tata steelium

VIKALPA • VOLUME 35 • NO 2 • APRIL - JUNE 2010 101

M A N A G E M E N TC A S E TATA Steelium –

A Success Story in B2B BrandingKaushik Bhattacharya and Biplab Datta

describes a real-life situationfaced, a decision or action

taken by an individualmanager or by an

organization at the strategic,functional or operational level

KEY WORDS

Business-to-Business

Branding

Value Proposition

Relationship Building

COMPANY BACKGROUND

TATA STEEL is the largest private sector steel marketer in India. Presently, itsJamshedpur (India) Works has a crude steel production capacity of 6.8 mil-lion tonnes per annum. The company has been successful in maintaining its

dominant position among key segments in the Indian steel market and has also es-tablished a significant presence in the international markets through both tie-upswith customers and mergers and acquisitions. The company is aiming at enhancingits domestic steel capacity to about 30 million tonnes per annum by 2015 (TATASTEEL, 2005-06).

TATA STEEL is regarded as a visionary company and is widely acknowledged andadmired as the industry leader in India. In May 2002, the company launched theVision Architecture 2007 (Tisco News, 2002); and, it can be justly said that the com-pany has been able to transform its vision into reality. Vision Architecture 2007 isshown in Figure 1. Each element of the strategy was clearly identified, carefullyframed, properly defined, and exhaustively communicated to give the core customerand the organizational issues an organization-wide clear and tight focus. Fulfillmentof goals like successful branding of steel, production of lowest cost steel, economicvalue creation and expansion have all contributed to company’s growth (TATASTEEL, 2004-05). The first strategic goal in the architecture for Vision 2007 was tomove from commodities to brands. The company had also articulated the intentionof achieving a turnover of Rs. 5,000 crore by the year 2012, through the brands pre-vailing at that time (Figure 2). During the period 2002–2006, the company hadlaunched and successfully established many more brands. In a nationwide studyconducted by ORG-MARG in 2005, all brands of ‘TATA STEEL’ emerged as leadershaving the highest brand equity amongst all brands in their respective categories(TATA STEEL, 2005-06).

Historically, the TATA group is the oldest, largest, and the most respected group ofcompanies in India. They are India’s largest employer and also the largest foreignexchange earner in the private sector. TATA is perhaps the most internationallyrecognizable Indian business house, largely due to the role that the TATAs haveplayed since its inception. Over the years, TATAs have been known for producingquality products and for living up to their commitments. The TATA group in gen-eral, has a strong reputation of having a good relationship with everyone in thetrade as well. Like other TATA group companies, ‘TATA STEEL’ uses interim names1

for their brands to capture part of the customers’ mind and heart (Figure 3). The

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corporate brand, ‘TATA,’ acts as a co-driver in gainingpower in the Indian market (Kotler and Pfoertsch, 2006).Today, the name TATA is perceived as a global, authen-tic brand with a strong heritage.

TATA STEEL, the flagship company of the Tata group,has several awards and recognitions to its credit (SeeFigure 4). In addition, during 2004-05, in the ‘TNS IndiaCorporate Reputation Study,’ both the financial com-munity and the general public rated TATA STEEL asthe No. 1 company with impeccable reputation. Onlyamong business managers did ‘Infosys’ beat ‘TATASTEEL’ by a margin of a single point (Tisco News, 2004-05). They are one of the lowest cost producers of steel inthe world and the global benchmark in corporate socialresponsibility activities. They have a strong distributionnetwork in the Southeast Asia and with the introduc-tion of cold rolled steel, they are now the leading sup-plier to the Indian auto industry.

In general, TATA STEEL proceeds with a master plancalled, ‘Branding Blueprint,’ focusing on all the existingbrands that the company sells through its distributionchannel. The brand management groups act as an inte-grator across all the business processes of the company.They also help create communications which correctlyembody the company’s brand position (Tisco News,2002).

Mr. A Sen,2 Chief of Marketing and Sales (flat products)of TATA STEEL said that the company’s emphasis is on“branding for credibility and comfort.” The idea was toput in place “a physical and accountable distributionsystem.” The Managing Director, Mr. B Muthuramansaid that company’s marketing focus is on “brandingby de-commoditizing steel.” About 1 per cent of the to-tal revenue from sales of branded products is spent onbranding initiatives (blonnet.com, 2007). The sales per-formance of TATA STEEL brands are given in Table 1.

TATA STEELIUM

On February 27, 2003, ‘TATA STEEL’ launched theworld’s first branded cold rolled steel (CRS) called‘TATA Steelium’ in Goa. Speaking at the launch, Mr. BMuthuraman, said “Branding will give rise to a custom-ized product in terms of value, performance, and pric-ing that will meet our customers’ needs better. Brandingwill go a long way in meeting the challenge of gaining asustainable competitive edge. It will add value to the

product and help in highlighting it in the otherwise frag-mented market for cold-rolled steel. It will not only helpin product identification, but will also boost the elementof brand recall, thereby creating a niche” (tata.com, 2007).It was clarified that the name ‘Steeluim’ connoted bothstrength and a feeling of being a world class brand. Mr.Sen, said that the sales target for the financial year 2004-05 had been fixed at Rs. 700 crore and with the nation-wide distribution network, the company was confidentof achieving the target easily (sify.com, 2007). During2005-06, the sales of brand Steelium increased from 0.355million tonnes to 0.392 million tonnes recording an in-crease of 10 per cent over the previous year.

Over the years, TATA STEEL has invested in a numberof branding activities to build its brand equity with theretail segment of cold rolled steel. TATA Steelium fo-cused on product mix enrichment by making suitablegrades and sizes available for different applications andsustaining price premium by strengthening productsupport services through distributors and dealers.3

TATA STEEL ensured that the TATA Steelium distribu-tors handle the brand exclusively and because these dis-tributors focused on servicing the identified set of majorcustomers, they were encouraged to cultivate the rela-tionship and the local ties and also contribute towardsbrand building. At TATA STEEL, efforts are continu-ously on for enhancing the capabilities of distributorsand dealers by installing dedicated service centres, pro-fessional training to distributors/dealers salespersons,implementing quality management systems at the dis-tributors, and through office automation of the dealers,etc. (TATA STEEL, 2005-06). Brief description of servicecentre facilities of a distributor, M/s Vijay Enterprise,can be found at their website vijayentps.com (2007). Oneof the Steelium distributors, M/s Kummachery Steelsclaimed, “...our relationship with TATA STEEL providesour customers with a level of service, product availabil-ity, and competitive pricing rarely found in our indus-try” (kummachery.com, 2007).

One member of the TATA Steelium brand managementteam explained, “Our primary value proposition is theconcept of providing a small customer total peace inpurchase and consumption of CRS. Once, it was a dreamfor them, but today every customer has his own inter-pretation of what it means. For some, it is about assuredavailability; for others, it is about customization of size,and for still others, it is about dealing with a professional

TATA STEELIUM – A SUCCESS STORY IN B2B BRANDING


organization. At TATA Steelium, we offer it all.” It wasalso explained that since TATA Steelium is bought onlyby small businesses who are concerned about their prof-itability and company image, the brand has the primaryresponsibility to protect their customers’ interest. Fur-ther, the brand must also take care of the interest of theintermediaries. However, TATA Steelium comes at aprice. Today the brand is selling at a premium of Rs.1,000-1,200 per tonne over competing products. Severaladvantages of TATA Steelium are illustrated in Figure 5.

By engaging in branding of CRS, TATA STEEL couldcreate value primarily in two areas. It could positivelyposition CRS in the retail market against others in theindustry and could achieve more market leverage re-lated to pricing and negotiations. In this manner, thefirm could influence customers and intermediaries sothat they remain loyal to the brand. The sales perform-ance of brand Steelium is given in Table 2. Today thebrand has about 3,350 identified customers and amongthem about 1,800 customers are involved in active buy-ing at any point in time. The brand is sold only throughthe distributor-dealer network where about 80 per centof the total brand sales are made by the distributors di-rectly to the customers and 20 per cent of the total salesare handled by the distributor-dealer chain.

