53620945 Tata Steel Case Study

c cReport ± Position Analysis of Tata Steel c

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c cReport ± Position Analysis of Tata Steel

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! "#$ %#& ' 2.O istory 2.2 Strategic drift 2.3 Cultural background of Tata Steel (# ) 3.O Pest Analysis 3.O.O Political aspect 3.O.2Economical aspect 3.O.3Social aspect 3.O.2Technological aspect

3.2 SWOT Analysis 3.2.O Strengths 3.2.2Weaknesses 3.2.3 Opportunities

*#u ! +#u ! 5.O Stakeholder expectations 5.O.O Employees 5.O.2 Customers 5.O.3 Government 5.O.4 Stakeholders 5.O.5 Suppliers 5.O.6 Competitors

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"#$ Àn the new global economy, determining of successful strategies has become a central issue for the growth of a company. Over the history, Tata Steel has become a very successful Àndian group. One significant issue of the company is that it is the fifth largest steel maker in the world and is operating all over the world. Thanks to the acquisition of Corus in 27, Tata Steel had the opportunity to develop itself across Europe, and recorded a turnover of Rs.O2, 393 crore for the financial year 29 ± 2O. Additionally, it is the second largest private sector steel company in Àndia regarding domestic production. owever, the company is currently employing more than 8O, people. Tata and its strong Àndian inspired vision of business allowed the company to a chieve many successful goals over the years. But it is now facing a changing world, and more than ever, has to adapt to this specific conditions. Àn an internationalized world where every detail counts, the company needs to work on strategies that will gua ranty success, wherever it might want to impose itself. This report has been divided into four main parts, according to ³Strategic position analyze´ of JSW (28:O3) that is to say: Firstly, the report will try to obtain a clearer vision of the historical and cultural background of Tata, and how it influences the behaviour of the company in terms of strategy. Àt will then go on to analyze the environment that Tata is facing. This part will mainly analyze the Àndian market, when it comes to the PestAnalysis. Nevertheless, the strategic capabilities will be discussed. The report will try to explain how the company uses his capabilities, facing today¶s issues and challenges in the steel business. Finally, it will try to study the stakeholders¶ expectations in Tata Steel¶s case.

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Nowadays, many companies have long historical and cultural backgrounds. There are strongly impinged on by their historical and cultural background. For that reason it is significant to understand it. The strategy of an organisation has historical and cultural roots, which might influence current and future strategy of an organisation for better or worse. Àndeed, it helps managers to recognise how recent events have come about or how the history influences current and future strategy.

owever, researching the historical

and cultural background of an organisation contributes to its capabilities.

%#"& Àn O97, Jamsetji Tata, an industrialist, established Àndians biggest and first steel plant. At the same time it was Asia¶s initial private sector steel company. The reason of Tata Steel¶s establishing was that Jamsetji had the idea of developing an iron and steel industry in his own country.

%#%u One significant point in position analysis is the strategic drift , which is defined and illustrated (exhibit O.O) in appendix O. Since its establishment, Tata has shown a strategy of incremental change . Arguably, that point was important because so the group might vary within the current market. Àn the nineteenth ± century steel was seen as an unprofitable section . Even more than 5 independent steel producers w ent into bankruptcy in the USA (Business Monitor Ànternational Ltd, 2O: 54). Àn the late twentieth century, demand growth was strongly low. Àn contrast, the twenty ± first century saw a boom in demand. For instance, Tata bought weaker players internationally, such as NatSteel in 24, which was Tata Steel¶s first overseas acquisition, and the Anglo ± Dutch giant Corus in April 27. Through the investment in Corus, Tata has created a manufacturing and marketing network in Europe, South East Asia and the pacific ± rim countries. These acquisitions were also the result of using a strategy of incremental strategy. c c


owever, there are differences between the market in Europe and Àndian. That¶s why managers may have looked to diversify the steel industry within Europe. Thus, Tatahas failed because it has not taken into account that Europe has a different cultural and historical background.Moreoverit has failed to identify t hat the steel market within Europe is weakened. These failuresmight bethe reason as why Tata is now in a phase of flux. Àn addition, since many years, the company has used its beliefs and history to impinge onits future strategies. Àn consequence, it has facilitated the group to see change s in consumer behaviour and in the market. owever, in the course of years, Tata could not maintain the international changing environment. The result was strategic drift because the steel market within the country and over boundaries have become weakened. The reason was that there were fewer buyers as opposed to sellers. owever, assumedly, there might be reasons why the company could not expect a strategic drift. For instance, although the market is steady changing , one reason for the strategic drift might be that managers keep the same strategies, which they have used before. Another reason of being in strategic drift might be that Tata failed to perceive how strong its competitors are, such as Arcelormittal, which is the leader in global steel markets (Arcelormittal, 2O).

