Strategic Management of Tata Steel

Strategic Management Project

Group-11

Amit Kumar 100

Arkadip Gupta 101

Dipayan Ghosh 102

Giri Seshadri 103

Sri Divya 104

Values

stronger th

an

Steel

Introduction Tata Steel, formerly known as TISCO Tata Iron and Steel

Company Limited, is the world's sixth largest steel company.

It is the second largest private sector steel company in India in terms of domestic production.

Ranked 315th on Fortune Global 500.

Vision statement: “To be the global steel industry benchmark for Value Creation and Corporate Citizenship”

Mission:

• Sustainable Growth

• Differential value creation

• Enhance employees' competencies

• Continuous improvement of business processes

• Being responsible corporate citizen

Time-Line • 1907: Tata Steel was established by Indian Parsi

businessman Jamsetji Tata

• 1935: Production of high-tensile steel commenced.

• 1961: Industrial license is obtained by Tata Steel for an

Alloy-Steel project 1963: The government approves in

principle expansion by One-Million tons during the 4th Plan.

• 1965: The Steel Ministry agrees to expansion to 4-Million

Ingot tons with a Strip Mill.

• 1974: Amalgamation with West Bokaro Limited for coal mine

operations.

• 1979: Five-year Rural Development programme for

upliftment of the villagers near Jamshedpur taken up.

1981: In 1981, Ratan was named Chairman of Tata

Industries; the Group's other holding company.

1985: Merger with the Indian tube company

1986: Started export cell

2000: Company was recognized as the world's lowest-cost

producer of steel.

2005: The company was also recognized as the world's

best steel producer by World Steel Dynamics.

2007: Won their bid for Corus .The joining of the two will

create the fifth largest steel company in the world

INDIAN STEEL INDUSTRY

Step AnalysisSocial Factors:

• Rehabilitation of people in mining areas.• Impact on economy and climate change.

Technological Factors:• Popularity of Steel Portals.• Application of SML (Steel Markup Language).

Economic Factors:• GDP Growth Rate.• Reduction in Customs Duty.

Political Factors:• Recommendations on Captive Mines.• Mining Scams. Eg: Goa

`

SWOT Analysis

ThreatsSocio Political Scenario/ Cap on mining activityAdvancing technology International CompetitionRegulatory requirementsRising prices of Coal

OpportunitiesCompetitive advantage by value of sizeGrowth of Infra Sector in IndiaHigher pricing opportunities in foreign marketsMovement along Value chain front

StrengthsAccess to Raw MaterialsStrong Brand ValueAccess to Corus talent poolRisk MitigationGood Corporate

Governance

WeaknessHigh debt loadsOperational InefficienciesLow demand for existing

products Less product innovationsHigh attrition rate

External Analysis

Michael Porter’s Five Forces AnalysisBuyers’ Power(low)• Increasing Demand for Steel.• Low customer preference.

Suppliers’ Power(high)• High Raw Material Prices.• Lack of Transportation.• Fragmented Coke Suppliers.

Competitive Rivalry(very high)• Competition from Foreign Players.• Spurt in Merger and Acquisition

Activities.

Threat of New Entrants (moderate)• High Cost of Basic Inputs and Services.• Industry is Capital Intensive.

Threat of Substitutes(moderate)• Use of Aluminium, Plastic, Carbon Fibre.

Factors Score(S)

Weightage(W)

Total weighted value(S*W)

Threats

Technology Risks 1 0.15 0.15

Raw Materials Security and Price Volatility

2 0.12 0.24

Forex, Credit, Liquidity and Counterparty Risk

2 0.07 0.14

Regulatory and Compliance Risks

2 0.06 0.12

Health, Safety and Environmental Risks

3 0.11 0.33

Opportunities

Macro environment 4 0.18 0.72

Industry Cyclicality 3 0.15 0.45

Growth Projects 3 0.12 0.36

Financing 3 0.08 0.24

2.75

External Factor Evaluation Matrix

Weighted score is 2.75 Tata Steel is externally somewhat strong.

