................................................................................................................... 26
2.12 Key trends and future developments............................................................................................................................. 28
2.13 Highlights Of Union Budget 2016 Impact On Steel Sector.......................................................................................... 29
3

Company Overview.............................................................................................................................................................. 30

3.1

Company background.................................................................................................................................................... 30

3.2

Timeline with key milestones and their strategic impact............................................................................................... 31

3.3

Vision, Mission, Goals, and Strategic Themes................................................................................................................ 33

3.4

Key Product and Service Portfolio.................................................................................................................................. 35

3.5

Core Competencies of the firm...................................................................................................................................... 38

3.6

Business Model of the organization............................................................................................................................... 39

3.7

3rd Generation Balanced Scorecard (Amalgamation of 1st Generation BSC and Activity System Map)........................41

3.8

SWOT Analysis............................................................................................................................................................... 43

3.9

Competitor Analysis (identify competitors)................................................................................................................... 44

3.9.1

Based on Critical Success factors............................................................................................................................ 44

3.9.2

Based on Financial indicators.................................................................................................................................. 45

Future Growth Strategy for the organization........................................................................................................................ 45

4.1

Portfolio Analysis........................................................................................................................................................... 45

4.1.1

Based on BCG Matrix............................................................................................................................................... 45

4.2

Companys Strategic Roadmap for future...................................................................................................................... 47

4.3

Re-imagining the Organization with the transformed business model or Use-case based on SMAC and IOE................50

4.3.1

Reimagining Business Processes............................................................................................................................. 50

4.3.2

Reimagining Customer Segments........................................................................................................................... 50

4.3.3

Reimagining Products & Services............................................................................................................................ 51

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.

Key Consumers of this industry and

their changing needs

Steel industry works on a Business-to-Business mode of operation. Being a vital input in

most industries steel has a huge consumption across sectors. Some of the key end
consumer of steel are sectors such as Construction, Automotive, Machines &
Engineering equipments, Aerospace, Railways, Energy, Consumer Goods etc.
Steel industry does see some fluctuation in demand with the turn of events in the
global economy. The crisis of 2007-08 resulted in a fall in Construction activity which
resulted in a decline in steel consumption. However, the per capita consumption of
total finished steel in India has risen from 51 Kg in 2009-10 to about 59 Kg in 2014-15.
India's steel consumption for FY 2015-16 is estimated to increase by 7 per cent, higher

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.

Total Available Market Size (National

and Global)

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.

Total Serviceable Market Size (National

and Global)

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%.

2.2 Key Growth drivers for the Industry

Key Growth drivers

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.

Rising disposable incomes

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.

2.3 Identification of Critical Success Factors (CSF)

Critical Success Factor identified

Rationale

CSF 1 Economic and Financial

Factors

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.

CSF 2 Customer Relationships

Efficient csrs and strong company image

Quality products at a reasonable price

CSF 3 Knowledge and Learning

Enhanced competencies in the formulation and implementation of CSR

Integration of cost consciousness in organisational culture and processes

CSF 4 Internal Process

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

2.4 Industry Benchmarks

Size of industry:

Category

Industry Level
(National)

Activity Ratios

Indicator

Industry Average of Top 5 Firms or

players serving 75-80% of the market

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

Industry Average of Top 5 Firms or

players serving 75-80% of the market

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

Industry Average of Top 5 Firms or

players serving 75-80% of the market

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

Industry Average of Top 5 Firms or

players serving 75-80% of the market

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

Industry Average of Top 5 Firms or

players serving 75-80% of the market

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

2.5 Import and Export Scenario in Indian Steel sector

Indian steel industry : Imports (in million tonnes)
Category
2010-11
2011-12
2012-13
Total Finished Steel (alloy + non alloy)
6.66
6.86
7.93

2013-14
5.45

2014-15
9.32

Indian steel industry : Exports (in million tonnes)

Category
2010-11
2011-12
2012-13
Total Finished Steel (alloy + non alloy)
3.64
4.59
5.37

2013-14
5.98

2014-15
5.59

2.6 PESTEL Analysis

Category
Political

Description

Key factors for analysis

Rationale

Anti-Dumping duties on cheap

steel import will benefit Tata
Steel
Tie ups with the Govt. on
campaigns like Make In
India are boosting the
visibility and reach of the Tata
Steel brand
High amount of risk by
investing in the countries like
Bangladesh, Iran, and
Thailand. E.g. Bangladesh and
Iran projects are getting
delayed due to political issues

Continuous infrastructural
development bound to decrease
costs

With delicensing and decontrolling

of capacity restrictions, Tata Steel
has come a long way and produces
29 mn. tonnes today

100% FDI allowed in the Steel

sector has given a huge boost to the
industry as a whole

Advance Licensing Scheme allows

duty free import of raw materials for
exports.

