THE TEAM – Section B | GROUP 7
Krishna Sil
UM15088
Preeti Patnaik
UM15097
Trisha Anand
UM15120
Varanasi Arjun
UM15121
Yasasvi Santosh K
UM15123
Strategic Analysis of TATA STEEL
Submitted To:
Contents
1 Executive Summary... 5
2 Industry Overview... 6
2.1 Nature and Size of the Industry... 6
2.2 Key Growth drivers for the Industry... 8
2.3 Identification of Critical Success Factors (CSF)... 8
2.4 Industry Benchmarks... 9
2.5 Import and Export Scenario in Indian Steel sector... 14
2.6 PESTEL Analysis... 14
2.7 Porter’s Five Forces Analysis... 18
2.8 Strategic Group Mapping... 23
2.9 Competitive Landscape... 24
2.10 Market Segmentation... 25
2.11 Buying Criteria Analysis of the Industry... 26
2.12 Key trends and future developments... 28
2.13 Highlights Of Union Budget 2016 – Impact On Steel Sector...29
3.1 Company background... 30
3.2 Timeline with key milestones and their strategic impact... 31
3.3 Vision, Mission, Goals, and Strategic Themes... 33
3.4 Key Product and Service Portfolio... 35
3.5 Core Competencies of the firm... 38
3.6 Business Model of the organization... 39
3.7 3rd Generation Balanced Scorecard (Amalgamation of 1st Generation BSC and Activity System Map)...41
3.8 SWOT Analysis... 43
3.9 Competitor Analysis (identify competitors)... 44
3.9.1 Based on Critical Success factors... 44
3.9.2 Based on Financial indicators... 45
4 Future Growth Strategy for the organization... 45
4.1 Portfolio Analysis... 45
4.1.1 Based on BCG Matrix... 45
4.2 Company’s Strategic Roadmap for future... 47
4.3 Re-imagining the Organization with the transformed business model or Use-case based on SMAC and IOE...50
4.3.1 Reimagining Business Processes... 50
4.3.2 Reimagining Customer Segments... 50
4.3.4 Reimagining Workplaces... 51 4.3.5 Reimagining Channels... 51
1 Executive Summary
Past few years have been demotivating for the domestic steel industry in India. While the target set for 2030 is
300MT, industry is facing major capacity underutilization. This is expected to be a consequence of the business cycle
that the steel industry is prone to. In addition to this, the dumping of steel by foreign players in domestic ground is
also adding to our woes.
According to the Steel Ministry's Joint Plant Committee (JPC), production of crude steel during April - December 2015
has been stagnant, growing at 0.9% compared to the same period last year, to 67 mt. The industry has also been
facing a surge in imports which grew by nearly 30%.
Tata Steel has been performing rather well given the market conditions. The fact that they can charge a premium on
a few branded products, gives them a huge benefit while compared to other players. Consistent performance has led
to shareholders’ faith. They are expected to grow in the encouraging future market demand scenario.
The Union Budget 2016 has shown huge promise with inclusion of domestic steel sector in campaigns like Make in
India and Smart cities. Major steel stocks like Tata Steel, SAIL and JSW Steel gained with the finance minister Arun
Jaitley announcing higher investment on infrastructure. While Tata Steel was up 1.99%, Steel Authority of India Ltd
(SAIL) gained 2.16% and JSW Steel jumped 1.54% on the BSE.
As the business cycles and anti-dumping measures by Govt. fall in place, the industry is expected to grow. All major
players have been planning on capacity enhancement and opening of new plants. The Union budget also has shown
steps of encouragement to the sector. This is bound to increase the share prices and hence the market caps of the
steel firms. As the industry will become highly competitive, players will have to be on toes to be in the market.
2 Industry Overview
2.1 Nature and Size of the Industry
History and Evolution of the industry The steel industry is the foundation industry of any economy especially in developing countries whose material intensity is likely to increase significantly in the future for infrastructure investment and growth in the manufacturing sector. Steel is crucial to the development of any modern economy and is considered to be the backbone of human civilization. The level of per capita consumption of steel is treated as an important index of the level of socioeconomic development and living standards of the people in any country. Tata Steel was established by Indian Parsi businessman Jamshetji
Nusserwanji Tata in 1907 (he died in 1904, before the project was completed). Steel was the first core sector that was freed from License Regime (1990-91) and pricing and distribution controls. The Indian steel industry began expanding into Europe in the 21st century. In January 2007 India's Tata Steel made a successful $11.3 billion offer to buy European steel maker Corus Group. New Industrial Policy adopted by the Government has opened the Steel sector for private investment and exempted it from compulsory licensing. Import of foreign technology, FDI and other initiatives have given impetus to the private participation. A number of new/green-field steel plants have come up using modern, state of the art technologies.
Key Consumers of this industry and their changing needs
Steel industry works on a Business-to-Business mode of operation. Being a vital input in most industries steel has a huge consumption across sectors. Some of the key end consumer of steel are sectors such as Construction, Automotive, Machines & Engineering equipments, Aerospace, Railways, Energy, Consumer Goods etc. Steel industry does see some fluctuation in demand with the turn of events in the global economy. The crisis of 2007-08 resulted in a fall in Construction activity which resulted in a decline in steel consumption. However, the per capita consumption of total finished steel in India has risen from 51 Kg in 2009-10 to about 59 Kg in 2014-15. India's steel consumption for FY 2015-16 is estimated to increase by 7 per cent, higher
than 2 per cent growth last year, due to improving economic activity, as per E&Y's 'Global Steel 2015-16' report
Stage in the Industry Life cycle The Steel Industry highly depends on the business cycles. The demand is directly dependent upon how the global economy is performing- recession or boom in critical which effects expenditure in areas like construction, automobiles etc. By and large the steel industry as a whole is a mature industry, individual companies within it might be in the growth phase. Global player continue to vie for a greater share of an otherwise stagnant market. Also with steel being a critical raw material, the industry will always remain on the higher end of the S-Curve in the maturity phase. As steel sector has been suffering from over capacity and slow demand rise, there is a need to innovate and be more proactive than reactive. This might involve usage of new technology for lower cost and viable substitutes which might shift the position of the industry on the S Curve towards the Take-Off Stage. The outlook for steel industry is on the brighter side with demand being spurred by the emerging economies and there is scope for the industry to perform better.
Total Available Market Size (National and Global)
India’s crude steel capacity reached 109.85 Million Tonnes (MT) out of which Tata Steel produced 26.20 million tonnes in 2014-15 and an overall growth of 7.4 per cent.
