Tata Chemicals Ltd Case

Strategy Formulation and Implementation

Submitted by:
Abhrajit Sett
PGDM –B
Roll No 140
1) Outline TCL's current company/SBU portfolio? Indicate your assessment of which of the TCL's
CSR initiative are linked to TCL's current SBU and Why?

Tata Chemicals Limited (TCL), established in 1939, diversified into industrial chemicals, crop protection,
fertilizers, and consumer products and has also ventured into biotechnology and bio fuels sector. TCL has
strong international presence with manufacturing facilities in US, UK, Netherlands, Kenya, Morocco
through its subsidiaries and joint ventures and serve customers in America, Europe, Africa, and Asia.

TCL has three core lines of business that focus on LIFE - living, industrial and farming essentials. The
company believes that in all three spheres, its products impact human life and improve its quality. This
explains why the company fosters the concept of a human touch in everything it does.
Major SBUs of TCL are:
1. Inorganic Chemicals Segment:
Soda Ash: TCL is the world’s second largest producer of soda ash with a capacity of over
5.0 million tonne with a global market share of approx 8.2 percent. TCL’s clientele includes
Unilever, P & G, Saint Gobain, Asahi.

Sodium Bicarbonate:  TCL is the world’s fourth largest manufacturer of Sodium bicarbonate
and a market leader in India and UK, having manufacturing facilities for the same in Mithapur,
India and Northwich, UK. market.

Cement: TCL processes the solid wastes generated as by-products in the manufacture of

soda ash, to manufacture ordinary Portland cement and Masonry cement.

2. Consumer Products Segment:

Packaged Salt: Tata Salt, the flagship salt brand of TCL, is the market leader in packaged
salt segment.

Water Purifier: In December 2009, TCL launched the Tata Swach water purifier, mainly
targeted towards low income consumers and rural markets.

3. Fertilizers and Agri Inputs Segment:

Crop Nutrition (Tata Paras): Crop nutrition comprises of manufacture and sale of Urea,
DAP, NPK, and SSP manufactured at the Babrala and Haldia plants.

Bio Fuels: TCL has recently forayed into bio fuels segment and has planned to use its
Nanded (Maharashtra) facility as a pilot plant for the purpose of R&D in the field of bio
ethanol and bio butanol.

The company has, through its business venture Khet-Se, has set up a state-of-the-art facility for fresh fruit
and vegetables sourcing, packaging and distribution, has begun cultivating a presence in the area of bio-
fuel with the construction of a bio-fuel plant in Maharashtra, and aims to develop world-class R&D
capabilities in the emerging areas of nanotechnology and biotechnology through its research arm, Tata
Chemicals Innovation Centre. 

Further, TCL provides a bouquet of crop management and crop protection services to the Indian farmers
through its initiatives like Tata Kisan Sansaar and Khet Se. It is a market leader in iodised salt business
(Tata Salt and I-Shakti) which forms a major part of its consumer products segment. Recently, TCL has
also forayed into water purifiers business through the brand ‘Tata Swach’ and bio-fuels and bio
technology business.

2) a) Comment on TCL's horizontal scope? Indicate which among TCL's SBU has a common
thread?
    b) Outline/Indicate the various accreditation and why are these accreditaton relevant for TCL's
long term success?

The SBUs of TCL are relatively similar as most of their business is in the field of chemical engineering.
From soda ash, cement to packaged salt and fertilizers there is an amount of limited ongoing sharing of
resources that take place. Their positioning in different geographic locations also complement their
services. The Company today has the world’s second largest capacity in soda ash and is a pioneer and
market leader in the Indian branded iodized salt segment. TCL is one of India’s leading producers of
nitrogenous and phosphatic fertilizers in the private sector and markets a range of crop nutrition offerings
under Tata Paras brand. Therefore we can say that model of corporate management of TCL is some of a
related business corporation which are holding it together but at the same time they have expanded
themselves to those SBU which are not strongly related to Core Business Corporation. These changes
have taken place due to the changing external environment.

Following are the various accreditations:

·         Indian Chemical Council’s (ICC) accreditation for manufacturing and distribution operations in
India.

·         UL DQS introduces the Responsible Care Program, RC 14001 Certificate for chemical
industry.

