Applying Management Strategy Concepts (SFI) on Tata Steel Company (Tata Group)

Corporate Strategy

Submitted To:

Submitted By:

Prof. Rashmi Menon

Mohnish Asnani (04) Shreyash Bhanvadia (05) Amruta Bhatt (07) Lovely Ganeriwal (18) Hardik Katariya (24) Unnati Modi (31) Upasana Modi (32) Nupur Shah (55)

Som-Lalit Institute of Management Studies SLIMS Campus, Opp. St. Xavier’s Corner, University road, Navrangpura, Ahmedabad-9. Strategic Management at TATA Steel

Page 1

INDEX S. R. No.

Particulars

1.

Executive Summary

2.

Introduction To Tata Steel

3.

Introducing Strategy

4.

The Environment

5.

Strategic Capability

6.

Expectations And Purposes

7.

Business Level Strategy

8.

Corporate Level And International Strategy

9.

Directions And Methods Of Development

10.

Organizing For Success

11.

Enabling Success

12.

Managing Strategic Change

13. 14.

Conclusion Bibliography

Page No. i

EXECUTIVE SUMMARY Strategic Management at TATA Steel

Page 2

The sub-prime crisis that erupted in the US and Western Europe impacted the global financial system, resulting in a significant cut-back in investment flows and the availability of funds. The global steel industry predictably also faced pressure on their margins arising from cost increases in iron ore and coking coal, but for the most part these increases were absorbed by the market through steel price increases. The full impact of these cost increases on steel producers and the consequential higher steel prices to user industries will, however, only be felt in the current year, at which time one might expect some slow-down in economic activity and consumer demand. It appears clear that in the immediate future, steel prices will be dictated by the level of iron ore and coking coal prices, which have been rising at mind-boggling rates, and continue to rise unabatedly. Tata Steel, thankfully, is self-sufficient in its current requirement of iron ore for its Jamshedpur operations. The Company has however sought mining leases to support its Greenfield projects in Orissa, Chhattisgarh and Jharkhand, and will need to invest in, or enter into contracts with mining companies to secure the availability of iron ore and coking coal for the Corus operations in the UK and the Netherlands. The Tata Steel and Corus operations are being run as one virtual company with performance improvement tasks being undertaken in each location. These initiatives are expected to result in substantial improvements in operating efficiencies and reduction in cost. The Company’s capacity now stands at 28.1 million tonnes, positioning it as the 5th largest steel company in the world. India is uniquely positioned to become a major self-sufficient, low-cost steel manufacturing nation. The demand for steel in the developing world will continue to be an important engine of growth. It will be the anchor material for construction, infrastructure, automobiles and consumer durables. China, India and Brazil, will be countries where internal demand to meet infrastructure and construction needs will continue to grow substantially in the years ahead. Tata Steel recognises that it no longer is a steel company located and operating in India alone, and that it has to sustain itself in the global arena. Its long-term goals would be to continue to play a meaningful role in the economic development in India and in the overseas markets it serves. Its future growth in India and overseas will be both in steel-producing facilities as also in natural resource assets. While the Company may grow and spread its geographical footprint, embracing different cultures, it will not lose sight of its great heritage of social and community responsibility.

Strategic Management at TATA Steel

Page 3

STRATEGY MANAGEMENT AT TATA STEEL “Tata Steel moves into its next target to become the world's second largest steel company by 2012 with the help of its most expensive bet worth $12.9 billion on Corus group”. - Business Standard

Introduction to Tata Steel The growth of a company is invariably determined not just by its strategy, but on how it responds to the challenges it encounters. Over the decades, Tata Steel has successfully countered several challenges that have come its way with innovative responses and continuous improvement which have enabled it to remain stable and even convert some of these challenges into opportunities. It is this culture of endurance that has accorded Tata Steel the insight and focus to deal with the current economic environment. Drawing from its inner strength and beliefs, Tata Steel responded by launching several initiatives across all its operations in various geographies that are helping the Group achieve sustainable growth even in the current times. Tata Steel, formerly known as TISCO and Tata Iron and Steel Company Limited, is the world's sixth largest steel company, with an annual crude steel capacity of 31 million tons. It is the second largest private sector steel company in India in terms of domestic production. Ranked 315th on Fortune Global 500, it is based in Jamshedpur, Jharkhand, India. It is part of Tata Group of companies. Tata Steel is also India's second largest and second-most profitable company in private sector with consolidated revenues of Rs 1,32,110 crore and net profit of over Rs 12,350 crore during the year ended March 31, 2008. Its main plant is located in Jamshedpur, Jharkhand, with its recent acquisitions; the company has become a multinational with balanced global presence in over 50 developed European and fast growing Asian markets, with manufacturing units in 26 countries operations in various countries. The registered office of Tata Steel is in Mumbai. The company was also recognized as the world's best steel producer by World Steel Dynamics in 2005. The company is listed on Bombay Stock Exchange and National Stock Exchange of India, and employs about 82,700 people. Tata Steel`s Jamshedpur (India) 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 three 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 signed an agreement with Steel Authority of India Limited to establish a 50:50 joint venture company for coal mining in India. Also, Tata Steel has bought 19.9% stake in New Millennium Capital Corporation, Canada for iron ore mining. On 2nd April, 2007, the Company completed the acquisition of Corus Group plc, Steel Company headquartered at UK for an Enterprise Value of USD 14.7 billion. Post the Strategic Management at TATA Steel

Page 4

acquisition of Corus, Tata Steel Group is now the world’s 6th largest steel company with current steel deliveries of 32 million tons. Set up as Asia’s first integrated steel plant and India’s largest integrated private sector steel company, a century ago, it is now the world’s second most geographically diversified steel producer, with operations in 24 countries and commercial presence in over 50 countries. Few years back, Tata Steel embarked on a journey to pursue Growth and Globalisation through organic and inorganic strategy to increase its capacity in excess of 50 MTPA by 2015. The Company identified several strategic levers including building a stronger base in India, acquisitions in both growing and developed markets, strategic investments in raw material assets and focus on branding.

History The Swadeshi Movement encouraged Jamsetji Tata to set up Asia’s first ever privatelyowned integrated iron and steel plant. His interest in iron making was triggered in 1882 when he came across an official report on the Chanda district which identified large deposits of high-quality iron ore but also noted a lack of suitable coal in the region. His idea of endowing his country with its own iron and steel industry gained support within the government and in 1907, when the Swadeshi Movement was at its height, the Tata Iron and Steel Company Ltd. was incorporated. The Tata’s raised the finance to build the steel plant within India – a significant milestone in Indian economic history. They proved a point to the then British government that an Indian company had the vision and the wherewithal to build an industry from the ground up and had the know-how to apply international standards to meet local needs. The setting up of the Tata Iron and Steel Company Ltd. gave Indian industry a voice paving the way for many a future enterprise. Tata Steel introduced an 8-hour work day as early as in 1912 when only a 12-hour work day was the legal requirement in Britain. It introduced leave-with-pay in 1920, a practice that became legally binding upon employers in India only in 1945. Similarly, Tata Steel started a Provident Fund for its employees as early as in 1920, which became a law for all employers under the Provident Fund Act only in 1952. Tata Steel's furnaces have never been disrupted on account of a labour strike and this is an enviable record.


Page 5

Vision Statement of Tata Steel: “Tata Steel aspires to be the global steel industry benchmark for Value Creation and Corporate Citizenship” They make the difference through: •

Their people, by fostering team work, nurturing talent, enhancing leadership capability and acting with pace, pride and passion.

•

Their offer, by becoming the supplier of choice, delivering premium products and services, and creating value with our customers.

•

Their innovative approach, by developing leading edge solutions in technology, processes and products.

•

Their conduct, by providing a safe working place, respecting the environment, caring for our communities and demonstrating high ethical standards.

Mission statement of Tata Steel: • •

• • • •

Achieve sustainable, profitable growth in steel and related businesses. Create differential value for their customers through innovative offerings. Continuous improvement of business processes and technologies. Foster partnership with key stake holders. Enhance employees' competencies to create a high performing and innovative organization. Be a responsible corporate citizen and enhance the quality of life of employees and key community.

Goals: • • • •

Employer of choice Safety Environment Value Creation

Strategy: • • • • •

Create a culture of continuous learning and change Achieve world-class status in services and products Reach the position of the most cost-competitive steel producer Establish industry leadership Wealth creation for share-holders.


Page 6

Objective/purpose: “Purpose of Tata Steel is to improve the communities which they serve”.

Porter Five Forces Model: In this case we have analysed the domestic steel sector through Michael Porter’s five force model so as to understand the competitiveness of the sector as well as pointed out the initiatives taken by Tata Steel to safeguard its position from all the five forces of threats, namely:

Entry barriers: High  Industry is already been crowded because of the many big private players such as

TATA, MITTAL steel and also the public enterprises such as SAIL, HSCL and VSP so it is very difficult for any new organization to enter in to this industry.  There has been a downfall in the prices of the steel so to survive in this situation for

any new organization is very difficult.  The cost of capital required to enter this industry is also very high and to invest in this industry in current situation where the prices of steel are falling is very dangerous.  The industry is mainly dependent on the customer and supplier loyalty and the players such as Tata steel, it is difficult for any new company to break the relationships between them.

Competition: High  The steel industry is truly global in terms of competition with large producing countries like China

 Significantly influencing global prices through aggressive exports.

 Steel, being a commodity it is, branding is not common and there is little

differentiation between competing products.

 The 4 major domestic rivals are SAIL, JSW, ISPAT & ESSAR STEEL. Rest are all

smallish mills which together accounts for 30 % of the total market share.

Bargaining power of suppliers: Low Strategic Management at TATA Steel

Page 7

 Supplier power is likely to be low for the Tata steel  After the acquisition with the Corus, Tata steel has increased the bargaining power of

suppliers for the raw material the one reason for the acquisition was to improve the negotiating power of the suppliers.  Thus the power of suppliers over the Tata steel is to be low after the acquisition of Corus.

Bargaining power of buyers: Low  Buyers power is likely to be low in this type of industry though there prevail a large

number of small and big players but in this industry mainly the product is sold on the trust on quality so there are only few big players on which we can trust so the bargaining power of buyers is likely to be low  The cost of switching to other supplier is also low because in this industry there

prevails very long term relations between the organization and the buyers.  In order to safeguard itself from the high bargaining power of the buyers, Tata Steel

has forayed much earlier into the strategy of ‘Backward Integration’.

Threat of substitutes: Low  The threat of substitutes depends upon the quality that is a substitute better , buyers willingness to buy, the relative price and performance of substitute  The steel industry has always faced competition from aluminum, other metals and

alloys, plastic, paper and composites, and it will continue to compete against newer materials as new technologies emerge.  The challenge is to keep on improving steel itself and becoming more cost competitive. It is also believed that steel has scope for many more applications that have not as yet been thought of.


Page 8

PESTEL Framework POLITICAL:  Tata committed a huge amount of investment in politically unstable country like Bangladesh, Iran, Mozambique and Thailand. The entire process of setting up plan is getting delayed in question of gas supply (in Bangladesh), Iron ore mine lease in Iran is escalating the Project cost.  Impact of Liberalization: The economic reforms initiated by the government in 1991 have added new dimensions to the industrial growth in general, and steel industry in particular. Some of the important features due to liberalization are: • Licensing requirement for capacity creation has been abolished. • Steel industry has been removed from the list of industries reserved for the state sector. • Automatic approval granted for foreign equity investment in steel has been increased up to 74% • Price and distribution controls were removed from January 1992 • Restrictions on external trade, both in import and export, have been removed. • Import tariff reduced from 105% in 1992/93, to 30% in 1996-97. • Other policy measures like convertibility of rupee on trade account, permission to mobilize resources from overseas financial markets, and rationalization of existing tax structure.  The Government plays a key role in the economics of TATA Steel. It has a role as a resource allocator (the mining policies of the Government), as Competitor (the public sector steel companies) and as Regulator. In volatile times the regulatory risk rises with measures like reduction in import duties, levy of export duties and withdrawal of DEPB benefits, threats of price curbs etc. Tata Steel counters this risk by being a rolemodel corporate citizen and playing an important role in contributing to the Nation building. Tata Steel is the second largest steel producer in terms of Geographical spread of its facilities.