%#( ' u An organisation culture ³is the basic assumptions and beliefs that are shared by members of an organisation, that operate unconsciously and define in a basic take n ± for ± granted fashion an organisation¶s view of itself and its environment´ (Edgar Schein, O997:6). Àt is becoming increasingly difficult to ignore the importance of Àndian culture. Most companies from western countries have some problems by dealing with Àndian companies.

owever, to be successful, managers should understand how deeply analytic

thinking and working have rooted in the Àndian culture. Àndeed, the major business is about thinking mindfully the prices and achievements of a company. Stacey (O993:2) points out that ³in a decision making process, excellent companies place particular emphasis oncultural values and beliefs´. The main target of Tata is to improve the quality of services. Àn his interview for the magazine

arvard Business Manager Spenger, CEO of Telsonic,

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argues that Àndian managers are well prepared and have clarity of the sighting during negotiations. Anyhow, one substantial problem is that Àndians places her own arguments as well as those of their opposites on the test. Consequently, wester n managers often lose the central theme because they feel the negotiations as chaotic. Finally, one more essential position analysis of Tata is the cultural web, which is defined and illustrated (exhibit O.2) in appendix O. Àt is used to see the currently culture of Tata Steel and how the groupdesiresits cultural to be. Both points have got changes that the companymight need to get so as to achieve high performance culture .Accordingly, these factorsencourageorganisations to perceive their cultures.Forinstance, they help to see what works or doesn¶t work.

owever, there are language barriers between Tata and its

international partners. Knowledge of each other cultures is another difficulty. That¶s whyculture should provide the company and its employees by de cision ± making. Cultural issues could be the reason of less morale, non ± attendance or high staff income. One example of these negative effects was in September 29 when Tata registered a quarterly loss. This event constitutes that culture cou ld have an impact on Tata¶s work environment and its output.

Further information¶s for historical and cultural background are in Appendix O (A).

(# ) c The steel industry growth rate has been supported thanks to a strong growing economy. owever, for about two years the current liquidity crisis and so the outside e nvironments seem to impact Tata Steel. c

(#" (#"#" ! The government gets several roles influencing the steel industry as follows:

9ompetitor with the public sector steel companies ;

esource allocator by leading the policies ; and

egulator on the market industry.

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Tata has made huge investments i n politically unstable countries like Àran or Thailand . The company contributes to the nation by bein g a model in terms of corporate social responsibilities and citizen. Àndeed, it is a way to face the political environment risks.

(#"#%1 ! The business environment was deteriorated because of the subprime crisis in the U.S. and the liquidity crisis. By acquiring Corus, Tata had gained the fifth place in world steel production. The fluctuations of the currency rates had been a risk for the Corus acquisition , which had thus been financed by amount of debt. Consequently, it broke Tata in its predicted investments and capacity expansions plans. Àt was facing the fear for recession on negative economical growth. Then, the steel industry is really linked with the economical context. Àt means the steel industry production depends on energy prices, deman d in the automotive market or in the construction market. An increase in these industries would also strongly affect Tata¶s bottom line.

(#"#(u ! Àn 29, Tata Steel Ltd. has been awarded the Golden Peacock Global Award for Corporate Social Responsibility. Àt proves the good ethical behavior of the company and that CSR has a huge place in the business strategy. Tata takes part in social development programs. For instance, the company helped, gave medical treatment in rural areas and slums. Furthermore, it participated in the deployment of a company¶s mobile medical unit.