Prior to brand launch, TATA STEEL brand managementteam had to acquire a very clear understanding and adeep insight into what TATA Steelium should repre-sent for the retail customers and how to differentiatethe brand well from the competitive products. Thebranding exercise has taken into account customers’behaviour and expectations, feedback from potentialintermediaries, and other necessary insights from themarketplace (tata.com, 2007).

Thus the roots of brand TATA Steelium arch all the wayback to the marketing study revealing the customers’unfulfilled needs and a strong passion of TATA STEELfor creating and capturing value by fulfilling those needs.Factors that play an important role prior to brand launchare described below.

Technology Selection

TATA STEEL was having the capacity to produce hotrolled coils (HRC) but not the facility to add further valueby rolling it in room temperature that produces CRS.The marketing study, undertaken prior to any technical

feasibility study on the cold rolling mill, assessed thenature of domestic demand (in terms of sizes, grades,applications) and gaps available (Kharkar, Chatterjeeand Muthuraman, 1997). As it was found that the mar-ket for high-end use of CRS (automobile, appliance,panel, etc.) is likely to have above average growth indemand and not enough capacity to supply, the com-pany decided to target the high-end sector of the CRSmarket (Tisco News, 1999). Each critical facility at Tata’scold rolling mill was selected in a manner that providesmany advantages to the customers over the competi-tors (See Table 3).

Importance for Retail Market of CRS and Branding

The minimum yearly capacity of 1.2 million tonnes offinished product was a techno-economically viable op-tion for an integrated steel plant with tandem mill andother technology parameters chosen by TATA STEEL.Out of this, the CRS capacity (based on annealing ca-pacity) was fixed at about 0.8 million tonnes per annum.

Further, such mills were required to produce a widevariety of sizes and grades for economical production.With such a large capacity, it was necessary that the com-pany targeted several segments that used different kindsof steel.

Volume-wise, the Indian CRS market was almost equallydivided between small (say less than 60 tonne a month)and large (say above 60 tonne to 1,500 tonne a month)customers. While most of the competitors attemptedselling directly to a few large customers and investedmuch of their efforts on the same, the large number ofsmall customers were generally neglected and servedby a few wholesalers. Moreover, the environment waschanging rapidly. Many small customers of CRS (mainlymanufacturers and fabricators) were becoming key sup-pliers to the large volume prestigious customers of CRSwho used to procure steel directly from steel majors.These small but growing customers could afford to payhigher prices for better materials and service.

TATA STEEL wanted to become the leader in CRS indomestic market by commanding the largest share ofmind and heart and by achieving the highest profitabil-ity. They saw two ways of accomplishing this goal, butthey could not undertake either directly. First, they hadto market their product (about 50% of the total produc-tion) with their own sales force to the large institutional

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customers. For these customers, the company developslong-term strategic plans, signed off by the customersthemselves, for successful and profitable relationships.

Second, it was also essential to make the product avail-able to widely dispersed large number of small custom-ers who care for quality product, better service, andprofessional dealing. Apart from popularity, this couldhelp the company achieve target profitability. However,TATA STEEL could never serve large number of smallcustomers effectively with their limited sales force. Alsoan integrated steel plant of this size was not designed tomeet the volume needs of small customers individually.Hence TATA STEEL had to use sufficient intermediar-ies at the right locations with consistent image and ca-pabilities. This situation is illustrated in Figure 6.

Unlike a directly served large-volume customer, smallcustomers seldom come in contact with company salesteam, and the company has little scope for tailoring com-munication and marketing programmes for them. Butwith a brand in place, the brand name, and, possibly thebrand slogan are the communication that reach smallcustomers. A strong brand name also helps the companyto attract capable intermediaries, propagate congruentmessages to the customer through intermediaries, andallow efficient channel management. This is how brandmanagement becomes useful in marketing of CRS in theidentified target market of retail customers.

Customer Opinion

The problems faced and compromises made by the smallcustomers of CRS prior to the launch of TATA Steelium,as it was revealed in the marketing study, opened aunique opportunity to establish a strong position in themarket by solving customers’ difficulties.

Three major conclusions regarding customer opinionemerged. First, the chemical composition, mechanicalproperties, and surface finish of the CRS that were mostlyavailable from the competitors were suitable only forsimplistic applications and not for deep drawing, bend-ing, forming and artistic uses. Superior quality materi-als available from import were beyond the reach of smallcustomers. Several compromises like local annealing,heat treatment, cutting, welding, etc., were necessarybefore use.

Second, small customers were having little access to the

manufacturer of CRS. They had to move from shop toshop to buy their regular requirements as availability ofmaterials with the retailers was never certain. Such re-tailers usually did not entertain quality complaints fromcustomers as they did not receive support from whole-salers or manufacturers. Accordingly, the need for trans-acting with a professional organization instead ofmarket-based retailers was strongly felt by the smallcustomers.

Third, identity and quality of CRS purchased from theretailers were often doubtful. Other manufacturers ap-parently sold identical CRS of different specificationsincluding inferior grades at lucrative price and terms.Manufacturer’s name and other details were usuallymarked only on the packaging materials that could beeasily manipulated by a dishonest retailer. In spite ofbeing aware about these problems, a small customer hadlittle option but to rely on these retailers.

Customers hated the power of dishonest retailers morethan anything else. They also felt frustrated for not get-ting to speak directly to manufacturer’s personnel or nothaving someone trustworthy supplying their require-ments of CRS reliably. Customers were nearly unani-mous in their dislike for frequent non-availability ofrequired items, searching for alternate availability, ne-gotiating price and other terms, taking the hassle of lift-ing the coil from a retailer/wholesaler, delivering thesame to a cutter4 and closely following up with them forthe desired size and shape. These customers were in factwilling to pay little more to get the materials in the man-ner required by them. Customers, in general, were an-noyed with the sales techniques of retailers/wholesalers/brokers and felt that most of them tried topush them into buying odd-sized CRS. Many custom-ers opined that wholesalers get special incentives frommanufacturers for buying leftover stock and they thenmotivate retailers to ignore the actual needs and wantsof small customers. To avoid the above problems, somecustomers preferred buying their quarterly/half-yearlyrequirements at one go by incurring much higher costto be eligible to buy directly from the manufacturers.

These feelings were confirmed during our interactionwith the customers. Some of the customers’ quotes areas follows:

• “Steelium has changed our life; it has increased our



productivity; it has made the life of our workers easyand has taken away many of our agonies.”

• “Our business was not going in the right directionand then we got the opportunity to change it withTATA CR.”

• “After taking the Steelium CR for a few months, werealized that it is quite different from what we usedto get from the market.”

Overall Business Environment

Prior to the brand launch, small customers were usuallydealt with by retailers in the local trading market. Tra-ditionally, these retailers do not buy directly from manu-facturers. They procure CRS from wholesalers who inturn buy from manufacturers. The contact between thesewholesalers and local retailers are mostly through bro-kers who connect both sides based on the availabilityand take part in the transaction price.

With increasing demand of CRS, the number of retail-ers was increasing at major trading locations. However,the number of wholesalers procuring from manufactur-ers was mostly constant. They were mostly unwilling toextend the scope of their business beyond the major trad-ing locations to avoid complexity. Thus the presence ofretailers at certain consumption centres (other than ma-jor trading locations) was negligible. Buyers in thoseareas had to depend on the nearby trading centre andwere often uncomfortable with the multiple handlingand logistics associated with the purchase of each con-signment.

All retailers and wholesalers were guided by the simpleprinciple of buying cheap and selling dear. They werelargely indifferent about the buyer’s preferences andcompromises. They were disinterested about providingvalue added services and considered that to be a losingproposition. The key success factor was the ability tobuy cheap from the manufacturers. Most of the old andsuccessful wholesalers/retailers had risen through ag-gressive buying and selling efforts and lacked a properappraisal of potential benefits from value added sup-port services to the customers.

Wholesalers and retailers were free to set their own sell-ing prices and there used to be hard bargaining betweenmanufacturers and wholesalers and between wholesal-ers and retailers on discounts and purchase volume.

