Tata Steel Corporate Strategy Group5

Tata Steel

1Corporate Strategy

Tata SteelCorporate Strategy

Group 52011

Tata Steel

History

2Corporate Strategy

History

1907 : Tata Steel was

established by Indian

Parsi businessman

Jamshedji Tata

1924: Manufacture of Steel by Duplex Process

commenced

1934: Profit-sharing Bonus

granted-first time in India

1935: Production of high-tensile steel commenced.

1938: J R D Tata

succeeds Sir N B

Saklatvala as the

Chairman of the

company.

1941-42: Manufact

ure of special steels

for war purpose

developed

1951-52: Tata Steel launches a

Modernization and Expansion Program

1965: The Steel Ministry agrees to

expansion to 4-Million Ingot tones with a Strip

Mill.

1991: In 1991, Ratan N Tata took over as

group chairman from J.R.D. Tata

3Corporate Strategy

History

4Corporate Strategy

1993-94: Several divisions of the

Company received ISO-9000

certification.

2000: In the year 2000, the company was recognized as the world's lowest-

cost producer of steel

2005: The company was also recognised as the world's best steel producer by

World Steel Dynamics in 2005.

2006-2007 :The Company’s steel

works at Jamshedpur crosses 5 million

tonne mark in crude steel

production.

2009- 2010:The Company was

awarded the CSR Excellence Award

2010 by the Associated

Chambers of Commerce and

Industry

Mission

Consistent with the vision and values of the founder Jamsetji Tata, Tata Steel “strives to strengthen India’s industrial base through the effective utilization

of staff and materials”

.

5Corporate Strategy

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

Vision

Our vision is to be the global steel industry benchmark for value creation and corporate citizenship.

We will achieve our vision through:

Corporate Strategy

Our conduct, by fostering teamwork, nurturing talent, enhancing leadership capability and working together

with pace, pride and passion

Our offer, by developing leading-edge solutions in technology, processes and products.

Our people, by becoming the supplier of choice, delivering premium products and services, and creating

value in close partnership with our customers.

Our innovation, by providing a safe and healthy workplace, respecting the environment, caring for our

communities and demonstrating high ethical standards.

Tata Steel

Present Performance

7Corporate Strategy

Present Performanc

e

8Corporate Strategy

.

Present Performanc

e

9Corporate Strategy

Present Performanc

e

10Corporate Strategy

Tata Steel

Corporate Strategy


Corporate Strategies


1 • Creating Greenfield capacities in India as well as at one or two places internationally

2• Brownfield operations abroad• For getting more in terms of branding & distribution• NatSteel & Millennium Steel acquisition• Corus – 19 million tones per annum

3• Tata along with Corus, looking at enhancing product

range to combat competition from plastic & aluminum

4• Differentiated product strategy, customer focus, cost

reduction programmes for European operations to create sustainable value in the future

5• Gaining security over raw materials in Europe• Direct Shipping Ore (DSO) Project in Canada,

Sedibeng Project in South Africa

6 • “Kar Vijay Har Shikhar” (Conquer every Peak)

Long

Term

Strategies


Tata Steel

Competition AnalysisA Matrix


Competition

Matrix


Parameters Tata Steel SAIL JSW VISA Steel

Production Capacity (mtpa) 7.4 13.5 8.4 3.5

Market Share 11% 32% 19% 8%

Year of establishment 1907 1954 1984 1996

Products

Construction Bars, Hot rolled sheets & coils, Cold roll sheets & coils, wires

and rods

Rods, pipes, rails, Hot rolled sheets & coils, Cold roll sheets

& coils

Hot rolled sheets & coils, Cold roll sheets

& coils, galvanized

sheets & coils

Alloy & steel metals catering to automobile,

railway, infrastructure, defense sector

etc

Net Worth (crores) 46,944.63 37,069.47 17,225.27 353.29

Revenue/ Turnover Rs 118.75 billion Rs 430.34 billion Rs 30 billion Rs 13.32 billion

