Tata Steel

Tata Steel Corporate Strategy Group 5 2011

Corporate Strategy

Tata Steel

History
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1907 : Tata Steel was established by Indian Parsi businessman Jamshedji Tata

1941-42: Manufacture of special steels for war purpose developed

1951-52: Tata Steel launches a Modernization and Expansion Program

History

1924: Manufacture of Steel by Duplex Process commenced

1938: J R D Tata succeeds Sir N B Saklatvala as the Chairman of the company.

1965: The Steel Ministry agrees to expansion to 4-Million Ingot tones with a Strip Mill.

1934: Profit-sharing Bonus granted-first time in India

1935: Production of hightensile steel commenced.

1991: In 1991, Ratan N Tata took over as group chairman from J.R.D. Tata

Corporate Strategy

1993-94: Several divisions of the Company received ISO9000 certification.

History

2000: In the year 2000, the company was recognized as the world's lowest-cost producer of steel

2009- 2010:The Company was awarded the CSR Excellence Award 2010 by the Associated Chambers of Commerce and Industry

2005: The company was also recognised as the world's best steel producer by World Steel Dynamics in 2005.

2006-2007 :The Companys steel works at Jamshedpur crosses 5 million tonne mark in crude steel production.

Corporate Strategy

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

Mission

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

Corporate Strategy

Our vision is to be the global steel industry benchmark for value creation and corporate citizenship. We will achieve our vision through:
Our conduct, by fostering teamwork, nurturing talent, enhancing leadership capability and working together with pace, pride and passion

Vision

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.
Corporate Strategy

Tata Steel

Present Performance
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Present Performance
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Present Performance
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Present Performance
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Tata Steel

Corporate Strategy
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Creating Greenfield capacities in India as well as at one or two places internationally

Corporate Strategies

Brownfield operations abroad For getting more in terms of branding & distribution NatSteel & Millennium Steel acquisition Corus 19 million tones per annum Tata along with Corus, looking at enhancing product range to combat competition from plastic & aluminum

Differentiated product strategy, customer focus, cost reduction programmes for European operations to create sustainable value in the future

Gaining security over raw materials in Europe Direct Shipping Ore (DSO) Project in Canada, Sedibeng Project in South Africa

Kar Vijay Har Shikhar (Conquer every Peak)

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Long Term Strategies

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Tata Steel

Competition Analysis A Matrix

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Parameters Production Capacity (mtpa) Market Share

Tata Steel 7.4 11% 1907 Construction Bars, Hot rolled sheets & coils, Cold roll sheets & coils, wires and rods 46,944.63 Rs 118.75 billion

SAIL 13.5 32% 1954 Rods, pipes, rails, Hot rolled sheets & coils, Cold roll sheets & coils 37,069.47 Rs 430.34 billion Export to over 20 countries, JV to acquire coal mines abroad, expansion plan with emphasis on state of the art technologies

JSW 8.4 19% 1984 Hot rolled sheets & coils, Cold roll sheets & coils, galvanized sheets & coils 17,225.27 Rs 30 billion Acquisition of steel mill in US, tie up in Japan for high grade automotive steel

VISA Steel 3.5 8% 1996 Alloy & steel metals catering to automobile, railway, infrastructure, defense sector etc 353.29 Rs 13.32 billion Presence in India, China, Australia, Indonesia, South Africa & Singapore

Competition Matrix

Year of establishment

Products

Net Worth (crores) Revenue/ Turnover

Global Presence

Operations in 24 countries & commercial presence in over 50 countries

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Organization

Strategy 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 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 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 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

Tata Steel

SAIL

JSW

VISA Steel

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Competition Matrix

Organization Tata Steel

Competitive Advantage

A distinct advantage in raw material sourcing. Striving for raw material security through joint venture in Thailand, Australia, Mozambique, Ivory Coast and Oman
Operational efficiency, valued added steel added to product basket & provided competitive advantage in a recessionary steel market Updated back end technology infrastructure

SAIL

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
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

VISA Steel

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Geographical Presence
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Tata Steel

SWOT
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Environment Analysis

SWOT Matrix

Internal Analysis

External Analysis

Strengths

Weaknesses

Opportunities

Threats

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SWOT Analysis

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

Weakness Threat

Strengths

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

Opportunities

Branching Out to Overseas Market Mergers & Acquisitions

Maintain CO2 Emission Standards Possible Economic Slowdown

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Tata Steel

Porters Diamond
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International presence

Tata Steel International was launched in March 2009. Formed from Corus Internationals global projects, mill sales and trading network and Tata Steels overseas sales offices, Tata Steel International is the single commercial face for Tata Steel Group across all international markets.

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Bokaro Steel Plant

INDOMAG Salem Steel Rourkela Steel Plant VAI Tinplate Company of India

Saudi Iron & Steel Qatar Steel Thyssen Steel Nordberg VAI UK

Key Customers

JSPL Steel Plant MECON Ltd. Durgapur Steel Plant Anjani Steels Ltd

Usha Martin Limited

Bhilai Steel Plant

JVSL Steel Plant

Concast

Steel Sector, Australia

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Sectors

Aerospace Automotive Construction

Consumer products Defense and Security Energy and Power

Lifting and Excavating Packaging Rail

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Competitors
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Porters Diamond Analysis

Chance

Government

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

Factor Disadvantages

Low quality of Raw Material: Quality of both iron ore and coal is very low. Indias 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

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Demand Conditions:
Demand Conditions
Demand drivers of steel in India

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

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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

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Firm Strategy, Structure & Rivalry:

Strategy, Structure & Rivalry

Strategy Structure Rivalry

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

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

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

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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
.

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Tata Steel

Porters Five Forces Model

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Porters Five Forces Analysis

Threat of substitutesmedium to low

Bargaining power of suppliers- low for fully integrated steel plants

Inter-firm rivalrymedium to low

Bargaining power of buyerslow

Barriers to entrymedium

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Porters Five Forces Analysis

Capital requirement

Government Policy

BARRIERS TO ENTRY

Economies of scale

Product differentiation

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Porters Five Forces Analysis

BARGAINING POWER OF SUPPLIERS

Fully integrated steel plants Bargaining power is low Non-integrated or semi integrated -

Depends on suppliers
Example - SAIL, which imports coking coal.

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COMPETITION

Porters Five Forces Analysis

In the steel industry medium as demands exceeds the supply

A threat exists from dumping of cheaper products

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Porters Five Forces Analysis

Threat is medium to low

The cost differential is very high.

Threat of substitutes

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

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Porters Five Forces Analysis

Steel is a commodity and in many of its utilizations , there are a few or no viable substitutes

Booming Asian economies need steel for construction of its cities

Bargaining Power of Buyers

Prices will be set according to demand

Market for freight ships is not likely to slow down

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Complementary Industries

Automob ile

Construc tion

Steel

Rail

Shipping

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Conclusion
Porters Five Forces Analysis
The domestic steel industry is likely to maintain its momentum in the long term

1.

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

3.

Investors need to focus on companies that are integrated, have economies of scale and sell premium quality products

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Tata Steel

Recommendations
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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

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Tata Steel

Learnings
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Bowmans Strategic Clock

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

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.

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Tata Steel

Thank You

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