Tata steel

Tata Steel

SWOT Analysis of   Tata Steel (Earlier known as Tata Iron & Steel Company up to 2005)

Contents:1. Tata Steel - Company Overview2. Tata Steel - Business Description3. Tata Steel – History4. Tata Steel - Major Products and

Services5. SWOT Analysis – Overview6. Tata Steel – Strengths7. Tata Steel – Weaknesses8. Tata Steel – Opportunities9. Tata Steel – Threats10.Conclusion

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Tata Steel

1. Tata Steel - Company Overview

Tata Steel has always believed that the principle of mutual benefit - between countries, corporations, customers, employees and communities - is the most effective route to profitable and sustainable growth.

Established in 1907, Tata Steel is among the top ten global steel companies with an annual crude steel capacity of over 28 million tonnes per annum. 

The Tata Steel Group, with a turnover of US$ 26.13 billion in FY 2011- 2012, has over 81,000 employees across five continents and is a Fortune 500 company.

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Tata Steel

2. Tata Steel - Business DescriptionTata Steel formerly known as TISCO and Tata Iron and Steel Company Limited, is the world's seventh largest steel company, with an annual crude steel capacity of 31 million tonnes. It is the largest private sector steel company in India in terms of domestic production. Currently ranked 410th on Fortune Global 500, it is based in Jamshedpur, Jharkhand, India. It is part of Tata Group of companies. Tata Steel is also India's second-largest and second-most profitable company in private sector with consolidated revenues of Indian Rupee .Its main plant is located in Jamshedpur, Jharkhand, with its recent acquisitions; the company has become a multinational with operations in various countries. The registered office of Tata Steel is in Mumbai. The company was also recognized as the world's best steel producer by World Steel Dynamics in 2005.The company is listed on Bombay Stock Exchange and National Stock Exchange of India, and employs about 82,700 people (as of 2007)

Tata steel:-

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Tata Steel

Our Vision and our valuesOur vision is to be the global steel industry benchmark for value creation and corporate citizenship.

Our brandThe Tata brand is highly respected throughout the world.

Organisation & managementTata Steel Europe is part of the Tata Steel Group. The day-to-day management of the company is conducted through the Executive Committee.

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Tata Steel

ProcurementProcurement objectives are dominated by ensuring the best value for the company, whilst ensuring security of supply.

3. Tata Steel – HistoryTISCO was established by Dorabji Tata August 26, 1907, as part of

his father Jamsetji 's Tata Group In year 1939, it had largest steel

plant in the British empire. A modernization and expansion program

was launched in year 1951.

The origins of Tata Steel, which has culminated into the century long history of an industrial empire, The story of Tata Steel is a century old. And so is the story of steel in India. Etched with the visions and hardships of a single man, the story has flowed through ages to redefine steel in every way. The saga, which started in 1907, completes a century of trust in 2007. Over the years this one company has exposed the various shapes and forms in which steel can be applied for effective utilization.

The story of Tata Steel: The leading Indian intellectuals of the 19th century believed that if India were to keep pace with the world it would have to master the modern scientific methods of

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Tata Steel

the West. In these times was born Jamsetji Nusserwanji Tata. Within his lifetime, Jamsetji was to witness the birth of a revolutionary Indian nationalism that would assist in the emergence of independent India, which he helped to create and whose presence could already be felt when he died in 1904.

4. Tata Steel - Major Products and Services

ProductsTata steel offer a wide range of standard and differentiated products for different and demanding markets worldwide such as ultra-high strength steel for Automotive, speciality steels for Aerospace and ultra-high hardness steels for Defence & Security.

All Products:-

1. Cold rolled

2. Metallic coated

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Tata Steel

3. Direct rolled

4. Narrow Strip

5. Pre-finished steels

6. Packaging steels

7. Plated steels

8. Electrical steel

9. Hot rolled

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Tata Steel

10. Tube

11. Sections

12. Special profiles

13. Rail

14. Wire rod

15. Speciality steel & products

16. Plates

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Tata Steel

17. Floors

18. Walls

19. Roofs

20. Modular

21. Building component

22. Structural steelwork

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Tata Steel

5. SWOT Analysis – Overview

A SWOT analysis focuses on the four elements of the acronym, but the graphic format you use varies depending on the depth and complexity of your effort.

