Q1) Is TCL a dominant business corporation, Related Business Corporations or

Unrelated Business Corporation.? Why?

A1) Tata Chemicals which is part of Tata Group was established in 1939 at Mithapur in
Gujrat, India. The company is truly a global company and is spread in countries like India,
UK, the Netherlands, Kenya and USA with Interests in Chemicals, crop nutrition and
consumer Products.

TCL’s global soda ash capacity is around 5.5 million tonnes per annum, out of which
60 per cent capacity is from natural soda ash deposits at Wyoming, USA and Lake Magadi,
Kenya. The company has extended its operations into the services sector and touches lives
through applications in agriculture, animal nutrition, construction, consumer products, glass,
metals, pharmaceuticals, soaps and detergents, and textiles and leather industries.

According to me, TCL is a related Business Corporation comprising of various SBU’s

in different sectors. Each of the units has a distinct bottom line and has one or more a
common thread s which link the businesses. TCL plans to leverage its expertise in chemicals
and agri-businesses together with its in-house research capabilities to develop strengths in
new businesses and sustainable technologies. As in a Related Business Corporation, TCL too
meets the best alternative test in some cases through one time transfers and sometimes
through transfer of specialized resources and skills to new lines of business which is
explained as below:

Best Alternative Test

The company which completely owns all four SBU’s does the same in the most efficient
manner. Here, let us list down the various SBUs and other stake holders in TCL

1. Consumer Products- Salt

2. Chemicals-Sodium Bicarbonate ,Soda Ash, Cement
3. Crop Nutrients- UREA, STTP, DAP,SSP; Secondary Nutrients namely Ca & S, Zn
and Boron
4. Others: Bio fuels, Tata Kisan Sanskar, Innovation Center, CAT, Fresh Produce
Now analyzing the SBU’s separately we find that

I. TCL started in 1939 with salt business and thereafter ventured into Soda Ash
and Fertilizers
II. The Basic rationale behind the different SBUs was twofold. Firstly it wanted
to venture into business in line with its business i.e. Enriching Quality of life
by offering products and services that meet essential needs of people. Products
 like iodized salt was to help people counter the problem of Goiter faced by
them way back in 1970s and is the basic need of people, Products like Soda
Ash was used in basic industries and leather processing and was a technology
available to only a few and Tata Chemicals having cracked the code gave an
indigenous Soda Ash to its people and lastly the Crop Nutrients business was
another sector as the Indian economy being an Agri based economy and
importing 30 % of its fertilizer requirement needed fertilizer as the same was a
basic Raw Material for agriculture enhancing productivity. And Secondly all
these businesses were chemical based as in all of them required expertise in
chemicals so the link was there.
III. Lastly all the four SBUs have synergies between each other and share
resources

By Products of Soda
Cement Ash are used as Raw
Material in Cement

Salt
SodaAsh Fertilizer
(BRINE)

ByProduct

PhosphoricAcid Bio Fuels

CalciumChloride

Also all three fit into the TATA Groups philosophy of incorporating new business ,
following the code of conduct ( in line with the corporate vision and mission and Business
excellence model guidelines ,which focuses on generating profits ).
 Because the company is able to pass these test and for also because of all the above
mentioned reasons we can say that TCL is a Related BusinessCorporation.

Q2) Considering 4 of TCL’s SBU’s Soda ash, Fertilizers, Table Salt, and Fresh
Produce, comment on TCL’s Horizontal Scope. Which of these SBU’s do you
recommend to be retained? Give Your Strategic Rationale.

A2) As mentioned in Previous question, TCL is a Related Business Corporation which has
many different but related areas of Business like Fertilizers, Soda Ash, Fresh Produce, Table
Salt etc. All these SBU’s are working well but if a company has to choose only SBU’s we
have to choose in which the Company is best parent. We will apply this test For TCL to find
the same.