ECONOMIC:


Page 9

 The steel industry is highly cyclical, receptive to general economic conditions and reliant on the condition of a number of other industries, including the automotive, appliance, construction and energy industries. If these industries experience a downturn, Tata Steel too would too take a hit, thus negatively impacting its rating.  Tata Steel became 6th biggest Steel Producer in the World after acquiring Corus, but the cost of the integration goes much more beyond the financial aspect.

 Corus follows the policy of entering into long term supply contracts with raw materials vendors. Thus there can be a huge time gap between variation in prices under purchase contracts and the time when Corus can make a corresponding price change under its sales contacts with its consumers. Moreover, Corus may not be able to pass on the increased raw materials costs to its customers. Such developments would lead to a downside in our rating.  Steel production processes are energy dependent and price movements in the energy market would accordingly affect Tata Steel’s bottom line. SOCIAL:  While talking about the Sociocultural factors for the steel industry such as population demographics, income distribution, and social mobility these all have somewhat some impact on the steel industry.  The people are getting very much quality conscious about the steel.  The income which they spend on these type of products is very rarely while some constructions so they spend a high amount on this product but very rarely  Mostly the customers for the Tata steel would be the manufacturing companies such as car manufacturing companies and the construction companies.  The steel industry is indirectly been affected by the income which the people is going to spend on cars or constructions and the spending depends upon the income distribution.  Tata Steel Ltd has been awarded the Golden Peacock Global Award for Corporate Social Responsibility (CSR) for the year 2009. The award looks for continual commitment by business to ethical behaviour, to economic development and to improving the quality of life of employees and their families, as well as to engagement with local communities and society at large.  From policies on corporate accountability, drugs and alcohol, and HIV prevention, to a Code of Conduct that extends to its stakeholders, ethics and responsibility are interwoven in the daily course of Tata Steel's business. CSR is an integral component of Tata Steel's business strategy, and constitutes one of the company's key enterprise Strategic Management at TATA Steel

Page 10

processes. Tata Steel aims to create a favourable social environment in its areas of operation by improving health, education and economic well-being, as well as nurturing young talent in sports.

Technological factors:  Government spending on technology: •

Though the choice of technology will be determined by entrepreneurs based on techno-economic considerations, the Government encourages adoption of technologies, which have synergy with the natural resource endowments of the country. Are conducive to production of high-end and special steel required for sophisticated Industrial and scientific applications. Minimize damage to the environment at various stages of steel making and mining. Optimize resource utilization. Facilitate modernization of the steel industry so as to achieve global standards of Productivity and efficiency. Development of front end and strategic steel based materials. • India’s expenditure on Research and Development has been negligible not only in absolute terms but also as a percentage of GNP at 0.86 percent. This can be compared to the developed world with an average ratio of 2.5 percent. In the case of steel industry, the ratio of expenditure on R&D as a percentage of turnover is only 0.26 percent.  Speed of technology transfer •

A consolidated steel industry will seek to deploy new technologies as rapidly and widely as possible, potentially limiting any first mover benefits. While the early entrant will be first on the learning curve, the supplier will seek to share as much of that learning as possible

Environmental:  Energy consumption:


Page 11

• The steel industry uses energy to turn iron ore and scrap metal in to steel. Hundreds of products we use every day are made of steel. It is very hard durable metal and it is heated at very high temperatures to manufacture it. Producing this at high temperatures needs lot of energy. The cost of energy in the steel industry is 15 to 20% of the total cost of making the steel. Most of this energy comes from the coal or electricity generated from the coal. • Since 1973, the steel industry has reduced its energy consumption by 45 percent per tone of steel. New technologies has made steel stronger so that less steel is needed for many uses • The use of recycled steel also saves energy. It requires 33 percent less energy to recycle steel than to make it from iron ore. Today, two third of new steel is made from recycled scrap, making steel the nations leading recycled product  Waste disposal: •

Plant waste, about two tonnes of solid waste per tonne of finished steel is generated in steel plants. Handling and disposal of this huge quantity of solid waste is not only difficult, it is also a costly affair. Accordingly, Tata Steel has developed and implemented schemes and strategies for controlled disposal of pollutants and wastes. Wastes are segregated as per their characteristics using uniform colour coded waste bins placed at different generating points across the Company and disposed of as per laid down procedure under the Environment Management System (EMS). • Town Waste: All the solid and liquid wastes generated in the township are disposed of in a scientific and sanitary manner. A fleet of 37 hydraulically operated state-of-the-art vehicles and equipment are engaged in hauling about 300 MT of garbage generated every day. The Company maintains a free flow of the sewage across the sewer network measuring over 450 km, and 771,000 running feet of surface drains in the township. • Medical waste: Medical wastes are mostly hazardous to human health and environment, having serious consequences if not handled properly. Therefore, the Company has instituted strict guidelines for proper handling and disposal of medical wastes.

Legal:  Health and safety •

In the manufacturing industries such as Tata steel health and safety of the employees matters the most. There are more chances of accidents in these big manufacturing companies. There are also many laws laid down by the ministry of India steel industry regarding to the health and safety of the employee in the manufacturing industries.


Page 12

•

Tata Steel’s safety and occupational health responsibilities and driven by commitment to ensure zero harm to people with whom they work with and society at large and integral to the way they do business. Our fundamentals belief is that all injuries can be prevented.

•

Tata steel has also laid down the policies in accordance with the ministry of Indian steel industry. These policies are detailed below: i. We will identify, assess and manage our S & OH hazard/ risks. ii. We will regularly monitor, review the progress and report. iii. We will ensure WILL and SKILL buildup among employees/ contractor partners to demonstrate their involvement, responsibility and accountability to achieve sound S & OH performance. iv. We are committed to continual improvement in our S & OH performance. v. We will set objectives – targets, develop, implement and maintain management standards and systems, and go beyond compliance of the relevant industry standards, legal and other requirements.

 Product safety:

• Ministry of Indian steel has laid down some laws regarding to the product safety of steel products. According to the laws laid down on the steel companies , the steel companies have to follow highest safety standards for the products, maintaining an excellent standard of technical know how involving the following initiatives: i. ii. iii.

Adherence to/exceeding both national and international design standards Rigorous and extensive product testing including computerized modeling and simulations Inducting and nurturing the best brain in the field


Page 13

Porters Diamond: Factor conditions:  Factor conditions provide initial advantages that are subsequently built upon to

yield more advanced factors of competition. In India Tata steel can get initial advantages from the cost of labour. The cost of labour compared to other countries is very less. The company here also gets the rebates. 

The government has now also reduced the interest rates. There has been a great liberalization in the policies of the steel industry. Unemployment is also more in India. Tata steel can easily get advantage by providing employment in India. There has been an also increase in the infrastructure industry in India from last few years so the increase in demand of infrastructure will directly would be the factor to increase or benefit the steel industry.

Demand conditions:  The present steel consumption per capita per annum is about 30 kg in India,

compared to 150 kg in the world, and 350 kg in the developed world. The estimated urban consumption per capita per annum is around 77 kg in the country, expected to reach approximately 165 kg in 2019-20, implying a CAGR of 5 percent.  Apart from the anticipated growth in the construction, automobile, oil and gas transportation, and infrastructure sectors of the economy, conscious promotion of steel usage among architects, engineers and students by the Institute of Steel Development and Growth (INSDAG) and the large producers will drive this additional consumption. Steps would be taken to encourage usage of steel in bridges, crash barriers, flyovers and building construction. Benefits of steel usage would be added to the technical education curricula in the country.

Related and supporting industries: Strategic Management at TATA Steel

Page 14

 Construction: The construction industry has been witnessing a growth rate of

12%-14% in recent times. Steel construction is now identified with speed and since India is in need of speedy project implementation, steel is the best alternative for fast track construction. With economy surging ahead and expected increase in income levels of population, it is believed that demand for steel from this sector will continue to grow at current rates if not improve.

 Automobile: The domestic automobile industry has also grown at more than

double-digit rates in the past five years. The Indian automobile sector is the second fastest growing market after China and has emerged as a prime demand driver for alloy steel. Automobile sector which is experiencing growth and competition is likely to be one of the major drivers for steel consumption in the coming years and most likely, its contribution in the overall demand pie is likely to improve from the current levels.  Auto components Industry: During the last five years, auto components market

has grown at 19% CAGR, led by both robust domestic demand as well as exports. India is fast emerging as hub for auto components. International companies such as General Motors, Ford, Daimler Chrysler, Toyota and Volkswagen are outsourcing auto parts from India as it has cost advantage with regard to forgings and castings. Also, the growing domestic automobile industry, which relies on steel industry for its parts manufacturing, will enhance the demand for steel in India.  Infrastructure: Infrastructure sector comprises of roads, railways, airports and

power. The 11th Five-year plan has lined up huge investments in all the above related sectors of infrastructure. The sector wise anticipated investment are $200bn in power, $80bn in railways, $48bn in roads, $13bn in ports and $9bn in airports. Because of surge in the above activities, the demand for long products of steel will be increasing in years ahead.  Consumer Durables: The consumer durables sector has also been witnessing

robust growth. It has grown at an average of 10% per annum and is expected to grow at double-digit rates for coming years. The share of white goods and utensils is predominant in India. The domestic appliances market which includes spin driers of washing machine, thermo ware, water filters, dishwashers, microwave ovens, catering equipment, cutlery, furniture etc. have opened new opportunities for steel consumption, thus ensuring a steadily growing trend of steel off take.  Oil & Gas Industry: Oil & gas sector is the major consumer of steel tubes and

pipes. The pipe consumption in oil & gas sector is expected to grow at a rate of 25% CAGR as this sector is set to witness massive capital investment. Apart from laying cross-country pipelines, exploration and production activities are also experiencing strong growth in both international as well as domestic markets. Strategic Management at TATA Steel

Page 15

Firm strategy, structure and rivalry:  Tata steel strategy is Wealth creation, Create a culture of continuous learning

and change, achieve world-class status in services and products, reach the position of the most cost-competitive steel producer, establish industry leadership  The Indian steel industry ranks 8th in the world, with an annual production of 31.8 million tone per annum 3.3% of world output. As a market, India presents potential, with low per capita consumption (20 kg, against 80 kg in China, 405 kg in Malaysia and 925 kg in South Korea).  As there is potential in steel industry in India, the Tata steel can achieve bases

of advantage of wealth creation. Nowadays branding in steel industry has taken a very good growth and with the help of this Tata steel can achieve world class status in service and products as the company has many branded products such as Tata Steelium (the world's first branded Cold Rolled Steel), Tata Shakti Tata Tiscon, Tata Pipes, Tata Bearings, Tata Structura, Tata Agrico (hand tools and implements) and Tata Wiron.

Thus these were the inherent reasons some nations such as India are more competitive than others and how steel industry in India is more competitive than others


Page 16

SWOT Analysis: Strength:  Tata Steel’s Indian operations are self-sufficient in the case of its major raw material iron ore through its captive mines.  Tata had a strong retail and distribution network in India and SE Asia. Tata was a major supplier to the Indian auto industry and the demand for value added steel products was growing in this market.  The Company is on its way to reach a crude steel capacity of 10 million tonnes per annum by FY 2011. The first phase of reaching the crude steel capacity of 6.8 million tonnes per annum, Brown field projects, is nearing completion.  Tata Steel has been on a path of accelerated growth with foray into several geographies and markets through aggressive mergers and acquisitions.  Tata Steel now is in the process of implementing a structured approach in risk management called Enterprise Risk Management (ERM). The key objectives of the Company through ERM are: • To enshrine the process of ERM as a usual Business Process and integrate into all decision making and planning processes. • To ensure that all levels of Management identify and monitor risks through a properly defined framework. • To provide periodic information and updates to the Board and the Shareholders on the significant risks and the ways of mitigating the same.  Tata Steel with its modernisation plans has ensured that it deploys the best

technologies to ensure quality, cost-efficiency and environment-friendly processes. Through acquisition of Corus and with new Greenfield ventures, Tata Steel has ensured that it has diversified the concentration risk in single technology of Iron & Steel making.

Weakness:  Steel production in India is also hampered by power shortages. Strategic Management at TATA Steel

Page 17

 Insufficient freight capacity and transport infrastructure impediments to hamper the growth of Indian steel industry.  Raw materials for steel production are rapidly depleting and are non-renewable; company has to come up with sustainable methods in steel production.  Low Labour Productivity: In India the advantages of cheap labour get offset by low labour productivity.  High Cost of Basic Inputs and Services: High administered price of essential inputs like electricity puts Indian steel industry at a disadvantage; about 45% of the input costs can be attributed to the administered costs of coal, fuel and electricity.