Production of crude steel grew by 8.9 per cent to 88. 98 MT. Total finished steel
production for sale increased by 5.1 per cent to 92.16 MT. Consumption of total finished steel increased 3.9 per cent to 76.99 MT. India produced 7.34 MT of steel in the month of September 2015, which was nearly equal to the country's steel production in
September 2014. All major steel producers had a marginal surplus barring the US which showed a deficit of 16 million tonnes.
Total Serviceable Market Size (National and Global)
In 2014, the world crude steel production reached 1665 million tonnes (mt) and showed a growth of 1% over 2013. China remained the world’s largest crude steel producer in 2014 (823 mt) followed by Japan (110.7 mt), the USA (88.2 mt) and India (86.5 mt) at the 4 th position. WSA has projected Indian steel demand to grow by 6.2% in 2015 and by 7.3% in 2016 as compared to global steel use growth of 0.5% and 1.4%
respectively. Chinese steel use is projected to decline in both these years by 0.5%.
2.2 Key Growth drivers for the Industry
Key Growth drivers Rationale
Infrastructure spending India lacks basic infrastructure amenities. The government has announced its intent to improve this. A lot of key projects, like high-speed railways linking major cities, highway construction, and housing for all citizens, have been planned by the new government.
Rising disposable incomes The current GDP per capita (PPP) in India is only $5,350. This is more than 70% of China’s. India has been on a rising trajectory. Rising income increases the demand for automobiles and other appliances. This in turn increases demand for steel.
Urbanization Rising incomes and better job opportunities mean people are moving to cities. This is leading to demand for housing, which increases steel consumption.
2.3 Identification of Critical Success Factors (CSF)
Critical Success Factor identified Rationale CSF 1 Economic and Financial
Factors
Higher Annual Net Income After Taxes(ANIAT) over Cost of Capital, High dividend and Capital Appreciation, Cost-cutting efforts, Domestic market growth, Expanding capacity, "Pricing Power" with large buyers, Threat from nearby competitors. CSF 2 Customer Relationships Efficient csrs and strong company image
Quality products at a reasonable price
CSF 3 Knowledge and Learning Enhanced competencies in the formulation and implementation of CSR Integration of cost consciousness in organisational culture and processes
raw materials, a good number of Alliances, mergers, acquisitions and jvs, Product quality, Skilled and productive workforce and Efficient leveraging of maximum value/benefit of CSR and its cost
2.4 Industry Benchmarks
Size of industry:
Category Indicator players serving 75-80% of the marketIndustry Average of Top 5 Firms or
Market Leader 2011-12 2012-13 2013-14 2011-12 2012-13 2013-14 2014-15 (till Q3) Industry Level (National) Market Size 114894 119792 135990 76,315.18 81,121.19 87,274.7 7 92,874.14 Size as % of GDP 1.69 1.8 2 .406 .432 .46 .49 Activity Ratios Inventory turnover 5.73 6.72 7.89 5.31 5.76 5.7 5.74 Receivables turnover 10.56 9.01 8.11 5.31 5.76 5.7 5.74 Payables turnover 4.87 6.83 8.76 8.95 9.33 9.91 9.52 Asset turnover 0.73 0.81 0.82 1.42 1.42 1.44 1.28
Category Indicator players serving 75-80% of the marketIndustry Average of Top 5 Firms or
Market Leader
2011-12 2012-13 2013-14 2011-12 2012-13 2013-14 2014-15 (till Q3)
Liquidity Ratios Current ratio 0.71 0.6 0.3 1.13 0.99 0.86 1.01
Quick ratio 0.34 0.23 0.20 0.74 0.69 0.65 .62 Cash ratio NA NA NA NA NA NA NA Solvency Ratios Debt-to-assets ratio 0.33 0.35 0.33 0.31047 0.31942 0.29936 0.28221 Debt-to-capital ratio 0.47 0.49 0.48 1.23 1.68 1.74 2.28 Debt-to-equity ratio 0.43 0.58 0.61 1.23 1.68 1.74 2.28 Interest coverage ratio 8.69 5.36 4.38 NA NA NA NA Profitability Ratios Gross profit margin 0.06 0.06 0.1 5.94 5.00 7.11 4.72 Operating profit margin 0.09 0.02 0.005 9.34 9.14 11.04 8.98 Net profit margin 10.51 7.54 7.53 4.05 -5.23 2.41 -2.81
Category Indicator players serving 75-80% of the marketIndustry Average of Top 5 Firms or Market Leader 2011-12 2012-13 2013-14 2011-12 2012-13 2013-14 2014-15 (till Q3) Return on assets (ROA) 3.487 3.92 3.487 438.79 351.85 417.33 322.79 Return on equity (ROE) 17.58 12.22 1.957 86.37 167.68 88.86 53.37 Valuation Ratios or Price Ratios Valuation Ratios or Price Ratios Price to Earnings (P/E) 11.1 12.7 13.89 7.85801 10.9047 9.5365 10.3529 PEG Ratio = (P/E Ratio) / Projected Annual Growth in Earnings per Share NA NA NA NA NA NA NA Price to Cash Flow NA NA NA NA NA NA NA Valuation Ratios or Price Ratios Price to Book (P/B) 0.65 0.59 0.95 1.234782 1.615632 1.508638 2.12646 Price to Sales NA NA NA NA NA NA NA
Category Indicator players serving 75-80% of the marketIndustry Average of Top 5 Firms or Market Leader 2011-12 2012-13 2013-14 2011-12 2012-13 2013-14 2014-15 (till Q3) Dividend Yield 2.11 3.18 2.76 120 80 100 80 Dividend Pay-out Ratio 23.19 37.94 31.06 13.63 -67.68 11.14 46.63 Enterprise value(market capitalisatio n plus debt minus cash)/ EBITDA 8.30 10.5 12.31 NA NA NA NA Competitive Ratios Staff Turnover or Industry Attrition Rate NA NA NA NA NA NA NA Staff Cost/ Salary as percentage of Sales 0.168 0.190 0.198 NA NA NA NA Operating Expenses as percentage of Sales 0.85 0.81 0.88 0.66652 0.71932 0.69644 0.7783
Category Indicator players serving 75-80% of the marketIndustry Average of Top 5 Firms or Market Leader 2011-12 2012-13 2013-14 2011-12 2012-13 2013-14 2014-15 (till Q3) Depreciation as percentage of Sales 3.89% 4.24% 4.73% 0.03393 0.04294 0.04624 0.04781 Fixed Assets to Sales Revenue 1.060 0.999 0.879 2.24897 2.12362 2.09237 2.22267 Advertising as percentage of Sales 0 0 0 0 0 0 0
2.5 Import and Export Scenario in Indian Steel sector
Indian steel industry : Imports (in million tonnes)
Category 2010-11 2011-12 2012-13 2013-14 2014-15
Total Finished Steel (alloy + non alloy) 6.66 6.86 7.93 5.45 9.32
Indian steel industry : Exports (in million tonnes)
Category 2010-11 2011-12 2012-13 2013-14 2014-15
Total Finished Steel (alloy + non alloy) 3.64 4.59 5.37 5.98 5.59
2.6 PESTEL Analysis
Category Description Key factors for analysis Rationale
Political Anti-Dumping duties on cheap
steel import will benefit Tata Steel
Tie ups with the Govt. on campaigns like ‘Make In India’ are boosting the
visibility and reach of the Tata Steel brand
High amount of risk by
investing in the countries like Bangladesh, Iran, and
Thailand. E.g. Bangladesh and Iran projects are getting
delayed due to political issues Iron and Steel industry has
been included in the list of
Continuous infrastructural
development bound to decrease costs
With delicensing and decontrolling of capacity restrictions, Tata Steel has come a long way and produces 29 mn. tonnes today
100% FDI allowed in the Steel sector has given a huge boost to the industry as a whole
Advance Licensing Scheme allows duty free import of raw materials for exports.