Confidential deals and discriminatory pricing were com-mon phenomenon. Rivalry between wholesalers andretailers were always putting downward pressure onmarket prices. Sometimes wholesalers and retailersbought larger quantity than they could sell and whenmanufacturers reduced their prices further, wholesal-ers and retailers would start panic selling depressingthe market more and more. Customers knew that retail-ers rarely pass through all the trading incentives andwere accustomed to substantial price difference amongretailers operating in the same location.

Wholesalers were uncertain about the demand; theypreferred to stock minimum quantities, were reluctantin committing their purchase well in advance, andwaited for month-end price relaxation. Manufacturerswere rarely concerned about the actual demand in themarket, or possible difficulties of the wholesalers/re-tailers but were concerned about selling an aggregatequantity every month. Price was considered as the onlylever and a loaded (overstocked) wholesaler used to beconsidered as a loyal customer. Manufacturers’ salesoffices forecasted the monthly demand of these whole-salers with large forecasting errors and frequent mis-match between production and the forecast were quitecommon. Retailers suspected that wholesalers did notdisclose the price relaxations being received from manu-facturers. When a wholesaler bought a considerablequantity of CRS, the retailers took the opportunity tobargain hard for the best price and terms. Similarly,when the wholesaler was able to buy items that were inhigh demand, he dictated terms to the retailers. In short,such perceived asymmetry in relationship between themanufacturer, wholesaler, and retailer was not condu-cive to the formation of trust between these parties.

Towards the end of 2002, the price of steel in all catego-ries started to stabilize and it was predicted to remainfirm over a long period of time. This necessitated muchhigher investment by each retailer to trade at similarvolume and to maintain similar margins. They were nowlooking for assurances from the manufacturers regard-ing sustained business and margins.

A Steelium distributor during our interaction said, “Wecould never think of the business proposition which we arenow handling profitably. Intimacy with a company like TATASTEEL and repeat business from so many satisfied custom-ers…. these are very rewarding experiences for us.”

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Critical Action Areas

It was understood that distributors, dealers, and theirsalespeople held the key to customers’ perception aboutthe brand. Most important was the creation of an envi-ronment where TATA STEEL, distributors/dealers, andcustomers had trust on one other. Since people withwidely different background (experience, education, age,communication skills, etc.) are involved in selling, it wasan enormous task to bring a minimum level of profes-sionalism and consistency among the dealing persons.It was a Herculean task as bringing simultaneous change(marketing orientation,5a brand care,5b brand ethics,5c

etc.) was necessary among the independent distributors/dealers and their salespersons who had little customerorientation.

It was important for the company to monitor and havecontrol over retail prices so that customers got fair anduniform prices at every location and the total channelprofit was maximized.

Improvement of service (level and quality) was longoverdue in the retail sales of CRS. Once again distribu-tors and dealers were to be convinced for delivering thenumber of value added services with assured qualitystandard. Further, service improvement must continueand service excellence over competition must persist.This is because it was understood that similar techno-logy can be installed by other firms later and differen-tiation in the physical product may not be a determinantof the purchase decisions in the future but imitating theintangible benefits may not be possible and thus serviceadvantage for the brand can be sustained.

BRAND ENGINEERING FOR ‘TATA STEELIUM’

Product

The company introduced choice of grade and size in amanner that best influenced the customers’ perceptionof value. Customized Steelium grades are available forvarying applications – TR15 for furniture, AU03/AU02for ordinary drawing applications, PN01 for panel fab-rications, and AU05/AU09 for extra deep drawing ap-plications. This supported the wide variety ofapplications undertaken by small customers. Steeliumcoils are available in thickness of 0.4 mm to 3 mm and inwidth of 1,000 mm to 1,540 mm. Coil weights vary asper the coil width. Steelium sheets are available in packet

weights of 2.5 to 3 tonnes. A customer can choose fromthe wide variety of standard thickness, width, and gradecombinations.

All Steelium CRS have absolutely flat spread, accuratethickness, superior formability, and surface finish. To-gether all these mean cost savings to the customer dur-ing processing, premium price for the end product byensuring superior performance, and premium look tothe ultimate customer during use. The TATA Steeliumlogo embossed on the CRS, every one metre of its length,ensures the authenticity of the material.

Packaging

Packaging of Steelium is unique in the industry. It iscompletely impermeable and highly protective undernormal circumstances. This is mainly due to the tech-nology specially selected for packaging. Steelium CRSis wrapped in VCI paper with HDPE laminate, metalpacked with galvanized steel. As customers want pro-tection, performance, information, and assurance fromthe packaging, Steelium packets are usually painted inblue and there are distinct identifiable TATA STEEL tagsand unique blue seals on the packaging which help iden-tify the source of the material. Packaging uniqueness asdescribed in ‘Steelium’ brochure is reproduced in Fig-ure 7. The label fixed on each packet/coil carry the brandname and a great deal of important information likegrade, size, weight, number of pieces/coil length, andbar code. The competitors did not have such packaging.

Pricing

Since TATA Steelium was to be positioned as a highquality pioneer brand sold only through well-equippeddistributors and dealers with value added services,TATA STEEL decided to charge premium price overcompetition. But steel items were traditionally seen asraw materials that could never justify a premium price.Also the steel price has operated as the major determi-nant of buyer choice whenever sufficient suppliers areavailable. So, the price premium of the brand must besupported by the customers’ perceived value. To ensurethis, the brand management team regularly monitorscompetitors’ prices, market dynamics, and componentslike quality premium, service premium, and relation-ship premium at different locations against the variousgrades supplied under TATA Steelium.



To ensure that customers are not required to negotiatethe price with the channel members at the time of pur-chase, and also to avoid conflict between the channelmembers (within a territory and between territories) onselling price, each grade of TATA Steelium has a loca-tion-wise floor price, below which the item cannot besold by the distributors or dealers. Charges for variousstandard processing are also fixed. Moreover, distribu-tors are taught to charge fair prices to reinforce relation-ship intention among customers. The distributor’smargin is ensured through the floor price.

Communication

TATA Steelium has been a widely published brand sinceits launch. Being the world’s first branded cold rolledsteel, it could draw sufficient media attention for quitesome time. The brand features and brand achievementsappear in the news time and again. Leading news chan-nels and publications from several stock research firmsreport various important events related to the brand andconsider the brand success as one of the key factors intheir predictions. For example, Moneycontrol. com (2007),says, “Tata Steel’s world-class facilities and the state-of-the-art production processes ensure superior propertieslike formability and unbeatable flatness.”

Traditional advertising methods were not used for build-ing brand awareness for Steelium. TATA STEEL decidedthat the key to their B2B brand strategy would not bethrough brand preference or brand image advertising,but by communicating its product and service strategyto a large number of small customers of cold rolled steel,mainly through the well-established network of distribu-tors and dealers. Brand management teams carry outelaborate studies of customer segments and send cus-tomized direct mail, brochures, and other relevant in-formation through distributors to position the brandfavourably in the minds of the customers. A portion ofone such brochure made for furniture manufacturers isshown in Figure 8. It carefully highlights the advantagesof brand Steelium over the competing products.

TATA STEEL regularly organizes meetings of distribu-tors, dealers, and customers. Once in a year, the com-pany organizes fabricators’ and OEMs’ meet. Also thedistributors are required to organize customers’ meet atleast twice a year. These are attended by senior com-pany officials and brand management team and detailed

presentations are made. Further, account managers andapplication engineers of TATA STEEL meet selectedcustomers once in a quarter along with the distributor.These account executives also meet some of their deal-ers’ customers during their quarterly retail run.

The website of TATA STEEL carries a lot of informationabout the brand. One can download the brochure anddetailed specification from the website. Interested per-sons can also post their enquiry or suggestions to thecompany directly. Enquiries of prospective customersare thus efficiently handled through company website.In addition, the brand also has a toll-free helpdesk toanswer the queries over phone and an e-mail service forthe detailed written enquiries.

Salespersons

TATA STEEL takes special interest in the recruitmentand development of the distributor’s salespeople so thatthey support the formation of consistent brand culture.It ensures that all Steelium distributors have a minimumnumber of salespersons according to their business vol-ume and they are knowledgeable about the product,systems, procedures, and customers. Training of dis-tributors’ and dealers’ salespersons on how to managethe brand has been a regular feature since the beginning(authorstream.com 2007).