Opportunities:  The biggest opportunity before Indian steel sector is that there is enormous scope for increasing consumption of steel in almost all sectors in India.  It is estimated that world steel consumption will double in next 25 years. Quality improvement of Indian steel combined with its low cost advantages will definitely help in substantial gain in export market.  The Tata Steel Group is leveraging the Group’s collective Research and Development experience in the Group’s various geographies to further enhance the Group’s performance and also the integration process.  Corus acquisition brings in a tremendous technological advantage by access to best

practices in global steel industry.  Booming infrastructure has opened up high demand for steel worldwide.

Threats:  In the developed world, industries have been facing rising environmental costs due to the increased concerns on Global Warming. It is, therefore, a challenge and responsibility for the Steel industry to be the trustee in conservation of nature for future generations.  It is recognised that the steel and aluminium industries are significant contributors to man-made greenhouse gas emissions as the manufacture of steel produces carbon dioxide (CO2), and the manufacture of primary aluminium generates both CO2 and per fluorocarbons (PFCs).  High raw material input cost and scarcity of non- renewable raw materials are a threat to the industry.  Threat of Substitutes Strategic Management at TATA Steel

Page 18

• •

Plastics and composites pose a threat to Indian steel in one of its biggest markets automotive manufacture. Steel has already been replaced in some large volume applications large diameter water pipes (RCC pipes), small diameter pipes (PVC pipes).

Cost Efficiency 1. Economies of scale  The use of leading-edge technology has driven business efficiencies, and

continued globalization has created further economies of scale, with both fueling rapid industry consolidation.  Economies of scale are very important for the manufacturing industries such

as Tata steel, because the cost of plant is very much high as compared to other industries. Economies of scale are more important for the Tata steel to achieve cost advantage.

2. Supply cost  Tata Steel puts a lot of emphasis on enhancing logistics in order to improve

delivery time, reduce transportation cost and better inventory management at stockyards located at strategic points. The import / export logistics is handled by its TKM Division. 

Tata Steel’s expertise in both in-bound and out-bound logistics makes its Ferro Alloys and Minerals Division (FAMD) the preferred supplier of imported thermal coal to customers in India. Tata Steel has its own stockyards and exclusive berths alongside both Haldia and Calcutta ports, equipped with sophisticated material handling equipment, to ensure damage-free smooth shipment and manned by trained personnel, well-versed in handling logistics and loading.



Besides, storage is planned in conjunction with experts and the actual loading is supervised by an internationally reputed independent inspection agency. Some of the salient features of its delivery logistics include: • • •

• •

A network of offices worldwide with the Head Office at Calcutta A chain of stockyards / distribution hubs at strategic locations A consolidated distribution network with large distributors and smaller retailers providing an efficient link of its supply points to consumers Long-term tie-ups with government and other transport agencies, including railways, ports, etc. Superior cargo handling at ports, including Haldia & Calcutta Ports


Page 19

• •

Value added services, such as in-house and chartering groups to ensure availability of suitable vessels at competitive rates An efficient communication global network providing up-to-date information, including: Dispatch Planning and Scheduling System and Online Transport Tracking System

3. Experience  Tata steel is very old company having an experience in the steel industry for

more than 100 years. With all the efforts and experience that Tata Steel undertook during these many years, it had become one of the lowest cost producers of steel in the world by 2001, and a company that the global steel industry started recognizing.

4. Product/process design  Product/ process design also influences the cost positions.  Processes to assure business performance: Design of products/services – The design of products/services is driven by customers’ needs, social and environmental considerations. Design of production and delivery processes – The design of production and delivery processes are based on the Technical Delivery Condition, which are translated and documented in specific process charts. Co-ordination – These processes are coordinated by Customer Service Department (CSD) that is an interface between Marketing & Sales and the Works.  Process performance: Daily collection and analysis of data is done to ensure product quality and consistency. The PQI captures the improvements made with regard to consistency and improvements in the chemistry and mechanical properties of the steel products. Process consistency is also ensured through ISO-9000 and TS-13004 Quality Systems. Total Operational Performance (TOP) programme aims at detailed analysis of the baseline performance of the processes and identification of the gaps with benchmarks. Improvement projects are taken up to bridge the gaps. ABC analysis of the cost influencing factors of key processes has been undertaken. Learning acquired in one area is shared with and deployed in other areas as well.


Page 20

Capabilities for Sustainable Competitive Advantage 1. Value for strategic capabilities  A TATA Company is committed to the supply of goods and services of the

highest quality standards, backed by efficient after-sales service, consistent with their requirements of the customers, to ensure their total satisfaction. The quality standards of the Company’s goods and services should at least meet the required national standards and the Company should endeavor to achieve international standards.  The Company does not have dedicated policies for customers and suppliers, but it is guided by the A fore mentioned clause 9 of the Tata Code of Conduct. Besides, the focus on customers and suppliers is evident from the organization workculture and its mode of operation. Be it the strategic objective, internal business process, performance management system, etc., it has a customer / supplier perspective embedded in all of them.  Tata has implemented the concept of internal customer and supplier across the

organization, using the Memorandum of Understanding as a tool to track and enhance the effectiveness of the model. Its Performance Management System based on Balanced Score Card (BSC) has a dedicated section based on customer / supplier perspective. It also seeks to strengthen its focus on customers with the help of several specific campaigns

2.

Rarity of strategic capabilities  The Wire Division of Tata Steel launched the 'Tata Wiron' brand for their

Galvanised Wires today. The Wire Division of Tata Steel (formerly Tata SSL Limited) is one of the top ten wire companies of the world. It is the largest wire producer in India with a presence in many global markets, and produces various types of coated and uncoated steel wires for diverse applications. Besides applications in the Auto, Infrastructure and Power segments, products like Galvanised Wires touch the lives of consumers in many ways and therefore the tag line of the new brand, 'Tata Wiron', speaks of relationships and has been aptly coined as 'baandhe rishton ke taar'. Strategic Management at TATA Steel

Page 21

 A unique, one of its kind organized retail outlet that aims to create new

paradigms in steel retailing for the ‘B2C’ consumer. Combining innovation with functionality and versatility with style, steel junction provides a ‘one stop destination’ for consumers intending to go ‘steel shopping’  The entire range of steel, be it mild steel, alloy steel or stainless steel, will be

covered in the product range covering two sections, namely “Home Construction & Maintenance Products” and the “Home Aesthetics Products”.  The products manufactured by Tata Steel cater to sectors such as auto/ auto

ancillaries, consumer durable, construction/ infrastructure, capital goods and general engineering. Typically 85% of the production is sold in the domestic market and the balance is exported.  Products manufactured at different locations reach the consumer through

direct dispatch or through a network of retail stockyards located in all major cities in India. Customized products are also delivered to end-users through various conversion agents.  Tata Steel has adopted a de-integrated business model. It attempts to add to its value chain in segments where it is competitive to do so. It manufactures the primary products where the raw materials are located and produces finished goods closer to its markets.

3. Robustness  Tata Steel’s leadership system is a visionary leadership force driving the

Company’s performance excellence effort in all areas related to its products, services and activities. A strong believer in participative management, it has enthused leaders at all levels to live by Tata Steel’s values, fashion the organisation’s passion for excellence and stakeholder focus, and cascade that energy throughout the organization. The Vision of the Company and its core values are the integrating bonds, ensuring a common message across the organization.  Tata Steel’s leadership system has two dimensions — the "Visionary" and the "Architectural".  The Visionary dimension encourages people to envision, empowers them and

energizes them to achieve superior performance.  The Architectural dimension is an enabler and includes processes, policies,

systems, strategies and measures that support and enhance superior performance.  Feedback from stakeholders constantly re-fashions the leadership system at Tata Steel 4.

Non-substitutability


Page 22

 Tata Steel is the pioneer in the concept of corporate social responsibility. It believes that the loyalty and commitment of its employees depend upon the quality of life they are provided with at work and at home. Consistent with the Group Purpose, Tata Steel has declared in its vision statement that it will constantly strives to improve the quality of life of the communities it serves through excellence in all facets of its activities.

 Tata Steel is among the few steel companies in the world who are EVA Positive - To

enhance net realization and to combat the commodity nature of steel; Tata Steel is continually improving its product mix, increasingly differentiating its products through branding and improving its processes to maintain cost competitiveness.  The Company has increased its sales volume of branded steel products, has

consolidated its years of experience through improvement initiatives and uses, of knowledge and skills to maintain its status as the world’s lowest cost producer. It is the first steel company in India to introduce Customer Value Management and Retail Value Management.  The Company has a strong presence in both flat and long products. It has leveraged its knowledge to cater to the auto sector to achieve higher realization and steady prices. In the long products segment it is tapping the huge growth potential of the market.

5.

Dynamic capabilities

 Tata Steel has been a pioneer in ushering in the most modern, state-of-the-art technology since it was set up in the year 1907. The Founder and those who have led the company have always laid emphasis on the use of modern technology in all areas of its operations. Consequently, over nearly 90 years the Steel Company has stayed young.

 Tata Steel’s openness to adopt latest technologies is exemplary and path breaking.

 The company aggressively embraced IT-enabled processes in the late 1990s, and by 1999 had installed a corporate Intranet, SAP ERP system, employee portal, and "special interest groups" focusing on various operational and manufacturing issues. The company's mission statement in 1998 was re-drafted to include: "Tata Steel enters the new millennium with the confidence of learning and knowledge-based organization."  The company has always harnessed the benefits of technical innovations and modern infrastructure. Thus, Tata Steel has always had a leading edge over its competitors not only in the domestic sector but also in the global market.


Page 23

 Technology obsolescence is an inherent business risk in this fast changing world. The

speed of change and adaptability is crucial for survival of business. At Tata Steel, a continuing modernization process has enabled the Company to do away with obsolete plants/processes and emerge as one of the most modern integrated Steel plant in the world. Steel being a capital intensive industry, this process has involved huge capital investment.  In the recent past, Tata Steel has taken major strides to adapt the latest technology available worldwide. This has resulted in huge benefits in the form of waste control, savings and cost of production. Tata Steel now, can proudly boast of being the lowest cost steel producer in the world. With this major advantage, it hopes to satisfy its valued customers and maintain its leadership position in the world market.  The technological revolution started in Tata Steel in the early 80's with the launch of Phase-I of the Modernization Programme. This phase witnessed the introduction of LD steel making technology not only in Tata Steel but also in the country. Phase-II strengthened the Company's product profile with the setting up of a high-speed bar & rod mill (now wire & rod mill), a raw material blending yard and the sinter plant-II that provides the highest quality of feed stock. This phase also brought in stamp charging technology to make coke of internationally acceptable quality. The success of both Phases-I & II and the need to enter the flat product market, provided the necessary impetus to Tata Steel to embark on the crucial Phase-III of Modernization.  A highly automated Blast Furnace of 1 mtpa capacity was commissioned. A second

LD shop with two 130 tonnes capacity with a downstream slab caster facility was also installed. Later, a third convertor was added to the shop. The new technical facilities finally feed a semi-continuous Hot Strip Mill. Continuing Modernization has enabled Tata Steel to phase out old units and technologies which have been superseded by new developments. This has improved productivity and provided a range of sophisticated products that meet the ever-increasing demand of today's discerning customers.  During Modernization Phase-IV, the Hot Strip Mill capacity was doubled to 2 mtpa and many new features were added to this mill. The hot metal capacity was raised to 3.8 mtpa and the production of continuous cast product reached 95%. In the year 2000, the Tata Steel entered Steelennium with the commissioning of the state-ofthe-art 1.2 mtpa Cold Rolling Mill at global cost and speed. Tata Steel now promises to deliver the highest quality of steel for the Automobile, White goods and Construction industries. Steel will now find the most unimaginable application by its users.


Page 24

Benchmarking The Tata Steel Group’s goal is to play in the premier league of the global carbon steel industry, and its Vision is to become the world steel benchmark in Value Creation and Corporate Citizenship.

Benchmark in value creation Value creation for the Tata Steel Group means making a difference in two ways. First, through a competitive offer, the Tata Steel Group must become the supplier of choice, delivering premium products and services and creating value for its customers. Second, through innovation and developing leading-edge solutions in technology, processes and products, it must secure its long term competitiveness. This will be achieved through a strategy of increasing the quality of earnings from its existing assets coupled with strategic growth.