`high priority' industries for automatic approval for foreign equity investment up to 100%.
The National Steel policy 2005 targets indigenous production of 110 million tonnes (mt) by 2019-20 against targeted consumption of 90 mt by 2019-20.
deregulated from January 1992.
The Planning Commission has approved a total outlay of US$ 9.5 billion for the development and promotion of the iron and steel sector.
The scheme for the promotion of research and development in the iron and steel sector has been approved with a budgetary provision of US$ 24.6 million to initiate and implement the provisions of the scheme.
Apart from this restrictions on the import and export have been reduced
Reduction in import and tariff reduced from the 105%im year 1992-1993to 30% in the year 1996-1997. Economic Analysts predict tough 2016 for the steel industry worldwide but expect India to
Slowdown in Chinese economy may benefit Tata Steel
Steel industry faces cyclical economic condition because if consuming industries like automobiles, appliances face
Cost of acquisition for Corus was beyond financial expectation. Huge debt on liability side will need to be reduced
Subprime crisis in US and Europe led to huge losses in opportunity
remain more profitable than its Asian peers.
any downturn steel companies also may share the losses
cost for Tata steel as the
Netherlands, United Kingdom and Germany are the main markets for CORUS
Social Tatas have
been known to be ethical and socially active. They have been pro-employees and industry analysts attribute their success to the same
Known for its ethical behavior and employee-care Tata steel was awarded the GOLDEN PEACOCK GLOBAL AWARD 800 villages in Jharkhand,
Orissa and Chhattisgarh are benefitted on issues like healthcare, economic
wellbeing and education. E.g. Hospital on wheels
They have responsibly helped in habitation of slum areas in urban developing cities.
Technological Although Tata Steel is one of the most modern steel-makers in India, they are still behind the state-of-art practices.
Metal Junction, an e-portal to sell steel online in
collaboration with SAIL, the biggest market for the
purchasing and selling of the steel in the world.
Tata Steel invests in R&D to reduce energy consumption in the
production process.
co2nin the environment the Tata steel is on with the research of the ultra-low carbon steel.
in which Tata steel would be able to reduce the co2 emersion by 20 %. A JV with L&T for the protection of
the Olive Ridley sea Turtles at Dharma port
Legal Issue of land acquisitions in
Singur, West Bengal From past 100 years the
company work is not disturbed because of any kind of the strikes and internal issues Tata steel ensures the EHS
(Environmental health and safety) under which each and every employee’s activity is managed by the EHS
framework.
Mines and Minerals (Regulation and Development and Regulation) Bill, 2010, requires mining companies to share 26% of its profit with local inhabitants. Royalties accounted for 3.4 % of Tata Steel's stand-alone expenses last year. The new
charges could account for nine per cent of their total expenditure and cost them 5-6 per cent of their operating profits.
Unstable government in Jharkhand and various tribal protestors are creating some legal issues for the Tata steel to set up 12 MTPA green field plant.
2.7 Porter’s Five Forces Analysis
Porter’s Five Forces Description Key factors for analysis Rationale Buyer Power Although, steel
industry’s products are used in the wide range of industry, the number of suppliers is comparatively low. The products are more or less standardized hence the prices are competitive. Only few can claim premium like TATA Steel on account of its brand image earned over the years and as they have branded
products like Tiscon and
Rising no. of substitutes Switching Costs
Scales of buyer purchases differentiated products Competition between buyers Availability of information Threat of backward integration Concentration of buyer power
The bargaining power of buyers is
high due to various factors.
First, there is low level of product differentiation thus low switching cost for buyers. Competition is basically on price. Second, there are many manufacturers in the market thus buyers have many choices. Third, due to cyclical demand for steel, there tend to be (sometimes) oversupply and this gives additional bargaining power to buyers. Bargaining power of suppliers is
also high due to scarcity of raw materials
especially scrap metals whereby suppliers are raising the price.
Shaktee Supplier Power
The
bargaining
power
of
suppliers is
low for the
fully
integrated
steel plants of
Tata
Steel
mostly have
captive
mines of key
raw material
like iron ore
coal.
This
takes away
supplier power
to a great deal
Competition in Supplier Industry substitutes of suppliers'
products
Importance of buyer to the supplier
Switching costs for suppliers' products
Threat of forward integration by suppliers
The easier it is to switch suppliers, the less bargaining power they have. Low supplier switching costs positively
affect Steel Industry. These statements will have a short-term positive impact on this entity, which adds to its value. Low Cost of Switching Suppliers is a difficult qualitative factor to defend, so competing institutions will have an easy time
overcoming it. Low Cost of Switching Suppliers will have a long-term negative impact on this entity, which subtracts from the entity's value.
The cost of the raw materials tend to fluctuate greatly and therefore in the long run, players with captive sources of inputs will be better insulated against the rising prices and better equipped to withstand downturns in the market. Players like Tata Steel have entered into contractual agreements with Miners for procurement of iron ore.
Existing Competition
It is medium in
the domestic
steel industry
as demand
still exceeds
Listed/Large competitors in
ascending order of size
o JSW Steel
o SAIL
Th The top 4 firm concentration ratio of the
Iron and Steel Industry is 71%.
This implies that there is oligopoly in the
industry as it is dominated my few major
players. Major percentage of market
the supply.
