Strategy

Tata Steel

Jyoti Anand (05)Jitender Kumar Jain(19)

Rohit Kumar(25)

Part A (Industry Analysis)

• Size(World, India)• Growth Rate(World, India)• Major players in the World• Major Players in India• Your Strategic Group- 3 major player in your

group

Industry

• Key Economic Features• Industry driving forces• KSF/CSF for the Industry• Industry attractiveness• Porter’s 5 forces competitive model• Value Net• Industry structure • How to compete-options

Part- B(Company Strategic Analysis)

• Along with one competitor(Strategic Group)• Reactive/ Relative SWOT• Resources and Capabilities• Core Competencies• Activity Systems View• How sustainable competitive advantage is

built up• Last 5 years financials and key data

Part C

• Strategic Challenges facing the company today and next 5 years

• Strategic Options and Pros and Cons of each• Your strategic recommendations and your

rationale thereof

Industry Analysis

• Size– Total crude steel production for the 66 countries

reporting to the IISI in January 2009 was estimated to be 85.8 million tonnes, a drop of 24% on January 2008.(source -www.steelonthenet.com)

Steel Industry

• Accounting for 6% of GNP• Total Production in India of finished carbon steel – 1991-92 - 14.33 million tonnes – 2001-02 - 30.11 million tonnes

• Demand for steel is adversely affected by a slowdown in real estate and auto sectors since September 2008.(Source – CMIE)

• Low demand, cheap imports and destocking could put pressure on prices of flat steel products in March quarter.

Steel Industry

• Production of finished steel in (000 tonnes)– Aug 2008 – 4602– Sep 2008 – 4577– Oct 2008 – 4471

(source – CMIE Jan 2009)

Key players in the WorldName Production ArcelorMittal (Global) 116.4 MtonNippon Steel (Japan) 35.7 Mton JFE (Japan) 34.0 Mton POSCO (South Korea) 31.1 Mton Shanghai Baosteel Group Corporation (China) 28.6 Mton Tata Steel (India / Global) 26.6 Mton LiaoNing An-Ben Iron and Steel Group (China) 23.6 Mton Shagang Group (China) 22.9 MtonHeBei Tangshan Iron & Steel Group (China) 22.8 Mton United States Steel Corporation (United States) 21.5 MtonWuhan Iron and Steel (China) 20.2 Mton Nucor Corporation (United States) 20.0 Mton Gerdau (Brazil) 18.6 Mton Gruppo Riva (Italy) 17.9 MtonSeverstal (Russia) 17.3 Mton

Key Players in India

1. Steel Authority of India Ltd(SAIL)2. Rashtriya Ispat Nigam Ltd(RINL)3. Tata Steel ltd(TSL)4. JSW Steel Ltd5. Essar Steel Ltd6. Ispat Industries Ltd7. Jindal Steel & Power Ltd

Two Routes to Steel Making

1. Classical route or primary route - Based on blast furnace (BF) and basic oxygen furnace (BOF)

2. Modern route or secondary route - Based on electric arc furnace (EAF), using steel scrap or sponge iron i.e. Direct Reduced Iron (DRI) as basic raw materials.

• Ten main rolled steel productsHot Rolled CoilHot Rolled PlateCold Rolled SheetCoated SheetWire RodSections and BeamsRebar Merchant Bar

Tata Steel – Facts and Figures

• Employee Strength = 35870 • Golden Peacock Award 2009 for its CSR activities• Earned the distinction of being the lowest cost

steel producer in the world (source – CMIE)• Expanding production capacity by 50% to approx

7.4 mn tonnes by FY 2011 (source – CMIE)• Acquisition of Corus, 2nd largest steel maker in

Europe.

Tata Steel

• Tata Steel is engaged in mining, production and distribution of steel and steel products in several countries across the world.

• The company’s operations are segmented on the basis of its holding and subsidiary companies operations including: Tata Steel, Corus Group, NatSteel, Tata Steel Thailand and Tata Metaliks Limited.

Products of Steel Division

Tata Steel Division

Hot Metal Crude Steel Saleable Steel

Tata Steel Who’s Who

• Chairman – Ratan Tata• MD - B Muthuraman • CEO - HM Nerurkar• CFO - Koushik Chatterjee

Tata Steel presence

• National– National– Jharkhand– Chhattisgarh– Orissa - Kalinganagar,

Dharma Port– Tamil Nadu

• International – Vietnam– Oman– South Africa– Australia– Mozambique– Ivory Coast

Key Success Factors

• Improved cost structures• Good Top Management• Technological expertise

Top Competitors for Tata Steel

• ArcelorMittal• Essar Group• N.V.Daido Steel Co., Ltd.• Steel Authority of India Ltd.• Jindal Vijaynagar Steel Ltd.

Challenges

• Tata Steel faced many challenges in respect of quality, global cost competitiveness, capacity expansion and modernization, overstaffing, change management and transformation into customer-driven culture, and shift in focus from steel commodity business to Tata Steel brand products

Responses to challenges

• Tata Steel responded proactively to these challenges by way of process innovation, continuous improvement in business processes, employee-friendly HR management practices, creating and spreading new performance-driven culture, and creating value for customers and shareholders.

Competitive Landscape

• Demand comes largely from the manufacturers of durable goods like motor vehicles, machinery, containers, and construction steel. The profitability of individual companies depends largely on efficient operations, because most products are commodities sold based on price. Big companies have large economies of scale in production. Accordingly, most producers of secondary products buy raw metal from the large producers. Small companies can compete by operating efficient local mini-mills or producing specialty products. The industry is highly automated: average annual revenue per worker is close to $300,000.

Strategy of Tata Steel in Future

• Emphasis on costs• Emphasis on operational efficiency• Ensuring cheaper resources• Enhancing revenue through better premium in

products

Strategy for future

• Emphasis on 3 aspects – Branding, product mix, costs (B Muthuraman in an interview)

Value Net

References

1. www.tatasteel.com (Tata Steel)2. www.steel.nic .in (Ministry of Steel)3. http://jpcindiansteel.nic.in/tech30sep.asp4. www.economictimes.indiatimes.com5. www.worldsteel.org6. CMIE – Monthly review of Indian Economy7. www.worldsteel.org 8. http://www.steelonthenet.com/production.html

9. http://www.researchandmarkets.com/reportinfo.asp?report_id=690579

10.http://www.ieindia.org/publish/mm/1003/oct03mm2.pdf