Increase the quality of earnings from its existing assets The Tata Steel Group has set itself an ambitious target to improve the return on invested capital of its existing assets to 30% from the current 19% over the next 5 years. The Group will pursue the optimization of its European assets, dispose and restructure assets that are of low profitability and pursue differentiation of products and services. It will also continue towards achieving benefits through continuous improvement of processes and products; from the synergies from the acquisition of Corus. Plans are in place to meet the initial synergy target of USD 450 million per annum. Innovation is the cornerstone of value creation and the Group is committed to investing in leading edge technology, process innovation and product development. The Tata Steel Group has already begun converting this strategy into action. For example, in April 2008, the Tata Steel Group disclosed a programme to restore the long term competitiveness of its packaging assets in Europe with the closure of its Bergen site (Norway), and the restructuring of its Trostre operation (United Kingdom). Other examples are the major investments that are currently being implemented at its plants in IJmuiden, Port Talbot and Scunthorpe which will drive the Group towards product differentiation and improve operational efficiency to reinforce its existing competitive position. Generate strategic growth The Tata Steel Group will pursue strategic growth through capacity expansions and securing access to raw materials. The Group is expanding its capacity in India through the expansion of its operations in Jamshedpur to 10 million tonnes per annum and through the construction of a 6 million Strategic Management at TATA Steel

Page 25

tonnes per annum ‘greenfield’ site in Orissa. Other Greenfield opportunities in India and across Asia are being assessed. The Group is also looking at further integration upstream in raw materials with an ambition to achieve 100% self-sufficiency in India and around 50% self-sufficiency in Europe over time. Agreements for the exploration of iron ore in the Ivory Coast, coal in Mozambique and limestone in Oman have already been signed and opportunities are under review in India to support the Indian Greenfield projects; and in Africa and South America, primarily to support its European steelmaking assets.

Benchmark in corporate citizenship Corporate citizenship involves providing a safe working place, respecting the environment, caring for its communities and demonstrating high ethical standards. The Group’s ambition of becoming the benchmark of the industry in corporate citizenship has been translated into clear goals and actions. The Group is committed to creating a safe working environment for everyone. Whilst it has achieved significant progress over the last few years, it has a goal to improve further, with lost time injury frequency improving to 0.4 by 2012 to becoming best in class. New actions will be introduced in the areas of high hazard facilities, occupational safety and health and a review of the management system and organization is on the agenda. Climate change is probably the biggest challenge ever to confront the steel industry. In response to this challenge, the Tata Steel Group will be part of the solution and is committed to minimizing the environmental impact of its operations and its products. It has a goal to reduce its CO2 footprint by at least 20% by 2020 compared to 1990. To meet this objective, the Group will, for example, continue to improve its current processes, invest in breakthrough technologies and develop new products and services that reduce the environmental impact over the product lifecycle. To improve its processes, priority is given to energy conservation schemes; in technology break-through such as Ultra Low Carbon Steel making and in other innovative projects where the Group has proprietary technology. In terms of communities, the Tata Steel Group promotes and encourages economic, environmental, social and educational development. In India, its focus is on fulfilling basic requirements including healthcare, food security, education and income generation through the development of rural infrastructure, empowerment and community outreach programmes. In Europe, it is actively involved in a broad range of community initiatives, such as being premier sponsor of the British Triathlon.

EXPECTATIONS AND PURPOSES Strategic Management at TATA Steel

Page 26

1. The Company’s Corporate Governance Philosophy The Company has set itself the objective of expanding its capacities and becoming globally competitive in its business. As a part of its growth strategy, the Company believes in adopting the ‘best practices’ that are followed in the area of Corporate Governance across various geographies. The Company emphasizes the need for full transparency and accountability in all its transactions, in order to protect the interests of its stakeholders. The Board considers itself as a Trustee of its Shareholders and acknowledges its responsibilities towards them for creation and safeguarding their wealth. In accordance with the Tata Steel Group Vision, Tata Steel Group (‘the Group’) aspires to be the global steel industry benchmark for value creation and corporate citizenship. The Group expects to realise its Vision by taking such actions as may be necessary in order to achieve its goals of value creation, safety, environment and people. I . Board of Directors

The Company has a non-executive Chairman and the number of Independent Directors is more than one-third of the total number of Directors. As on 31st March, 2009, the Company has 14 Directors on its Board, of which 8 Directors are independent. The number of NonExecutive Directors (NEDs) is more than 50% of the total number of Directors. The Company is in compliance with clause 49 of the Listing Agreement pertaining to compositions of directors. Strategic Management at TATA Steel

Page 27

None of the Directors on the Board is a Member on more than 10 Committees and Chairman of more than 5 Committees (as specifi ed in Clause 49), across all the companies in which he is a Director

II. Audit Committee The Company had constituted an Audit Committee in the year 1986. The scope of the activities of the Audit Committee is as set out in Clause 49 of the Listing Agreements with the Stock Exchanges read with Section 292A of the Companies Act, 1956. The terms of reference of the Audit Committee are broadly as follows : a. To review compliance with internal control systems; b. To review the findings of the Internal Auditor relating to various functions of the company. c. To hold periodic discussions with the Statutory Auditors and Internal Auditors of the company concerning the accounts of the Company, internal control systems, scope of audit and observations of the Auditors/Internal d. To review the quarterly, half-yearly and annual fi nancial results of the Company before submission to the Board; e. To make recommendations to the Board on any matter relating to the financial management of the Company, including Statutory & Internal Audit Reports; f. Recommending the appointment of statutory auditors and branch auditors and fixation of their remuneration

III. Remuneration Committee The Company had constituted a Remuneration Committee in the year 1993. The broad terms of reference of the Remuneration Committee are as follows : a. Review the performance of the Managing Director and the Whole-time Directors, after considering the Company’s performance. b. Recommend to the Board remuneration including salary, perquisites and commission to be paid to the Company’s Managing Director and Whole-time Directors. c. Finalise the perquisites package of the Managing Director and Whole-time Directors within the overall ceiling fi xed by the Board. d. Recommend to the Board, retirement benefi ts to be paid to the Managing Director and Whole-time Directors under the Retirement Benefi t Guidelines adopted by the Board. The Remuneration Committee also functions as the Compensation Committee as per SEBI guidelines on the Employees’ Stock Option Scheme. The Company, however, has not yet introduced the Employees’ Stock Option Scheme.

Remuneration Policy The Company while deciding the remuneration package of the senior management members takes into consideration the following items : Strategic Management at TATA Steel

Page 28

(a) employment scenario (b) remuneration package of the industry and (c) remuneration package of the managerial talent of other industries. The annual variable pay of senior managers is linked to the performance of the Company in general and their individual performance for the relevant year measured against specific Key Result Areas, which are aligned to the Company’s objectives. The Non-Executive Directors (NEDs) are paid remuneration by way of Commission and Sitting Fees. In terms of the shareholders’ approval obtained at the AGM held on 5th July, 2006, the Commission is paid at a rate not exceeding 1% per annum of the profits of the Company (computed in accordance with Section 309(5) of the Companies Act, 1956). The distribution of Commission amongst the NEDs is placed before the Board. The Commission is distributed on the basis of their attendance and contribution at the Board and certain Committee Meetings as well as time spent on operational matters other than at the meetings. The Company pays sitting fees of Rs. 20,000 per meeting to the NEDs for attending the meetings of the Board, Executive Committee of the Board, Remuneration Committee, Audit Committee and Committees constituted by the Board from time to time. For other meetings, viz. Investor Grievance Committee and Ethics Committee, the Company pays to the NEDs sitting fees of Rs. 5,000 per meeting. The Company pays remuneration by way of salary, perquisites and allowances (fixed component) and commission (variable component) to Managing and Whole-time Directors. Salary is paid within the range approved by the Shareholders. Annual increments effective 1st April each year, as recommended by the Remuneration Committee, are approved by the Board. The ceiling on perquisites and allowances as a percentage of salary, is fixed by the Board. Within the prescribed ceiling, the perquisites package is approved by the Remuneration Committee. Commission is calculated with reference to net profits of the Company in a particular financial year and is determined by the Board of Directors at the end of the financial year based on the recommendations of the Remuneration Committee, subject to overall ceilings stipulated in Sections 198 and 309 of the Companies Act, 1956. Specific amount payable to such directors is based on the performance criteria laid down by the Board which broadly takes into account the profi ts earned by the Company for the year

2. Business ethics and Social responsibility The values and principles, which have governed Tata Steel’s business for a century, have been deployed through implementation of the Tata Code of Conduct (TCOC). The process of implementation of TCOC among stakeholders is known as Management of Business Ethics (MBE), which is deployed effectively in the Company through its four pillars concept, which are namely, Strategic Management at TATA Steel

Page 29

• Leadership • System and Processes • Training and Awareness • Measurement A number of initiatives were taken to reinforce TCOC among employees and other stakeholders. The systems and processes vulnerable to unethical practices were revisited and modified. A number of policies like Gift Policy, Whistle Blower Policy etc. were reinforced through various communications. The senior leadership team in the Company was actively engaged in communication on business ethics at various levels and forums. A number of visible punitive actions were taken against the wrong doers and violators of TCOC. A value based leadership program was also organized for senior members of leadership team. A major step towards engagement of employees at shop floor into MBE was taken by signing of TCOC by all Office Bearers of the Tata Worker’s Union. This has strengthened the process of reinforcement of TCOC among employees. In order to make all stakeholders aware various policies, a special campaign was launched during the Ethics month which was celebrated in July 2007. In order to improve sensitivity regarding ethics among management students and senior school students, various presentations were made in Business Schools and other educational institutions. To cope with the globalization and align and deploy the Tata Steel values and TCOC with our global companies, company’s Ethics Counselor visited Tata Steel Thailand, NatSteel and launched TCOC in the month of July 2007. An integration process of value and TCOC with Corus was also taken up during the year. The effectiveness of all these initiatives is measured by various internal and external surveys, the results analyzed and improvement actions taken. One such external survey was conducted by TQMS for MBE Assurance survey where the Company has scored higher than its previous result. This shows that all key systems and processes are in place.

Corporate social responsibility Tata Steel believes that the primary purpose of a business is to improve the quality of life of people. Tata Steel will volunteer its resources, to the extent that it can reasonably afford, to sustain and improve a healthy and prosperous environment and to improve the quality of life of the people of the areas in which it operates.”


Page 30

As its operations have expanded to new geographies, the Tata Steel Group has retained a collective focus on the various areas of corporate sustainability that impact the environment; people and their health; and society at large. The Tata Steel Group’s focus in the area of corporate sustainability includes Social Sustainability; Environmental Sustainability; Social Welfare; Sport; and Inclusive Growth. This last ensures that the Group’s successes are shared by all its constituents and stakeholders.

Conserving Nature for Future Generations 1. All production units certified to ISO 14001 2. Town Services certified to ISO 14001 3. Planted -”thousand trees for thousand days” - as a millennium gift for future generations. The eventual count was 1.6 million 4. 20% reduction in consumption of raw materials in the past five years 5. 100% treatment of waste water, discharged upstream from point of collection 6. Greening of Supply Chain

Continuously augmenting Town infrastructure to promote business growth 1. Tata Steel and its subsidiaries provide business opportunities to ancillary units 2. Institutions such as National Institute of Technology, R.D.Tata Technical Education Center, and Savak Nanavati Technical Institute provides technical and job oriented training 3. Promoting rural economy through natural resource management, micro financing and credit, and training for gainful employment 4. Tate Steel caters to over 600 villages and several company towns, in the provinces of Orissa and Jharkhand 5. Creating a ripple effect across towns and villages

Health care facilities open to employees and non-employees 1. 850-bed hospital, two super dispensaries and nine dispensaries in Jamshedpur 2. Mobile medical units reach out to rural and semi urban areas 3. Health Centers based in villages and communities. Supports alternative remedies such as ayurveda, naturopathy, homeopathy, etc 4. Supports Blood Bank, specialty hospitals for tuberculosis, eye care services, cancer, etc 5. Taken “Lifeline Express” seven times to remote parts of rural India Strategic Management at TATA Steel

Page 31

6. Partner for Child Survival, Smile Train, Polio and Water and Sanitation projects

Jamshedpur is a centre for excellence in education 1. 2. 3. 4.