The purpose of performing a SWOT is to reveal positive forces that work together and potential problems that need to be addressed or at least recognized. Before you conduct a SWOT session, decide what format or layout you will use to communicate these issues most clearly for you.

We will discuss the process of creating the analysis below, but first here are a few sample layouts-ideas of what SWOT analysis can look like.

INTERNAL EXTERNAL

Strengths Weaknesses Opportunities Threats

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Tata Steel

Positives Negatives

strengths

assets

resources

opportunities

prospects

weaknesses

limitations

restrictions

threats

challenges

6. Tata Steel – Strengths1. Mineral Reserves -

Tata Steel has two collieries in West Bokaro and Jharia, in the state of Jharkhand.

The iron ore units are located in Noamundi, Joda and Katamandi in the states of Jharkhand and Orissa.

These mines are located at an approximate distance of 150 kms from Jamshedpur; home to the steel company’s manufacturing facility.

The Steel Company's iron ore units produce 9 million tons per annum of various grades of high quality iron ore including rich blue dust ore. The company in India is having mines of 281 million tonnes reserves in its mines in Jharkhand.

2. Information Technology -

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Tata Steel

The entire mining operation of the Company is safeguarded against accident occurrence. Proactive measures are undertaken to ensure the employee's health and productivity through ergonomically designed work stations and by protecting them from occupational hazards.

. All its mines are ISO-14001 -Environmental Management System Certified. Tata Steel's collieries use 'Surpass', a state-of-the-art mine planning software that estimates the volume of coal in every seam.

This software is coupled with qualitative detailing that focuses on output consistency. To maximize productivity and utilization, a voice and data equipped Global Positioning System is used.

3. Management Team - Tata Steel has a highly credible management

team who has displayed their skills in expanding the company through inorganic route.

The company has successfully acquired Nat Steel of Indonesia, Millennium Steel of Thailand and more importantly Corus.

The company’s virtuosos of finance have been able to find innovative ways to tackle

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Tata Steel

the company’s bludgeoning debt and keep the bottom line in the green zone despite lowering demand and huge debts accumulated.

4. Innovativeness of TATA Steel with respect to its competitors -

Tata Steel has the lowest operating cost for steel manufacture in the world.

Further it has displayed effective means in adopting an eco-friendly and sustainable approach towards the manufacture of steel.

5. Adaptability of the company in the fast change of the environment –

Tata Steel has displayed immense agility in the recent past during the global financial tsunami.

Its virtuosos of various fields have adopted various methods like lowering of production and even shutting down of steel plant sowing to the lack of demand, managing the balance sheet efficiently etc.

The company has 70% of its procurement of raw materials for its operations in Asia through long term contracts.

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Tata Steel

6. Brand value - The TATA brand owing to its highly ethical

and a socialistic approach to business have made its name synonymous to trust. After the acquisition of Corus another powerful brand, the brand value of the company has enhanced further.

7. Corporate governance- Tata Steel has had impeccable record for

corporate governance. It has set the benchmark in global corporate governance principles of transparency, accountability and equity for others to follow.

Tata Steel has been consistently receiving prestigious awards at both the national and the international arena.

The Best Governed Company Award for corporate practices presented by Asian Centre for Corporate Governance.

8. Excellent integration with Corus–

Corus has a great reserve of around2000 metallurgists and technology which could be exploited by Tata Steel on several fronts.

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Tata Steel

9. Excellent procurement philosophy-

Tata Steel has around 70% of its supplies through long term contracts. Thus it can be shielded from the volatility of the financial markets.

10. Spawning upon opportunities-

Tata Steel has been amongst the earliest to spot the escalation in the demand for steel in the forth coming years. It has hence invested heavily in the expansion of its existing facility at Jamshedpur and is setting up other green field projects at Orissa, Jharkhand etc.

