Professional Documents
Culture Documents
COMPANY BACKGROUND
T
ATA STEEL is the largest private sector steel marketer in India. Presently, its
Jamshedpur (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-ups
with customers and mergers and acquisitions. The company is aiming at enhancing
its domestic steel capacity to about 30 million tonnes per annum by 2015 (TATA
STEEL, 2005-06).
Historically, the TATA group is the oldest, largest, and the most respected group of
companies in India. They are India’s largest employer and also the largest foreign
KEY WORDS exchange earner in the private sector. TATA is perhaps the most internationally
recognizable Indian business house, largely due to the role that the TATAs have
Business-to-Business
played since its inception. Over the years, TATAs have been known for producing
Branding quality products and for living up to their commitments. The TATA group in gen-
Value Proposition eral, has a strong reputation of having a good relationship with everyone in the
trade as well. Like other TATA group companies, ‘TATA STEEL’ uses interim names1
Relationship Building
for their brands to capture part of the customers’ mind and heart (Figure 3). The
On February 27, 2003, ‘TATA STEEL’ launched the One member of the TATA Steelium brand management
world’s first branded cold rolled steel (CRS) called team explained, “Our primary value proposition is the
‘TATA Steelium’ in Goa. Speaking at the launch, Mr. B concept of providing a small customer total peace in
Muthuraman, said “Branding will give rise to a custom- purchase and consumption of CRS. Once, it was a dream
ized product in terms of value, performance, and pric- for them, but today every customer has his own inter-
ing that will meet our customers’ needs better. Branding pretation of what it means. For some, it is about assured
will go a long way in meeting the challenge of gaining a availability; for others, it is about customization of size,
sustainable competitive edge. It will add value to the and for still others, it is about dealing with a professional
Second, small customers were having little access to the • “Steelium has changed our life; it has increased our
Wholesalers and retailers were free to set their own sell- A Steelium distributor during our interaction said, “We
ing prices and there used to be hard bargaining between could never think of the business proposition which we are
manufacturers and wholesalers and between wholesal- now handling profitably. Intimacy with a company like TATA
ers and retailers on discounts and purchase volume. STEEL and repeat business from so many satisfied custom-
ers…. these are very rewarding experiences for us.”
All distributors and most of the dealers are web-ena- Improvement of supply chain efficiency and effective-
bled for the purpose of communication, data exchange, ness through the theory of constraints (TOC): Accord-
and tracking order execution online. In addition, a pass- ing to the proposed scheme of continuous replenishment
word-protected community website, ‘TATA Steelium programme, the decision making authority for determin-
Parivaar,’ has been designed to cater to the needs of the ing shipments of Steelium from TATA STEEL to a dis-
distributors and dealers who as ‘Parivaar members’ can tributor would transfer from the distributor to TATA
freely interact with each other. Since the members are STEEL. Instead of fulfilling orders provided by distribu-
dispersed geographically, the website binds them closer tors, TATA STEEL would monitor the flow of its prod-
by offering a uniform platform to express themselves uct through the distributors’ warehouses, and decide
and their commitment to the branding and growth of what to ship to the distributor, and when to ship it. All
Steelium (allindia.com, 2007). the distributors of Steelium have agreed to implement
this new scheme and are in the process of investing in
Distributor Selection infrastructure. Distributors would benefit through re-
duced investment in inventory, increased return on as-
In general, TATA Steelium distributors and dealers have
sets, and enhanced ability to serve the dealers and
high market reputation, premium business location, and
customers. In 2006-07, the average distributor inventory
superior capabilities to serve the customers. Distributor
selection is done through a three-step process. The com- of TATA Steelium Cold Rolled Sheets and Tata Shaktee
pany selects a few distributors for each consumption Galvanised Sheets came down by as much as 20 per cent
centre from a large number of applicants. Level-1 screen- (prdomain.com, 2007). Wherever implemented, TOC has
ing is based on the combination of objective and subjec- given TATA STEEL the visibility and control over in-
tive criteria like investment capabilities, interest in ventory levels at distributors and helped distributors on
how different grades and sizes should be stocked. Si-
exclusive dealership, registration with statutory authori-
multaneously, TATA STEEL educates their distributors
ties, and market reputation. Level-2 screening is again
about efficient inventory management and advises them
based on the combination of objective and subjective
criteria where the compensatory6 decision rules are usu- to hold optimum inventory as they can depend on reli-
ally applied. The criteria considered in this phase are able supply from TATA STEEL. TOC is a part of com-
business experience, turnover, knowledge, and quan- pany’s commitment to provide the best support for
tum of sales. Finally, in level-3, nominated senior offic- Steelium distributors.
ers of the company take decision about distributor Human resource development initiatives for employees
selection based on their ratings and scores in level-1 and working with channel partners: TATA STEEL organ-
level-2. The process is illustrated in Figure 9. izes training on sales management for all employees of
distributors through reputed business schools or other
corporate training organizations. Distributors are reco-
“My Steelium distributor is one of the most profes- Having established infrastructure, systems and facilities,
sional steel dealers we have ever worked with. They many competent distributors are looking for the next
are very much committed to our satisfaction.” level of excitement. Fulfilling the growth aspirations of
distributors continue to be the main concern in the long-
“Our distributor’s staff is committed to our satisfaction
term as the production capacity of Steelium may not
and well being. It is great and they must keep it up.”
increase substantially in the immediate future. Thus the
“Whenever I call I get somebody at distributor’s company’s ability to satisfy the distributors’ growth
premises to help me with an answer. They always try needs would be the key determinant of the ongoing re-
to solve our problems. That is what I like most.” lationship between TATA STEEL and their Steelium dis-
tributors.