Three primary schools, six high schools and one college run by the company 312 private schools and 171 “balwadi” schools assisted by Tata Steel Jamshedpur has among the highest literacy rates in the country Instituted Dr J J Irani Education Excellence Award

Patron of Art and Culture 1. Contributed to setting up of National Centre for Performing Arts, Mumbai 2. Tribal Culture Centre set up for preservation and promotion of indigenous art and culture 3. Supports cultural institutions in 4. Jamshedpur and outlocations 5. Promotes rural arts and crafts 6. “Art in Industry” camps 7. One of the oldest and finest collection of India’s masters and contemporary Indian art

3. Stakeholders expectations The Vision and the Group Purpose Statement define who the Company believes are its stakeholders. The Vision statement clearly states that Tata Steel would continue to improve the quality of life of the employees and the communities it serves. Further, the Vision has identified upholding the spirit and values of Tata’s towards nation building as the basis for attainment of strategic goals and vision.


Page 32

The Group Purpose underscores the Tata Values "of returning to the society what we earn, evolve trust among consumers, employees, shareholders and communities." Tata Steel has identified "balancing stakeholders’ needs" as a key strategic issue. Thus, the total stakeholder base of the Company encompasses shareholders, financial community, customers, media, communities, employees, regulators, suppliers and partners. The Company undertakes projects in collaboration with a large number of non-government organisations, industry associations and organisations to meet the needs of its stakeholders. Tata Steel has identified “balancing stakeholders needs” as a key strategic issue. The identification of stakeholders is derived from the vision of the company, which sets forth the strategic directions & strategic goals and emphasises upon upholding the spirit and values of Tatas towards Nation building. Thus the total stakeholder base of the company encompasses Shareholders, Financial Community, Customers, Media, Community, Employees, Regulators, Suppliers & Partners as presented in Figure 3.1. At Tata Steel the stakeholders are identified for most of the Key Enterprise Processes. Realizing the Vision of “sustainable growth” and “long term stakeholder value creation” also requires strategic and value creating partnership with suppliers which has been identified as a strategic objective. This sets out the basis for identification of stakeholder groups of relevance. Within each group of stakeholders, key stakeholders are identified based on strategic imperatives derived from the strategic objectives.

Figure 3.1 Stakeholder Engagement Process

Approach to stakeholder consultation and communication Approach to prioritised stakeholder consultation and the frequency of the consultation is furnished in Figure-3.2 Stakeholder Shareholders & Financial Community

Forum for Assessing Requirements, Communicating Directions & Receiving Feedback Investors meet across the globe; Annual General Meetings; Quarterly and half-yearly reports to Shareholders;


Frequency Annual/As per plan/Annual Page 33

Customer Suppliers & Partners External Public/ Govt. / Media Employee, Community & Society

Updating major Shareholders (LIC, UTI); Shareholder Relations’ Meets; Customer forum; MD’s Conference with customer groups. Worldwide; Visits to Customers & CVM, RVMs; Learning from Field Failures Vendor Dialogues. Meetings with Key Suppliers; Vendor Meets & Recognition Meetings with Govt./Steel Ministry/Trade Bodies, Industry Associations; NGOs, Ministry for Environment & Forests, Press Briefings & Releases, etc. Dialogues with the employees, JDCs, JWC, Apex Council, Senior Citizens Forum; Spouses’ Dialogue; Uday, Joint Community meeting, Community need analysis

As per plan Quarterly Twice / year, As per plan, Once a year As per need

Quarterly, Twice/year, As per plan

Source: http://www.tatasteel.com/sustainability_05/management_sys/ms_07.htm

4. Cultural Context


Page 34

The Tata Group is one of the world’s largest private-sector employers. But you need more than just numbers to gauge the Group's attractiveness as an employer. One reason: the Group firmly believes that talented professionals are among its most vital resources.

National and regional cultures The national cultural context influences the expectations of stakeholder directly. For example: attitude at work, authority, equality and a number of other important factors differ from one location to another. Tata Steel provides equal opportunities to all its employees and all qualified applicants for employment without regard to their race, caste, religion, colour, ancestry, marital status, gender, sexual orientation, age, nationality, ethnic origin or disability. Employees of a Tata company shall be treated with dignity and in accordance with the Tata policy of maintaining a work environment free of all forms of harassment, whether physical, verbal or psychological. Employee policies and practices shall be administered in a manner consistent with applicable laws and other provisions of this Code, respect for the right to privacy and the right to be heard, and that in all matters equal opportunity is provided to those eligible and decisions are based on merit.

The organisational field


Page 35

An organizational field is a community of organizations that partake of a common meaning system and whose participants interact more frequently with one another than with those outside the field. Tata Steel share within a field a common business environment such as a dominant technology, regulation or education and training programs, which increases internal interaction between the field members of the organization.

Organisational culture The Tata Steel has a framework that enables its managers to orient themselves to changing international realities, and to hone their knowledge and skills in a manner that helps them maximise their potential on the global stage. Organizational culture consists of four layers:

Value • • • • •

Trusteeship. Integrity Respect for the individual Credibility Excellence

Beliefs People at Tata Steel believe themselves as the part of the Tata Parivar and that at Tata they will be treated as family members and stakeholders. They believe in the company’s vision of having a better tomorrow for the country and their families.

Behaviors Behavior of the people is generally guided by the company’s goals and the code of conduct. People behave in a family oriented way and help each other during work routines and obey the guiding laid down by the company.

Taken for granted assumptions Tata Steel has assumptions like team work, nurturing talent, enhancing leadership capability and acting with pace, pride and passion. Tata Steel will providing a safe working place, respecting the environment, caring for our communities and demonstrating high ethical standards.

Functional divisional subcultures


Page 36

Inter-company mobility is an integral aspect of leadership development in the Tata Group. Through cross-company movements, managers are exposed to different industries and functions, enabling them to become knowledgeable about various business scenarios (start up, consolidation, acquisition, etc). Inter-company mobility helps the Tata Group develop and nurture industry and sector experts, while also creating functional experts (by rotating them through different companies in the same function). High-potential managers often feel the need to move into new areas of work to recharge their batteries, build up their own abilities and realise their personal aspirations. The Tata Group encourages job mobility within its companies as a means of building know-how, generating synergies, and encouraging initiative and self-improvement. This strengthens internationalism, professionalism and diversity, and adds to the Group's competitive strength, while providing satisfaction and choice to the individual.

5. Cultural Web a.

Stories


Page 37

Tata Steel... A 100 Years And Still Counting... “ Celebrating an achievement, accomplished by few...” A vision envisaged by the Founder... executed by his successors... developed and evolved by future generations... to become today, a Global enterprise! This is the story of Tata Steel which completes 100 glorious years of existence on August 26, 2007 following the ideals and philosophy laid down by its Founder, Jamsetji Nusserwanji Tata way back in 1907.

b.

Organisational Structure

Tata Steel Group has announced a new organization structure effective from January 01, 2008 as follows: Tata Steel Group comprises of two entities, namely, Tata Steel (including Tata Steel Thailand and NatSteel Asia) and Corus Group Ltd. In order to realise this ambition, a new organisation is announced on November 28, 2007, which is effective from January 01, 2008. The Chairman of Tata Steel, Mr. Ratan Tata will continue to chair the Strategy and Integration Committee. Mr. Jim Leng, Mr. B Muthuraman, Mr. Philippe Varin, Dr. Tridibesh Mukherjee, Mr. Rauke Henstra, Mr. Hemant Nerurkar, Mr. Koushik Chatterjee and Mr. JeanSebastien Jacques are members of this Committee. A Group Centre is created for functions that are to be performed with a common approach across the Tata Steel Group. These functions are Technology & Integration, Finance, Strategy, Corporate Relations & Communications and Global Minerals. The executives responsible for these functions will report to the MD of Tata Steel and the CEO of Corus:  Dr. Tridibesh Mukherjee is appointed as Group Director, Technology & Integration  Mr. Koushik Chatterjee is appointed as Group Chief Financial Officer  Mr. Jean-Sebastien Jacques is appointed as Group Director, Strategy  Mr. Manzer Hussain is appointed as Group Director, Communications  Mr. Arun D Baijal is appointed as Group Director Global Minerals Both Tata Steel and Corus entities will have Executive Committees chaired by the MD, Mr. B Muthuraman and the CEO, Mr. Philippe Varin respectively. A Joint Executive Committee for Tata Steel Group will meet quarterly to review overall performance against the Group ambition. This committee will be co-chaired by the MD of Tata Steel and the CEO of Corus.

C. Control System Strategic Management at TATA Steel

Page 38

So far, most of the company's innovations, admittedly, have been in the area of process improvements and cost re-engineering. Tata Steel holds a patent for improvements in the production process for high-purity manganese and magnesium-carbonate from magnesite/dolomite, for example, and another for a liquid-fuel emulsion atomiser for efficient combustion and briqueting of ilmenite for blast furnace operations. Tata Steel does not hide the need for technical alliances, and it has been working closely with companies such as Thyssen for steel-making and hot strips, and Nippon Steel for its CRM. On management issues, it has consultants such as Arthur D Little for management, BA Hamilton for supply chain management, and McKinsey for operational performance. Plus, it has academic tie-ups with UK's Sheffield University and Imperial College, USA's MIT, India's IIT Kanpur, and France's CEDEP.

6. Organizational purposes Strategic Management at TATA Steel

Page 39

Corporate value Tata Steel constantly deploys its resources, strengths and strategies in a manner that it moves closer to achieving Vision 2007. It does so while upholding the core values of transparency, integrity, honesty and accountability which are fundamental to the Tata Group. Tata Steel believes that good corporate governance practices enable the management to direct and control the affairs of the Company in an efficient manner and will help achieve its ultimate goal of maximizing value for all its stakeholders. Tata Steel’s corporate value mainly consists of: • • • • •

Trusteeship. Integrity Respect for the individual Credibility Excellence

Mission Statements 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.

Objectives Sustainability issues are reflected through specific social and environmental objectives and targets accepted by the top management as a part of Vision 2007 and so on... To achieve its sustainability goals, the organisation has identified key enterprise processes critical to the growth and success of the organisation. Mapping and identifying stakeholder concerns through a structured engagement and feedback process has been initiated. These stakeholder concerns are analysed, prioritised and are the prescribed goals for Corporate Sustainability Management. The senior management of Tata Steel tracks the performance of the targets against each strategic goal.


Page 40

Bases of Competitive Advantage: The Strategic Clock

TATA CORUS

The Hybrid Strategy of Tata Corus: • Tata Corus gets supply Raw material at lower cost. Tata is the low cost producer of steel and TATA-Corus banks on this advantage of gaining raw materials at lower cost. •

Tata-Corus achieved access to high-developed markets and premium customer base. Acquisition of Corus extends product portfolio of Tata Steel and now it also produces steel products for sectors like aerospace, automotive, consumer product, engineering, rail, ship building and security and defence which was not the case before. Before, TATA only manufactured low valued long and flat steel products.

• With the acquisition of Corus, there will be sharp decrease in production cost leading to economies of scale and economies of scope.


Page 41

SUSTAINING COMPETATIVE ADVANTAGE Differentiation

Price –Based Strategies Accept reduced margin Reduce costs Focus on specific segments

Sustainin g Competit ive Advantag e Lock in

Create difficulties of imitation Achieve imperfect mobility (of resources/competenc es) Reinvest margin

Achieve size/market dominance First- mover advantage Reinforcement Rigorous enforcement

Price based strategy Tata steel is lowest-cost steel producer in the world and Corus is an ideal combination of high-quality developed and low-cost high-growth markets. The emerging competition and the quest for cost leadership are forcing Tata Steel to take a close look at applied research. In all probability, the company’s next growth wave will be driven more by its intellectual property than by its physical assets. Today the company patents everything and sees a strategic competitive edge from its intellectual property rights (IPR). The management sees patents and IPR as products capable of generating revenue streams in the future. The company has used various strategies such as cost-cutting efforts, pricing power with large buyers, product quality and skilled and productive workforce to sustain its leadership.

Differentiation Strategic Management at TATA Steel

Page 42

Tata Steel – currently the sixth largest steel producer in the world - has reaped manufacturing gains while Corus has benefited from lower taxes, shared service and corporate governance. Tata Steel Group, that now includes Corus, is committed to investing in leading edge technology, process innovation and product development and has targeted return on its existing investment of 30 per cent against the current 19 per cent over the next five years. The Tata Steel Group will pursue the optimisation of its European assets, dispose and restructure assets that are of low profitability and pursue differentiation of products and services. Lock-in Tata steel has spent much of its investment for rigorous innovation like: 1. Defend, support and expand existing business by... • • •

Discovering and using new process designs, operating philosophies and enabling technology Designing products and services based on customer needs Piloting and controlling the implementation of new or changed processes

2. Drive new business by continuously scanning technology development in steel and other allied areas. 3. Broaden and deepen technological capability by... • • •

Encouraging creativity and innovation by awarding experimentation and providing an atmosphere of freedom Collaborating with leading international research institutes Sponsoring leading international researchers to participate in Tata Steel’s programme.