Distributors are considered as the key customers and asales team is responsible for satisfying the transactionand relationship needs of the distributors. Account man-agers spend a lot of time with distributors and remainaccessible to them for problem solving. Personal rela-tionships with the distributors are developed throughregular visits when account managers study and helpdistributors/dealers to improve their operations.

Channel Design

Based on the consumption pattern and strategic busi-ness volume, TATA STEEL decided to go for selectivedistribution in each major location. The primary job ofthe channel is to provide value added support servicesto the customers. TATA STEEL appoints distributorswho in turn appoint dealers based on the guidelines is-sued by the company. Steelium products are sold bothby distributors and their dealers and not by TATA STEELdirectly. Each distributor and dealer needs to operatestrictly within the specified territory. TATA STEEL be-

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lieves in developing customer acquisition and retentionplan jointly with the distributors. Thus, in the course offour years of operation, most of the important custom-ers have been specifically attached to a distributor or adealer for sales and service. All distributors are requiredto submit monthly details of their sales including theirdealers’ sales to the company. Information thus receivedremains available for further analysis and validation bybrand managers and brand sales team. Distributors areprovided mutually agreed targets (sales volume, levelof support services, and customer satisfaction scoreswhich is not below 80%) for improving the quality oftheir sales and are required to report their performancein those areas.

All distributors and most of the dealers are web-ena-bled for the purpose of communication, data exchange,and tracking order execution online. In addition, a pass-word-protected community website, ‘TATA SteeliumParivaar,’ has been designed to cater to the needs of thedistributors and dealers who as ‘Parivaar members’ canfreely interact with each other. Since the members aredispersed geographically, the website binds them closerby offering a uniform platform to express themselvesand their commitment to the branding and growth ofSteelium (allindia.com, 2007).

Distributor Selection

In general, TATA Steelium distributors and dealers havehigh market reputation, premium business location, andsuperior capabilities to serve the customers. Distributorselection is done through a three-step process. The com-pany selects a few distributors for each consumptioncentre from a large number of applicants. Level-1 screen-ing is based on the combination of objective and subjec-tive criteria like investment capabilities, interest inexclusive dealership, registration with statutory authori-ties, and market reputation. Level-2 screening is againbased on the combination of objective and subjectivecriteria where the compensatory6 decision rules are usu-ally applied. The criteria considered in this phase arebusiness experience, turnover, knowledge, and quan-tum of sales. Finally, in level-3, nominated senior offic-ers of the company take decision about distributorselection based on their ratings and scores in level-1 andlevel-2. The process is illustrated in Figure 9.

Distributor’s Capability Improvement

A member of the TATA Steelium brand managementteam stated, “There were a lot of misconceptions aboutthe small customers of CRS. For instance, there was anotion that small customers only see price, and hardlycare for service and business relationship. So, a lot ofour job was meant for educating the intermediaries onexactly what they are required to do and how they willbe rewarded.”

TATA STEEL has taken multi-pronged action for im-proving their channel members’ ability to serve custom-ers better while improving the profitability of the entirechannel. These actions are detailed below.

Improvement of supply chain efficiency and effective-ness through the theory of constraints (TOC): Accord-ing to the proposed scheme of continuous replenishmentprogramme, the decision making authority for determin-ing shipments of Steelium from TATA STEEL to a dis-tributor would transfer from the distributor to TATASTEEL. Instead of fulfilling orders provided by distribu-tors, TATA STEEL would monitor the flow of its prod-uct through the distributors’ warehouses, and decidewhat to ship to the distributor, and when to ship it. Allthe distributors of Steelium have agreed to implementthis new scheme and are in the process of investing ininfrastructure. Distributors would benefit through re-duced investment in inventory, increased return on as-sets, and enhanced ability to serve the dealers andcustomers. In 2006-07, the average distributor inventoryof TATA Steelium Cold Rolled Sheets and Tata ShakteeGalvanised Sheets came down by as much as 20 per cent(prdomain.com, 2007). Wherever implemented, TOC hasgiven TATA STEEL the visibility and control over in-ventory levels at distributors and helped distributors onhow different grades and sizes should be stocked. Si-multaneously, TATA STEEL educates their distributorsabout efficient inventory management and advises themto hold optimum inventory as they can depend on reli-able supply from TATA STEEL. TOC is a part of com-pany’s commitment to provide the best support forSteelium distributors.

Human resource development initiatives for employeesworking with channel partners: TATA STEEL organ-izes training on sales management for all employees ofdistributors through reputed business schools or othercorporate training organizations. Distributors are reco-



mmended to organize customized training on advancedsales management topics required by them. In additionto professional training, distributors are required to im-plement standard HR practices for remuneration, yearlyperformance evaluation, recognition and rewards. Thecompany’s HRD department provides full support forproblem solving (if any) and consultancy to distribu-tors free of cost. “In 2006, through its Steelium servicecentre, TATA STEEL Limited trained through 29 ses-sions in eight different languages, approximately 550dealers on various selling techniques” (sebi.gov.in, 2007).

Implementation of key account management (KAM)process among distributors: Each distributor is requiredto identify its key customers according to profitability/relationship criteria and submit a valid account devel-opment plan for each such customer. Distributors bringout account-wise sales plan for the year which is closelymonitored. In addition, each distributor is required toestablish a customer-friendly procedure for handlingquality complaints and order management (receipt tofulfillment) and implement a system of no-haggle pric-ing and periodical monitoring of customer’s satisfactionon the established criteria. Further, an initiative has beentaken to recognize the key employees of distributor’scustomer through a special programme called ‘Vijeta’programme. Based on the purchase quantum and coop-eration during a given period, some of these identifiedemployees get recognition and reward from distribu-tors/TATA STEEL. In medium-to-large organizations,this fulfills the individuals’ (in DMU) recognition andemotional needs.

Retail value management, a programme extended to allthe major brands of TATA STEEL, has successfully cre-ated ‘long-term positive memory’ among its customers,and this has redefined the selling of steel by streamlin-ing channel structure, introducing product improve-ments, and changing the look and feel of steel shops(highbeam.com, 2006). Optimal structuring of the retailnetwork has ensured higher capacity and reach, highvisibility across the retail chain, systematic measurementof intangibles like distributors’ and dealers’ capability,their involvement and brand care, customer accountmanagers’ capability, etc. Several dedicated outlets aredesigned to ensure that the customers’ experience ofbuying a brand is convenient, shopping time is reducedand the visibility of company’s brands are enhanced.Along with these developments, the company has been

working to reduce transaction costs by using e-com-merce for distributors and major dealers. In the nextphase, distributors and dealers will be able to transactwith their key customers using e-commerce. Awards tothe distributors and dealers are given based on specificperformance parameters and benchmarks. Dealer-meetsare organized for ‘A’ category distributors and dealersunder each segment. Separate meets for B and C cat-egory dealers and distributors are also organized. Thus,many new ideas are generated towards strengtheningthe channel, creating brand ownership, and enhancinginvolvement of channel partners.

Evaluation of Distributors

TATA STEEL measures the performance of Steeliumdistributors periodically, using scorecards prepared onperformance and capability parameters. Such samplescorecards are illustrated in Figure 10.1 and 10.2 respec-tively. The dimensions of performance scorecard in-clude:

• Sales compliance• Quality of feedback• Inventory management• Market receivable management• Customer visits• Margin monitor

The dimensions of capability scorecard include:

• Market understanding• Quality of service centre• Service capability• Quality of HRM practices• Implementation of quality management systems• Work on special projects

The capability scorecard constitutes around 40 per centof the weight in the evaluation, indicating the impor-tance of service to customers. Besides evaluation, TATASTEEL always actively helps distributors to improve andprovide superior services. And this is one of the reasonswhy TATA STEEL could develop very strong relation-ship with their distributors.

