2.

Tata Steel wanted to de-commoditize steel and make it less vulnerable to swings in the
business cycle? Do you think the company’s branding initiatives would help it achieve this
objective? Explain with reasons.

Sol: I completely agree that the effort of Tata Steel to de-commoditize steel and make it less
vulnerable to the swings in the business cycle served its purpose. The company took the step of
branding its products to help this objective. It is clearly given in the case that Tata Steels 80% of
the sales was due to its large business customer’s i.e. B2B. The rest 20% was from the B2C
customers.

It is known that the segment that is most effected due to business cycles like recessions &
depression is the end consumers which is B2C sales. Tata steel wanted to increase its B2C sale
from 20% to higher volumes. The company also wanted less vulnerability to the business cycles.
As a resulted it adopted Branding Strategy to differentiate its products from the others.

Explanation:

Let us first consider a boom in the steel industry (a stage in the business cycle).Now we
know that through branding the company was able to differentiate its products and cater to
different segments of the market. It would also help the in premium pricing. Hence in the
booming market the demand for steel is more than the supply and the company with its different
brand portfolio can easily make use of premium pricing and earn more profits.

During recession the supply of the product is usually more than the demand. Same is the
case with steel industry where there is excess supply of steel during recession. More number of
players tries trapping the limited demand in the market. During that time if the company has an
associated Brand value then it will be easier for them to gain that market share.

Tata steels B2B market was more concerned about the quality of the product. Its
industrial customers include Maruti, Telco & Ford who have technical knowledge of steel and
buy products on the bases of quality and service value. According to company sources, the B2B
customers were usually in a position to discuss about the specifications and advantages of using
different grades of steel, forcing the company to focus on product quality. Hence branding will
not directly affect the B2B Market. But when we consider a recession say in a particular industry
(Real Estate) . Now due to low demand the consumption of steel decreases due to decrease in
Housing construction. Even in this scenario since the Tata steel is a big brand the few consumers
will specify the builders to use Tata steel in the construction which will differentiate it from the
other suppliers. Hence branding makes difference during the business cycles even in B2B
scenario.