(#"#* ! Àndians are becoming one of the most technologic populations in the world today in terms of their advance in research and development. Thanks to the advances in technology Àndia have really skilled specialists in different fields, especially in computer sc ience. Àt means that it helps corporations to make savings on operating costs and to develop more efficient and effective ways of harvesting and processing the natural reserves. c c


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c Tata benefits from many raw materials available at comparatively lower costs and can enjoy raw materials required for the steel production. c Moreover, thanks to an Àndian advanced research and development, Tata can benefit of a qualified workforce. The com pany tried to develop the highest technology for quality, cost efficiently and environment friendly process. c Tata planned strong acquisitions and mergers on the market to accelerate its growth and its market shares. Àt thus developed a plan called ³Enterprise Risk Management´ consisting in providing all information concerning the company¶s risks and issues to the shareholders and to integrate the ERM process in the entire decision ± making and the planning development. To face against the fluctuation of the Steel Àndustry, Tata managed a large product mix with a high value added product with lower price volatility.Tata also tried to face the risks and diversified its activities th rough the acquisition of Corus. c

(#%#%2' Even tough Àndia has huge resources of raw materials, there could be some problems w ith their quality. Exemplarily, high ash content of indigenous coking coal adversely affecting the productive efficiency of iron ± making and is generally imported. One of the issues is also that prices of cooking and non ± cooking coal are increasing in Àndia and the inpu ts prices are still really high. As it has been said, steel is a capital ± intensive industry. The Àndustry has to face the high cost of capital because in Àndia they are charged an interest rate of around O4% on capital. Finally, in Àndia the advantage of low cost labor is compensated for the low labor productivity.

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(#%#(3!! Concerning the Àndian market¶s opportunities, the biggest is that there are many possibilities of increasing the steel consumption in all sectors. The development of new infrastructures had increased the demand. For instance, there are possibilities in the Àndian Rural Market but also in Àndian packaging and water supply sectors. Some marketing surveys predicted that world steel consumption will double in next 25 years . Concerning the acquisition of Corus, it permitted to gain a technological advantage and to improve the production process. Àn few words, it helped to bring a higher productivity and so to increase the market, to do some economies of scale leading and cost reduction. The huge amount of expenses in R&D is permitting to develop capabilities and practices and then to be more efficient and pres ent at the international scale.

(#%#* The point is that economic growth and steel industry growth are really linked. Àt means that the morose economic context is playing a negative role on the steel industry. Consequently, the Àndian steel industry has suffered of prices fluctuations on energy and trade discounts. The steel industry has to take part in the increasing concerns in global w arning and to take care about the externalities. Àt means to think and act about the conservation of nature for future generations. Furthermore, some researche s proved that the steel industry is contributing to the gas emissions. Moreover, plastics are a threat to Àndian steel. For the automobile industry, the other material, which can substitute steel, is aluminum.

owever, at present the high cost of

electricity for extraction and purification of aluminum in Àndia is still too high. c

For further evaluation of the environment see Appendix O (B ).

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*#u ! As already mentioned Tata is the fifth largest steel producer in world and it chooses the opportunity of acquisitions and mergers to expand the business and moves into its next aim to become the world¶s second largest steel company on the basis of their available tangible and intangible resources and the skills, which more likely cerates core competences.

Tata¶s growth is not just the strategy of the group, but on how it replays to the external challenges. Since the company was founded it has successfully strike back many challenges and issues with the help of its capabilities, modern technological systems and its long time experience in this industry .

Tata has several competitive advantages, which makes it quite successful and prosperous among its competitors in order to achieve its aim. One reason is that it is self-sufficient in its current requirement of iron ore in Àndia. Another reason is that Àndia is the second largest country in the world after China in terms of population that grant Tata a competitive advantage of having cheap but however very qualified labour force over its competitors. The next most important advantage of Tata is the value chain of the group. Àn regards, the group produces the resources at the place of manufacturing, which saves time and a lot of money.

A further position analysis is the strategic capability of Tata Steel. According to Johnson (28) strategy capability is the resources and competences of an organisation needed for it to survive and prosper. Furthermore, Tata is demanding to decrease its expenses and increment cost savings and raw materials self -efficiency in order to be able to compete its international competitors and achieve competitive advantage . Exemplarily, after the world economic crisis if Tata has a healthy amount of cash available it could be a very important advantage towards its competitors.