TATA Steelium distributors clearly know what the
brand represents and how it has been established and Dealers’ Characteristics
based on that they feel that they know where the brand
can or can not go. The key characteristics are indicated The role and influence of the dealers are most impor-
below: tant in areas where distributors’ capabilities are yet to
Summary Opportunities
There are three strong forces worth considering. Rivalry • Contract production by maintaining quality stand-
and threat of new entrants are on the increase. Buyers ard and other parameters can enlarge customer base
can become very powerful as an equivalent grade CRS and sales volume.
could be easily available in future. TATA Steelium can • Within the present market size, there exists consid-
stay ahead of competition by leveraging its unmatched erable room for Steelium to expand and enhance prof-
distribution network and customer service culture. To itability.
be able to do so, TATA STEEL must be able to maintain • Improvement of sales and realization potential is
and enhance its relationship quality with channel mem- possible by increasing the supply of drawing and
bers and must sustain its strong and clearly differenti- deep drawing grades.
ated brand image. • Further value can be created and captured by inno-
Essar Steel High volume, superior technology, good quality No organized distribution network for retail
product, good distribution network existing for marketing of CRS; no experience of
their hot rolled items; ability to supply number of providing technical support to the channel
flat products to the distributors, location advantage members and customers; attempt to sell
for western and southern parts of India; targeting CRS through multiple channel creating
high end sectors like auto, appliance, etc. dissonance.
Bhusan Steel & Power Good product quality; supplies in customized Not an integrated steel plant (however
and Bhushan Steel & blanks; focus on high margin customers like auto captive HR is coming up) not having strong
Strips 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 in
grades 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 on
for hot rolled steel as input material; doubling the import for input materials; availability of
production capacity; good quality of product; CRS is not regular.
concentrates on local sales with better service and
higher margins; controls the thinner CR market
in western region.
Hero Cycles Narrow mill; 60% own consumption; can supply High input cost, small volume.
customized sizes; good product quality.
Source: Authors
Brand Management
• Relation with channel members
Small Customers • Value for customers
served through
Distribution
(About 0.4 MT/year)
Source: Authors
Customer Intimacy
Excellent
Functional
Quality
Source: Authors
Figure 12: Utility of Price Comparison – Potential Benefit of Customers in buying TATA Steelium
Rs.42,700
Rs.42,150
Rs.700
Rs.400 550
Price of TATA Loss for no Impact of Value of CRS from Essar’s current price
Steelium support service relationship with new entrants (includes freight)
Includes freight) distributors
NOTES
1. Interim names: Company trade name combined with in- needs and wants of its customers.
dividual product names. TATA STEEL ties its group name 5b. To safeguard brand power, all brands require some care
to an individual brand name for each product. (judiciousness in avoiding harm or danger) such as mak-
2. Mr. A Sen designated as Chief of Marketing and Sales, is a ing sure that all marketing activities undertaken by the
senior level marketing executive of TATA STEEL handling distributors and dealers send a consistent message about
flat products of the company. At TATA STEEL, brand the brand.
management including the initiatives of internal branding 5c. Ethics (a general enquiry into what is good) is an inescap-
falls under the responsibility of Chief of Marketing and able part of brand management. All marketing decisions
Sales, flat products and long products. They report to the and actions of distributors and dealers must be consistent
company Managing Director, Sri B Mutturaman. with the brand’s stated ethical intentions and in all such
3. Dealers: At TATA Steelium, retailers are called dealers. actions, ethical issues must be taken into account so that
They are appointed by the distributors as per company the actions are culturally good and there is no harmful ef-
guidelines. fect on customers, employees, company, other partners,
4. Cutters act as a service centre for steel coils. Here the coils the community and the world as a whole.
are decoiled, cut into specific sizes, sometimes silted and 6. In compensatory decision rule, the weakness of a distribu-
recoiled depending on the customer’s requirements. TATA tor on one attribute can be compensated for by strength on
STEEL encourages their distributors and major dealers to another, and the scores are summed up to determine the
install such facilities and beyond. highest scoring (most favourable) and the lowest scoring
5a. Marketing orientation is an organizational orientation that (most unfavourable) distributor.
centres its activities on achieving success by satisfying the
Kaushik Bhattacharya is a Ph.D candidate at the Vinod Gupta Biplab Datta, a Ph.D from the Indian Institute of Technology,
School of Management, Indian Institute of Technology, Delhi, is currently an Assistant Professor of Marketing at the
Kharagpur. He has over 15 years of experience in marketing Vinod Gupta School of Management, Indian Institute of Tech-
and sale of Indian steel industry. nology, Kharagpur. His teaching and research interests include
relationship marketing, customer relationship management,
e-mail: bhattacharya.kaushik.67@gmail.com brand management, consumer behaviour and e-business. He
has worked on various management projects and co-authored
several articles for Indian as well as international journals.
e-mail: bd@vgsom.iitkgp.ernet.in.