India is a net
importer of
steel.
However, a
threat from
dumping of
cheaper
products from
foreign players
does exist.
o Jindal (Hisar)
o Visa Steel
o Manaksia Steels
Unlisted
o Rashtriya Ispat Nigam
Limited
output is generated by the 4 largest firms
in the industry. Large no of
unorganized players
Major players are competing among
themselves
Threat to new entrants The threat to new entrants is moderate. This depends to a great extent on the four policies mentioned. These four policies also define Capital Requirement Economies of scale Government Policy Product differentiation Capital Requirement: Steel industry is a capital intensive business. It is estimated that to set up 1 mtpa capacity of integrated steel plant, it requires between Rs 25 bn to Rs 30 bn depending upon the location of the plant and technology used.
Economies of scale: As far as the sector forces go, scale of operation does matter. Benefits of economies of scale are derived in the form of lower costs, R& D expenses and better bargaining power while sourcing raw materials. It may be noted that those steel companies, which are integrated, have their own mines for key raw materials such as iron ore and coal
and this protects them for the potential threat for new entrants to a significant extent.
Government Policy: The government has a favorable policy for steel manufacturers. However, there are certain discrepancies involved in allocation of iron ore mines and land acquisitions. Furthermore, the regulatory clearances and other issues are some of the major problems for the new entrants.
Product differentiation: Steel has very low barriers in terms of product differentiation as it doesn't fall into the luxury or specialty goods and thus does not have any substantial price difference. However, certain companies like Tata Steel still enjoy a premium for their products because of its quality and its brand value created more than 100 years back. Bargaining power of buyers: Unlike the FMCG or retail sectors, the buyers have a low bargaining power. However, the government may curb or put a ceiling on prices if it feels the need to do so. The steel companies
either sell the steel directly to the user industries or through their own distribution networks. Some companies also do exports.
Threat to substitutes The price of steel cans is constrained by the price of glass bottles, aluminium cans, and plastic containers. These containers are substitutes, yet they are not rivals in the same
industries.
Buyers propensity to substitutes
Relative price and performance of substitutes
Cost of switching to substitutes
It is medium to low. Although usage of
aluminium has been raising continuously
in the automobile and consumer durables
sectors, it still does not pose any
significant threat to steel as the latter
cannot be replaced completely and the
cost differential is also very high.
Effect of
Complementors
Coke Strong Demand Growth Driven by increased Focus on Fuel Diversification
The demand for these two complementary products are being led in the Asian
geography by India and China. With China’s GDP and internal demand declining, India is expected to have huge gains
Limestone 553 limestone mines existed way back in 2011-2012 in India
2.8 Strategic Group Mapping
Name Market
Cap. Sales Capacity
JSW Steel 27,639.71 46,087.32 14300000
Tata Steel 24,965.09 41,785.00 29000000
SAIL 14,828.59 45,710.78 15400000
Jindal (Hisar) 669.28 7,401.44 8000000
Capacity wise, Tata Steel is the largest private player as represented by the size of the bubble Market cap wise, Tata Steel and JSW Steel are quite competitive and lie on the upper end
Sales wise, all 3 i.e. SAIL, Tata Steel and JSW Steel are competitive as per the latest information
2.9 Competitive Landscape
Value propositions ( Low Cost, Differentiation, Niche) Competitive Strength Assessment (Normal and Weighted)
o NORMAL
MEASURE
TataSteel SAIL JSW Jindal Steel Essar Steel Normal ratios RATIN
G RATING RATING RATING RATING Long Term Contracts for
Raw Materials 9 9 6.5 3 1 31.58%
Low Production Costs 9 8 7.5 7 6 24.00
%
Export Capability 9 7 4 4 2 34.62
%
Value added Services 8 8 5 4 2 29.63
%
MEASURE
WEIGHT Tata Steel SAIL JSW Jindal Steel Essar Steel
RATIN
G SCORE RATING SCORE RATING SCORE RATING SCORE RATING SCORE Long Term Contracts for
Raw Materials 0.50 9 4.5 9 4.5 6.5 3.25 3 1.5 1 0.25
Low Production Costs 0.25 9 2.25 8 2 7.5 1.875 7 1.75 6 1.5
Export Capability 0.15 9 1.35 7 1.75 4 0.6 4 0.6 2 0.3
Value added Services 0.10 8 0.8 8 4 5 2.5 4 2 2 1
Scores 8.9 12.25 8.225 5.85 3.05
2.10 Market Segmentation
Key Products and/or Services Regions
Flat Products - Hot Rolled - Cold Rolled - Metallic Coated - Direct Rolled - Tubes - Pre-finished Steels - Packaging Steels - Electro Plated Steels - Electrical Steels - Narrow Strip Agricultural Implements Bearings Processes Long Products - Sections - Special Profiles - Rail- Wires - Wire Rod
- Speciality Steels and Bar - Plates - Rebars Construction Products - Structural Steel - Floors - Walls - Roofs - Modular India
Asia excluding India Europe
- Building Components
2.11 Buying Criteria Analysis of the Industry
Parameter Details End-user Segments Significance Attached (Low,
Medium, High)
Strength of Steel It is a measure of the tensile strength of the steel. The automobile sector has shown an increased demand for HSS(High Strength Steel) and UHSS (Ultra High Strength Steel) in the recent years. The prime reason for using steel in the body structure of an automotive is its inherent capability to absorb impact
Automobile Sector Construction Industry Individual Customers High High Low
energy in a crash situation . This, in combination with the good formability and joining capability, makes these materials often a first choice.
Formability
With HSS, there can be a tradeoff
between strength and formability; in other words, the stronger a steel is, e.g., in resisting
stretching (tension), the more difficult it can be to forge into shapes, particularly the stylistically and
aerodynamically optimized shapes needed for new vehicles. Steel suppliers are therefore developing steels with a range of properties that give engineers more flexibility in selecting an ideal grade of steel for any given
application.
Automobile Sector
High
Resistance to corrosion The automobile and
construction sectors prefer different alloys of stainless steel as it provides them better resistance to corrosion.
Automobile Sector Construction Sector
Price/Value The value attached to the product bought by a customer by paying a particular price.
Individual Customers
B2B Clients HighHigh
On Time Supply Most of the clients are B2B customers, have a pre-planned schedule.
In case
the order is not completed
on time, then it could
result in payment of the
large amount as a penalty.
Therefore, on time supply
of top quality of steel is
needed so the production
isn’t affected.