Iron and Steel industry has

been included in the list of

Price and distribution of steel were

14

`high priority' industries for

automatic approval for foreign
equity investment up to 100%.

deregulated from January 1992.

The Planning Commission has

approved a total outlay of US$ 9.5

billion for the development and
promotion of the iron and steel
sector.
The scheme for the promotion of

The National Steel policy 2005

targets indigenous production
of 110 million tonnes (mt) by
2019-20 against targeted
consumption of 90 mt by
2019-20.

Economic

Analysts
predict tough
2016 for the
steel industry
worldwide but
expect India to

Slowdown in Chinese economy

may benefit Tata Steel
Steel industry faces cyclical
economic condition because if
consuming industries like
automobiles, appliances face

research and development in the

iron and steel sector has been
approved with a budgetary
provision of US$ 24.6 million to
initiate and implement the
provisions of the scheme.
Apart from this restrictions on the
import and export have been
reduced

Reduction in import and tariff

reduced from the 105%im year
1992-1993to 30% in the year 19961997.

Cost of acquisition for Corus was

beyond financial expectation. Huge
debt on liability side will need to be
reduced
Subprime crisis in US and Europe
led to huge losses in opportunity

15

remain more
profitable than
its Asian peers.

Social

Technological

Environmental

any downturn steel companies

also may share the losses

Tatas have
been known to
be ethical and
socially active.
They have
been proemployees and
industry
analysts
attribute their
success to the
same

Known for its ethical behavior

and employee-care Tata steel
was awarded the GOLDEN
PEACOCK GLOBAL AWARD

800 villages in Jharkhand,

Orissa and Chhattisgarh are
benefitted on issues like
healthcare, economic
wellbeing and education. E.g.
Hospital on wheels

Although Tata
Steel is one of
the most
modern steelmakers in India,
they are still
behind the
state-of-art
practices.

cost for Tata steel as the

Netherlands, United Kingdom and
Germany are the main markets for
CORUS

They have responsibly helped in

habitation of slum areas in urban
developing cities.

Metal Junction, an e-portal to

sell steel online in
collaboration with SAIL, the
biggest market for the
purchasing and selling of the
steel in the world.

Tata Steel invests in R&D to reduce

energy consumption in the
production process.

To reduce the emersions of the

Tata steel is designing a programme

16

co2nin the environment the

Tata steel is on with the
research of the ultra-low
carbon steel.
Legal

Issue of land acquisitions in

Singur, West Bengal
From past 100 years the
company work is not disturbed
because of any kind of the
strikes and internal issues
Tata steel ensures the EHS
(Environmental health and
safety) under which each and
every employees activity is
managed by the EHS
framework.

in which Tata steel would be able to

reduce the co2 emersion by 20 %.
A JV with L&T for the protection of
the Olive Ridley sea Turtles at
Dharma port
Mines and Minerals (Regulation and
Development and Regulation) Bill,
2010, requires mining companies to
share 26% of its profit with local
inhabitants. Royalties accounted for
3.4 % of Tata Steel's stand-alone
expenses last year. The new
charges could account for nine per
cent of their total expenditure and
cost them 5-6 per cent of their
operating profits.
Unstable government in Jharkhand
and various tribal protestors are
creating some legal issues for the
Tata steel to set up 12 MTPA green
field plant.

17

2.7 Porters Five Forces Analysis

Porters Five Forces

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

Key factors for analysis

Rising no. of substitutes

Switching Costs

Scales of buyer purchases

differentiated products

Competition between buyers

Availability of information

Threat of backward integration

Concentration of buyer power

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

Competition in Supplier Industry

substitutes of suppliers'
products
Importance of buyer to the
supplier
Switching costs for suppliers'
products
Threat of forward integration by
suppliers

The easier it is to switch suppliers, the

less bargaining power they have. Low
supplier switching costs positively
affect Steel Industry. These statements
will have a short-term positive impact on
this entity, which adds to its value. Low
Cost of Switching Suppliers is a difficult
qualitative factor to defend, so competing
institutions will have an easy time
overcoming it. Low Cost of Switching
Suppliers will have a long-term negative
impact on this entity, which subtracts
from the entity's value.