·         AAALAC International of USA for animal welfare

·         Department of Science and Industrial Research, Government of India, and recognized by several
universities for carrying out research and doctoral programmes.

·         GLP accreditation
·         HACCP, PFA, ISO 9001:2008, ISO 14001:2004 and OHSAS 18001:2007

3) Explain briefly the core competencies, resources and comment on how TCL has built its
resource endowments and distinctive competencies?

Looking at the TATA group as whole, it is a vast group doing businesses in diversified fields. TCL has
outsourced its entire IT infrastructure to its sister TATA companies. This move made the company to
focus on the thing they know the best and which were their core competency, manufacturing and
innovation.  In a similar way, TATA tea outsourced the sourcing, packaging and distribution to TATA
chemicals. As a result, there is a very low cost margin from all the corners of production and sales for
TCL (and for all the TATA companies). It outsources the power from Tata Power, it acquires automobiles
from TATA motors, it acquires IT infrastructure from TCS and it acquires Steel from Tata Steel. Tata
Chemicals currently has four “pillars” of sustainability within the organization – Tata Trusts, Tata Relief
Committee (TRC), Tata Council for Community Initiatives (TCCI), and Tata Quality Management Services
(TQMS). 

Tata also has institutions like Tata Chemicals Innovation Center and initiatives each business silo, with
annual group wide meetings devoted to sharing best practices.  The individual responsibilities of TCCI
and TQMS overlap, although TCCI’s functions are more organic and less rigid than the TQMS process. 
This organizational structure can be rightly credited with maintaining Tata’s cultural core values. Tata
Group is very famous for its ethics and dedication towards the society. Tata Chemicals has been involved
in many CSR activities so that we give back more than what we take from the society.

As a result, a strong feeling of trust has been developed for TCL which resulted in high brand value and
high revenues. TCL acquisition of many companies around the globe gave the chance to expand its
portfolio, increase quality standards and expanded markets.

4) a) Pick one SBU of your choice and name TCL's 2 major rivals worldwide in that SBU?
    b) For the chosen SBU analyze industry attractiveness [ 5 forces ]
        Identify complementers and their impact of value creation in TCL? Evaluate what is the basis
of competing

The SBU of choice is Inorganic Chemical segment (Fertilizers).

Major rivals worldwide for TCL are:

- Solvay Chemicals, Inc.

- OCI Chemical Corporation

In fertilizer SBU, the rival are mainly

- Aditya Birla Chemicals (India) Limited

- Indian Farmers Fertilizers Cooperative Limited (IFFCO)

.
 Supplier power

 High dependence on energy

suppliers
 Backward Integration
 Usually the main-driver for end
price
 High-volume order

New entrants Industry Competitors Substitute products

 Capital-Intensive  Increasing International  Pro-biotic fertilizers:

industry competition substitute for
 Safety, Health and  High fixed costs and exit chemical fertilizers
 Environmental barriers  Intercropping:
regulations  Low switching costs Fertilizer substitute
 Cyclical nature of  Homogenous products in in low-scale farming
business basic fertilizers
 Development of
consumer base is a
lengthy process

 Buyer power

 Low Product Differentiation

 Excess capacity in global markets
 Highly Fragmented market
 Motivation for forward
Integration
 High Brand identity(TATA)

Some of the major complementors of TCL fertilizers are :

a. Alternates to fertilizers such as manures, pro-biotics and intercropping for low-scale farming.
b. Competitors in Indian as well as global markets such as IFFCO, Aditya Birla Chemicals and
Solvay, OCI Chemicals worldwide.

These complementors increase the buyer’s willingness to pay for fertilizers at the demand end and
decrease the industry supplier price at the supply end. Keeping in mind that India is still a major agro-
based economy and the consumption is huge, i.e. the there is a huge customer base in rural area, the
basis of competition will always be for a differentiated product at the most affordable price. In the world
market, the major competition comes from the host country manufacturers where an MNE has to compete
against local companies and also keep the host country government satisfied.