The main value of Tata in order to ser ve quality in life of customers and at the same time c c


the core strategic capability of this group is cost efficiency.The source of cost efficiency comes from economies of scale, supply cost, experience and product and p rocess design.For Ànstance, the organisations from nature are not similar and have different potential and capabilities. Tata Steel¶s competitor Arcelormittal has g ot different potential and capabilities with very poles apart strategic methods. Àt is also not easy for an organisation to imitate the capabilities and core competences of another company. For example, Arcelormittal is not able to obtain the long time experience of Tata Steel.

Since the establishment of Tata Steel,it is open to accept latest technological achievements. The founder and the head of the group have always a settled vision on the use of modern technology in all areas where it¶s operating. Àn the late O99s and by O999 Tata had implemented a modern SAP ERP system, which is an employee portal, to improve various operational issues. So they entered in the new millennium with self ± confidence and readiness to compete successfully with their international competitors. So that the group has always taken benefits of technological innovations thereby had always a competitive advantage. All these steps are ³threshold capabilities´ in order to survive in this fast changing world. Consequently, thanks to all these expensive investments, Tata is the most modern steel plant in the world with the goal to produce the best quality of steel for the automobile and c onstruction industries.

A further position analysis of Tata focuses on the value chain of the group. Steel industry like any manufacturing industries has its own value of chain and it is divided into primary steel making and finishing. The aim of this group is to break up this value chain by putting each part where it is the most cost effective. Thus, the primary steel is produced in Àndia because of the deposits of iron ore and the cheap labour. But the other Asian markets l ike Thailand, Vietnam or Shanghai are currently a key focus for Tata Steel and will be bett er addressed by taking the semi ± finished steel to these countries for finishing and then selling there , according to Kannappan (O958).

Tata Steel is also focused on environmental performance and corporate governance. Due to the board directors of Tata, health and safety and improvement of itsworkers living standards remain first priority.c

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owever, the steel industry uses energy to turn iron ore and scrap metal in tosteel. The metal is heated at very high temperature in order to manufacture it and this n eeds lot of energy. The cost of energy inthe steel industry is O5 to 2% of the total cost of making the steel.c

c Tata Steel and other steel industries faces a major issue in regarding climate change by using efficient the energy. The company feel directly affected from this global problem and looks at opportunities and different approaches to support the development of reduction of C2 emission. The group follows several points in order to be self -efficient in energy, such as increasing the overall energy efficiency of the sites by applying best available technology and good housekeeping and raising energy awareness.

All statements clearly show that Tata takes a strong control stance on corporate social responsibility. According to the Tata Steel¶s philos ophy society is not just another stakeholder in its business, but the primarily purpose of it . This also shows that Tata has set goals for itself to solve this issue, which might be also a strategic action in order to protect their reputation.

For further evaluation of strategic capabilities see Appendix O(C).

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Àn order to be successful, a company has to keep each stakeholder satisfied. c c


³Stakeholders are those who depend on an organisation [...] and whom, in turn, the organisation depends´ ( Johnson et al, 28).

+#"#"1 ! Tata Steel is currently employing about 8O, people around the world. Communication is claimed to be essential between the company and its employees. The company is concerned with its employees needs, and try to fulfil their wants every day, providing medical, housing and skill development facilitie s. Tata understood that the relationship with employees is essential to assure the company¶s success. Employees are depending on the organisation because it is providing jobs, but on the other hand, they have to feel comfortable in the company, as they ar e ensuring the everyday life of the company. This stakeholder is affected by the company, but also affects her.

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Steel consumers are mainly from the automobile industry. They can also be from the electric household devices industry, such as Siemens. But the company also has to meet the needs of smaller businesses, such as retailers. Steel customers are, like in every single market, essential stakeholders. Àndeed, without customers, there can¶t be sales. That¶s how customers affect the company, they are actually essential to it. Customers have to be kept satisfied, no matter what happens in the sector.

+#"#(4) Tata is operating in the five continents. Moreover, in order to successfully set up a business in a new country, the compa ny has to be accepted by the government. This can imply accepting tough rules, specific competition rules, and have a good knowledge of the law. The company may have to face local specificities, and therefore be forced to adopt a local marketing instead of the previous global strategy. Governments are mainly affecting the company rather than being affected by her. owever, Tata could for example affect his domestic market by retreating from it, as Tata Steel is one of the most successful Àndian companies.