In addition to the above, the distributor’s performanceis also monitored through surveys among regular cus-tomers. Surveys include questions on steel supplied andthe support services provided. This gives TATA STEELan indication of the services available and overall im-

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pression of the customers. If a problem is identified,TATA STEEL works together with distributors and deal-ers, get involved in the operations, and attempts im-provements.

Other Corporate Actions

TATA STEEL recognizes that all corporate actions mustbe consistent with brand values. In spite of the organi-zation being considerably large, continuous efforts aremade to keep everybody aware of the brand vision andgoals and also about the reward and punishments forenhancing or degrading it. In this way the companyensures that all actions even the ones that are appar-ently far away from marketing are controlled.

VALUE PROPOSITION

TATA Steelium came into the Indian market with highly-integrated value proposition that was perfectly alignedwith the rational, emotional, stated, and secret needs ofthe target market consisting of many small yet qualityconscious customers of CRS. The value proposition ofTATA Steelium consisted of three primary elements asshown in Figure 11.

Excellent functional quality: When Steelium was intro-duced, there were limited options for small customersrequiring high performance defect-free CRS for sophis-ticated use. Against this, all CRS items produced by thenew mill of TATA STEEL were distinguishable as supe-rior quality by customers and users in the shop floorloved to use it. Steelium slogan ‘Help Shape yourDreams’ indicating superior shaping and forming ap-plication properties, formed the core of a highly-differ-entiated value proposition.

Steelium CRS has changed the manner in which aesthet-ics, paintability and yield are rated among end users.Value is achieved by enabling the customers to do al-most anything with TATA Steelium with substantialpeace of mind.

Dream customer service through highly capable distri-bution: It was ensured that the distributors and theirdealers in each location provided adequate services andsatisfactory buying experiences to every customer. Theseintermediaries made sure that the process of ordering,finding, purchasing, and using CRS must work the wayit is supposed to. They book the order from customers,

confirm likely supply period, inform order status fromtime to time, inform availability, collect payment, ex-tend credit in selected cases, and arrange door deliverywherever necessary. Many distributors have investedin setting up service centres to facilitate delivery of cus-tomized sizes and shapes that helped customers to re-duce cost and hassle significantly.

Customer intimacy: Distributors and dealers are moti-vated to know all their customers individually, contactthem at regular intervals, solve customers’ problems un-der all circumstances, and ensure hassle-free transac-tions. The goal of the company is to give each customera sense of dealing with a professional organization in-dicative of ‘Tata’ brand by having competent and con-cerned intermediary employees and installing effectivesystems of dealing with customers. To develop relation-ship and intimacy between customers and their inter-mediaries, the company has been implementing accountmanagement process among the distributors.

As a result of the value delivered by the company andits trade partners, the following consumption patternand brand perceptions were recognized:

Consumption pattern: TATA Steelium is mostly usedby customers for shaping and forming applications thatrequire technically superior steel. Segment-wise salesdata of 2006-07 shown in Table 4 confirms this. The high-est consuming segments like auto and panel require sig-nificantly higher forming and shaping properties thanother segments.

Small customers lack the facility to carry out destruc-tive and non-destructive testing on steel and rely fullyon ‘Steelium’ logo for genuine and reliable CRS. Mostof these customers have regular requirements and con-firm their requirements to the specified distributor ordealer well in advance, depend very much on the serv-ice components, and are willing to pay premium pricefor consistently satisfactory brand experience. Largenumbers of regular users of the brand are now enjoyingreliable delivery, customized sizes, lower inventory,higher yield, trusted brand outlet, professional dealings,and strong company image.

Brand perceptions: Among the retail segment, ‘Steelium’is widely regarded as the best CRS to use and conjuresup a number of strong associations among both custom-ers and intermediaries alike:



• Fair and professional treatment• Caring parent company• Complete peace of mind in dealing with or using the

brand.

As a consequence, a large number of customers todayask for TATA Steelium despite the premium it com-mands over generic CRS available from competition.

Distributors’ Characteristics

“Selling TATA Steelium is different from selling other CRSthat are available in India. We know we have to respond toour customers’ needs much more than any reseller of steeldoes in India. Our customers have got special attention; theyexpect a different level of service which we think is unique toour brand, TATA Steelium,” said the owner of a distribu-tor firm. As another distributor’s manager summed itup: “We attach greatest importance to the services to be de-livered to our customers, and we are to take whatever actionsthat may be necessary and appropriate.” It is clear that thedistributors of TATA Steelium strongly identify thebrand with their social grouping and they view the brandas a means to their increased profitability and growth.The relationship between TATA STEEL and the steeliumdistributors and also the relationship between these dis-tributors and their regular customers is intense and ac-tive, which TATA STEEL has fostered over the yearsthrough its grass-root marketing activities. As one of thedistributors expressed, “Since the beginning, working withTATA STEEL has been like working with a business partner.It is very rewarding.” Distributors’ dedication to customersatisfaction has created a notable impression with theTATA Steelium’s customers:

“My Steelium distributor is one of the most profes-sional steel dealers we have ever worked with. Theyare very much committed to our satisfaction.”

“Our distributor’s staff is committed to our satisfactionand well being. It is great and they must keep it up.”

“Whenever I call I get somebody at distributor’spremises to help me with an answer. They always tryto solve our problems. That is what I like most.”

TATA Steelium distributors clearly know what thebrand represents and how it has been established andbased on that they feel that they know where the brandcan or can not go. The key characteristics are indicatedbelow:

• There has been a large improvement in the capabil-ity of many distributors across India. Distributorshave undergone major changes in mindset, businessknowledge, and skills with exposure to best practicesand growth among peers.

• Most distributors are willing to invest more in estab-lishing facilities and infrastructure for the future re-alizing the benefits of growing with the TATASteelium brand. The company is taking up with dis-tributors the installation of at least one service centrewith adequate facilities at every location. During2007-08, it was expected that 15 distributors wouldhave their own service centres at an investment ofRs. 50 crore in total.

• Each distributor has willingly taken a target of Rs.70-100 per tonne of steel to be sold by him during theyear towards brand promotion activities.

• Distributors are committed to establish professionalorganization and systems. With growing demandfrom customers for certified suppliers, many distribu-tors have established quality management systemsin their organization and gone ahead with ISO certi-fication. So far 14 distributors have been certified withISO 9001-2000 and it was expected that a total of 21distributors would be ISO certified within 2007-08.

• A strong sense of customer ownership has been in-voked among distributors. Distributors have identi-fied segment-wise key customers and developed amicro plan for sales during 2007-08. They hadplanned sales of 337 lakh tonnes of Steelium to keycustomers against a target of 420 lakh tonnes during2007-08. Clearly, there has been a paradigm shift fromrandom sales to planned sales approach.

Having established infrastructure, systems and facilities,many competent distributors are looking for the nextlevel of excitement. Fulfilling the growth aspirations ofdistributors continue to be the main concern in the long-term as the production capacity of Steelium may notincrease substantially in the immediate future. Thus thecompany’s ability to satisfy the distributors’ growthneeds would be the key determinant of the ongoing re-lationship between TATA STEEL and their Steelium dis-tributors.

Dealers’ Characteristics

The role and influence of the dealers are most impor-tant in areas where distributors’ capabilities are yet to

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be developed completely.

• In most of these areas, the present dealers ensure dis-tribution of Steelium to the widely dispersed smallfurniture manufacturers.

• Dealers are also doing the financing to most of thesmall customers tied to them and are having revolv-ing credit with them.

• While outlets were mostly multi-brand in previousyears, channel development activities have led to theestablishment of many exclusive Steelium dealers inmost of the major consumption areas.

• Also more and more applications are being receivedcontinuously by the distributors for further appoint-ment of exclusive dealers.

CHALLENGES AHEAD

The competitive landscape of the Indian CRS market hasdisturbing implications for the brand ‘TATA Steelium’in 2007-08 and afterwards. TATA STEEL is faced withthe challenge of maintaining the sales and growth of itsbrand TATA Steelium in an increasingly competitivemarketplace.