5) Current challenges facing TCL and the chosen SBU and the likely challenges you can see they
will face in next 3-5 years

Some of the major challenges that TCL is facing currently and likely to face in the next 3-5 years can be
as follows:
 a) High competition in the world market: Looking at the tough competition from the global market the
company has used the horizontal integration strategy, to enable TCL to achieve economies of
scale, wider reach and a larger scope to the markets.
b) Reduction of emissions: One of the integral resources in a chemical industry is electricity. Due to
this high consumption the emission of greenhouse gasses like CO 2 has also increased. Because
of the growing concern for global warming industries are looking for low energy consuming
technology. This change has affected TCL’s manufacturing operations.   
c) Rising cost of resources: Cheapest source of making fertilizers is gas, but India today doesn’t
have enough gas and more than 30% of fertilizers are being produced from naphtha and other
liquid fuels. Today naphtha is five times costlier than gas.
d) Agri-policies by government: The fertilizer business accounts for more than 60% of companies
revenues and is directly linked to the agricultural sector and hence to the government policies
related to the sector. Variation in these policies may significantly affect companies business. To
reduce the risk the company has formed a new SBU the Agri Services. Concern for soil nutrition
for instance goes well beyond the mere application of fertilizers – it would mean determining and
then providing the nutrition the soil actually needs, using modern technology and new value
added offerings. 
e) Supply-demand imbalance in soda ash industry: The world soda ash industry saw significant
structural change in the 1990s, and the process is still continuing. US and Chinese production
capacity rose substantially, while a number of plants in Europe and Japan closed. As production
has outstripped demand, soda ash producers have been unable to raise prices for a number of
years.
f) Rise of new technology: The pace at which today the technology is proceeding, it is a major
challenge for TCL to keep up to the pace, and continuously change, both internal and external,
itself in an ongoing basis. Today’s competitive edge may be an outdated knowledge tomorrow.
So, TCL needs to keep on improvising on its key learning.

6) Your strategic recommendations for TCL and your choosen SBU?

Strategic recommendations for TCL and fertilizer SBU:

They are the decisions which an organization takes for allocation of the resources among the various
businesses of the firm, selection of various businesses for a firm, transferring of resources from one
business to the other and managing a portfolio of businesses in such a way so as to create synergy
among the businesses to achieve the overall objective of the firm. Some of the corporate strategies which
TCL can take up are -
  Optimization across the value chain: Keeping in mind of the horizontal integration approach, TCL
can look for more resource optimizations across SBUs to eliminate redundant activities, and
increase buyer’s value across value chain.
 Creating shared value: Through some CSR initiatives TCL can create shared benefit both for the
company and society. Already it has set up call center which has provided employment to the
rural population. TCL should increase this effort.
 Geographical scope: TCL can increase their geographical presence and can set up industries
where energy prices are competitive.

Country Strategies:

TCL has manufacturing locations located in India, UK, Netherlands, Morocco, Kenya and South Africa.
TCL’s strategy is to grow inorganically, and as a part of this strategy, the company is eyeing markets in
the EU. It plans to make some acquisitions in the EU through its subsidiary, HIPL. This will help it to
strengthen its brand in the market and also acquire expertise in the chemicals domain. Moreover, it plans
to expand BMGL’s plant in Lake Magadi, Kenya, to meet the demands of the rapidly growing glass
industry. As per the vision statement of the company, TCL acquired the strategic stakes in various
companies present in various regions of the world.e.g. TCL acquired Brunner-Monnd in UK who was
amongst the largest Soda Ash manufacturers in Europe.

    

SBU Strategies:

Fertilizer Industry: With the worsening world food situation, the availability of fertilizers and thus the
fertilizer manufacturing plants gains significance. This industry is going to be the lifeline for many other
industries hence TCL is making concentrated efforts to innovate and bring down the input costs thus
becoming a major player in the international market as well. Chemical: TCL has already gained market
leadership in few of the flagship products globally like in Soda Ash , in which it is the 2 nd Largest producer
in the world.

7) Key learnings from the TATA chemicals case?

Some of the key learnings from the Tata Chemicals case are as follows:

a. Functioning of the chemical industry and the sector as a whole.

b. How the management of Tata Chemicals functions under the umbrella of TATA group.
c. How they have developed their core competency over the years and how they have diversified
horizontally to include more and more products under their portfolio.
d. How Tata Chemicals have used acquisitions around the world to their advantage to expand
operations as well as truly become a global company.
e. Learnings from the various CSR activities carried out by TCL and how do these activities add
value to their products, customers, and the company.