The cost of the raw materials tend to

fluctuate greatly and therefore in the long
run, players with captive sources of
inputs will be better insulated against the
rising prices and better equipped to
withstand downturns in the market.
Players like Tata Steel have entered into
contractual agreements with Miners for
procurement of iron ore.

Listed/Large competitors in Th The top 4 firm concentration ratio of the

Iron and Steel Industry is 71%.
ascending order of size
This implies that there is oligopoly in the
o JSW Steel
industry as it is dominated my few major
players. Major percentage of market
o SAIL

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

output is generated by the 4 largest firms

in the industry. Large no of
unorganized players
Major players are competing among
themselves

o Rashtriya Ispat Nigam

Limited

Capital Requirement
Economies of scale
Government Policy
Product differentiation

Capital Requirement: Steel industry

is a capital intensive business. It is
estimated that to set up 1 mtpa
capacity of integrated steel plant, it
requires between Rs 25 bn to Rs 30 bn
depending upon the location of the
plant and technology used.

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. It may be noted that those
steel companies, which are integrated,
have their own mines for key raw
materials such as iron ore and coal

20

and this protects them for the

potential threat for new entrants to a
significant extent.

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.

Product differentiation: Steel has

very low barriers in terms of product
differentiation as it doesn't fall into the
luxury or specialty goods and thus
does not have any substantial price
difference.
However,
certain
companies like Tata Steel still enjoy a
premium for their products because of
its quality and its brand value created
more than 100 years back. Bargaining
power
of
buyers:
Unlike
the FMCG or retail sectors, the buyers
have
a
low
bargaining
power.
However, the government may curb or
put a ceiling on prices if it feels the
need to do so. The steel companies

21

either sell the steel directly to the user

industries or through their own
distribution
networks.
Some
companies also do exports.
Threat to substitutes

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

Relative price and performance

of substitutes

Cost of switching to substitutes

Coke

Strong Demand Growth Driven by

increased Focus on Fuel Diversification

Limestone

553 limestone mines existed way back

in 2011-2012 in India

It is medium to low. Although usage of

aluminium has been raising continuously
in the automobile and consumer durables
sectors, it still does not pose any
significant threat to steel as the latter
cannot be replaced completely and the
cost differential is also very high.

The demand for these two complementary

products are being led in the Asian
geography by India and China. With Chinas
GDP and internal demand declining, India is
expected to have huge gains

22

2.8 Strategic Group Mapping

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

2.9 Competitive Landscape

Value propositions ( Low Cost, Differentiation, Niche)

Competitive Strength Assessment (Normal and Weighted)
o NORMAL

MEASURE

Long Term Contracts for

Raw Materials
Low Production Costs
Export Capability
Value added Services
o

Tata
Steel

SAIL

JSW

Jindal
Steel

Essar
Steel

Norm
al
ratios

RATIN RATIN RATIN RATING RATIN

G
G
G
G
9
9
6.5
3
1
9

7.5

31.58
%
24.00
%
34.62
%
29.63
%

WEIGHTED

24

MEASURE

WEIG
HT

Long Term Contracts for

Raw Materials
Low Production Costs
Export Capability
Value added Services
Scores

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

2.10 Market Segmentation

Key Products and/or Services
Flat Products
- Hot Rolled
- Cold Rolled
- Metallic Coated
- Direct Rolled
- Tubes
- Pre-finished Steels
- Packaging Steels
- Electro Plated Steels
- Electrical Steels
- Narrow Strip
Agricultural Implements
Bearings
Processes

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

Asia excluding India

Europe

Rest of the world

25

- Building Components

2.11 Buying Criteria Analysis of the Industry

Parameter

Details

End-user Segments

Significance Attached (Low,

Medium, High)

Strength of Steel

It is a measure of the tensile

strength of the steel. The
automobile sector has shown
an increased demand for
HSS(High Strength Steel) and
UHSS (Ultra High Strength
Steel) in the recent years.
The prime reason for using
steel in the body structure of
an automotive is its inherent
capability to absorb impact

Automobile Sector
Construction Industry
Individual Customers

High
High
Low

26

energy in a crash situation .

This, in combination with the
good formability and joining
capability, makes these
materials often a first choice.