To achieve high levels of customer satisfaction and com-mitment, TATA Steelium relied mostly on two elements:largely superior steel quality and extraordinary cus-tomer services through distributors and dealers. Therewere ranges of subjective attributes that defined thequality of TATA Steelium, like its surface finish, pack-aging, labelling and distributors’ capabilities – but it wasthe consistently superior functional quality that uniquelycontributed to the brand equity of TATA Steelium. How-ever, this value proposition confronted the brand TATASteelium with a challenge: competitors are about to bringCRS of equal or superior functional quality to the do-mestic market soon.

Because of the company image, number of years of ex-istence in steel market, size, other product features, andsegment diversification, so far SAIL-Bokaro was the onlycomprehensive competitor of TATA Steelium. The func-tional quality of TATA Steelium was still unmatched.Thus many small customers who purchase competingproducts have shown preference for TATA Steelium. Butnow Essar Steel was likely to enhance its volume ofequivalent quality CRS from 25,000 tonnes per monthto 40,000 tonnes per month in 2007-08 and Jindal SouthWest was on the verge of bringing new age CRS in the

market. These competitors are likely to focus their ef-forts in their local markets first for maximizing margins.With Steelium’s focus gradually shifting to the more or-ganized customers and higher growth segments, themajor competition will be for these segments. In spite ofthis, the challenging target taken by ‘Steelium’ for 2007-08 is given in Table 5. Strengths and weaknesses of mostof the important suppliers of CRS are given in Table 6.

Secondly, because of the increased supply, there is astrong probability that the overall market sentiment willdecline and it will not be easy to sustain the price pre-mium and sales growth in a falling market. Further, thesenew entrants are quite unlikely to invest in establishinga brand name and they may try to offer customers justthe basic product without any service component so thatthey can keep their cost as low as possible. Some of thebrand’s dealers and distributors may consider takingpart in trading competitor’s CRS in a different name inorder to fulfill their growth needs.

Customers

Brand has always played a critical role in steel purchas-ing decision. When selecting cold rolled steel, retail cus-tomers considered several factors: yield, availability,cost, support service, company image, product authen-ticity, brand culture, brand values, and above all rela-tionship with the dealers or distributors. One customer,during recent interaction, seemed to have spoken formany, “One salesman contacts us almost everyday to findout our requirements. We get the steel packets as per our re-quirement on the desired date and time from the Tata dis-tributor if we inform them about our requirements in advance.This is a huge benefit to us.”

Over time, however, customers have become very vo-cal, especially after they developed intimacy with theTATA Steelium distributors and dealers. Many custom-ers personally know the TATA STEEL account manag-ers and brand managers. They talk to all of them veryopenly about the quality of steel and that of additionalservices where they want the company to improve fur-ther. In brief these are as follows:

• Expectations of service centre facility in terms of cus-tomized blanks, sizes, etc., are increasing.

• Expectation for technical support is increasing.• With India gradually becoming a global hub for

outsourcing for many industries especially auto an-



cillaries and panel (Metals, 2006), small customers’demands in terms of product quality and service lev-els are becoming more stringent. They are demand-ing product development and new product introduc-tion.

• With increasing price and reduced availability con-tinuing since 2004, customers felt a kind of powershift to TATA STEEL and brand’s distribution net-work. Some of the very small customers demandedfixed price contract and long-term supply contract.

TATA STEEL recognizes that such a feeling can be det-rimental to the ongoing business relationship and spe-cial care has been taken to ensure timely supplies to thedistributors. Also the distributors and dealers have beenadvised to maintain service quality and enhance theircapabilities so that additional services and ready avail-ability is ensured to the customers. This will alleviatethe felt effect of power shift by creating more goodwill.

It was TATA STEEL that first manufactured exceptionalgrade of cold rolled steel with a great brand name; theyhave never lost sight of their customers and distribu-tors. Company-intermediaries-customers all trustedeach other in an ongoing relationship. The debate anddilemma lie in whether or not the present relationship-oriented branding strategy will continue to the benefitof the brand under the changing market scenario or thecompany should think of reframing its marketing strat-egy.

Industry Structure

In order for ‘TATA Steelium’ to develop an effectiveappraisal of the present market situation and success-fully develop its future plan, it is necessary to examineits strengths, weaknesses, opportunities, and threats. Todo so, we first take a structured look at the industry us-ing Porter’s five forces model. For this purpose, data wascollected through various interactions with industryexperts comprising of the executives of SAIL, TATASTEEL, Essar, Jindal, Bhusan, etc.

Intensity of Rivalry – Increasing

• There are a limited number of firms competing inthe retail market of CRS with the top quality pro-duct like ‘Steelium’. But competitors like Essar andJindal are also eyeing the retail market with compa-

rable quality and capacities. Essar was increasing itssupply from October-November, 2007 while the sup-ply from Jindal was likely to commence only fromthe end of 2007 or beginning of 2008. The supply fromSAIL-Bokaro is likely to remain at the same level tillit adds further capacity which is expected in anothertwo years time.

• For the trade segment, earlier there used to be gen-tlemen’s agreement between manufacturers regard-ing monthly prices, but such agreements may not befeasible now with so many firms likely to operate inthe near future.

• Though most of the sectors served by TATA Steeliumare expected to grow at a healthy rate (Table 4), thisgrowth rate may not sustain for a long time and over-all market may fall substantially if economic woesplague again. This means that all these firms will becompeting for a larger share of a shrinking pie.

• At present stand-alone cold rollers are concentrat-ing on exports for better realizations. But the drop ininternational/domestic prices will force them torefocus on domestic retail market putting furtherpressure on price levels.

• Over a period of about four years, however, the typi-cal ‘Steelium’ buyers have learned to buy CRS notjust on price. They are interested in other attributeslike service comfort, brand assurance, and the rela-tionship with the ‘Steelium’ distributors/dealers.They look for customized shapes and sizes from thedistributors’ service centres and other value addedservices. In spite of competition, therefore, brandSteelium has an opportunity to build on its uniquecapabilities in the retail CR market of India.

Threat of New Entrants – Increasing

• Global players like ‘POSCO’ and ‘Mittal Steel’ witha long experience of supplying CRS in internationalmarket have already announced their arrival in theIndian market.

• These MNCs and the new domestic players like Essarand Jindal have good corporate image. Some of thebrand loyal customers of ‘Steelium’ may be takenaway by these firms.

• These new entrants have no dearth of funds and canestablish large and capable distribution network in ashort time.

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Threat of Substitutes – Mixed

• In general, the thicker CRS is getting substituted bythe thinner hot rolled steel (HRS).

• Fibre glass, aluminum, plastics, etc., are becomingsuitable substitutes of CRS in many applications likecar body, furniture, etc.

• CRS from competitors may remain unbranded. Butany such effort may result in a large impact upon thelong-term performance of TATA Steelium and it willrequire significant change in decision making.

• As Steelium serves the complex use and consump-tion needs of the customers, the large number of sat-isfied users are likely to pose considerable resistanceto substitution by other brands or other materials.

Threat from Buyers – Medium to High

• So far the small retail buyers of CRS are not well or-ganized.

• Sometimes small customers bargain on the retailprices but usually they do not pursue this aggres-sively as often the credit provided by the trade chan-nel is more important to them than the price.

• Small customers often do not have much knowledgeabout market dynamics and they are less likely toinitiate purchase action from other sources unlessthey are properly identified, approached, and per-suaded by a new supplier.

• Some small customers are now able to import CRSeasily and many such customers are demanding newproduct development/customized production.

Threat from Suppliers – Weak

• Since TATA STEEL is having its own hot rolled coilproduction, there is no threat to the input materialsfor the production of Steelium.

Summary

There are three strong forces worth considering. Rivalryand threat of new entrants are on the increase. Buyerscan become very powerful as an equivalent grade CRScould be easily available in future. TATA Steelium canstay ahead of competition by leveraging its unmatcheddistribution network and customer service culture. Tobe able to do so, TATA STEEL must be able to maintainand enhance its relationship quality with channel mem-bers and must sustain its strong and clearly differenti-ated brand image.

SWOT Analysis of Brand ‘TATA Steelium’

The source of this analysis is the data collected in vari-ous interactions with industry experts comprising theexecutives of SAIL, TATA STEEL, Essar, Jindal, Bhusan,etc.