B2B clients Low
2.12 Key trends and future developments
Key Trend Impact on Industry (Low, Medium, High) Certainty of Impact (Low probability, medium probability, high probability)
Increased Domestic Competition: The incumbent and challengers in the sector have announced 71 MTPA of steel capacity between 2012 and 2017 through both Greenfield and Brownfield
Medium. An increase in capacity and supply needs to be matched with a growing demand for greater
profitability. Steel firms have been making losses and operating with
Medium Probability. With the government announcing an increase in public expenditure in the Union Budget on infrastructure and housing there would be greater demand for steel.
projects. negative cash flows. However, land acquisitions and regulatory clearances prove to be hurdle.
Muted Global Demand for Steel : Global steel demand to continue to grow at 2-4% p.a. Recent recession and economy slowdown impacted steel industry growth.
Medium-High. Steel demand is
expected to flatten in OECD economies and other heavy weight economies as signs of recovery are slow. Structural shifts in China resulting in over capacity can impact other regional players in Asia including Indian players resulting in lesser margins.
Medium Probability. A McKinsey report puts the CAGR growth of global steel demand at 3.5% between 2013-20. However the report also states that the next cycle of growth would come from the developing economies- Asia, Africa and Latin America. With a pro reforms government in seat and rising GDP figures for emerging economies one can see a gradual peak in demand. India’s demand to grow at 5-6%p.a.
Increasing Mergers& Acquisitions: Facing myriad challenges like demand volatility, over supply, under utilisation of capacity, steel makers will fight for survival. Taking cue from takeovers such as Tata-Corus and Arcelor-Mittal, there is likely to be an increase in M&A acitivity. Limited access to capital would also force some closures and invitation for mergers.
Medium. Increased M&A would result in rationalisation of the sector. Cut down of over production, better
capacity utilisation. Might also result in portfolio optimisation as steel makers would assess the assets and tweak as per demand ( sectoral demands).
Low-Medium Probability. With 80% of global steel industry operating with negative cash flows over the past 3-4 years, a big merger or acquisition is less likely especially as demand is muted. However, aggressive players from emerging economies might find this a lucrative opportunity to expand business. This would also provide the opportunity to increase their asset base and product diversity.
2.13 Highlights Of Union Budget 2016 – Impact On Steel Sector
Budgetary proposals will help the industry meet its growth target and reach its full potential
However, doubling of Clean Energy Cess from Rs 200 to 400 per ton would further increase the input cost for
domestic producers
"The domestic steel industry will continue to play an important role to the Government of India's schemes of
'Make in India' and 'Smart cities' as it is a key material supplier to the allied industries.
Outlay for the road and rail projects amounting to about Rs 1.8 lakh crore would boost the ailing steel
industry by inducing steel demand,
However, the industry has been bogged down by a deluge of imports and predatory pricing over the last 18
months.
Long term measures to create a level playing field are required to firewall the domestic steel industry
from global overcapacity and dumping
3 Company Overview
3.1 Company background
Tata Steel Group is one of the top 10 global steel companies with an annual crude steel capacity of over 29 million tonnes per annum. It was established in 1907 as Asia's 1st integrated private sector steel company. It is now world's second-most
geographically-diversified steel producer, with operations in 26 countries and a commercial presence in over 50 countries. The Tata Steel Group, with a turnover of Rupees 1, 48,614 crores in the financial year 2014, has over 80,000 employees across 5 continents and is a Fortune 500 company. Backed by 100 glorious years of experience in steel making, Tata Steel is the world’s sixth largest steel company with an existing annual crude steel production capacity of 30 Million Tonnes Per Annum (MTPA).
It was the vision of Jamsetji Nusserwanji Tata that on February 27, 1908, the 1st stake was driven into the soil of Sakchi. His vision helped Tata Steel overcome several periods of adversity and strive to improve against all odds.
Tata Steel`s Jamshedpur Works has a crude steel production capacity of 6.8 MTPA which is slated to increase to 10 MTPA by 2010. The Company also has proposed 3 Greenfield steel projects in the states of Jharkhand, Orissa and Chhattisgarh in India with additional capacity of 23 MTPA and a Greenfield project in Vietnam.
Tata Steel has created a manufacturing and marketing network in Europe, South-East Asia and the pacific–rim countries. Corus, which manufactured over 20 MTPA of steel in the year 2008, has operations in the United Kingdom, the Netherlands, Germany, France, Norway and, Belgium.
Tata Steel Thailand is the largest producer of long-steel product in Thailand. It has a manufacturing capacity of 1.7 MTPA. Tata Steel has proposed a 0.5 MTPA mini blast furnace project in Thailand. NatSteel Holdings produces around 2 MTPA of steel products across its regional operations in 7 countries.
The iron ore mines and collieries in India give the company another advantage in raw material sourcing. Tata Steel is also striving towards raw materials security through joint ventures in Thailand, Australia, Mozambique, Ivory Coast and, Oman. Tata Steel has signed an agreement with SAIL (Steel Authority of India Limited) to establish a 50:50 joint venture company for coal mining in India. Tata Steel has also bought 19.9% stake in New Millennium Capital Corporation (Canada) for iron ore mining.
In Tamil Nadu(India), exploration of opportunities in titanium dioxide business, ferro–chrome plant in South Africa and setting up of a deep sea port in coastal Odisha (India) are integral to the ‘Growth and Globalization’ objective of Tata Steel.
Tata Steel India is the 1st integrated steel company in the world, outside Japan, to be awarded the Deming Application Prize 2008 for excellence in Total Quality Management.
3.2 Timeline with key milestones and their strategic impact
1907: Tata Iron & Steel Co Ltd was established by Jamsetji Tata. Iron making commenced in Bihar where rich iron ore (deposits) had been identified in the early 1900s.
1911: Blast Furnace operation at Sakchi begins.
1919: The iron and steelmaking factory in Sakchi and adjacent township was later named Jamshedpur. 1912: At this time, a 12 hour working day was the legal requirement in Britain.
1920: Leave-with-pay introduced. This practice was rare pre-1940s. 1924: TISCO close to closure as a result of 1920s Depression.
1971: Government attempt to nationalize TISCO fails.
1987: Collaboration started with Timken in bearings production.
1987: Collaboration with the Timken Co (USA) was in the setup of Tata Timken for the manufacture of industrial bearings. 1996: Tata Ryerson was a joint venture that would provide industrial materials management services in India.
2001: Announces closure of steelmaking in Llanwern, South Wales.
2004: An online trading and procurement platform was launched (website: www.mjunction.com). It is a joint venture of Tata Steel and SAIL (Steel Authority of India)
2005: TISCO changed its name to Tata Steel.