CORPORATE LEVEL AND INTERNATIONAL STRATEGY Strategic Management at TATA Steel

Page 43

Global Points of Presence of TATA STEEL

Courtesy: www.tatasteel.com

Market Diversity Strategic Management at TATA Steel

Page 44

Related diversification It is strategic development for Tata Steel beyond current markets, but within the capabilities or value network of the organization. Now let’s look at how Tata Steel has done it: A. Backward integration

Tata Steel Group is also expanding its operations in India. In January 2008, Tata Steel and Steel Authority of India (SAIL) signed an agreement to establish a 50:50 joint venture company for coal mining in India. The joint venture would identify, acquire, and develop coal blocks in India. Also, Tata Steel signed a joint venture pact with Jasper Industries to establish a coalbased power plant in the eastern state of Orissa, in June 2008.Jamshedpur works unit as part of the INR140,000 million (approximately $3,477.6 million) brownfield expansion to augment its production capacity to 10 million tonne in over two years.The group’s expansion in India would help it to generate additional revenues. B. Forward integration Tata steel acquire NatSteel which allowed it to establish a beachhead in seven countries across the region, namely Singapore, Thailand, China, Malaysia, Vietnam, the Philippines and Australia, but also provided it with a customer base for close to two million tonnes of steel. NatSteel's finishing facilities across the region now provide Tata Steel with the necessary support for upstream capacity expansions in India, as well as access to knowledge and expertise in downstream processing of rebars and wire rods. C. Horizontal integration Apart from the main steel division, Tata Steel's operations are grouped under the following strategic business units. ⇒ Bearings Divisions: Manufactures ball bearings, double row self-aligning bearings, clutch release bearings and tapped roller bearing for two wheelers, fans, water pumps, etc. ⇒ Ferro Alloys and Minerals Division: Operates chrome mines and has unit for making ferro chrome and ferro manganese. Its one of the largest players in the Rings and Agrico Division global ferro chrome market.

International Diversity and International Strategy 1. Reasons for international diversity for Tata steel Strategic Management at TATA Steel

Page 45

•

Globalization of market and competition

Through investments in Corus, Millennium Steel (renamed Tata Steel Thailand) and NatSteel Holdings, Singapore, 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 2008, has operations in the UK, the Netherlands, Germany, France, Norway and Belgium.

•

Internationalization of value adding activities

A business in India has a lot of government intervention. Any global diversified company like Tata steel can easily be out from this intervention through its geographic diversification. In other countries Tata steel takes advantages of higher prices and it will be able to maintain its net profit margin. •

Stabilization of earnings across market

Tata steel has fully diversified its revenue portfolio, so in case if there is slow-down in UK, then also it will be able cover up its sales from other developing countries like India. •

Economies of scale

Economic factors were also favorable for globalization. Because of standardization of core products, the company is able to enjoy economies of scale in manufacturing.


Page 46

The International Value Network Global Sourcing The iron ore mines and collieries in India give the Company a distinct advantage in raw material sourcing. Tata Steel is also striving towards raw materials security through joint ventures in Thailand, Australia, Mozambique, Ivory Coast (West Africa) and Oman. Tata Steel has signed an agreement with Steel Authority of India Limited to establish a 50:50 joint venture company for coal mining in India. Also, Tata Steel has bought 19.9% stake in New Millennium Capital Corporation, Canada for iron ore mining.

Tata Steel’s Strategy Like any manufacturing industry, steel has its own value chain. For the sake of simplicity, let us divide it into two - primary steel-making and finishing. Tata Steel's strategy is based on breaking up this value chain and putting each part where it is the most cost-effective. So primary steel will be produced in India, where there are large deposits of iron ore. But the other Asian markets like Thailand, Vietnam, Shanghai, etc., are now a key focus for Tata Steel and will be better addressed by taking the semi-finished steel to these countries for finishing and then selling there. For the last few years, Tata Steel has been doing some thinking on the central strategy of growth. A long value chain is there in any business and each part of this value chain has a cost incidence. Only five or six countries have these resources. Not all countries have natural gas. Not all countries demonstrate the same extent of growth potential. Demand in countries like the US, Japan and South Korea has flattened and growth will take place only at 1.5 per cent to 2 per cent - for replenishment of consumption. Certain other countries like China and India will show robust growth. So the customers are going to be in the developing world. There is iron making, steel making, rolling, finishing, the customer and demand - all these things are not at the same place. In China, there is no iron ore but there is steel consumption. In South-east Asia, there is no iron ore but consumption is growing. Tata Steel believes globalization is a method by which you put the right part of the value chain in its right place in the world and link it up properly - finishing facilities in places where customers exist, and primary manufacturing facilities in places where manufacturing is competitive.


Page 47

2. International Strategies

• The global-local dilemma Tata Steel have signed binding agreement with New Millennium, these projects is proved to be a source for part of the raw materials requirements of Tata Steel Group. In view of its geographical proximity, Canada is a favorable location to source raw materials for Tata Steel’s European operations.

Global strategy Market factors pushed for globalization. The market needs for steel was homogeneous and they had global customers. Because of homogeneity of needs, the brands and advertising were transferable. Economic factors were also favorable for globalization. Because of standardization of core products, the company was able to enjoy economies of scale in manufacturing. Since the company is ninety nine years old, they also enjoy the benefit of steep learning curve. Again, the raw material cost in U.K. is high. This can be offset by sourcing from India, where raw materials are comparatively cheaper.

Evaluate current extent of globalization: The current extent of globalization is measured under 5 dimensions. ⇒ Market participation: Tata steel has sales in various countries like USA, Srilanka, Nepal, Shanghai etc but it lacked global identity or image. ⇒ Product standardization: The basic product was standardized throughout the world. At final stages the product was customized as per the requirements. ⇒ Activity concentration: Tata steels technological and integration, finance, strategy etc were concentrated only in India whereas the manufacturing activities were dispersed in India, USA, UK, Thailand, Vietnam, Malaysia etc. Trading was done in Bangladesh, Srilanka, Nepal, South Africa, Hong Kong, etc. ⇒ Marketing uniformity: The market positioning and marketing mix strategy were uniform throughout the world.


Page 48

⇒ Integration of competitive moves: Tata steel has taken an integrated approach to global competitors. They have tough competition with Mittal steels in almost all countries.

Value Creation and the Corporate Parent Value-adding activates

Strategic focus The strategic focus of the Company has been to increase the steelmaking capacity in excess of 50 million tons by 2015 through organic and inorganic growth. The key enablers identified to achieve the strategic goal and to build a sustainable value centric culture are: • • • • • • • •

Being the employer of choice Oneness with the society Leadership & talent management Adaptability to changes in the external environment Security of raw materials Research & development and technological upgradation. Branding Financial prudence through capital stewardship & performance management.

Intervention within business unit In order to make India self-reliant in this field, Tata Steel entered into an agreement in 1937 with Stewarts & Lloyds of UK to manufacture and sell tubes, made from steel supplied by the Tata Iron & Steel Co. in India. The successful journey across half a century has been the result of foresight, enterprise and the ability to understand and meet the ever-changing demands of the Indian market. The road ahead appears even more challenging and exciting, with many new initiatives on the anvil including modernization of the plants, expansion of capacity, new approaches to channel management and development of new businesses and product lines.


Page 49

BCG Product Portfolio Matrix Tata Steel has stable market growth but has a relatively high market share so it comes under cash cow. This implies it is generating enough revenue that can be pooled into “stars” and “question mark”.


Page 50

The Parenting Matrix Here, the parenting company is Tata steel group and its SBU is Tata tubes falls under HEARTLAND BUSINESS of parenting matrix. The Tubes SBU, today is the largest tube manufacturer in India with an annual production capacity of more than two lakh tonnes. It is the market leader, with applications of tubes ranging from plumbing, irrigation to cold storages and in closed structural (Rectangular and Square Hollow Sections) applications. Tata Pipes, the flagship brand of the Tubes SBU has grown from strength to strength and it commands a premium over competitors. The brand has become a household symbol of trust and commitment to the promise “ Fit it for Life”. The Tubes SBU also has the distinction of being the only Indian tube company to manufacture tubes through the unique FM (Fretz Moon) process, which gives a highly differentiated product for utility in the plumbing and irrigation segments. Through the FM process, the Tubes Division is capable of manufacturing pipes upto 50mm with no internal weld beads. This gives pipes an edge in the market, as other pipe manufacturing processes have residual weld beads in the inner bore of the tubes. The absence of inner weld beads results in smoother flow of fluid, lesser frictional and pressure losses and reduces the possibility of choking due to accumulation of dirt.

Roles in an International Portfolio Large multinational companies like Tata steel have a network of subsidiaries, which play its roles according to the level of local resources and capabilities available to them. Strategic leader Corus, a subsidiary of Tata steel, holds tremendous value for Tata steel. It has huge production capacity, large and wide distribution network in UK, Netherlands and Germany. Tata steel has competitive advantage in raw material security, technology and its distribution network. So, we can see that Corus is strategic leader for Tata steel.

Directions for Strategy Development Strategic Management at TATA Steel

Page 51

1. Protect/built Consolidation: acquisition of Corus has strengthened Tata steel’s position in their current market with same products. Benefits that Tata steel has are: Product life cycle of steel industry is currently at highest level of growth till now. This is expected to decline in coming 2-3 years. Then again will in growth stage. Strategic head of Tata steel at the time of acquisition has said that we have paid only half of the price to acquire Corus that will establishment such existing capacity. The acquisition will add 19 million tonnes a year overnight to Tata Steel's capacity. Setting up a Greenfield project takes three to five years. Within two years of time after acquisition total value of firm increased tremendously. Tata steel has been able to have much better results from Corus acquisition then it has expected ever before through top class management. Tata steel has got excellent reduction in cost through acquisition of Corus. This has been able to expand its global operation. It is also expanding its capacity in India and it has already good client so it is been able to cater a competitions level of the leaders market among competitors.

Product developments The main focus for strip products continued to be the further development and improvement of steel grades with high strength and good formability, such as the ‘Dual Phase’ family of steels. Work continued on the improvement of chromium-free passivation coatings for tinplate and for hot-dip galvanised material. For tinplate, this work is being carried out with other tinplate producers, lacquer suppliers and can makers, with the aim of developing one single, standardised, chromium-free passivation coating worldwide. A new metallic coated steel product has been developed jointly with Salzgitter with a coating containing zinc, magnesium and aluminium, which gives higher corrosion resistance than conventional metallic coatings. Two new families of rail steel have been developed, targeting the key degradation mechanisms of rail, namely rolling contact fatigue (RCF), resistance and wear. Bainitic and ultrahigh carbon (UHC) rails both display exceptional resistance to RCF and could provide cost effective solutions to meet customer requirements.

2. Diversification Geographical diversification Strategic Management at TATA Steel

Page 52

Tata steel has diversification in terms of geographical area. It has well diversified its investment and revenue in different countries of Asia including India, UK, and various European countries. In case there is slow-down in one country, then also it will be able to maintain its revenue targets from other countries of world.

Methods for Strategy Development Internal development: Tata steel has its own organic development which has been the primary methods of development. This has been done in following ways: Tata Ryerson Limited (TRYL): TRYL is in the business of steel processing and distribution. It offers hot and cold rolled flat steel products in customized sizes and quantities through processing services and materials management services. Tata Sponge Iron Limited (TSIL): TSIL is the first Indian sponge iron plant based on Tata Steel's Direct Reduction Technology. Its major product lines are sponge iron lumps and fines. Tata Pigments Limited: TPL's range of products includes oxides of iron, dry cement paint, exterior emulsion paint and distemper. Its products are used in paints, emulsion, cement floors, plastic etc. Jamshedpur Injection Powder Limited (Jamipol): JAMIPOL manufactures carbide desulphurising compounds which are used for de-sulphurising hot metal for the production of low-sulphur, high-quality steel. Jamshedpur Utility and Service Company Limited (JUSCO): Re-engineered out of Tata Steel's town services, JUSCO is a wholly owned subsidiary of Tata Steel and is the country's first enterprise that provides municipal and civic services for townships. JUSCO is the only EMS 14001 civic services provider in the country. However for starting up all this activity requires much higher initial investments. As it is financially sound, so it can make such calls. However benefits from such are visible over longer period of time as cost is spread over time.