Strengths

• High functional quality of the product and gradessuitable for different applications of CRS

• High awareness and preference among retail custom-ers in all locations

• Established, highly capable and motivated channelpartners supported by able Tata employees (accountmanagers and application engineers)

• Value addition through dedicated and high qualityservice centres

• Long emphasized service culture in all stages like pre-sales, sales, and after-sales

• Enduring relationships with customers already es-tablished by the distributors/dealers

• Major supply chain improvement initiatives through‘TOC’ will help improvement of supply chain effec-tiveness

• Association with TATA name brings special trustamong the Indian customers.

Weaknesses

• Limited availability with increasing demand mayforce the existing customers and channel membersto look for other sources

• Production being located at only one place(Jamshedpur in India), logistics disadvantage is likelyfor supplying to certain parts of India

• Brand identity (logo) of Steelium is lost when proc-essed further (like slitting, blanking, etc.) in a servicecentre.

Opportunities

• Contract production by maintaining quality stand-ard and other parameters can enlarge customer baseand sales volume.

• Within the present market size, there exists consid-erable room for Steelium to expand and enhance prof-itability.

• Improvement of sales and realization potential ispossible by increasing the supply of drawing anddeep drawing grades.

• Further value can be created and captured by inno-



vative marketing strategies like production and salesof exclusive and branded furniture. If the existing dis-tributors are inducted, this will fulfill their growthneeds too.

• Continual improvement in service will help in sus-taining competitive advantages.

Threats

• By far the most significant threat ‘Steelium’ faces isthat of losing some of the important customers anddistributors in the hand of competitors like Essar andJindal that can also become a quality national sup-plier.

• On the back of this uncertainty, ‘Steelium’ has to con-tinue investing on relationship with channel mem-bers and customers.

• In absence of any real differentiation in material qual-ity, Steelium will have to compete solely on thestrength of intangibles.

SUMMARY

Today the brand TATA Steelium has the best customersin its portfolio and gets the best chance to sell in themarket. Compared to the other steel producers, TATASTEEL is viewed by customers and intermediaries asmuch more collaborative. In comparison to Essar, theprice of TATA Steelium works out cheaper, after con-sidering the service and relationship value to the cus-tomers. This is illustrated in Figure 12. In view of thelarge demand-supply gap that exists in the CRS market,TATA STEEL can afford to sacrifice some of its casualcustomers and maintain its premium position with serv-ice-sensitive customers.

New Strategy?

A large number of small customers and steel merchantsare now familiar with the TATA Steelium brand andhold a favourable, strong, and unique brand associationin their memory. The brand is also distributed in a veryeffective way. It is true that the brand is being driven bythe sophisticated service seekers who are also coopera-tive customers. Price-sensitive customers are not theregular buyers and cost is the primary reason for theirnot going for a repeat purchase. Though brand buildingthrough relationship and service has always been theprimary focus of the company, it is important to con-sider the other reasons that customers bought the brandfor, which included brand’s functional quality and avail-

ability constraint from competitors.

Today, the brand holds a dominant market position andan excellent long-term profit potential in view of thelikely growth in the consumption of CRS and furtherimprovement of market prices. However, the potentialfor the volume growth of the brand is limited due tofixed production capacity.

Under such circumstances, the first and foremost con-cern of the brand will be to achieve customers’ percep-tion as the fairest-priced CRS with its brand features andassociations. Should the brand premium be reduced orthe company must find avenues to add more valuethrough tangibles or intangibles? Reduction of price willsurely mean reduction in profit for the whole chain whileadding new values will require further research andpossibly new competencies. The next important concernis to protect the distributors’ and dealers’ loyalty. Whilecompetitors may entice away some of the existing part-ners, few others may be tempted to start a parallel busi-ness of distributing competitors’ product for higherturnover and growth. Should the company motivatethese distributors and dealers to sell its other brands orshould it start a new venture of manufacturing andmarket its own range of high quality, innovative line ofstylish yet affordable steel furniture using Steelium, forhome and office? The existing distributors and dealerscan install manufacturing facility and open a chain ofretail furniture stores. In selling other brands, the dis-tributors and dealers will have to serve different cus-tomers and will be subjected to different guidelines. Inthe business of related end product like furniture, themarket will be new to the company as well as to thedistributors. All participants will require new skills anda proper understanding of the product, market, custom-ers, collaborators, and competitors. Also, the new busi-ness will consume the raw material; and to maintain thecurrent market share, the company will require capac-ity addition.

Capacity addition will take a little more time but it isforthcoming as all the existing steel majors includingTATA STEEL have taken definite steps towards thesame. In fact, the Indian CRS market of small customersmay witness yet another revolution with the entry ofmultinationals as they will not only bring good qualitysteel but also extraordinary support services. This mayresult in acute competition for the brand Steelium. The

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new entrants would be vying for the same service-sen-sitive segment of the CRS customers. Measuring thesuccess of relationship initiative and customer intimacyunder the changed marketing environment will be ex-tremely difficult. At this stage, therefore, the companymay seriously think whether the current relationship-oriented initiatives are worth reinvesting in or whetherthe company should prepare to launch a stripped-down

version of the brand in standard specifications offeringlower prices and only essential services. This secondoption may also make the Indian CRS market little un-attractive to the new entrants. Importantly, in continuingwith the current strategy, continual improvements willbe required and the evolutionary path, that will help thebrand to sustain its competitive advantages, will have tobe made clear to the company in a very short time.

Table 1: Sales Performance of Branded Products

Rs. Crore

2003-04 2004-05 2005-06 2006-07

Sale of branded products 2,365 3,362 3,848 4,604

Growth over previous year (%) 42 14 20

Total sale of products 11,332 15,251 16,521 17,700

Growth over previous year (%) 35 8 7

Brand sales w.r.to total sales (%) 21 22 23 26

Source: TATA STEEL Annual Reports

Table 2: Sales Performance of ‘TATA Steelium’

Lakh Tonnes

2003-04 2004-05 2005-06 2006-07 2007-08(E)

Steelium Sales Volume 2.83 3.55 3.92 3.71 4.2

Growth over previous year (%) 25 10 -5 13


Table 3: Technology Parameters and its Advantages

Key Facilities Advantage over Competition

Coupled shallow bath • Lower idle time and improved productivityhydrochloric acid pickling • Less damage of the strips

• Uniform product quality• Low acid and energy consumption

Tandem cold rolling mill • Better gauge and shape accuracy• No damage during storage• Lower cost in terms of investment, manpower, and consumables• Less off-gauge and higher yield

Batch annealing • Can take care of orders in small lots which is the characteristic of Indian retail market• Can get close to customer’s requirement of draw- ability, ductability along with strength

Skin passing • Precise amount of surface roughness is imparted,• Possibility of surface defects like stretch marks, etc., are eliminated• No need for the customer to prepare the coil before deformation

100% inspection under strobe lights • 100% performance at customer’s end and not merely a specification guaranteeby trained inspector and with • Matching precise oil requirement of the customer and thus ensuring smooth operationelectrostatic oiling capability at customer’s end.

Machine packing with thin • No damage due to moisture or loss of oilplastic film • Increased protection to handling damage

Electrolytic cleaning • Removes dirt or contaminations from the grooves and deepening on strip surface

Electro discharge texturing machine • Matte, bright and mirror bright finish depending on the customer’s end use requirements

Source: Tisco News, 1999 and Kharkar et al., 1997.



Table 4: Segment-wise Sales of ‘TATA Steelium’

Segments % Sales in Sectoral Growth2006-07 Rate Estimated(%)

Automotive 38 18

Panel 34 16

Gen Engg 16 9

Furniture 5 10

Tube 3 N.A

Stamping 2 N.A

Packaging 1 9

Others 1 N.A

Source: Company records

Table 5: Sales Target of ‘TATA Steelium’

2006-07 2007-08Actual Plan

Market Size 21.79 24.21

Growth (%) 11

Steelium Sales 3.71 4.2

Growth (%) 13

Market Share (%) 17 17

Premium (Rs./Ton) 800 1300


Table 6: Strengths and Weaknesses of Major Competitors of Steelium

Competitor’s Name Strengths Weaknesses

SAIL Large capacity; operates through financially strong CRS quality not suitable for higher-endtraders all over India; supplier of many other applications; do not have authorized sellingcategories of steel in retail market; sales tax (VAT) agents; little control over traders; focus onadvantage due to many number of own stockyards low-end segments; sells large quantity ofacross India. CRS in standard grade.