TCL’s current SBU structure is as follows

Better off Test:

1. Increasing the scope has enabled TCL to diversify from Industrial Chemicals into
Crop Nutrients and Consumer products like Salt thereby increased volumes and profit
Margins

2. It also helped it to improve upon the structure of the industry by improving upon the
cost competitiveness (Scope economies). Eg The phosphoric Acid essentially an
Industrial chemical is a Raw Material to fertilizer. The consumer products such as
Brine a byproduct of Salt is a Raw material for Cement and Soda Ash. New Product
offerings that will make a difference like Flue Gas treatment, Carbon Absorption and
Nano glass-coatings for insulation will complement its existing line of business.
3. It will also create value for all three SBUs by reducing the risk it bears. For example
rising prices of Raw materials for its product STTP is forcing company to reconsider
its manufacture and also as the rise of Agri price index has led to the overall decrease
in demand for consumer products and simultaneously increasing demand for
Fertilizers as Agricultural household incomes increase. Thus diversification into
separate business which are complimentary would enable the company to mitigate
Risk.
4. Umbrella Branding will also enable TATA Chemicals to reap benefits of a strong
Brand
 5. Lastly all of the SBU’s reinforce the corporate vision “ Enriching Quality of life by
offering products and services that meet essential needs of people”

The company has core competency in Chemical Business as it is the second largest Soda
Ash producer in the World with a capacity of over 5.5mt/year. The Businesses like Fertilizers
and Urea use this chemical which can thus be retained when retaining the Business in which
you have core competency i.e. Soda Ash production. The new Business are comparatively
less directly related. For eg Fresh Produce Industry is an Industry where the Fertilizers made
by the company can be used but it doesn’t have competence in Selling agricultural product for
which it has tied up with foreign company on a 50:50 Equity arrangement. In this, it uses this
foreign company’s expertise in this business. So, if the need arises the company can divest the
JV partnership amicably. But as it is a little unrelated ,it also provides hedging against risk.
This and Bio-Fuel segment have to be kept in mind future of the Industry. As TCL has low
share in Business like Cement which can be removed from the basket.

Q3) Identify and explain briefly any 3 CSI areas for TCL. Give your Rationale.

A3) Central to the corporate philosophy of Tata Chemicals is its passionate commitment to
the social development of the communities in which it operates.

This objective of social responsibility is equally well-entrenched in the minds of its

employees, who play an active part in providing financial support and empowering rural
communities to chart their own development.

Tata Chemicals Limited (TCL) set up the Tata Chemicals Society for Rural Development
(TCSRD) in 1980 to promote its social objectives for the communities in and around
Mithapur and Babrala, where its facilities are located.

TCL has adopted all forms of CSR initiatives such as Generic CSR – distribution of water in
Mithapur city, Responsive CSR – illustrated best by company’s cement plant in Mithapur &
Strategic CSR – agriculture development, education & health development, etc.
The key features of TCL’s CSR activities are

 The company follows the ‘avoid, reduce and recycle philosophy’. This is illustrated
best by the company’s cement plant at Mithapur, originally set-up to consume the solid
waste generated at the plant.
 A signatory to Responsible Care, a voluntary global initiative of the chemical industry
that demonstrates allegiance to safety, health and environmental issues
 TCL supplements government initiatives to aid farmers by undertaking programmes
to educate farmers at the grassroots level in the proper use of urea manufactured by it. The
company provides these services through the Tata Kisan Sansar (TKS).
 Tata Chemicals’ Society for Rural Development (TCSRD) nurtures rural populations
in and around the facilities.
 In addition to the Society's relief and infrastructure activities, a host of programmes
have been initiated to encourage self-sufficiency and to ensure that the Tata tradition of
dedicated social responsibility is carried forward.

The various CSR initiatives taken up by Tata Chemicals Limited can be categorized under the
following heads:

• Agricultural Development

• Education and Health

• Women’s Programmes’

• Animal Husbandry

• Rural Energy

• Training

• Watershed Development

• Infrastructure

• Relief Work

There is an opportunity for shared value creation in many of these initiatives because of
which it earns goodwill from government and Society as a whole.

Three of the areas where it can concentrate for shared value creation is as follows:
Agricultural Development: Babrala is a drought prone area and besides the area also suffers
from poor quality of land. To make matters worse the water used for irrigation contains
dissolved salts which makes the land further infertile. The opportunities for TCL can be-

1. The education provided to farmers regarding the better use of fertilizers and irrigation
facilities new farming techniques and the most appropriate crop varieties, crop inputs
and methods of pest management provides the company with a market for its own
products.

2. Further the company can test market its products in the area and know the results
before launching the product in the market.

3. Further the company can test market its products in the area and know the results
before launching the product in the market.

4. In addition, the local produce is being used to enter the wholesaling of fresh
agricultural produce. This diversification would help in mitigating risk from
slowdown in the core business.