Mergers and Acquisitions: Corus acquisition: Strategic Management at TATA Steel

Page 53

Acquisition of Corus by Tata Steel is consistent with Tata Steel's stated objective of growth and globalization. Growth at Tata Steel has been focused towards new, higher end-markets and a more sophisticated customer base. Tata Steel has identified a number of specific benefits that it sees from a combination with Corus. Enhanced scale will position the combined group as the sixth largest steel company in the world by production, with a meaningful presence in both Europe and Asia. Benefits for Tata steel after acquiring Corus: 1. It has got available steel capacity that it will plan to expand. So speed for growth will

be much fast then it was expected. Corus is Europe's second largest steel producer with revenues in 2005 of GBP 9.2 billion, and crude steel production of 18.2 million tons primarily in U.K. and Netherlands. Corus is primarily engaged in the manufacture of semi-finished and finished carbon steel products. Its activities are divided into three main divisions: strip products (including coated and uncoated strip and welded tubes, sold both as coil and sheets), and the distribution and building systems division, which operates as a link between Corus's manufacturing operation and its customers. It has a global network of sales offices and service centres.

2. Cost efficiency that Tata steel achieve is enhanced its operation in aggressive manner.

The powerful combination of low cost upstream production in India with the high end downstream processing facilities of Corus will improve the competitiveness of the European operations of Corus significantly. The combination will also allow the cross-fertilisation of research and development capabilities in the automotive, packaging and construction sectors and there will be a transfer, from Europe to India, of technology, best practices and expertise of senior Corus management. In addition, Tata Steel will retain access to low cost raw materials and slab for the enlarged group, and exposure to high growth in emerging markets, whilst gaining price stability in developed markets.


Page 54

Acquisition of Australian Mining Company Tata steel has done MoU with Australian based Riversdale mining Ltd. through which both companies will develop the project jointly for strategic investment in Riverseale's Mozambique coal project by acquiring 35 percent stake for a sum of Australian $100 million. The coal produced from this project would be supplied to Corus facilities’ in the UK, Europe and also to India in future. This will enable Tata steel strategy of progressing towards raw material security for its global business. This partnership gives Tata Steel an opportunity to explore large coal basin, which could enhance long-term competitiveness of global operations. From this move Tata Steel's long-term strategy of forming a global minerals group, which is actively exploring various opportunities to secure access to iron ore and coal in various geographies has came true. This would enable the company to continue its competitive cost position in the global steel industry. Tata Steel did differently in the often-volatile world of mergers and acquisitions: 1. Don't conquer but build partnerships. 2. Don't send planeloads of people but only the key integrators. 3. Pay attention to cultural sensitivities. 4. Create shareholder value by aligning objectives. 5. Continue to maintain existing identities. 6. Co-create the value of enterprise by developing aspiration targets.

Strategic Alliances: Strategic Management at TATA Steel

Page 55

Joint ventures: The following joint ventures allow Tata steel to remain independent. Tata NYK: A joint venture with Nippon Yusen Kabushiki Kaisha (NYK Line) for setting up a shipping company to cater to dry bulk and break bulk cargo. Tata Steel and NYK will each hold 50% stake in the joint venture company. Tata BlueScope Steel Limited: A joint venture with BlueScope Steel Limited, Australia, Tata BlueScope Steel Limited offers a comprehensive range of branded steel products for building and construction applications. The Company is constructing a state-of-the-art metallic coating and painting facility at Jamshedpur. Dharma Port Company, Orissa: A JV between Larsen & Toubro Ltd. and Tata Steel Ltd., the company will build a deep-draft (18 metres) all weather port on the east coast of India. The port will handle 80 million tones per annum of cargo. TM International Logistics Limited (TMILL): TMILL provides material handling and port operation services at Haldia and Paradip Ports in addition to providing freight forwarding and chartering services. Tinplate Company of India Limited (TCIL): With a market share of over 35%, it is the industry leader in India. It has the capability to supply all tinning line products including electrolytic tinplate / tin-free steel and cold-rolled products Tayo Rolls Limited: India's leading roll manufacturer and supplier, the company produces rolls which find application in integrated steel plants, power plants, the paper, textile and food processing sectors, and the government mint.

Opportunistic Alliances: Strategic Management at TATA Steel

Page 56

NatSteel Holdings (NSH): A leading supplier of premium steel products for the construction industry. NatSteel Holdings became a 100% subsidiary of Tata Steel in February 2004. NSH produces about 2 MT of steel products annually across its regional operations in seven countries. Tata Steel Thailand: The Company is the dominant steel producer in Thailand. The company has the capacity to produce 1.7 million tones of steel for the construction industry per year. Tata Steel KZN: Proposes to set up high carbon ferrochrome plant in South Africa. The plant is slated to be commissioned by October 2007 with an annual production capacity of 135,000 tones during Phase 1. Sila Eastern Company Limited: Established to develop limestone mines in Thailand, mainly for the captive use of Tata Steel. Through such opportunistic alliances Tata steel have speed of market change From India to any Thailand and South Africa.

Financial Analysis Return on Equity Strategic Management at TATA Steel

Page 57

Return on equity is been arrived at by dividing net profit with total share holder‘s fund. This ratio tells that how much profit is been earned by each share of a company. If we look at the graph of ROE we will find that the return for the year 1999, 2000, 2001 has been showing a steady increase but in the year 2002 we see a small dip and this is because the expenditure has increased by around 5%. Then in the year 2003 we see a big jump. This jump is because the revenue has increased by around 30%. Then we can see that there is a sudden dip in the year 2006. This is because there was a bumper profits in the year 2005 and that was used for purchasing gross block which has resulted into increasing the reserves and in turn increasing the shareholders fund hence the dip.

Net profit margin ratio


Page 58

This is one of the most important ratios as it tells us what percentage of the total revenue is net profit. Generally we only look at the total revenue but it may be misleading as most of the revenues may be absorbed by the expenditure. If we look at the ratio since 1999 we can see the ratio is improving almost every year.

Multinational Structures Strategic Management at TATA Steel

Page 59

The Transnational Structure

Characteristics of the transnational structure which relate to TATA steel •

Each national unit operates independently , for which an example is Corus. As of now they want to be separate and do business separately having the same organisation structure and culture and in the direction to achieve the common goal i.e continuous growth

•

TATAs have also not changed the organisation structure of Corus where in the Corus CEO Philippe Varin remains the same. Neither TATA and CORUS plan to merge as a single organisation.

•

TATAs have also kept the same functional level employees as they have been a part of Corus since long and know the operations better which are in sync with the local demand and preferences of local country

Some example of various SBU’s which operate independently Strategic Management at TATA Steel

Page 60

Strategic Business Units Apart from the main Steel Division, Tata Steel's operations are grouped under the following Strategic Business Units: Bearings Division : Manufactures ball bearings, double row self-aligning bearings, magneto bearings, clutch release bearings and tapered roller bearings for two wheelers, fans, water pumps, etc. Ferro Alloys and Minerals Division : Operates chrome mines and has units for making ferro chrome and ferro manganese. It is one of the largest players in the global ferro chrome market. Agrico Division : Tata Agrico is the first organised manufacturer in India of hand tools and implements for application in agriculture. Tata Growth Shop (TGS) : Has designed, developed, manufactured, erected and commissioned thousands of tonnes of equipment ranging from overhead cranes to high precision components, including a rocket launch pad for the Indian Space and Research Organisation. Tubes Division : The biggest steel tube manufacturer with the largest market share in India, it aspires to strengthen its market presence by expanding and modernising its commercial and precision tube manufacturing capacity. Wire Division : A pioneer in the manufacture of steel wires in India, it produces coated and uncoated wires, branded as Tata Wiron. The division also operates a wholly owned subsidiary in Sri Lanka The above mentioned SBU’s work independently to achieve a particular objective ,achieving a common mission and thus vision

TATA Steel’s vision Strategic Management at TATA Steel

Page 61

We aspire to be the global steel industry benchmark for Value Creation and Corporate Citizenship. And they achieve it through

• • • •

•

Our people, by fostering team work, nurturing talent, enhancing leadership capability and acting with pace, pride and passion. Our offer, by becoming the supplier of choice, delivering premium products and services, and creating value with our customers. Our innovative approach, by developing leading edge solutions in technology, processes and products. Our conduct, by providing a safe working place, respecting the environment, caring for our communities and demonstrating high ethical standards. Managers of countries or territories have potentially a dual responsibility to other parts of the transnational. First they must act as a sensor to the local needs which the subsidiary of TATA i.e Corus has done successfully , a part of which is achieved by collaborating with universities and research institutes all over the world as well as with key customers in the automotive, transport, packaging and construction areas. It employ almost 950 researchers across Britain and the Netherlands and supply ‘metal solutions’ to Corus sites around the world. Also with the presence around the world it ensures the new technology and processes are spread internationally to other countries as well for new products and services. By doing this they seek to be competent i.e become the centre of excellence which allows it to be a contributor to the company as a whole, which can be seen through the TATA Steel’s profits(shown in the next para) where a substantial contribution of the profit is from Corus.

• The corporate centre i.e TATA manages the global network by establishing the role of every business unit , establishing the systems, relationships and culture to make the network of business units operate effectively o Tata Steel almost tripled its consolidated net profit for the last fiscal to touch Rs 12,321 crore, as compared to Rs 4,165 crore in the previous year, o Corus, which Tata Steel bought after a fierce bidding war with Brazilian steel maker CSN, contributed about $2 billion to Tata Steel’s consolidated profits. o Its consolidated income during the year was Rs 132,110 crore, up from Rs 25,650 crore in the previous year. o The stand-alone net profit and income from operations were Rs 4,687 crore and Rs 20,028 crore, as compared to Rs 4,222 crore and Rs 17,984 crore respectively in the previous fiscal


Page 62

From the above explanation we could conclude about the national units which have achieved greater scale economies and have turned around TATA Steel’s profit making abilities. The success of a transnational corporation is dependent on the ability simultaneously to achieve global competences, local responsiveness and organisation wide innovative and learning

A critical role is also played by the corporate manager which is so vital in transnational organisation in integrating the roles and responsibilities to a leader. They act as talent spotters among business, country and functional managers, facilitating the interplay between them. Mr. Ratan Tata sees a big potential in the CEO of Corus and hence has kept the same after the acquisition too, for which the results are clear as well. The over all profits earned by TATA Steel is because of Corus’s business in the European countries.


Page 63

Managing People The Tata Steel Group’s Vision, has been co-created by its people, and speaks of creating value for all its stakeholders.

People as resources With the initiation of the process of Environment Management System (EMS) & Occupational Health & Safety Management System (OHSMS) implementation, numerous training and awareness programmes have been undertaken by the Company for its employees as well as contractors’ employees. Manpower training is an essential part of the oganisation’s management programme. Tata Steel has in-house facilities for technical as well as management training. The training needs of all the employees are identified through the Training Need Survey.

Human Rights, Diversity & Opportunity The Human Resource policy of Tata Steel lays stress on recognising people as the primary source of its competitiveness. An equal opportunity employer, Tata Steel endorses the articulated position of the Tata Group in the Code of Conduct, with respect to equal opportunity and non-discrimination. In accordance with this policy, prospective employees at all entry level positions are provided equal opportunities so as to attract the best available talent and create a cosmopolitan workforce. Respect for individuals and their rights is a core belief at Tata Steel. Any violation is dealt with as per the prescribed law. Tata Steel also ensures protection of the Fundamental Rights of individuals, which are enshrined in the Constitution of India. The Company has made it mandatory for its suppliers and contractors to implement Human Rights norms. "Happy and enthused employees" is an important constituent of Vision 2007 of Tata Steel. All employees have been trained on the objectives of Vision 2007. The quality of life of its employees, developing their talent and maximising their productivity as well as ensuring transparency, fairness and equity in all its dealings with the employees is an important component of the Company’s Human Resource Policy.


Page 64

Organizing People Compensation Benchmarking Having always focused on people as the key resources, fair compensation has been an area of importance. A market based benchmarking of compensation is undertaken to ensure that Tata Steel remains employer of choice in all the countries in which it operates.