Essar Steel High volume, superior technology, good quality No organized distribution network for retailproduct, good distribution network existing for marketing of CRS; no experience oftheir hot rolled items; ability to supply number of providing technical support to the channelflat products to the distributors, location advantage members and customers; attempt to sellfor western and southern parts of India; targeting CRS through multiple channel creatinghigh end sectors like auto, appliance, etc. dissonance.

Bhusan Steel & Power Good product quality; supplies in customized Not an integrated steel plant (howeverand Bhushan Steel & blanks; focus on high margin customers like auto captive HR is coming up) not having strongStrips and appliance; good quality service centre in the distributor’s network, availability of CRS is

mill; can supply small quantities of deep drawing not regular and mostly opportunistic ingrades to retail segments. nature based on price differential between

domestic and export market.

Uttam Galva Excellent tie-up both domestic and international Not an integrated steel plant and depend onfor hot rolled steel as input material; doubling the import for input materials; availability ofproduction capacity; good quality of product; CRS is not regular.concentrates on local sales with better service andhigher margins; controls the thinner CR marketin western region.

Hero Cycles Narrow mill; 60% own consumption; can supply High input cost, small volume.customized sizes; good product quality.

Source: Authors

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Figure 1: Vision Architecture 2007

Source: Tisco News, 2002.

Figure 2: Brand Revenue Target

Source: Tisco News, 2002.



Figure 3: Branded House of TATA STEEL

Creating Value by Branding


Figure 4: Awards and Recognitions for TATA STEEL


Figure 5: TATA Steelium Advantages

Source: Steelium Brochure.

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Figure 6: Targeting Retail Customers with ‘TATA Steelium’

Source: Authors

Figure 7: Highlighting the Packaging Features

Source: Steelium Brochure

Large Customerserved directly

(About 0.4 MT/year)

ALL CUSTOMERS

Small Customersserved through

Distribution(About 0.4 MT/year)

Tailored strategy and communicationfor long-term relationship

Cannot sell more than 0.4 MT/yearwith large customers only

Brand Management• Relation with channel members• Value for customers



Figure 8: Brochure Showing ‘Steelium’ Advantages for Furniture Segment

Source: Steelium Brochure

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Figure 9: Steps in Distributor Selection




Figure 10.1: Step 1 in Distributor Evaluation


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Figure 10.2: Step 2 in Distributor Evaluation




Figure 11: Value Proposition for ‘TATA Steelium’

Source: Authors

Figure 12: Utility of Price Comparison – Potential Benefit of Customers in buying TATA Steelium

Source: Customer interviews

NOTES

1. Interim names: Company trade name combined with in-dividual product names. TATA STEEL ties its group nameto an individual brand name for each product.

2. Mr. A Sen designated as Chief of Marketing and Sales, is asenior level marketing executive of TATA STEEL handlingflat products of the company. At TATA STEEL, brandmanagement including the initiatives of internal brandingfalls under the responsibility of Chief of Marketing andSales, flat products and long products. They report to thecompany Managing Director, Sri B Mutturaman.

3. Dealers: At TATA Steelium, retailers are called dealers.They are appointed by the distributors as per companyguidelines.

4. Cutters act as a service centre for steel coils. Here the coilsare decoiled, cut into specific sizes, sometimes silted andrecoiled depending on the customer’s requirements. TATASTEEL encourages their distributors and major dealers toinstall such facilities and beyond.

5a. Marketing orientation is an organizational orientation thatcentres its activities on achieving success by satisfying the

needs and wants of its customers.5b. To safeguard brand power, all brands require some care

(judiciousness in avoiding harm or danger) such as mak-ing sure that all marketing activities undertaken by thedistributors and dealers send a consistent message aboutthe brand.

5c. Ethics (a general enquiry into what is good) is an inescap-able part of brand management. All marketing decisionsand actions of distributors and dealers must be consistentwith the brand’s stated ethical intentions and in all suchactions, ethical issues must be taken into account so thatthe actions are culturally good and there is no harmful ef-fect on customers, employees, company, other partners,the community and the world as a whole.

6. In compensatory decision rule, the weakness of a distribu-tor on one attribute can be compensated for by strength onanother, and the scores are summed up to determine thehighest scoring (most favourable) and the lowest scoring(most unfavourable) distributor.

ExcellentFunctional

Quality

Dream Customer Service

Customer Intimacy

Price of TATASteelium

Includes freight)

Loss for nosupport service

Impact ofrelationship with

distributors

Value of CRS fromnew entrants

Essar’s current price(includes freight)

Rs.42,700

Rs.700

Rs.400 550

Rs.42,150

126

http://www. allindia.com/sst_projects-2005.asp accessed on17.03.2007

http://www.authorstream.com/Presentation/sainipk2-69424-tata-bajaj-auto-ppt-entertainment-powerpoint/accessed on 25.12.2007

http://www. blonnet.com/2003/05/21/stories/2003052102410200.htm accessed on 17.03.2007

http://www.highbeam.com/The+Hindustan+Times/publications.aspx?date=20060216&pageNumber=8,“TATA STEEL Implements Retail Value Management;Creates Long-term Positive Memory Among Consumers”February 16, 2006.

Gregory, R J and Sexton, E D (2007). “Hidden Wealth in B2BBrands,” Harvard Business Review, March, 23.

Kharkar, H C; Chatterjee, A and Muthuraman, B (1997), “Tech-nology Selection for TATA STEEL Cold Rolling Com-plex,” TATA Tech, 28.

Kotler, P and Pfoertsch, W (2006). B2B Brand Management,Springer, 264-265.

http://www. kummenchery.com/inpages/profile.htm ac-cessed on 17.03.2007

Lynch, J and Chernatony, L D (2007), “Winning Hearts andMinds: B-to-B Branding and the Role of the Salesperson,”Journal of Marketing Management, 23(1-2), 123-135.

REFERENCES

Metals 2006, Steel For Auto and Construction, Published in anindustry meet organized by Bengal Chamber of Com-merce & Industry, 28.11.2006

http://www.moneycontrol.com/india/news/pressmarket/tata-steelium-organises-managing-changesthe-panel-inds/23/10/299719 accessed on 25.12.2007

http://www.prdomain.com/companies/T/TataSteel/newsreleases/20074340008.htm accessed on 12.05.2007.

http://www.sebi.gov.in/dp/tatasteel.pdf accessed on01.09.2007.

http://headlines. Sify.com/news/fullstory.php accessed on17.03.2007

http://www. tata.com/tata_steel/releases/20030227.htm ac-cessed on 17.03.2007

TATA STEEL, (2004-05), 98th Annual Report

TATA STEEL, (2005-06), 99th Annual Report

Tisco News, (1999), “Facing the Future” October.

Tisco News, October 1, 2002

Tisco News (2004 – 05), “The Best Name in India says TNS Sur-vey”, Issue – 4.

http://vijayentps.com/services.htm accessed on 17.03.2007.

Webster, Jr. E F and Keller, L K (2004). “A Roadmap for Brand-ing in Industrial Markets,” Brand Management, Vol II (5),388-402.


Kaushik Bhattacharya is a Ph.D candidate at the Vinod GuptaSchool of Management, Indian Institute of Technology,Kharagpur. He has over 15 years of experience in marketingand sale of Indian steel industry.

e-mail: [email protected]

Biplab Datta, a Ph.D from the Indian Institute of Technology,Delhi, is currently an Assistant Professor of Marketing at theVinod Gupta School of Management, Indian Institute of Tech-nology, Kharagpur. His teaching and research interests includerelationship marketing, customer relationship management,brand management, consumer behaviour and e-business. Hehas worked on various management projects and co-authoredseveral articles for Indian as well as international journals.

e-mail: [email protected].

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