2007: Expansion in Vietnam by Tata Steel was affected through NatSteel Asia Pte Ltd (Tata's wholly owned Singapore subsidiary).
2007: Bid for Corus commenced in 2006 with a deal signed by Tata Iron & Steel and Corus. Around 1 month after this deal was signed; Brazil's CSN launched a counter offer to Corus. Within a few weeks, Tata Steel increased their original offer which was matched within a few hours by a yet higher offer from CSN. Around 6 weeks later, Tata Steel won the bid - albeit at a markedly higher price than Tata's original offer.
2010: Mothballing of the Teesside plant was regarded as necessary after the consortium involved in the steel off take contract (for which a 10-year deal was signed in 2005) pulled out of the steel slab purchasing arrangement, soon after the financial and steel market crisis of summer in 2008. Thailand's SSI later purchased Teesside plant.
2011: Mothballing of Llanwern intended as a temporary measure, with HSM restart [it was subject to steel market demand conditions] anticipated at the end in 2012.
2013: Tata Steel Europe reports record GBP 1.2 billion losses.
2015: With the decision (August 2015) to close Llanwern hot strip mill, production of HRC was to be centred on Port Talbot. 2015: Mothballing of Tata Steel's Scunthorpe plate mill, closure of the Dawes Lane coke oven complex, closure of steel plants in Dalzell and Clydebridge in October 2015. Other in October 2015 steel plant closures in the UK included Redcar in Teeside.
In October 2015 the UK's Caparo Industries also went into administration. Cheap Chinese steel imports, high energy costs, a strong pound, and other cost burdens [e.g. excessive business rates] were cited as the main reasons for these closures.
2015: December 2015, Tata announced that it had exclusive talks with Greybull Capital to sell a number of plants including its steelworks in Scunthorpe and also mills at Dalzell and Clydebridge in Scotland.
2016: Announces 700 job losses at Port Talbot in South Wales.
3.3 Vision, Mission, Goals, and Strategic Themes
The journey of Tata Steel has seen the Company re-define its performance parameters constantly to become the
global steel industry benchmark for value creation and, corporate citizenship. Tata Steel ensures a total
commitment to its ethical business practices and a people oriented vision:
3.3.1 VisionTata Steel aspires to be the global steel industry benchmark for Value Creation and Corporate Citizenship
Tata Steel makes the difference through: People:
By fostering teamwork, nurturing talent, enhancing leadership capability and acting with pace, pride and passion. Offer:
By becoming the supplier of choice, delivering premium products and services and creating value for its customers. Innovative Approach:
Conduct:
By providing a safe workplace, respecting the environment, caring for its communities and demonstrating high ethical standards.
3.3.2 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. 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.
3.3.3 Goals and Strategic Themes
Tata Steel has taken several strategic initiatives to leverage its strength and counter challenges in all its geographies. • Some key initiatives in India include the greenfield expansion project at Odisha; entry into the steel doors segment under the brand name Pravesh; Kar Vijay Har Shikhar (KVHS) operations programme led to improvement projects across the value chain resulting in savings of `1800+ crores; Shikhar 25, expected to achieve 25% EBITDA in next 3-4 years and the ‘Find it-Own it- Fix it’ Safety Campaign.
• In Europe, the Company's market differentiation strategy will help develop a sustainable long-term position in its chosen markets; and the New Product Development pipeline is enabling the launch of new products. 30 new products were launched during Financial Year 2013-14. In Financial Year 2014-15 another 35 products were launched. In addition, an innovative new iron making technology is being piloted which could improve resource efficiency.
• Various initiatives in Thailand include tighter working capital management; increasing proportion of rebar sales in regional areas; developing differentiated products and services; an increase in volume of downstream products; completion of
Procurement Excellence Project along with Renoir.
• NatSteel is countering Chinese slowdown by sourcing billets at competitive prices and addressing pressure on margins with a two pronged strategy:
- Enhancing value to customers by moving towards 100% value-added products. The Singapore downstream sales grew 3.7%. It continues to enhance its downstream products and services offering to create further value. The introduction of a new Carpet Reinforcement product is an example.
- Growing its downstream business in Xiamen (China), Johor Bahru (Malaysia), as well as set up a new JV in Hong Kong; expand its rebar/wire rod exports into higher margin regions to maximize profitability.
3.4 Key Product and Service Portfolio
Tata Steel products are manufactured using the most advanced technology. A disciplined production process is followed at all Tata Steel production units to ensure the products are superior in quality and consistent in mechanical and chemical
properties. All products as well as the production units are certified as per the highest national as well as international standards and carry the same trust that the brand Tata commands.
As Steel is an essential commodity in many industries and across sectors hence the key products and offerings of TATA Steel are used across them.
Tata Steel serves customers in all major market sectors globally, and recognises that each sector (E.g. automotive or construction or packaging) requires different solutions to meet its specific needs. Depending on market, region and specification of the product the offerings might vary.
Some of the sectors are: 1. Automotive 2. Construction 3. Consumer Goods 4. Aerospace
5. Energy
6. Defence and Nuclear Equipment 7. Ship and Railways building 1. Automotive:
The automotive sector accounts for roughly 16% of all European steel consumption, and for a rapidly growing proportion of steel demand in India and other developing countries. Steel makes up more than half the weight of a car and is used not only for the body and chassis but also the powertrain, gearbox, wheels and tyres.
Products:
Main Brands: Galvano Galvatite® HyPerform® - advanced Dual Phase steels MagiZinc® Auto Precision Tubes Vegter Model Vegter Lite Ymagine® Ympress® Tata Wiron® Tata Bearings Tenform
2. Construction:
From helping to build the world’s most impressive buildings to providing the metal and expertise for infrastructure projects, Tata Steel has the products and services to meet the needs and standards of the global construction sector. The construction industry is Tata Steel’s largest single market globally, and produces an extensive and innovative range of steel construction products and systems, all manufactured to the same high quality. Tata Steel offers a range of products and systems that can be segmented according to their primary function – the structural Main Brands:
Advance® Structural sections, Aquatite® ,Bor Lor Sor ,Catnic® Celsius® 355 Colorcoat HPS200 Ultra®, Colorcoat Prisma™ , Colorcoat Urban® ,ComFlor®, Confidex® Contiflo™ Durbar® Hybox® Infire Kalzip® ,MagiZinc®, Slimdek® Strongbox® Tata Shaktee®, Tata Tiscon® ,Tata Tubes, Tata Structura, Tata Wiron®
Tata Steel manufactures and processes steel for a wide range of customers across the Consumer Goods sector worldwide. The product and service solutions vary: from hot rolled coil through to high-gloss pre-finished steel perforated blanks. These products are primarily used in domestic appliances, lighting, furniture and office equipment, racking and shelving, battery cases, bake-ware, enamel-coated applications and decorative pre-finished metals. Customers in this sector want a variety of quality products – often tailored individually to their specifications – from a single point of contact; reliability and flexibility in supply and service; innovation, and technical support to provide them with differentiation and competitive advantage.