Global Presence

Operations in 24 countries & commercial

presence in over 50 countries

Export to over 20 countries, JV to acquire coal mines abroad, expansion plan with emphasis on state of the

art technologies

Acquisition of steel mill in US, tie up in Japan for high grade

automotive steel

Presence in India, China,

Australia, Indonesia, South

Africa & Singapore

Competition

Matrix


Organization Strategy

Tata Steel

• Greenfield capacities in India & abroad• International acquisition for getting more in terms of branding & distribution – NatSteel & Millennium Steel• Tata along with Corus looking at enhancing its product range to combat competition from plastic & aluminum• TSE – leverage the global presence of the wider Tata Group• Market differentiation, technological innovation & operation excellence to reduce conversion costs

SAIL

• Multi pronged strategy to emphasize on input security & cost – competitiveness, expand marketing network & enhance productivity by focusing on best work practices• Strategic alliances with internationally reputed steel companies to contribute to national economic growth• Looking at JVs with Posco, talks having been held with Arcelor Mittal

JSW

• Strategy of Vertical Integration (Forward & Backward) & Horizontal expansion (growth in volumes)• Move from developed economies to India due to the meltdown of 2008 2009• Closed down UK service centre facility, relocated production assets to India, close to steel consuming markets & automotive hubs

VISA Steel

• Focused on its vision to emerge as the lowest cost producer of value added steel products• By mining its own iron ore & coal in order to improve margins• Capture a Iron Ore mining lease in Orissa & Chhattisgarh in the near future• Identifying products with demand growth

Competition

Matrix


Organization Competitive Advantage

Tata Steel• A distinct advantage in raw material sourcing. • Striving for raw material security through joint venture in Thailand, Australia, Mozambique, Ivory Coast and Oman

SAIL• Operational efficiency, valued added steel added to product basket & provided competitive advantage in a recessionary steel market• Updated back – end technology infrastructure

JSW• Concentration on India as a place for making & selling steel, as opposed to other parts of the world• Flexible product mix to meet client needs

VISA Steel

• Proximity to infrastructure facilities in Kalinganaagar, Orissa – Rail, road, port, power & water• Raw Material Linkage – Govt of Orissa – MoU• Long Purchase agreement with Visa Comtrade AG – supply of 500,000 TPA coking coal• Expertise in raw material sourcing

Geographic

al Presenc

e


Tata Steel

SWOT


SWOT Matrix


Environment Analysis

InternalAnalysis

Strengths Weaknesses

ExternalAnalysis

Opportunities Threats

SWOT Analysis


Stren

gths

•Brand Equity•Value Chain Efficiency•Resources & Capabilities•Existing Dealers & Service Networks•Large Shareholder Base For Capital Needs.•Business Model, ERM

Weaknes

s

•Increasing Debt to Equity Ratio•Over Dependence On Indian Markets• Deficiency in raw material

Opportunities

• Branching Out to Overseas Market

• Mergers & Acquisitions

Threat

• Maintain CO2

Emission Standards

• Possible Economic Slowdown

Tata Steel

Porter’s Diamond


International

presenc

e

Tata Steel International was launched in March 2009. Formed from Corus International’s global projects, mill sales and trading network and Tata

Steel’s overseas sales offices, Tata Steel International is the single commercial face for Tata Steel Group across all international markets.


Key Customers


Bokaro Steel Plant INDOMAG Saudi Iron & Steel

JSPL Steel Plant Salem Steel Qatar Steel

MECON Ltd. Rourkela Steel Plant Thyssen Steel

Durgapur Steel Plant VAI Nordberg

Anjani Steels Ltd Tinplate Company of India VAI UK

Usha Martin Limited JVSL Steel Plant Steel Sector, Australia

Bhilai Steel Plant Concast

Sectors


Aerospace Consumer products Lifting and Excavating

Automotive Defense and Security Packaging

Construction Energy and Power Rail

Competitors


Porter’s Diamond

Analysis


Government

Chance

Factor

Conditions


Factor Conditions:

Factor Advanta

ges

•Low Labor Cost in India: Skilled and Unskilled•India is well equipped with iron ore reserves. •Goodwill

Factor Disadvan

tages

•Low quality of Raw Material: Quality of both iron ore and coal is very low. India’s iron ores have relatively high alumina and low iron contents•Power shortages hamper production at many locations.•In India, insufficient freight capacity and a weak transport infrastructure

Demand

Conditions


Demand Conditions:

Demand drivers of steel in India

• Automobile Production• Ships Manufacturing• Industrial for Consumer Durables• Infrastructure Growth• Construction Sector Growth

Related &

Supporting Industries


Related & Supporting Industries:

In a national framework, a strong network of competitors, suppliers and service providers is created that collectively

influence a healthy growth of business, increase demands and boost supplies.