Formability

Resistance to corrosion

With HSS, there can be a

tradeoff
between strength and
formability; in other words,
the stronger a steel is, e.g., in
resisting
stretching (tension), the more
difficult it can be to forge into
shapes, particularly the
stylistically and
aerodynamically optimized
shapes needed for new
vehicles. Steel suppliers
are therefore developing
steels with a range of
properties that give
engineers more flexibility
in selecting an ideal grade of
steel for any given
application.
The automobile and
construction sectors prefer
different alloys of stainless
steel as it provides them
better resistance to corrosion.

High
Automobile Sector

Automobile Sector
Construction Sector

High

27

Price/Value

The value attached to the

product bought by a
customer by paying a
particular price.

Individual Customers
B2B Clients

High
High

On Time Supply

Most of the clients are B2B

customers, have a preplanned schedule. In case

B2B clients

Low

the order is not completed

on time, then it could
result in payment of the
large amount as a penalty.
Therefore, on time supply
of top quality of steel is
needed so the production
isnt affected.

2.12 Key trends and future developments

Key Trend

Impact on Industry (Low, Medium, High)

Certainty of Impact (Low probability, medium

probability, high probability)

Increased Domestic Competition:

The incumbent and challengers in the
sector have announced 71 MTPA of
steel capacity between 2012 and 2017
through both Greenfield and Brownfield

Medium. An increase in capacity and

supply needs to be matched with a
growing demand for greater
profitability. Steel firms have been
making losses and operating with

Medium Probability. With the government

announcing an increase in public expenditure
in the Union Budget on infrastructure and
housing there would be greater demand for
steel.

28

projects.

negative cash flows.

Muted Global Demand for Steel :

Global steel demand to continue to
grow at 2-4% p.a. Recent recession and
economy slowdown impacted steel
industry growth.

Medium-High. Steel demand is

expected to flatten in OECD economies
and other heavy weight economies as
signs of recovery are slow. Structural
shifts in China resulting in over capacity
can impact other regional players in
Asia including Indian players resulting
in lesser margins.

Increasing Mergers& Acquisitions:

Facing myriad challenges like demand
volatility, over supply, under utilisation
of capacity, steel makers will fight for
survival. Taking cue from takeovers
such as Tata-Corus and Arcelor-Mittal,
there is likely to be an increase in M&A
acitivity. Limited access to capital
would also force some closures and
invitation for mergers.

Medium. Increased M&A would result

in rationalisation of the sector. Cut
down of over production, better
capacity utilisation. Might also result in
portfolio optimisation as steel makers
would assess the assets and tweak as
per demand ( sectoral demands).

However, land acquisitions and regulatory

clearances prove to be hurdle.
Medium Probability. A McKinsey report puts
the CAGR growth of global steel demand at
3.5% between 2013-20. However the report
also states that the next cycle of growth would
come from the developing economies- Asia,
Africa and Latin America. With a pro reforms
government in seat and rising GDP figures for
emerging economies one can see a gradual
peak in demand. Indias demand to grow at 56%p.a.
Low-Medium Probability. With 80% of global
steel industry operating with negative cash
flows over the past 3-4 years, a big merger or
acquisition is less likely especially as demand is
muted. However, aggressive players from
emerging economies might find this a lucrative
opportunity to expand business. This would
also provide the opportunity to increase their
asset base and product diversity.

2.13 Highlights Of Union Budget 2016 Impact On Steel Sector

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.

3.2 Timeline with key milestones and their strategic impact

1907: Tata Iron & Steel Co Ltd was established by Jamsetji Tata. Iron making commenced in Bihar where rich iron ore
(deposits) had been identified in the early 1900s.
1911: Blast Furnace operation at Sakchi begins.
1919: The iron and steelmaking factory in Sakchi and adjacent township was later named Jamshedpur.
1912: At this time, a 12 hour working day was the legal requirement in Britain.
1920: Leave-with-pay introduced. This practice was rare pre-1940s.
1924: TISCO close to closure as a result of 1920s Depression.

31

1971: Government attempt to nationalize TISCO fails.