Products:
Advantica® Galvano HIBRITE® HILAN® MagiZinc® Motiva® NICOR® Tata Steelium® Tata Wiron® Ymagine 4. Engineering:
General Engineering Tata Steel manufactures a range of steel products, encompassing hot rolled and cold rolled sheets, wire rod and wire, sections, plate, bearings and tubes, which serve a multitude of small and medium-sized engineering companies in Europe, India and South East Asia.
A variety of high-quality agricultural implements marketed as Tata Agrico are widely used throughout rural India. Similarly a range of wire products has many applications in farming and fencing. Engineering Services, Plant & Equipment
Multi-disciplinary engineering expertise relating to the design, manufacture and supply of high- precision equipment is offered to various industry sectors.
.
Products:
Celsius®355 Galvano Hybox® 355 Tata Steelium® Tata Wiron® Tata Bearing. The most important brands under Steel Products are
-- Tata Shaktee - Tata Steel’s most important brand in the field of Galvanised Corrugated Sheets - Tata Tiscon - First Thermo Mechanically Treated (TMT) Rebar in India
- Tata Steelium – World’s 1st branded Cold Rolled Steel (CRS)
- Tata Astrum - Best-in-class Hot Rolled Sheets (HRS) & Coils offered by Tata steel - Tata Structura - Lightweight Hollow Steel Sections that ensure high durability
- Tata Pipes - Commercial tubes mainly used for carrying liquids and low pressure gases
- Tata Precision Tubes - Robust precision tubes catering to automotive, boiler and general engineering segments - Tata Automotive Steels - Products ranging from strips to tubes, and welded blanks to automotive(advanced) steels
3.5 Core Competencies of the firm
The TATA Group lives by its mission and vision of Improving the Quality of Life. Hence all the TATA companies derive strength as also the core strategy from that. Some of the instances are cited below:
-Typically, Tata’s business competes on the basis of their available tangible and intangible resources and the skills. The skill resources are in essence the group’s core competences. It is said that “at corporate or strategic levels of management the core competencies are difficult to manage” The Tata’s Core Strategies of exploiting its resources and competence to meet the challenge of external environment are somehow similar to the dimensions of business excellence. The dimensions relates to the pattern in the sequence of strategic action taken by the group. The group built their strengths and core competences and never diversifies far away from these. The senior management has a clear understanding of their business as well as micro and macro environment. The Group’s knowledge and experience provides the basics of their management intuition and credibility. They only do what they know and avoid what they don’t.
- If we take the example of TATA Steel, the group sticks to the steel industry as the main aim of strategic development to achieve cost leadership.
-The group actively is a Customer and Market Oriented corporate, listens to the customers and place excellent emphasis to deliver quality, reliability and high level of service.
-Tata sets very high standard in these regards and ensures their achievement through reward system that includes emotional rewards. The strategic approach is to involve the customers.
- The other value drivers of the group to successfully exploit the resources are the productivity through the people and liberty and entrepreneurship.
- The group empowers people to make decisions about their own jobs, the culture values are that the people are not penalized for failures they should be educated and led them to continuous improvement.
- The group also express concern for the feeling of their employees and try to foster attitude in which people perceive themselves as belonging to an extended family.
Today TATA Steel has a more aggressive strategy with an eye on the global map and a new path of expansion to become a benchmark in the global steel industry and that is through JVs and M&As.
3.6 Business Model of the organization
Key Partners
NAT Steel
Millenium Steel
Corus Steel
Motivations for partnerships
More capital/fund is available and the business has more borrowing power.
Partners share the decision making and can help each other out when they need to.
That people will need to stay or work in better spaces and dress better.
Reward to risk ratio will increase Key
Activities
Mining
Extraction
Manufacturing
Customising
To leverage synergies between Tata Steel and Corus and accelerate performance improvement through learning and sharing, a Performance Improvement (PI) Committee has been constituted.
Under this committee 7 PI groups have started functioning, identifying Key Performance Indicators (KPI’s) to be improved and improvement projects to be undertaken across various sites of the Tata Steel Group.
Propositions
Highly Valued by all
Stakeholders
Variety of Products
improving processes, with a view to consistently increasing efficiencies, enhancing quality, and thereby achieving better performance benchmarks in all areas.
The various initiatives taken by the several companies in its operations across the world have seen the development of
several models that have sustained over the years and have now become institutions.
These initiatives typically have been designed to encompass in their fold all the people down the line, so that process
improvement becomes a way of life. Customer Relationship s
Strong Base
Value Driven
Employee Friendly
practises
The process of value creation at Tata Steel is based on five key actions. Customer need identification through a number of active
listening and learning mechanisms.
Analyses and prioritisation of inputs. • Evaluation of ‘potential value for customers’ and feasibility checks.
Implementation of pilot projects through cross functional teams. Monitoring of projects.
Customer
Segments
Automotive
Construction
Consumer Goods
Aerospace
Rail and Ship building
Defence purposes
The Company’s Long Product Division launched RAISE
(Responsible Architectural Initiatives and Structural Engineering), an initiative promoted with INSDAG, to engage with architects and structural engineers across India.
The programme aims at driving responsible construction practices and creating brand ambassadors in the process. Key
Resources
Access to Raw Material
Strategic Alliances
Skilled Manpower
A holistic approach to the use of natural resources led to
improvements in the productivity of customers who manufacture continuous electrodes for the auto industry from WR3M / Low Ca ER70S6 grades of wire rods.
The 100% increase in speed and productivity has led to a reduction in power consumption and water that makes up for consumption in different parts of the product’s value chain.
Channels
Traditional supply chains
directly to consumer
Cost
Structure
Processing Costs
Interest on Debt
Raw Material Extraction.
Steel prices are now increasingly aligning to global export prices as markets strike a balance between imports and domestic demand. China’s waning demand and resultant rise in exports poses a risk to leveraging improving domestic demand in South Asia and Europe.
Further, movement of currencies against US$ would also have a significant impact on the movement of global steel and raw material prices.
Revenue
Streams
Steel Tubes
Alloys
Sale of Minerals & Bearings
Sale of power and water.
