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ICFAI UNIVERSITY DEHRADUN

CLASS OF 2011, SEMESTER III

NAME: BHASKAR PRATIM SARMA


IUD NO: 0901200547
IBS NO: 09BS0000547
COURSE CODE: SLMM603
COURSE NAME: B2B MARKETING
FACULTY NAME: PROF. SUKESH KUMAR
DATE OF SUBMISSION: 16/07/2010
TOPIC OF ASSIGNMEMT: CASE ANALYSES (BRANDING
A COMMODITY-THE TATA STEEL WAY)

STUDENT SIGNATURE FACULTY SIGNATURE


About Tata Steel: Tata Steel was established in 1907 by JN Tata at Jamshedpur in Bihar, India.
The company commenced production in 1911. In the early 1980’s, the company initiated a
modernization program for its steel plants. By the mid 1990’s, Tata Steel was Asia’s first and
India’s largest integrated steel producer in private sector. In 2003, Tata Steel declared a turnover
of Rs 98.44 billion with a profit after tax of Rs 10.12 billion.

1) In the early 2000s, Tata Steel decided to embark on marketing and branding initiatives
for its steel products in a major way. Discuss the reasons for this decision to opt for the
branding and aggressive marketing of the company’s steel products.

Ans: Branding of commodities offers additional value both to the consumers and the producers.
Branding leads to commodity differentiation and hence enables consumer preference. This
translates into greater choice and quality for the consumers. To the producers branding provides
the opportunity to increase gross margins by increasing the value perception of their product.
The most successful brands will always be those that deliver not only the tangible functional
value but also the intangible value that is the implied guarantee of a branded product. The
promise of the brand will always be seen as the most valuable benefit because when confronted
with two choices of apparently equal benefit, the consumer will always choose the one that feels
right. Trusted brands are not established overnight but are built up as a result of long-term
investment in delivering on the brand promise. If a manufacturer can manage this, branding
provides an escape from commoditization as it moves the buying decision away from solely
price factors and therefore can generate a strong return on investment and long term sustainable
advantage.
Tata Steel decided to embark on marketing and branding initiatives for its steel products
in a major way. The first reason was to reduce the dependence of Tata Steel on the external
environment. The profitability of steel industry in India is strongly linked to variations in
business cycle. Steel companies register heavy profits when there was boom in the economy and
profits decrease when there is depression. In the late 1990’s, the Indian steel industry was
experiencing a glut and this affected the profit margins of players. To reduce its dependence on
external environment, Tata Steel adopted a two-prolonged strategy in this period. The strategy
involved:
 Branding its products.
 Moving to high value products.
To get its branding exercise right, Tata steel focused on strong customer focus. It initiated
internal campaigns emphasizing customer focus and service. Tata Steel set up a branding task
force to explore the possibilities of branding its steel products. It took the help of R.
Gopalakrishnan who had experience in branding in HLL. It also took help of FMCG companies
to train its marketing personnel in branding.
The second reason was low revenues coming from B2C segment. 80% of its revenues
were coming from B2B customers (about 200 large business customers), while only 20%
revenues were coming from B2C segment (about 5000-6000 customers). Customers in this
segment were not very concerned about the quality of steel or brand name. They were concerned
with only the product availability and prices. Thus the company decided to opt for different
selling strategies for the B2B and the B2C segments. As the graph below says that for any future
Perspective we need some kind of branding strategy that would stimulate some incremental
growth which in turn, can turn to successful stories in the long run.

Source: Branding Industrial Products, Kevin Lane Keller and Frederick E. Webster Jr

Tata’s second area of key focus was to shift into the domain of high value added
products. In April 2000, Tata Steel launched its first branded product, along with the
commissioning of its CRM plant. Tata Shaktee is their brand for galvanized corrugated sheets.
Eight months later the company introduced its second brand, Tata Tiscon (re-bars) for rods used
in the construction industry. In February 2003, Tata Steel launched another product brand Tata
Steelium. By September 2003, Tata Steel had three products as well as three generic brands in its
brand portfolio, as Tata Pipes, Tata Bearings, and Tata Agrico (hand tools and implements) and
Tata Wiron (galvanized wire products).