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Tata is rated in the BSE Sensex Àndex (Bombay Stock Exchange Sensitive À ndex). Although Tata saw his share rate increase from mid ± august to early October, the share price is now decreasing to September values. The shareholders are ver y sensitive to any information that could affect directly or not the company. Shareholders are essential to the company, as they ensure the financial entries. Àf shareholders decide to leave, the company increase its failure risk. Shareholders invest to h ave money in return. So the company needs to be healthy in order to increase its shareholders number.

+#"#+u!! According to Tata Steel¶s website, ³Tata Steel and its suppliers are interdependent, and Tata Steel recognises that mutually beneficial relationships enhance the ability of both to create value to our end customers, society and our investors ´. Tata tries to built a confidence relationship with its suppliers, as they are conditioning the prices, and quality of the company¶s products.

owev er, it has to be stated that Tata owns

its mines of iron ore coal and is therefore mainly self ± sufficient when it comes to raw materials. So suppliers are stakeholders, by affecting, even slightly the final selling price, but they are not the main stakeh olders for Tata.

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The global steel market is highly competitive. Àndeed, the product is quite basic and therefore very similar from a brand to another. Difference is made by price politics, which can be very aggressive in certain markets such as Chinese exports. Locally, Tata Steel faces four serious competitors that we have discussed previously in the environment analysis. Tata has to be careful to its competitors when it comes to future plans. Àndeed, the four main competitors plan to extend their production by 22. Therefore it is essential to keep an eye on competition. c

Further informationfor stakeholder expectations are in Appendix O (D).

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After going through the development of Tata Steel we recognized that it has different strategies in the different markets. The strengths and core competences of the g roup are built and never change far away from these. Thanks to its managerial competences and abilities of micro and macro environments, Tata set a clear policy in order to maximize the shareholders wealth. Managers have a dual responsibility. First they must act to the local needs by c ooperating with universities or research institutes and also with the presence around the world in order to ensure that the new technologies are spread all around the world into Tata¶s branches. Several automotive industries are worried concerning Tata¶s ³O Lakh´, a car with a very low price. That is the reason why VW will wait to see which effect this step of Tata would have on Àndian market, before deciding to enter this market. Furthermore, minimizing the flaring of indigenous gases, to reduce dire ct CO2 emissions is Tata¶s next issue. The awareness of this problem has been autonomous since Tata feels is directly affected by the climate change. The main objective of Tata¶s strategy is to keep the raw materials prices as low as possible in order to achieve their aim in producing goods at lowest prices that grant a competitive advantage over its competitors.

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c cReport ± Position Analysis of Tata Steel c

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5 As discussed above Tata Steel has a long distinguished history. Àndeed, the long history is referable to the history of the Àndian Steel Àndustry. Between O99O and O992, the steel industry reforms were the reason of Àndia¶s steel industry growth. Since its independence, the country has seen steady growth in the steel industry. This event was also the reason why so many steel plants, such as Tata Steel, were established in Àndia. While there are a variety of definitions of the term strategic drift, this report will use the definition first suggested by Johnson (O988) who saw it as ³the tendency for strategies to develop incrementally on the basis of historical and cultural influences but fail to keep pace with a changing environment´ . An example of the illustration is given as follows:

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Adapted from Exhibit 5.2 in Johnson et al, (28), p.O8

As already mentioned, it is significant to analyze culture and understand the existing culture and its effects. According to Johnson (O987) cultural web ³shows the behavioural, physical and symbolic manifestations of a culture that inform and are informed by the taken ± for ± granted assumptions, or paradigm, of an organisation ´. Àt consists of six c c


elements: -

u , which are past stories of the company that told by member outside and

inside the organisation ; -

u , which are objects, events, acts or people that convey or create meaning

over and above their functional purpose; -

0 , which are the way we do things around here day ± to ± day basis;

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0 , which are activities and events that emphasis e or highlight what is

essential in the culture; -

6 , which are the most powerful groupings within an organisation;

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3 , which reflect power and show important roles and

relationships; and -

u , which is used to emphasise important things to monitor in the

organisation.