• Automobile Engineering• Mechanical Engineering• Equipment Production

• Construction

Strategy

, Structure & Rivalry


Firm Strategy, Structure & Rivalry:

Strategy•To have a Global presence.•Acquire smaller weaker companies and increase market share.•Produce its own raw material.

Structure•Tall Structure ensures proper balance and checks.•Increases productivity•Therefore improves economy

Rivalry•Domestic Rivals: SAIL, Jindal Steel, Visa Steel, Bhushan Steel•International Rivals: ArcelorMittal, HBIS Steel, POSCO, Nippon

Government


Government:

Government

• Price and distribution controls have been removed as well as foreign direct investment up to 100% (under automatic route) has been permitted

• Trade Policy has also been liberalized: Import and export of iron and steel is freely allowed with no quantitative restrictions on import of iron and steel items.

• Leasing Land: Jharkhand Government has renewed Jamshedpur land lease agreement with Tata steel for a period of 30 years.

• Support from Orissa Government: As Tata Steel touched the lives of more than 25,000 needy families in 500 villages in Orissa bringing in health care, education, livelihoods and rural infrastructure.

Tata Steel

Porter’s Five Forces Model


Porter’s

Five Force

s Analysis


Inter-firm rivalry-

medium to low

Porter’s

Five Force

s Analysis


Capital requirement

Government Policy

Economies of scale

Product differentiation

BARRIERS TO ENTRY

Porter’s

Five Force

s Analysis


Fully integrated steel plants - Bargaining power is low

Non-i

ntegrate

d

or se

mi i

ntegrate

d -

De

pe

nds

on s

uppliersExa

mple - S

AIL,

whic

h i

mports c

oki

ng c

oal.

Porter’s

Five Force

s Analysis


COMPETITION In the steel industry – medium as demands exceeds the supply

A threat exists from dumping of cheaper

products

Porter’s

Five Force

s Analysis


Threat is medium to low

The cost differential is very high.

Usage of aluminum is rising continuously ,it still does not pose any significant threat to steel as the latter cannot be replaced completely

Moulded plastic also poses a significant threat to steel industry

Threat of substitutes

Porter’s

Five Force

s Analysis


Steel is a commodity and in many of its utilizations ,

there are a few or no viable substitutes

Prices will be set

according to demand

Market for freight

ships is not likely to

slow down

Booming Asian economies

need steel for construction of

its cities

Bargaining Power of Buyers

Complementar

y Industries


Steel

Porter’s

Five Force

s Analysis


1.• The domestic steel industry is likely to

maintain its momentum in the long term

2. • However, the growth may get affected in short run.

3.• Investors need to focus on companies

that are integrated, have economies of scale and sell premium quality products

Conclusion

Tata Steel

Recommendations


Recommendation

Continue with acquiring raw material in order to establish itself as the market leader in steel internationally.

Concentrate on geographies that are logistically favorable with respect to its plans in Europe & Asia

Acquire new virgin sites with sufficient resource potential and stocks


Tata Steel

Learnings


Bowman’s Strategi

c Cloc

kSource: Bowman, C. and Faulkner, D.; Competitive and Corporate Strategy; Irwin; 1996.


Learning

s

India will become the largest steel consumer after China and the U.K. next year, with growth of 8.2 percent and 13.6 percent expected in 2010 and 2011, respectively, the association said.

Steel demand in India is forecast to grow 10 percent in the year ending March 31, helped by demand for automobiles and spending on roads and ports.


Tata Steel


Thank You

Tata Steel Corporate Strategy Group5

Documents

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