Annual sales in the Automotive segment at a record 1.37 million tonnes, as against 1.17 million tonnes in the previous year. Annual Tata Tiscon sales at a record 1.23 million tonnes, as
against 1.09 million tonnes in the previous year.
Annual Tata Shaktee sales at a record 0.23 million tonnes, as against 0.21 million tonnes in the previous year.
Annual Durashine sales at a record 100k tonnes (20% more than the previous best).
Annual sales in the LPG segment at a record 85k tonnes and a market share of 36% (23% in the previous year).
3.7 3rd Generation Balanced Scorecard (Amalgamation of 1st Generation BSC and Activity System Map)
-Turnover at 1, 65,000 Cr by 2015.
-EBITDA at 15,000 Cr by 2015.
- PAT is at -5000 Cr by 2015.
-India leads in geographical distribution of revenue at 29% and in capital employed by geographies at 46% for TATA
Steel.
Customer:
-
Diversified Customer Base
-
Diverse Sectors & Usage: Automotive, Construction, Consumer goods, Defence etc
-
Increasing marketing efforts in Rail Ship, Aerospace, Nuclear etc.
Internal Business Process:
-
Adoption of TATA Business Excellence Model (Malcolm Balbridge Model) –gives strategic direction and
process improvement.
-
Well defined TQM Standard for controlling defects and improving quality. Statistical Process Control measures
in check.
-
Some of the key themes through which quality is controlled are: Throughput, Value in Use, Energy Efficiency,
Logistics and Supply chain.
-
Adoption of National Voluntary Guidelines to ensure transparency, ethics and care for community.
Learning & Growth:
-
Presence of four R&D centers across India to promote cutting edge technology and product variation.
-
TATA Steel Group Process Improvement Techniques deployment for continuous process improvement.
-
Growth of company has been slow due to recent global slowdown owing to Subprime Crisis. Effected by
economic cycles.
3.8 SWOT Analysis
STRENGTHS
Experience, Micro Environment, Business
Model, Expertise, Resources and
Capabilities, Culture, Access to raw
materials
WEAKNESS
Value Chain, Distribution, Macro
Environment.
Opportunities
Exports, New Products, New Markets,
Mergers and Acquisitions, Growth of
Infrastructure.
THREAT
Free Market, Globalisation, Economic
Cycles- recession in global economy, rising
coal prices.
A SWOT analysis is important for Tata Steel to evaluate its current position and formulate strategies to tackle its
competitors.
Strengths of Tata Steel
Tata Steel is the pioneer of steel business in India and thus enjoys brand equity. Tata Steel has a multiple
companies under the same banner, which gives it an advantage of value-chain efficiency, whereby the company
can utilize products made in its sister companies to process raw materials and increase efficiency.
Weaknesses of Tata Steel
The biggest weakness of Tata Steel is its increasing debt-to-equity ratio. Most of its assets are financed by debt,
which can be dangerous in the long-run. Tata Steel largely depends on domestic and a few international markets
for generating business. This over-dependence can prove to be fatal in times of economic crisis.
Opportunities for Tata Steel
Tata Steel is branching out to overseas market. The company has recently signed a deal with Corus group, which
provides access to European markets. Tata Steel will now be in a position to utilize the R&D facility and the patents
owned by the Corus group. Exposure to new technologies and markets is a big advantage for the company.
Threats to Tata Steel
In the current scenario, the biggest threat for Tata Steel is to maintain the Co2 emission standards when it starts its
operations in Europe. The sudden overseas exposure along with a possible economic slowdown is the biggest
challenge faced by Tata Steel in the present circumstances.
3.9 Competitor Analysis (identify competitors)
3.9.1 Based on Critical Success factors
MEASURE
WEIGHT Tata Steel SAIL JSWRATING SCORE RATING SCORE RATING SCORE
Long Term Contracts for Raw Materials 0.50 9 4.5 9 4.5 6.5 3.25
Low Production Costs 0.25 9 2.25 8 2 7.5 1.875
Value added Services 0.10 8 0.8 8 4 5 2.5
8.9 12.25 8.225
3.9.2 Based on Financial indicators
Steel Authority of
India
Tata Steel
Limited BhusanSteel Industries]Ispat JSW Steel Jindal St &Pwr WelspunGujarat Adhunik Metaliks
Market Cap (Rs Cr) 60,303.84 23,093.28 2,635 2,078.08 8,949.82 29,260 2,320.29 508
Sales (Rs Cr) 8,920.63 4,802.14 1,119.95 1,123.55 3,573.61 1,781.07 1,456.63 258.97
Net Profit Margin
(%) 18.16 23.43 10.09 0.41 14.92 22.79 8.7 7.96
4 Future Growth Strategy for the organization
4.1 Portfolio Analysis
4.1.1 Based on BCG Matrix
Focus on improving the product and service portfolio, has led Tata Steel to be uniquely positioned to serve the
growth markets globally. Also, it has given special focus on value engineering activities. Over the years, the Tata
Steel Group has placed a continuous emphasis on improving its processes, so as to consistently increase
efficiencies, enhance quality and thereby achieving better performance benchmarks in all its areas of operations.
Tata’s first brand building endeavours have always been directed at building assurance, reliability and value
creation for products in every segment.
There are twelve market sectors in which all the TATA steel products are divided. These sectors include
construction, automotive, consumer goods, energy and power, agriculture, lifting and excavating, engineering,
packaging, aerospace, shipbuilding, rail, defence and security.
BCG Matrix of the products is:
STARS
Ferro alloys and minerals division
Infrastructural investment in Asia resulted in
improvement in the demand for
stainless steel. The first oversees
hub of Tata Steel was established
in South Korea. In India. This
division of Tata Steel is the market
leader in Ferro Chrome Business
with a market share of around 27%. TATA Steel
attained the status of being the largest producer of
Manganese Alloys in India
QUESTION MARKS
Bearing division and the tubes division
They are growing rapidly but
have low market product
share. This division has
the potential to gain market
share and become a star. It
can also become cash cow
when the market growth
slows down after reaching its
potential
CASH COWS
Steel division
The steel division without doubt
places itself in the cash cow
section due to continued revenue
returns and churn cycles
DOGS
No products
As on date, all products of
TATA Steel have a good
market share and hence none
of them fall into Dogs
category. But recent economic
recession in China has
impacted the commodity
market as a whole and hence the picture may
change in the near term, but the Moody’s rating
after the Union Budget on 29
thFebruary, gave a
positive outlook for Indian steel industry as a
whole.
4.2 Company’s Strategic Roadmap for future
Near Term (<- 2 years) Mid Term (2-5 years) Long Term (5-10 years)