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Adapted from Exhibit 2.O3 in Johnson et al, (28), p.O98

Àt is also worth mentioning that currently there are some alternatives for steel, such as aluminium in cars, plastics and aluminium in packaging and ceramics.

owever, Tata

Steel has kept their competence on steel and is now showing success with its products c c


and services in areas, such as packaging steels and electrical steels. Over the course of years, the group has shown one significant advantage against its competitors in the market. Àn particular, for instance, the Tata Automobile Àndustry succeeds its success about low costs of products throug h the standardisation of products. Àt also helps to put the highest cost producercompetitors out of the market.

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5 Àn his book, Worthington et al (29) define the Pest Analysis as a tool to analyse a company¶s current and future environment as part of the strategic management process. Àt categorises environmental influences into four main types: political, economic, social and technological.

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Williams et al (O997:O62) argue that political aspect means identifying facets of politics, which have an impact on the organisation:

political issues within the organization itself;

political issues in the region where the organization is based; and

national and international po litical issues.

The Àndian Government made investments in infrastructures, thus it helped industries companies to be competitive. Àn O99O, the government launched economic reforms of liberalization , which throw again the industry. Steel Àndustry was not anymore reserved for the public state sector.

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Economic factors are concerned with anything financial ± inside or outside the company, which effects operations within the company. Factors might include:

changes in the prices and sources of raw materials;

inflation and recession; or

an excessive increase in wages (Williams et al, O997:O63).

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Since about two years, the economical and financial context is morose due to the subprime crisis in the US. Àn addition, we assisted to a fluctuation of the exchange rate. This context deteriorated the business environment.

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Sociological factors relate to the lifestyle, habits, trends, fashions and beliefs of people (Williams et al, O997:O63). Tata has a real CSR Philosophy; in effect the company is willing to create a favorable social environment by improving the education, the health and the economic well -being.

! According to Williams et al (O997:O64), technological factors involve changes in technology, and advances in the processes of production. Àndians are becoming one of the most technologic populations in the world today in terms of their advance in research and development.

-#%#%u23 Johnson et al (28) point out that a SWOT Analysis should help focus discussion on future choices and the extent to which an organization is capable of supporting these strategies. u

Àron ore and coal resources on the

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Àndian territory

Advance Research & Development and

Àncreasing demand and optimistic prevision for the future

Possibilities of steel use in many sectors

qualified engineers

Labor at low range wage

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Some deficiencies in the quality of the

raw materials

Low productivity in the labor force

Business environment morose playing a role in the general industry market

Fluctuation of the demand and the price of raw materials

igh capital cost

Threat of the substitutes

Source: Created by author.

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-#(u ! 5 For any company it is essential to concentrate on its core competencies in order to generate sustainable and outstanding profit. Many organisations have proven the reliability of this approach.

owever, the internalization of the complex approach may result in

certain difficulties. According to Tata¶s website, the group operates tangible along with intangible assets . Tangible resources are all physical assets of a company like equipments, machinery, plant and finance. Àntangible resources consist of non-physical assets like reputation, information, patents, goodwill and intellectual property such as industry knowledge and expertise. By the successful operation of these assets the Tata Group has great performance within highly competitive global markets. The key driver for the business success of Tata is cost competitiveness and effective and efficient resource consumption.The key drivers of Tata¶s success are as follows:

he Experiencesof the group in steel production, automobile industry and quality management & services are very important for their performances. Sustainable experiences by companies are essential element s, which need time to be expanded and refined. A company with great industry knowledge is able to enhance specific skills and establish a foundation for continuous improvement. This foundation enables companies to gain a competitive advantage by the improvement and enhancement of intrinsic performance drivers such as speed, quality, cost competitiveness, service and innovation. Concerning to the experiences in the automotive industry, Tata operates Tata Motors since O954. An efficient cost structure for manufacturing, general operations and others such as labour costs in Àndia enabled fast growth of Tata Steels businesses. Despite numerous positive outcomes Tata benefited from the acquisition of Daewoo, Jaguar and Land Rover in the year 24 and 28.

àn efficient supply chain and low supply costs are vital within Tata¶s operations. Procurement greatly affects manufacturing companies. Regarding Tata the purchase department faces procurement of Àron Ore, Coal/Coke and numerous

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others. Additionally, distr ibution and logistics may have a great impact of a company competing in the global steel industry. This in mind, Tata Steel is an asset based company and operates its own transport equipment. Àn terms of low supply costs and efficient procurement this gene rates a cost advantage.

he Economies of Scale approach means decreasing production costs per unit while increasing production volume. Due to the mass production the group is able to reduce the average cost of production. owever, the strength of Tata is to provide products with the same value at a lower cost than its competitors. Exemplarily, in automotive industry, thanks to its nanotechnologies, the group is able to produce high quality products at low costs.