5. Khet Se Initiative: provides the company an opportunity to integrate both the

programs for shred value.

Education & Health:

The various initiatives taken by TCL are village libraries, pulse polio programs, First Aid
Training, Help with the infrastructure set up for schools, Intensive reproductive health and
family-welfare programme. Such type of programs would result in:

1. A healthy society, which means healthy workers since the local population is
employed for the blue collared jobs which means less problems of absenteeism, loss
of production etc.

2. Educated workers are a better input to TCL since they can work and learn in a better
way as compared to the uneducated workers.

Eg : Continuing its efforts as a socially responsible corporate citizen, Tata Chemicals, under
the aegis of its flagship community initiative, the ‘Desh Ko Arpan Programme’ (DKAP),
announced its partnership with Cohesion Foundation Trust (CFT) to support students’ hostels
in the Kutch region of Gujarat on 14th September 2009..

Traditionally, the salt production in Gujarat is undertaken by families, (including

children) belonging to the most deprived socio-economic classes. Due to the lack of sustained
employment, salt pan workers along with their children migrate to various locations across
the state in search of livelihood, which disrupts their education and they end up dropping out
of schools.

Taking a cue from this problem, Tata Chemicals has identified the need to extend
support, for effective and sustained functioning of seasonal hostels for salt pan workers’
children thereby ensuring that they do not migrate and have continuous schooling at the
village.

This welfare activity for children’s education will create a platform at a later stage to
indulge in holistic welfare - education, health and livelihood – of salt pan workers and the
community.

Women’s Programmes:

The various initiatives taken up by TCL are formation of self help groups and Mandals,
training programme for SHG’s, Handicrafts promotion and agro based produce. This helps
the workers in the following ways:

1. It helps them to supplement their income which helps them have a better standard of
living. It would in turn result in better productivity for the company.

2. Agro based produce can provide the blue collared employees of the company with
certain inputs for their products in addition to providing the local community with
supplementary income.

Rationale for opting for The above mentioned initiatives are Benefits to TCL and farmers /
villagers on creation of shared value

Benefits to farmers:

With shared value creation, farmers can get better prices for their final products.
Increased competition within farmers will improve their productivity. The CSR initiative by
TCL helps farmers in easy availability of loans, crop insurance, access to latest knowledge
which will help them in improving their yields, easy leasing of farm equipments.

Benefits to Tata Chemicals:

The strategic CSR initiatives by TCL will help them to enhance their corporate image
and will increase their brand value. This will also help them in getting access to quality
business partners, favourable access to capital markets, enhanced public relations, improved
financial performance, increased productivity, sales & quality. The above factors will help
TCL to gain confidence of customers, suppliers, employees, communities, investors thus
building a sustained relationship.

RESPONSIVE CSR
Generic

Responsible Care signatory commited to

safety health and enviornment

Providing medical infrastructure in and

Q4) What are the major changes in the International Business Environment for TCL
since July 2008? What strategic Challenges does TCL faces today? Give your strategic
around villages
recommendations for 2009-12 for TCL in terms of its corporate strategy portfolio of
SBU’s and countries it should be present.
A4) There have been several change in International Business environment post 2008 which
are listed below:-

1) Tata Chemicals increases its stake in Rallis India : The board of Tata Chemicals
decided to increase its equity shareholding in Rallis India by offering to purchase
equity shares from other qualifying “Promoter Group” Tata companies (i.e., Tata Tea,
Tata Sons, Tata Investment Corporation and Ewart Investments) through inter-se
transfer of shares. Tata Chemicals has a strong presence in crop nutrition business and
Rallis is amongst the leaders in crop protection business in agri-sector

2) Babrala plant de-bottlenecking process: Total project completed in record 18

months, with a total investment of Rs 208 crore De-bottlenecking to boost capacity

for both ammonia and urea production at the facility. The increased growth of
production draws impetus to the company commitment of providing high quality
products for its discerning customers. With this the production capability of the
Babrala fertilizer increases from 8,64,600 mt to 11,55,000 mt per year.

3) Tata Chemicals signs a binding agreement with JOil (Singapore) Pte Ltd : Tata
Chemicals' wholly owned subsidiary, Tata Chemicals Asia Pacific Pte, has entered
into definitive agreements to invest US$25 million in JOil (Singapore) Pte . JOil, a
Jatropha seedling company based in Singapore, has been set up by the Temasek Life
Sciences Laboratory (TLL), along with other investors in Singapore. This shows that
Tata Chemicals is also looking at alternative businesses in Bio-fuel segment outside
the country too.