1987: Collaboration started with Timken in bearings production.
1987: Collaboration with the Timken Co (USA) was in the setup of Tata Timken for the manufacture of industrial bearings.
1996: Tata Ryerson was a joint venture that would provide industrial materials management services in India.
2001: Announces closure of steelmaking in Llanwern, South Wales.
2004: An online trading and procurement platform was launched (website: www.mjunction.com). It is a joint venture of Tata
Steel and SAIL (Steel Authority of India)
2005: TISCO changed its name to Tata Steel.
2007: Expansion in Vietnam by Tata Steel was affected through NatSteel Asia Pte Ltd (Tata's wholly owned Singapore
subsidiary).
2007: Bid for Corus commenced in 2006 with a deal signed by Tata Iron & Steel and Corus. Around 1 month after this deal
was signed; Brazil's CSN launched a counter offer to Corus. Within a few weeks, Tata Steel increased their original offer which
was matched within a few hours by a yet higher offer from CSN. Around 6 weeks later, Tata Steel won the bid - albeit at a
markedly higher price than Tata's original offer.
2010: Mothballing of the Teesside plant was regarded as necessary after the consortium involved in the steel off take contract
(for which a 10-year deal was signed in 2005) pulled out of the steel slab purchasing arrangement, soon after the financial
and steel market crisis of summer in 2008. Thailand's SSI later purchased Teesside plant.
2011: Mothballing of Llanwern intended as a temporary measure, with HSM restart [it was subject to steel market demand
conditions] anticipated at the end in 2012.
2013: Tata Steel Europe reports record GBP 1.2 billion losses.
2015: With the decision (August 2015) to close Llanwern hot strip mill, production of HRC was to be centred on Port Talbot.
2015: Mothballing of Tata Steel's Scunthorpe plate mill, closure of the Dawes Lane coke oven complex, closure of steel plants
in Dalzell and Clydebridge in October 2015. Other in October 2015 steel plant closures in the UK included Redcar in Teeside.

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.

3.3 Vision, Mission, Goals, and Strategic Themes

The journey of Tata Steel has seen the Company re-define its performance parameters constantly to become the
global steel industry benchmark for value creation and, corporate citizenship. Tata Steel ensures a total
commitment to its ethical business practices and a people oriented vision:
3.3.1 Vision
Tata Steel aspires to be the global steel industry benchmark for
Value Creation and Corporate Citizenship
Tata Steel makes the difference through:
People:
By fostering teamwork, nurturing talent, enhancing leadership capability and acting with pace, pride and passion.
Offer:
By becoming the supplier of choice, delivering premium products and services and creating value for its customers.
Innovative Approach:
By developing leading edge solutions in technology, processes and products.

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.

3.3.3 Goals and Strategic Themes

Tata Steel has taken several strategic initiatives to leverage its strength and counter challenges in all its geographies.
Some key initiatives in India include the greenfield expansion project at Odisha; entry into the steel doors segment under
the brand name Pravesh; Kar Vijay Har Shikhar (KVHS) operations programme led to improvement projects across the value
chain resulting in savings of `1800+ crores; Shikhar 25, expected to achieve 25% EBITDA in next 3-4 years and the Find itOwn it- Fix it Safety Campaign.
In Europe, the Company's market differentiation strategy will help develop a sustainable long-term position in its chosen
markets; and the New Product Development pipeline is enabling the launch of new products. 30 new products were launched
during Financial Year 2013-14. In Financial Year 2014-15 another 35 products were launched. In addition, an innovative new
iron making technology is being piloted which could improve resource efficiency.

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.

3.4 Key Product and Service Portfolio

Tata Steel products are manufactured using the most advanced technology. A disciplined production process is followed at all
Tata Steel production units to ensure the products are superior in quality and consistent in mechanical and chemical
properties. All products as well as the production units are certified as per the highest national as well as international
standards and carry the same trust that the brand Tata commands.
As Steel is an essential commodity in many industries and across sectors hence the key products and offerings of TATA Steel
are used across them.
Tata Steel serves customers in all major market sectors globally, and recognises that each sector (E.g. automotive or
construction or packaging) requires different solutions to meet its specific needs. Depending on market, region and
specification of the product the offerings might vary.
Some of the sectors are:
1.
2.
3.
4.

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

3.5 Core Competencies of the firm

The TATA Group lives by its mission and vision of Improving the Quality of Life. Hence all the TATA companies derive strength
as also the core strategy from that. Some of the instances are cited below:

-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.

