Tata Steel Corporate Strategy Group5
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Transcript of 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”
.
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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
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Present Performanc
e
8Corporate Strategy
.
Present Performanc
e
9Corporate Strategy
Present Performanc
e
10Corporate Strategy
Tata Steel
Corporate Strategy
11Corporate Strategy
Corporate Strategies
12Corporate Strategy
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
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Tata Steel
Competition AnalysisA Matrix
14Corporate Strategy
Competition
Matrix
15Corporate Strategy
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
16Corporate Strategy
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
17Corporate Strategy
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
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Tata Steel
SWOT
19Corporate Strategy
SWOT Matrix
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Environment Analysis
InternalAnalysis
Strengths Weaknesses
ExternalAnalysis
Opportunities Threats
SWOT Analysis
21Corporate Strategy
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
22Corporate Strategy
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.
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Key Customers
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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
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Aerospace Consumer products Lifting and Excavating
Automotive Defense and Security Packaging
Construction Energy and Power Rail
Competitors
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Porter’s Diamond
Analysis
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Government
Chance
Factor
Conditions
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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
29Corporate Strategy
Demand Conditions:
Demand drivers of steel in India
• Automobile Production• Ships Manufacturing• Industrial for Consumer Durables• Infrastructure Growth• Construction Sector Growth
Related &
Supporting Industries
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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
31Corporate Strategy
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
32Corporate Strategy
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
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Porter’s
Five Force
s Analysis
34Corporate Strategy
Inter-firm rivalry-
medium to low
Porter’s
Five Force
s Analysis
35Corporate Strategy
Capital requirement
Government Policy
Economies of scale
Product differentiation
BARRIERS TO ENTRY
Porter’s
Five Force
s Analysis
36Corporate Strategy
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
37Corporate Strategy
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
38Corporate Strategy
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
39Corporate Strategy
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
40Corporate Strategy
Steel
Porter’s
Five Force
s Analysis
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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
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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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Bowman’s Strategi
c Cloc
kSource: Bowman, C. and Faulkner, D.; Competitive and Corporate Strategy; Irwin; 1996.
45Corporate Strategy
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.
46Corporate Strategy
Tata Steel
47Corporate Strategy
Thank You