4) Other Changes which impacted Tata Chemicals were the reduced oil price, fall in
freight rate which helped the Company. Even the fall in value of dollar due to
recession in US had a positive impact on the company all of which increased the Tata
Chemicals Q1 FY 2009-10 Net Profit Up 60.80 per cent Y-o-Y at Rs 94.40 Crore Vs
Rs. 58.70 Crores .

a) Corporate strategy

 TCL has been following an aggressive growth strategy over the last 4 years with a CAGR
exceeding 33%
 It is following an expansion strategy in order to increase its geographical presence
through acquisitions and mergers (Brunner Mond group, and General Chemicals).
 Focus on low cost, natural processes and a greater share of global trade flows
 Aiming towards integration to focus on customer, markets, supply chain and sourcing
efficiencies
 There is little overlap between the various businesses, they do not compete with each
other, and have very different sector, market and pricing approaches

b) SBU Strategy

i) Chemicals SBU

 Capacity expansion for Soda Ash production through acquisition of General Chemicals
Industrial Products ,(GCIP), USA in 2008.
 Forward and backward integration across a wide spectrum of products and business
segments.
 Membership of global trading corporations (American Natural Soda Ash Corporation
(ANSAC),in order to increase exports
 Focus on natural processes to produce chemicals ( eg Soda Ash) as such processes are less
energy-intensive and thus save energy costs, helping the company to achieve a
competitive advantage
 Developing an efficient supply chain though geographical diversification.

ii) Consumer Products Business

 Better realization on account of price hike

 Integrated operations at Chemical site - Embedded competitive advantage
 Business with social objective – first Iodized Salt (goitre), now Fortified (iron deficiency)
 Attempt to leverage distribution strengths and brand management skills in the consumer
products space by renaming the Food Additives Business to ‘Consumer Products
Business’
 Aiming at need based positioning of products with offerings aimed at Nutrition (Salt
brand I-shakti,Tata Salt-Lite, Bicarbonate based product applications)
 Improving market reach and strengthening the distribution of salt in metros, minimetros
and Class I towns.
 Increased thrust on salt exports – especially in Middle East
iii) Crop Nutrients & Agri Business

 Focus on growth to meet the growing demand for fertilizers in India either through de-
bottlenecking or brown-field expansions.

 Renaming of the fertilizers business to that of Crop Nutrition Business in order to

reinforce TCL’s role as going beyond merely manufacturing and selling of fertilizers to being
able to address soil health correction and improve crop yields
 Widening horizontal scope from primary plant nutrients (Nitrogen , phosphorous and
potassium) to include secondary plant nutrients (Calcium, sulphur etc)
 Emphasis on setting prices at low levels because price alone determines the choice and
quantity of fertilizers used by farmers.
 Vertical integration with suppliers through Joint Ventures: The company acquired a one-
third stake in Indo Maroc Phosphore S.A. (IMACID), a JV with Chambal Fertilisers Co.
Ltd. and OCP, Morocco in order to secure its supplies of Phosphoric Acid.
 Widening geographical scope by country wide expansion in terms of number of outlets of
Tata Kisan Sansar (TKS)
 Adopting a hub – and spoke business model
 Second order fit between activities : Building a bond with farmers by providing a variety
of services and farming solutions, such as advice on crops and farming practices,
information on prices of their produce together with contract farming arrangements and
market linkages for agricultural produce. These farmers then form the customer base for
their fertilizer products
 Using TKS outlets to develop new farm related businesses in the agri-space, such as fresh
produce business .

Country Strategy:
 TCL is focusing on a clutch of priority markets, which are expected to be of strategic
importance in the years ahead.

 Tata chemicals has a sales presence in Brazil, as Brazil is one of the key priority markets
for the Group as it is one of the primary emerging markets and has growth very similar to
China and India.

 Trading and Business operations in Sri lanka as the Tata Group has a longstanding
presence in Sri Lanka. The Tata brand is well recognised within the country and the
Group has more than 1,200 employees in the country.
 Exporting products like soda ash to key markets such as Thailand and the Middle East
 Expand businesses in Vietnam, given the country's positive outlook on foreign direct
investment and privatization..

TCL’s Global Presence