7. Tata Steel –Weaknesses

1. Huge debt burden- Tata Steel is having a total debt of 10.2 billion USD in its books. It has a debt equity ratio 0f 1.6 which means

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Tata Steel

that the assets of the company is largely financed through debt.

2. High attrition rate- Tata Steel has traditionally faced the brunt of high attrition rate. In its Jamshedpur plant many engineers constantly change their jobs to SAIL in Bokaro and vice-versa. Thus the formation of a core team of capable individuals across all departments is very difficult as the size of the team is ever changing.

3. Products in the portfolio lacking demand- The company has certain products in its portfolio like aerospace steel which lacked demand in the recent past. Primarily due to the slow down of the aviation sector which led to delay in the delivery of aircrafts as a result of cutting of capacity by airlines. The company also had certain Cast products largely marketing in the UK which has been witnessing slowdown in demand since 2001

4. Degradation in brand value owing to job losses-TATA group has made its name synonymous to job security of it employees. But the shutdown of its plants in the UK and The Netherlands will dent its image to a certain extent. As a result of which around 1600 employees would lose their daily livelihood.

5. Low cost recovery– There are specific products like the aerospace steel and cast products which has received

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Tata Steel

feeble response in the past. The company has failed to recover costs in this business front.

6. Laggard in technological front- Companies like SAIL has efficiently introduced the XRF (X-Ray Fluorescence) in its plants at Durgapur and Bokaro over 12 months back which the Tata Steel has failed to do.

7. Bad raw material procurement philosophy of its subsidiaries- The largest subsidiary of Tata Steel,Corus has high exposure to spot prices and a higher operational gearing among the larger European steel companies. Hence it has the risk of volatility associated with pricing, one of the key elements in determining profitability of a commodity company.

8. Tata Steel –Opportunities1. Competitive position of the company- Tata Steel is the second largest producer of steel in India and the sixth largest producer in the world.

2. Newer technologies –i. The Codex process

Combines an iron meter/coal gas if vessel with a pre-reduction shaft to produce a liquid product that is very similar to blast furnace hot metal. Coal, oxygen, and pre-reduced iron are fed

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Tata Steel

into the meter/gas to melt the iron and produce a highly reducing off-gas.ii. The His melt process

Iron reduction and coal gasification take place in a liquid metal bath. The fundamental processes of HI smelt began with early experiments in Germany with bottom-blown oxygen steel making converters (LD, LD-AC, KMS, among others) to allow for coal, lime, and/or iron ore injection through the bottom nozzles.iii. Direct Iron Ore Smelting(DIOS) process in Japan and the AISI direct steelmaking process in North America produced two similar routes to hot metal production. Both processes utilize a smelting reactor where the primary reactions occur in a deep slag bath as opposed to in the metal phase.

3. Opportunities in the field- The Government of India has earmarked Rs.1, 70,000 crore for infrastructural spending for the fiscal year 2010- 2011 and the trend is set to escalate up to the fiscal year 2025 when India is slated to become the third largest economy in the world. Further many private players either independently or by undergoing public private partnerships (PPP) has also come into the fray. The consumption of steel has been steadily increasing with the rapid investment in the infrastructure and real estate projects. The annual steel production of India has touched 200MT and according to governments steel policy is expected to touch around 250 MT by 2013-2014. The demand for Indian made steel is escalating overseas out of the 200 MT of steel currently produced in India around 50% of it is exported. In the first six months of the fiscal year 2009-2010 the Indian steel export almost doubled to 9.3MT from 4.4MT in the same period

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Tata Steel

the previous fiscal year. The country’s iron ore exports during April-October 2009 period grew 20 per cent over the year ago period to 53 million tons.

4. Acquisition opportunities -In the aftermath of the financial tsunami various mineral assets are available globally at a price which is just a shade of their prime valuations. The government of various countries has been putting up coal blocks under the hammer. Tata Steel has been very active in the asset acquisition space and has bagged various coal blocks in Asia, Africa etc. which is essential for its security of raw materials.