3.6 Business Model of the organization

Key Partners

NAT Steel
Millenium Steel
Corus Steel

Key
Activities

Mining
Extraction
Manufacturing
Customising

Value

Trusted Brand

Motivations for partnerships

More capital/fund is available and the business has more
borrowing power.
Partners share the decision making and can help each other out
when they need to.
That people will need to stay or work in better spaces and dress
better.
Reward to risk ratio will increase
To leverage synergies between Tata Steel and Corus and
accelerate performance improvement through learning and
sharing, a Performance Improvement (PI) Committee has been
constituted.
Under this committee 7 PI groups have started functioning,
identifying Key Performance Indicators (KPIs) to be improved and
improvement projects to be undertaken across various sites of
the Tata Steel Group.
Over the years, Tata Steel has placed a continuous emphasis on

39

Propositions

Highly Valued by all

Stakeholders
Variety of Products

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

improving processes, with a view to consistently increasing

efficiencies, enhancing quality, and thereby achieving better
performance benchmarks in all areas.
The various initiatives taken by the several companies in its
operations across the world have seen the development of
several models that have sustained over the years and have now
become institutions.
These initiatives typically have been designed to encompass in
their fold all the people down the line, so that process
improvement becomes a way of life.
The process of value creation at Tata Steel is based on five key actions.
Customer need identification through a number of active
listening and learning mechanisms.
Analyses and prioritisation of inputs. Evaluation of potential
value for customers and feasibility checks.
Implementation of pilot projects through cross functional teams.
Monitoring of projects.
The Companys Long Product Division launched RAISE
(Responsible Architectural Initiatives and Structural Engineering),
an initiative promoted with INSDAG, to engage with architects
and structural engineers across India.
The programme aims at driving responsible construction
practices and creating brand ambassadors in the process.

A holistic approach to the use of natural resources led to

improvements in the productivity of customers who manufacture
continuous electrodes for the auto industry from WR3M / Low Ca
ER70S6 grades of wire rods.
The 100% increase in speed and productivity has led to a
reduction in power consumption and water that makes up for
consumption in different parts of the products value chain.

40

Channels

Cost
Structure

Traditional supply chains

directly to consumer
Processing Costs
Interest on Debt
Raw Material Extraction.

Revenue
Streams

Steel Tubes
Alloys
Sale of Minerals & Bearings
Sale of power and water.

Steel prices are now increasingly aligning to global export prices

as markets strike a balance between imports and domestic
demand. Chinas waning demand and resultant rise in exports
poses a risk to leveraging improving domestic demand in South
Asia and Europe.
Further, movement of currencies against US$ would also have a
significant impact on the movement of global steel and raw
material prices.
Annual sales in the Automotive segment at a record 1.37 million
tonnes, as against 1.17 million tonnes in the previous year.
Annual Tata Tiscon sales at a record 1.23 million tonnes, as
against 1.09 million tonnes in the previous year.
Annual Tata Shaktee sales at a record 0.23 million tonnes, as
against 0.21 million tonnes in the previous year.
Annual Durashine sales at a record 100k tonnes (20% more than
the previous best).
Annual sales in the LPG segment at a record 85k tonnes and a
market share of 36% (23% in the previous year).

3.7 3rd Generation Balanced Scorecard (Amalgamation of 1st Generation BSC and Activity System Map)
Financial:

41

-Turnover at 1, 65,000 Cr by 2015.

-EBITDA at 15,000 Cr by 2015.
- PAT is at -5000 Cr by 2015.
-India leads in geographical distribution of revenue at 29% and in capital employed by geographies at 46% for TATA
Steel.

Customer:
-

Diversified Customer Base

Diverse Sectors & Usage: Automotive, Construction, Consumer goods, Defence etc
Increasing marketing efforts in Rail Ship, Aerospace, Nuclear etc.

Internal Business Process:

-

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.

Learning & Growth:

-

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.

42

Growth of company has been slow due to recent global slowdown owing to Subprime Crisis. Effected by
economic cycles.

3.8 SWOT Analysis

STRENGTHS
Experience, Micro Environment, Business
Model, Expertise, Resources and
Capabilities, Culture, Access to raw
materials
Opportunities
Exports, New Products, New Markets,
Mergers and Acquisitions, Growth of
Infrastructure.

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.

Strengths of Tata Steel

Tata Steel is the pioneer of steel business in India and thus enjoys brand equity. Tata Steel has a multiple
companies under the same banner, which gives it an advantage of value-chain efficiency, whereby the company
can utilize products made in its sister companies to process raw materials and increase efficiency.