Source: www.tatasteel.com
The leader of the company had decided that branding the commodity steel would provide them a
unique selling proposition in a great way. Branding Steel would help Tata Steel in two big ways:
It would help stabilize the flow of revenues even during business downturns, and it would make
premium pricing possible. Similar development could be noticed in other steel companies around
the world. Usinor Steel, today part of Arcelor Steel conglomerate established in 2000 a clear set
of product brands which propelled their sales to new heights. Tata went on a similar road.
Because the corporate brand Tata was already associated with various products and attributes the
company decided not to put the main focus on it but to create sub-brands with separate identities,
supported by the corporate brand as co-driver. At that time the Tata group was involved in a
wide range of product and service categories ranging from automobiles to software and was one
of the biggest industrial houses of the country. They had learned from the European competition
that specialty product offerings and strong brand associations had guarded the market against the
low cost importers from the Far East. Tata Steel wasn’t the first company to brand its steel in
India. Other steel companies are hoping to keep their bottom-line healthy by producing branded
steel in their furnaces that customers will ask for by name. But Tata was pushing ahead with its
ambitious plans to ensure that larger quantities of its steel are branded in the coming years.

2) Tata Steel wanted to de-commoditize steel and make it less vulnerable to swings in the
business cycle. Do you think the company’s branding initiatives would help it achieve this
objective? Explain with reasons.

Ans: Yes, I think the company’s branding initiatives would help them to achieve their objective
to de-commoditize steel and make it less vulnerable to swing in the business cycle. Tata Steel
had already announced that its branding initiatives started showing results right from the first
year. The company reported that Tata Steel’s branded products increased their market share in
each product category, and sales of branded products as a percentage of total sales also
registered an increase.
According to the source in the case: MD’s Presentation to Press, April 2003, Tata Steel
said that by 2003, Tata Steel had succeeded in capturing the mindshare of customers in the retail
segment, with customers starting to ask for Tata Steel products by name. And also surveys by
Feedback Ventures, indicated that in Karnataka, chicken farmers asked for ‘Tata’ galvanized
wire ropes. From the beginning, the branding initiative of Tata Steel showed impressive
results. The company has projected a rise in the share of branded products in total sales from
12% in FY03 to 28% in FY04 and to 34% in FY05. As regards customer focus, the company
aims to increase its share of CR steel in the automobile segment from 30% in FY03 to 39% in
FY04, and in white goods segment from 13% to 40%. Thus the company is clearly aiming to
focus on its high- end customers.
The future expectations and prospects of the company are also very positive. Today,
Tata Steel is already one of the best branded names in steel industry and has already started
initiatives in the co-branding arena with high end customers like Ashok Leyland and Telco.
Looking to the future, Tata Steel has announced that the company would be focusing on co-
branding initiatives with its high-end customers such as Telco, Ashok Leyland. Company
sources say that initially Tata Steel would be focusing on the automobile sector; later the
co-branding initiative will be expanded to the consumer durables sector also. Tata Steel also
announced that it would focus on improving its product mix by introducing high end products.
Further the company says that it wants to focus on Original Equipment Manufacturers (OEM)
and the construction sector. Tata Steel is also interested in branding all its flat products and
selling them through retail distributors. It plans to undertake extensive market research and
channel management initiatives along with its branding activities. The steel industry has been
racing along at a surprisingly high speed during recent years, largely due to the huge buying
from China. Tata Steel has also done extraordinarily well as the industry moved upwards, but the
next big challenges are already seen on the horizon: Global reach with Global Branding.
In 2003, Tata Steel declared a turnover of Rs 98.44 billion with profit after tax of Rs
10.12 billion; it was the most profitable steel company in India. The company’s success was
attributed to its focus on operational excellence and its branding initiatives. Though the steel
industry in India was experiencing slow growth, Tata Steel was able to post high profits because
of its strong B2C and B2B sales. Tata Steel’s commitment to sustainable development and
growth is amply reflected in its vision and different branding strategy for B2B and B2C
segments. Today, Tata Steel is well positioned to take forward its 100-year ethos with
renewed vigour, having formally integrated its economic, environmental and social performance
reporting.

REFERENCE:
1) ICMR Case Study- Branding a Commodity- The Tata Steel Way (By K. Subhadra).
2) Branding Industrial Products- Kevin Lane Keller and Frederick E. Webster Jr.
3) Branding in B2B markets, John Frosyth, Alok Gupta, Suddep Haldar and Michael Marn,
The McKinsey Quarterly, 2000 Number 4.
4) www.tatasteel.com

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