TATA STEEL INDIA

Reduced growth, reduced consumption Long steel growth remain prospective,

Cash cows

TATA STEEL EUROPE

Fall in demand; increase in diversified product offering

Star –question mark

TATA STEEL SE ASIA

High demand, High growth opportunity, High y-o-y growth

Star

NAT STEEL Automation implementation, up gradation of production units, increased performance, obtained multiple projects

Question mark

Iron Ore Project Canada

Ramping up of coal production, succesful completion of Direct shipping Ore project

Question mark (2013)

TATA STEEL GLOBALLY

Profit Pools

Brownfield expansion Increase in capacity, more production, more dedicated production to flat steel

Cash Cows

Global wire business Largest wire manufacturer, Revenue US$ 496 M

Cash Cows

TATA growth shop Increased savings

Agrico Present in market for over 80 yrs, high popularity, high product diversification

Cash Cows

Tinplate Company of India Ltd

Largest producer, high growth opportunities y-o-y 14%

Star cash cows

TATA Sponge Iron Ltd

Improve synergies, future alternative

Question mark star

GreenField expansion Future growth opportunity for furthur product diversification

Question Mark

Internal Analysis

Balance Scorecard• Financial

• Turnover at 1,34,712 crores by 2013• EBITDA is at 12,654 crores by 2013• PAT is at -7058 crores by 2013.• India leads in geographical distribution of revenue at

29% and in capital employed by geographies by 46% for Tata Steel.

• Customer • Diversified customer base.• Automotive ,Construction , Engineering , Consumer

goods industries etc are major customers.• Increasing marketing efforts in industries like Railways ,

Ship Building , Defense etc.

Internal business processes• Kar Vijay Har Shikhar ,a Continuous improvement

programme, a well-defined six step process involving TQM and statistical tools for improving quality.

• Some of the key themes through which process improvements are taken up are – Throughput, Value-in-use, Energy Efficiency, Opportunistic Plays, Logistics & Supply Chain

• Adoption of National Voluntary Guidelines to enforce transparency , ethics and care for the community.

Learning and Growth• Presence of four research centers supporting cutting

edge R&D in steel.•  Tata Steel Group Process Improvement Teams

deployment for continuous process improvements.• Growth of the company as a whole has been affected by

weak global economy in 2013.

Internal Factor Evaluation MatrixWeighted score is 2.56.Tata Steel is internally somewhat strong.

Business Model AnalysisKey

Partners

• Nat Steel

• Millennium Steel

• Corus

Key Activities

• Mining• Extraction• Manufacturin

g

Value Proposition

• “Trusted Brand”

• Highly valued by all stakeholders

Customer Relationshi

ps

• Strong Base

• Value driven

Customer Segments

• Automotive

• Construction

• Engineering

• Consumer goods

Key Resources

• Access to Raw Material

• Strategic Alliances

Channels

Traditional supply

channels direct to

customers

Cost Structure

• Processing Costs• Interest on Debts

Revenue Streams

• Steel, Tubes and Alloys• Sale of minerals & bearings

• Sale of Power and water

Major players in Steel Sector Main Producers (SAIL plants, Tata Steel and Vizag

Steel/RINL), Major Producers (Essar Steel, Jindal Steel & Power and

Ispat Industries) Other Producers Total production value :

Sector Production

Public Sector 12.579 M tonnes

Private Sector 38.015 M tonnes

Total 50.594(89% cap util)

Major player in Steel SectorNAME MAJOR

PRODUCTSTOTAL CAPACITY (million tonnes)

REVENUE (Billion US$)

Tata Steel wire rods, bars, and steel flats

28 6.9

Jindal Steel & Power

mild steel slabs and sponge iron

20 3.2

Essar Steel sponge iron, steel and iron ore pellets

14 5.6

Rashtriya Ispat Nigam Ltd

liquid steel 30 1.7

Bhushan Power & Steel Ltd

iron Ore beneficiation

12 (incl of the expansions)

1.32

Lloyds Steel corrugated sheets and steel coils

Steel Authority of India Limited

Stainless steel and iron

25 7.8

Mahindra Ugene Steel Corporation

1.8 0.210

Product Portfolio

Market Share

Mar

ket G

row

th Hig

hLo

w

LowHigh

Ferro Alloys and Minerals

Division

Bearings and Tubes

Division

Steel Division

External factor based decisions• Updating frequently on the latest technological

advancements• Improving storage facilities• Cash management and treasury management

techniques

Internal factor based decisions• Improving operational efficiency.• Merging with high technology foreign

companies in similar line of business.• Incentivizing employees for long term

association with the company.

ANSOFF MATRIX

Market penetration: Bearings and tube division

Product development: Steel coils

and Corrugated

steel

Market developmen

t : International

markets

Alliance and Mergers

Diversification:Not

diversifying in the near future

Long Term Strategic plan

2012 2020

28 mtpa60+ mtpa

Fewer Intnl Markets

Strong Intnl presence

Thank you !!