Managing Technology Tata Steel with its modernisation plans has ensured that it deploys the best technologies to ensure quality, cost-efficiency, environment friendly processes and enhanced product range. Through acquisition of Corus and with new Greenfield ventures, Tata Steel has ensured that it has diversified the concentration risk in single technology of Iron & Steel making. Infrared Camera for slag detection at LD#2: IR cameras have been installed at LD#2 to reduce slag carry over and improve product quality. •

Tube Change device: At slab caster, tube change device has been put in place. This has resulted in significant improvement in tundish life from 6-7 to 11-12 heats. •

Scarfing Manipulator: Scarfing manipulator has been commissioned at LD#2 and SC for scarfing of slabs meant for surface critical automotive grades. •

Electrolytic Cleaning Line: Electrolytic cleaning line with 0.5mtpa capacity has been commissioned at CRM for guaranteed surface cleanliness of cold rolled products for auto and white goods. •

NSC Technical Assistance Programme: The programme has stepped into third year. The scope of the technical assistance includes (a) improvement in strike rate of automotive steel, b) approval from auto majors, c) development of high strength auto grades. •

Technology agreement with Acrelor: An agreement with arcelor has been signed. The scope includes a) transfer of knowhow for manufacturing of extragal and Galvannealed, b) to help adapt Extragal in the processes of three automotive customers, c) assistance in operational and customer related problems. •

Modification of anchoring agreement to ID bead trimmer in 6” HFIW Mill: With the existing anchoring arrangement, ID bead trimming was not as per standard. Trimming tools used to break very frequently. To overcome this problem, anchoring arrangement was modified to incorporate two-point support for the trimmer body. With the modified arrangement, ID trimming is now as per standard and tool breakage is eliminated. •


Page 65

Inhouse design and manufacturing of grab arrangement for drossing of galvy baths: A bucket was used for drossing. This bucket was dragged with the help of EOT crane. This resulted in agitation of the galvy pot resulting in more formation of dross. Moreover, this process was very unsafe. Grab operated with pneumatic cylinders has been designed and manufactured in house and is being successfully used. Application for patent of this design has been processed. •

Inhouse design and manufacturing of rolls for 100.6 mm pipes for cold draw application: Marketing wanted 90mm OD cold drawn pipes. In the existing PT mills, mother hollow for this size was not possible as mill can roll up to 76.2 mm OD pipes. It was decided to roll these hollow in 6^ HFIW Mill. Rolls for mother hollow of 100.5 mm was designed and manufactured in house. •

Installation of dot matrix printers in SF Finished for on line printing of Tata Logo on all galvanised pipes: Customers wanted some different visual identify for our pipes. Four dot matrix printers were installed on line in the existing K&A machines. •

Installation of thermal printers in ST and PT finishing: Tubes bundles are manually searched and located during stocktaking. Many times, bundles could not be located due to lack of information. This search resulted in multiple handling also. Quarterly stock taking details are noted and fed into Avalon manually. To overcome these problems, thermal printers have been installed. Using bar coded labels from thermal printer will enable bar code scanning for stocktaking. •

Managing Information Strategic Management at TATA Steel

Page 66

Research shows that a significant proportion of organisational change initiatives fail to deliver their intended benefits, largely for two reasons 1) no clearly communicated vision, 2) under-communicating progress by a factor of ten. In other words, good communication delivers tangible bottom line benefits. The traditional role of communications within organisations is rapidly changing and innovative technology is a key driver for change. The Tata Steel Group communications function aims to support the Group Vision of becoming an industry benchmark in terms of the value it delivers. It has recently delivered a number of initiatives that are in line with best practices. Information and competitive performance Customer expectation of service standard for example on speed or reliability become the universal benchmark crossing all industry and public services. So, for example public service providers become “compelled” to develop website because the expectation of general public have been raised through their dealing with the private sector. Websites – Relevant cross links between the two corporate sites of Corus and Tata Steel were created to update information on each site related to management structures, network and other information. Publications – The in-house magazines of Corus, NatSteel Asia and Tata Steel have been customized to publish articles on the Tata Steel Group. Each publication has dedicated space for news on other entities within the group which helps keep the employees of the companies well informed about the global operations. In addition, a number of activities have been undertaken to further strengthen integration between the Tata Group and the Tata Steel Group. These activities include participation in the Tata Innovation awards, as well as promoting the Tata competitions for women’s essay writing and children’s painting. Information and structuring Moving beyond the integration process, the Group Communications function has a clear focus. It will strengthen employee engagement, particularly in support of the new Vision. It will also strive to build a positive corporate image of the Group by successfully engaging with all key stakeholders on a regular basis, in an open and transparent manner.

Information Technology Strategic Management at TATA Steel

Page 67

Tata Steel certified under BS7799 standard on information security The corporate IT systems of Tata Steel have been certified under the BS7799 standard for 'information security management system' (ISMS) by Software Testing and Quality Control (STQC), ministry of information technology, Government of India. STQC is the first accredited BS7799 ISMS certification body in India; it offers certification services under accreditation from RvA, Netherlands. BS7799 is the most widely recognised standard in the world for information security management systems. This standard provides a comprehensive set of 127 controls, comprising best practices for managing information security. Information security has assumed greater importance recently with the increased usage and dependence on IT, the growing complexity of IT infrastructure, and increasing threats and recent instances of security incidents in different organisations. The benefits of this certification are: • • •

Improved credibility and enhanced customer confidence. Confidence of customers in international trade / business. Assured capability of the organisation to meet the changing requirements of information security.

Thirteen organisations, mostly software houses, have obtained this certification in India. Tata Steel is the first organisation in the Tata group to receive this certification.

Managing Finance Managing for value Strategic Management at TATA Steel

Page 68

A Tata company shall be committed to enhancing shareholder value and complying with all regulations and laws that govern shareholder rights. The board of directors of a Tata company shall duly and fairly inform its shareholders about all relevant aspects of the company’s business, and disclose such information in accordance with relevant regulations and agreements. It is concerned with maximizing long term cash generating capabilities of Tata steel

Funding strategy development As after this we have found that the best funding strategy for Tata steel is maturity(cash cows). The business risk and financial risk is medium. The company has substantial reserve in it balance sheet. Now let see how entire funding has been made for acquiring Corus.

Financing of Acquisition of Corus i. Financing Structure The financing structure of the Corus transaction has been reorganised to achieve fiscal unity in the Netherlands and consequent tax efficiencies. ii. Funding Structure The bulk of the financing for the Corus acquisition has now been completed with all the bridge funding having been paid off through a mix of debt, equity and internal accruals. The funding structure as on 31st March, 2008 is as follows: in GBP Bn

in USD Bn

Equity Capital from Tata Steel Limited Non-recourse long-term debt at Corus

3.75 3.15

7.45 6.26

Total

6.90

13.71

The dividend payment ratio is also high

Dividend Ye

Mon

Dividend


Page 69

ar

th

(%)

200 9

Jun

160

200 8

Jun

160

200 7

May

155

200 6

May

130

200 5

May

130

200 4

May

100

Financial expectation of stakeholder Tata Steel has identified “balancing stakeholder’s needs” as a key strategic issue. The identification of stakeholders is derived from the vision of the company, which sets forth the strategic directions & strategic goals and emphasizes upon upholding the spirit and values of Tata towards Nation building. Thus the total stakeholder base of the company encompasses Shareholders, Financial Community, Customers, Media, Community, Employees, Regulators, Suppliers & Partners Stakeholder

Shareholders & Financial Community Customer Suppliers & Partners External Public/ Govt. / Media Employee, Community & Society

Forum for Assessing Requirements, Communicating Directions & Receiving Feedback Investors meet across the globe; Annual General Meetings; Quarterly and half-yearly reports to Shareholders; Updating major Shareholders (LIC, UTI); Shareholder Relations’ Meets; Customer forum; MD’s Conference with customer groups. Worldwide; Visits to Customers & CVM, RVMs; Learning from Field Failures Vendor Dialogues. Meetings with Key Suppliers; Vendor Meets & Recognition Meetings with Govt./Steel Ministry/Trade Bodies, Industry Associations; NGOs, Ministry for Environment & Forests, Press Briefings & Releases, etc. Dialogues with the employees, JDCs, JWC, Apex Council, Senior Citizens Forum; Spouses’ Dialogue; Uday, Joint Community meeting, Community need analysis


Frequency

Annual/As per plan/Annual

As per plan Quarterly Twice / year, As per plan, Once a year As per need Quarterly, Twice/year, As per plan

Page 70

Managing Strategic Change According to a recent report by the World Resources Institute, the steel industry emits 15% of industry-emitted greenhouse gases and takes third position after the chemicals and cement industries. With all industry emissions being 21% of total world emissions, this means the steel industry emits around 3-4% of global greenhouse gases.

Climate Change Strategy Looking at the full value chain

•

Direct emissions are physical emissions from the site.

•

Indirect emissions are caused by the site, but generated somewhere else, e.g. emissions related to purchased electricity.


Page 71

Tata Steel Group Vision 2012 regarding emission of CO2 Specific CO2 emissions Tata Steel Group (consolidated, weighted average, integrated sites only)

Corus Steel Plant UK Energy Strategy: Vision Strategic Management at TATA Steel

Page 72

“To be self-sufficient in Energy”

•

Increasing the overall energy efficiency of the sites by: – Applying Best Available Technology – Good Housekeeping and raising Energy Awareness

•

Minimizing the flaring of indigenous Gases, to reduce direct CO2 emissions and natural gas Import

•

Maximize the onsite Power Generation to reduce the Electricity import and direct CO2 emissions within CSP UK

•

Reduce the reliance on the National Grid for the electricity supply

•

Reducing the impact on the local community

Types of strategic changes Strategic Management at TATA Steel

Page 73

ADAPTION: - change which can be accommodated within the current paradigm and occur incrementally.

Adaptation through Improving Current Processes •

Energy & Climate Change Policy

•

Minimize flaring of works arising gases, to reduce direct CO2 emissions and reduce natural gas import

•

Maximize on-site power generation to reduce electricity import and reduce indirect CO2 emissions

•

Increase overall energy efficiency by:

•

Applying ‘Best Available Technique’ technology

•

Good housekeeping and raise energy awareness

•

Working with Welsh Universities & local council

•

Potential help from EA RD&T (Bristol)

•

Centre of Excellence in Energy/Waste Optimization (Cardiff)

•

Key process modeling/development work (Swansea)

Context of change in terms of time and scope Strategic Management at TATA Steel

Page 74

Time: - CO2 emmision is a major issue for the steel industry because, owing to its technological processes, it currently cannot avoid contributing to the problem. Tata Steel wants to be part of the solution and is addressing this issue proactively with a multi-pronged approach, looking at opportunities to reduce carbon emissions in the short to medium-term and to support the development of carbon trading schemes. The Tata Steel Group is also, through projects such as the Ultra Low CO2 Steelmaking project (ULCOS), engaged in cutting edge research to develop new technologies for the long-term future of the industry, which will break through existing technological barriers, to achieve a 50% reduction of carbon emissions by 2050. Scope: - To meet this objective, the group has and will continue to improve its current processes, invest in breakthrough technologies and develop new products and services that reduce the environmental impact over the product lifecycle. To improve its processes, priority is given to energy conservation schemes; in technology breakthroughs such as Ultra Low Carbon Steel making and in other innovative projects where the Group has proprietary technology.

Force field analysis:Pushing forces:•

High quality

•

Increase in reputation due to corporate social responsibly

Resisting forces:•

Cost increase

•

Development and alterations in processes

CONCLUSION Strategic Management at TATA Steel

Page 75

After going through the development of this project and application of various strategic concepts on TATA Steel, we found that TATA Steel being the fifth largest producer of steel in World and may grow and spread its geographical footprint, embracing different cultures; it will not lose sight of its great heritage of social and community responsibility. Driven as much by its commitment to society as by its performance and profits, the Tata Steel Vision aspires to make the Group the global industry benchmark for both Value Creation and Corporate Citizenship. The key drivers of the Group Vision will manifest themselves in the goals and objectives the Group sets for itself in the coming years.

Bibliography Tata Steel – 101st Annual Report 2008-2009 Websites: Strategic Management at TATA Steel

Page 76

http://www.tatasteel.com http://www.rediff.com/money/tatacorus.html http://www.moneycontrol.com/ http://www.articlesbase.com/international-business-articles/ http://www.corus.com http://www.tatanagar.com/ http://www.businessstandard.com Magazine: Business World Business Today Business India India Today


Page 77

Applying Management Strategy Concepts (SFI) on Tata Steel Company (Tata Group)

Recommend Documents