43

Weaknesses of Tata Steel

The biggest weakness of Tata Steel is its increasing debt-to-equity ratio. Most of its assets are financed by debt,
which can be dangerous in the long-run. Tata Steel largely depends on domestic and a few international markets
for generating business. This over-dependence can prove to be fatal in times of economic crisis.

Opportunities for Tata Steel

Tata Steel is branching out to overseas market. The company has recently signed a deal with Corus group, which
provides access to European markets. Tata Steel will now be in a position to utilize the R&D facility and the patents
owned by the Corus group. Exposure to new technologies and markets is a big advantage for the company.

Threats to Tata Steel

In the current scenario, the biggest threat for Tata Steel is to maintain the Co2 emission standards when it starts its
operations in Europe. The sudden overseas exposure along with a possible economic slowdown is the biggest
challenge faced by Tata Steel in the present circumstances.

3.9 Competitor Analysis (identify competitors)

3.9.1 Based on Critical Success factors

MEASURE

WEIGHT

Tata Steel
RATING

Long Term Contracts for Raw Materials

Low Production Costs
Export Capability

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

Value added Services

0.10

0.8
8.9

4
12.25

2.5
8.225

3.9.2 Based on Financial indicators

Steel
Authority of
India

Tata Steel
Limited

Bhusan
Steel

Ispat
Industries]

JSW Steel

Jindal St &
Pwr

Welspun
Gujarat

Adhunik
Metaliks

Market Cap (Rs Cr)

60,303.84

23,093.28

2,635

2,078.08

8,949.82

29,260

2,320.29

508

Sales (Rs Cr)

8,920.63

4,802.14

1,119.95

1,123.55

3,573.61

1,781.07

1,456.63

258.97

Net Profit Margin

(%)

18.16

23.43

10.09

0.41

14.92

22.79

8.7

7.96

4 Future Growth Strategy for the organization

4.1 Portfolio Analysis
4.1.1 Based on BCG Matrix
Focus on improving the product and service portfolio, has led Tata Steel to be uniquely positioned to serve the
growth markets globally. Also, it has given special focus on value engineering activities. Over the years, the Tata

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

Ferro alloys and minerals division

Infrastructural investment in Asia resulted in
improvement in the demand for
stainless steel. The first oversees
hub of Tata Steel was established
in South Korea. In India. This
division of Tata Steel is the market
leader in Ferro Chrome Business
with a market share of around 27%. TATA Steel
attained the status of being the largest producer of
Manganese Alloys in India

QUESTION MARKS

Bearing division and the tubes division

They are growing rapidly but
have low market product
share. This division has
the potential to gain market
share and become a star. It
can also become cash cow
when the market growth
slows down after reaching its
potential

46

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.

4.2 Companys Strategic Roadmap for future

Growth Areas

Near Term (<- 2 years)

Mid Term (2-5 years)

Domestic Consumption:
Domestic consumption is
expected to grow at 5.3%
in 2016.

Smart Cities: 100 smart

cities to be built.

Govt Projects: Metro

projects of Delhi,
Bangalore, Hyderabad and
other cities, infrastructure
projects.

Govt Projects: Metro

rails, Infrastructure etc.
First 20 smart cities have

Long Term (5-10 years)

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

been finalised and the next

23 cities will be finalised by
April 2016. These 43 cities
will receive funds of 200
crores each in the 20162017.

kgs in 2025-26, and

given the fact that
the population of
India is projected to
grow to 1.45 billion
that year, the steel
consumption in 202526 is likely to be
around 250 million
tonnes.
The goal of India to
increase share of
manufacturing to 25
per cent of GDP by
2025. The above
target if achieved can
propel the usage of
finished steel from
17.6 kgs / $ PPP in
the year 2014 to 22
25 kgs / $ PPP in the
year 2025-26. This
would mean a growth
in steel consumption
of 9 -10 per cent and
the steel
consumption in 202526 is likely to be
around 230 250

48

High Level Tasks

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

Enhanced global presence

and entering new markets

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.

capture market transitions

and stakeholder
satisfaction

Boost in export incentives

Tax benefits
Growth depends on
success of capacity

49

Key Success Factors

posing a threat to the

business.
Disruption in supply of raw
materials
because
of
government regulations in
India
Captive Sources of ores;
Technology

indebtedness could affect

the financial flexibility

expansion projects,
restructuring.

Captive Sources of Steel,

Value Added Services;
Technology transfers

Captive Sources of ores,

Export Capability;
Technology

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

50

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.

51

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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