5. Opportunities for demand of higher prices- The demand for steel is on arise both domestically and internationally as a result of the enhanced focus upon infrastructural development. Secondly with other steel projects of international giants POSCO, ARCELOR MITTAL stalled due to land acquisition problems the prices of steel are slated to soar. In the month of April 2010 the steel prices were increased by Rs.2500/ton and this is just the brink of the U-Shaped economic recovery and the prices are slated to rise further in the near future.

6. The movement of Tata Steel in the value chain front-India is the only country in the world where steel can be made cheaper and there is consumption. Then there are other countries like Ukraine, Iran, Brazil, Australia and Bangladesh where steel can be made cheap because of the availability of iron ore and coal. Tata

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Tata Steel

Steel has been to Iran, Ukraine, and Bangladesh - all in the last year and is looking at China for finishing capabilities Ukraine is like India, where the factors of production are competitive. The sustainable level of demand in Ukraine is 12 million tons (MT), but one can make much more steel because of the availability of ore. Secondly, the labour is cheap in India.

9. Tata Steel –Threats1. Resources to cushion the from business environmental change-

Tata Steel is a company floated by Tata Sons whose assets are valued at around 108 billion USD and thus the company has enough reserves to cushion itself from market fluctuations.

2. International competition-

Companies like the Indian Steel magnate Lakshmi Mittal’s Arcelor Mittal’s, Posco has landed in the shores of India and have proposed to set up 8 MT and 12 MT respectively. These are amongst the largest steel producers in the world and have a high chance of eating into the market share of Tata Steel. Indian market is also plagued with cheaper Chinese made steel which is ubiquitously available and is significantly munching through the pie of all Indian steel makers including Tata Steel.

3. Financial Crises -

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Tata Steel

Tata Steel is having a huge debt of 10.2 billion USD in its books and hence a huge interest burden. With the volatility of the financial markets and the tightening of the liquidity by the central banks this rate is slated to go up and hence would further increase the interest burden of the company.

4. Adoptability of the company to technological changes –

Tata Steel has shown immense integration abilities in the past. With the acquisition of it has been able to imbibe the high end technological knowledge to its production facilities and hence has been able to produce high quality steel at least prices and significantly bettered its operating margins.

5. Regulatory norms-

The government of India has chalked a strict norm for the clearance of a plant through environmental impact assessment (EIA). To get clearance from the concerned authority demands more than eight months thus leads to delay and project cost escalation. Albeit the governments’ steel policy has been pro industry in order to increase the steel capacity at a brisk pace.

6. Adverse effects of land acquisition picketing-

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Tata Steel

India is plagued with violent agitation against land acquisition. The land acquisition process of the company’s plant in Orissa has been stalled primarily due to the uprising of the land losers in the concerned area. Albeit the company is providing with attractive compensation packages, the uprising is primarily due to the cheap politics of the local leaders to come into the limelight. This will severely dent the company’s expansion plans of the future.

7. Decrement in the sales volumes-

Some of the Tata Steel products (like aerospace steel) have witnessed a severe reduction in sales and as a result of which the production facilities of the company in the UK and The Netherlands is facing the brunt of shut down.

8. Brand equity of the products-

Tata Steel brand is a very powerful one, can only take a product very far. Beyond that it will be necessary for the Product to strike ahead with its own brand. He says, "A villager who goes to buy steel in the marketplace does not know what Tata Steel is bringing to this steel. All he knows is that it is a Tata product." That villager needs to be told about the superiority of Tata Steel’s product over others. This is the work of the brand. Branding has begun to yield rich

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Tata Steel

dividends. Last year Tata Steel sold about 345,000 tons of branded steel,

10. Tata Steel-ConclusionTata Steel has shown that it is committed to sustainable and environmental practices as part of its overall aim to act responsibly. It shows commitment and progress towards key targets of sustainability as well as encouraging sustainable decision-making in its customers and within their markets.The key to the success of this approach is to recognise the unique properties of steel as a recyclable material and to ensure that measurements of sustainability are taken over the entire life cycle of a product, not just the use-phase.

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Tata Steel

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