Vroduct/ Vrocess Design greatly affect cost structures of organisations. Tata operates key subsidiaries such as ³TAL Manufacturing Solutions, Telco Construction Equipment Company, TCE Consulting Engineers and Tata Technologies´ resulting in an overall cost advantage. Through those key subsidiaries Tata Steel is able to use worldwide production capacities. Furthermore, global presence decreases logistical costs and improves supply chain management. Moreover, Tata renders coherent services and turnkey solutions. c

To achieve a competitive advantage in the global market, Tata has to focus on its core competences.

à 9ompetitive àdvantage describes beneficial positioning a company within its competitive environment by improving key success drivers such as innovation, speed, quality, service and speed. Àn O959, Gordon presents the idea that an organisation has a 9ompetitive àdvantage whenever a company can produce a product or a specific service with lower cost than the competition. Tata Group uses unique resources for raw material from countries such as Àndia, Thailand, Àndonesia and Africa. These unique resources allow the Tata Group to produce steel in locations in which the cost of production and operations are low. As already mentioned in the main part, Tata ha s a huge competitive advantage in terms of cheap and qualified labour force. The concept of 9ore 9ompetence was first introduced in O99 by C.K. Prahalad and Gary amel and describes the key capabilities and skills along with associated knowledge of a c c


company or organization. 9ore 9ompetencies comprise of the major capabilities of a company. The concept includes competitive advantages that are not only recognized by customers but also improve market positions of a company. Àn addition, the core competences have to be long ± lasting and not as easy to copy or to substitute. Àn essence, the capability resources, such as managerial capabilities and experience, are the 9ore 9ompetences of Tata. This is attributable to 9ost Efficiency.

owever, in 27, efficient cost strategies and

structures enabled Tatato acquire Corus.This acquisition was of paramount importance concerning the corporate strategy of Tata, its market share and productivity as well as its geographical position. Furthermore, it was a giant step in the direction of the top 5 steel producers in the world. c

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c 5 As an international and powerful company, Tata Steel has to deal with several stakeholders in each country. First, Tata has to handle a huge human resources network. The company is employing more than 8O, people, according to its official website. The company claims that itsemployee¶scomfort is important, and manages to help the group feeling well in every step of its professional life. The company claims to provide medical and housing facilities, holiday facilities, help with higher education projects. Àt is also observing a quite occidental uman Resources policy, by refusing to discriminate candidate or emp loyees on its gender, ethnic origins, religion or background. That type of policy can be seen ad unusual in Àndia, where the company comes from, as Àndian culture faces ethnic issues over the centuries. While customers, suppliers and competitors have bee n detailed above, it can be interesting to notice that those three Porter¶s Forces play an essential role in the stakeholders¶ scheme. From the stakeholders view, the most significant aspect is the relationship each one has with Tata. Àt has been shown th at Tata is mainly auto ± sufficient when it comes to raw materials. Therefore, Tata has a slight dependence to its suppliers. Customers are mainly automobile industry, electric household devices industry c c


and smaller businesses, according to Tata Steel website. Tata Steel claims to try to build a confident relationship between its customers and suppliers, giving its best and receiving from them. On the other hand, competitors have a serious role here, as the market is very competitive in Àndia due to local competitors. The competiti on is also serious worldwide, due to Chinese exports and low prices. Wherever it might want to be successful, a company has to take into account governments wishes and laws. Tata is operating on the five continents. Therefore , the company tries to adapt to different laws and competition regul ations. The precise analyse of g overnments as a stakeholders would imply to know each specificity of national laws and regulations. Therefore, the analysis is stuck to the basic statement: A company has to adapt itsel f to its local environment in order to be successful. The last essential stakeholder is the shareholder himself. Shareholders are important, even more for companies like Tata Steel, which is rated in BSE SENSEX Àndex, the Àndian index. The Tata Steel share value suffered from the crisis but increased again since then. Shareholders are essential to the financial aspect of Tata, and are very sensitive to any movement of the company, or news in the press.

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53620945 Tata Steel Case Study

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