Tata and BlueScope: a union of equals

Case Study | BlueScope Steel June 2014

With uncertainty over the long-term future of manufacturing, the joint venture between India’s Tata Steel and Australia’s BlueScope Steel is an example of how Australian manufacturers can find new markets and new revenues overseas.

While BlueScope Steel can trace its heritage to the birth

of steelmaking in Australia, the company’s future lies in

selling Australian innovation, technology and expertise

to Asia and beyond.

BlueScope’s successful global partnerships allow it to

prosper in diverse markets such as North America,

Saudi Arabia and India, where the company established

a joint venture in 2005 with the Tata conglomerate.

The partnership between Tata and BlueScope has

outperformed expectations, powered by India’s

economic growth.

Partnership creates opportunities

Today, Tata BlueScope Steel has three business

divisions in India offering premium brand steel products

for building and construction.

The company has four state-of-the-art manufacturing

plants, supported by a network of sales offices. A board

that comprises representatives from both companies

governs the Tata BlueScope business.

BlueScope, which had limited operating experience in

India, opted for a joint venture because of Tata’s local

brand recognition and its corporate values.

Tata had strong growth ambitions, and a marketing and

branding ethos similar to BlueScope.

Tata BlueScope CFO, Shyamsunder, an Australian

national, says the move into South Asia has helped

BlueScope to increase revenue.

However, he says operating in an economy of rapid

growth yet poor infrastructure posed a few challenges.

‘The Indian market is highly price sensitive,’

Shyamsunder says.

‘You must take the time to understand each market, become a local operator, and develop enduring relationships. This takes perseverance and patience.’

Tata BlueScope CFO, Shyamsunder

‘You can achieve premiums for your product only after

proving its value, and that takes a long time in India.

Having a global brand does not guarantee acceptance

by the local market.

‘We learnt this the hard way. We based our business

case on achieving premiums because we held

significant share of the Australian market and we

thought we would achieve similar results in India.

Tata Bluescope Steel manufacturing facility in India

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But that was not to be the case. We had to do the hard

slog of building brand value. This is one of the reason

why it so important to have a strong, well-recognised

local partner.

Doing business in India

People often underestimate or misunderstand India’s

strong business culture, which Shyamsunder says is

different to other South-East Asian countries.

He says English literacy, numeracy, and engineering

skills are strong in India. This gives India an edge in

business and entrepreneurialism.

‘India has a strong, confident business culture,’ says

Shyamsunder. ‘Even at the corporate leadership level,

people are entrepreneurial in ways that surprise those

from a western corporate culture. And Indian companies

are prudent about investments. Australian companies

have to be prepared to work through these issues to

find a way forward that works for both sides.

‘The country also has a hierarchical and paternalistic

management style where the subordinates believe that

being the boss means you need to be consulted on

almost all decisions. Even highly qualified subject

matter experts will always feel obliged to refer to their

managers. This takes some getting used to for

Australian companies.’

Shyamsunder also says that protecting intellectual

property, careful use of language, and respect for

cultural and religious sensitivities are important

considerations in India.

For success, Shyamsunder’s advice is straightforward.

‘First and foremost, do not be tempted to enter India just

because it is a fast-growing economy. You are bound to

fail. Instead, you must ensure India is a strategic fit into

your longer-term business plans. Prepare for a very

long haul and be ready for unexpected turbulence.

‘You must take the time to understand each market,

become a local operator, and develop enduring

relationships. This takes perseverance and patience.

‘I would also encourage people to determine your

sustainable competitive advantage. In India, you need

to understand your competitive advantage, whether it’s

cheaper access to raw material, a lower cost base, or

strong relationships. These three are vital. India is a

relationship-based country.

‘We experienced some challenges. The market was

unpredictable and political in nature. What we did not do

well, but later corrected, was making sure there was

strong and demonstrated alignment between, and

within, our board and our management. You must

ensure that any ambiguity in your strategy is resolved

throughout all layers of management.

‘You must review your business performance more

frequently and keep your standards high. Where you

need to make changes to work culture and systems, do

so in a way that does not make your local management

and partner feel marginalised. Think local.

‘Management must support the local business and have

a strong allegiance to local communities. You must

assimilate. India has a highly unionised labour force,

and you must become part of the communities in which

you operate to be successful.

‘Having said all this, a well led and adaptive Australian

company can overcome these issues and create

important new markets and revenue streams in India.’

Tata BlueScope is enthusiastic about its future in South

Asia. It sees rapid growth in industrial and commercial

buildings and bright prospects in India in particular.

There are also opportunities for Tata BlueScope Steel in

the continued development of the South Asian

Association for Regional Co-operation, South Asia’s

premier body for economic unity.

BlueScope’s experience shows that India is a market

that demands commitment, robust plans, and a long-

term perspective, but great rewards await those willing

to make the effort.

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