BUSINESS STRATEGY AND COMPETITVE

ADVANTAGE

COMPONENT 1 REPORT

TATA STEEL
 ABOUT TATA STEEL

Tata Steel Limited is an Indian multinational steel-making company headquartered in Mumbai,

Maharashtra, India, and a subsidiary of the Tata Group.

It is one of the top steel producing companies globally with annual crude steel deliveries of 27.5
million tonnes (in FY17), and the second largest steel company in India (measured by domestic
production) with an annual capacity of 13 million tonnes after SAIL.

Tata Steel has manufacturing operations in 26 countries, including Australia, China, India, the
Netherlands, Singapore, Thailand and the United Kingdom, and employs around 80,500 people.
Its largest plant located in Jamshedpur, Jharkhand. In 2007 Tata Steel acquired the UK-based
steel maker Corus.

It was ranked 486th in the 2014 Fortune Global 500 ranking of the world's biggest corporations.
It was the seventh most valuable Indian brand of 2013 as per Brand Finance.

Founded by Jamsetji Tata and established by Dorabji Tata on 26 August 1907, the company
began producing steel in 1912 as a branch of Jamsetji's Tata Group. By 1939, it operated the
largest steel plant in the British Empire. The company launched a major modernization and
expansion program in 1951. Later, in 1958, the program was upgraded to 2 million metric tonnes
per annum (MTPA) project. By 1970, the company employed around 40,000 people at
Jamshedpur, and a further 20,000 in the neighbouring coal mines. In 1971 and 1979, there were
unsuccessful attempts to nationalise the company. In 1990, the company began to expand, and
established its subsidiary, Tata Inc., in New York. The company changed its name from TISCO
to Tata Steel Ltd. in 2005.

Tata Steel on Thursday, 12 February 2015 announced buying three strip product services centres
in Sweden, Finland and Norway from SSAB to strengthen its offering in Nordic region. The
company, however, did not disclose the value of the transactions.

In September 2017, ThyssenKrupp of Germany and Tata Steel announced plans to combine their
European steel-making businesses. The deal will structure the European assets as Thyssenkrupp
Tata Steel, an equal joint venture. The announcement estimated that the company would be
Europe’s second-largest steelmaker, and listed future headquarters in Amsterdam.

MISSION

Consistent with the vision and values of the founder Jamsetji Tata, Tata Steel strives to
strengthen India’s industrial base through effective utilization of staff and materials. The
means envisaged to achieve this are cutting edge technology and high productivity,
consistent with modern management practices.

Tata Steel recognizes that while honesty and integrity are essential ingredients of a
strong and stable enterprise, profitability provides the main spark for economic activity.

Overall, the Company seeks to scale the heights of excellence in all it does in an
atmosphere free from fear, and thereby reaffirms its faith in democratic values.

Vision :- We aspire to be the global steel industry benchmark for Value Creation and
Corporate Citizenship.

SWOT Analysis of Tata Steel

STRENGTHS

Market Position: Tata Steel is one of the largest steel manufacturers in the world and
world’s second most geographically diversified steel producer. It has the strong
presence in Asia-pacific and Europe.

Diversified Product Portfolio: Tata Steel has a wide range of products ranging from flat
steel products, agricultural implements, construction products and much more. A
diversified product portfolio ensures revenue flow from different markets around the
world.

Trust of TATA: Tata is one of the most trusted and respected brands not only in India
but all over the world. The association of the name provides immense brand equity to
the company.
Integrated operations in India: The whole process of extraction from mines and ores
to producing finished steel material is integrated in India. The integrated operations
save a lot of time and cost and also maintain the required quality.

Global footprint: Tata Steel has the presence in over 50 countries with operations in
over 26 countries which increase its market penetration and share.

WEAKNESS

Mistry fiasco has hurt the image: The fallout between Ratan Tata and Cyrus Mistry
has had an adverse impact on the image of the Tata group which also translates to Tata
Steel.

Over dependence on Europe: Over 50 percent of Tata Steel’s business comes from
Europe and thus any economic slowdown in the Europe affects Tata Steel’s revenues.

Disintegrated operations in Europe: Although Tata Steel’s operations in India are

integrated; its operations in Europe are disintegrated and hence are dependent on
various other suppliers. This affects control on quality an increased costs.

OPPORTUNITY

Increasing demand for steel in India: The steel market in India is expected to grow in
the next 4 years due to the growth in the construction industry and manufacturing
facilities in India. This will certainly benefit Tata Steel.

Adapt newer technologies: Tata Steel lags behind its competitors in

the technologyfront and has an opportunity to adopt newer technologies such as the
Cortex process,melt process etc.

Growing manufacturing, construction and automotive industry around the

world:Growth in manufacturing, construction and automotive industry in the future will
drive the growth in the steel industry and Tata Steel is set to benefit from it.

THREATS

Intense competition: Tata Steel faces stiff competition from industry giants such as
JSW Steel, Essar Steel, and ArcelorMittal etc. This reduces its market share around the
world.
Government and Environmental regulations: Tata Steel is subjected to stringent
governmental and environmental regulations in mining as well as production. This
increases compliance costs for the company.

Decreasing global steel prices: Excess steel production in China meant that it
supplied steel cheaper to the world which forced the process to lower down throughout
the world.

Porter’s Value Chain Analysis

The value chain also known as Porter’s Value Chain Analysis is a business
management concept that was developed by Michael Porter. In his book Competitive
Advantage (1985), Michael Porter explains Value Chain Analysis; that a value chain is a
collection of activities that are performed by a company to create value for its
customers. Value Creation creates added value which leads to competitive advantage.
Ultimately, added value also creates a higher profitability for an organization.

The strength of the Porter’s Value Chain Analysis is its approach. The Porter’s Value
Chain Analysis focuses on the systems and activities with customers as the central
principle rather than on departments and accounting expense categories. This system
links systems and activities to each other and demonstrates what effect this has on
costs and profit. Consequently, it (Value Chain Analysis) makes clear where the
sources of value and loss amounts can be found in the organization.
Porter’s Value Chain Analysis consists of a number of activities, namely primary
activities and support activities. Primary activities have an immediate effect on the
production, maintenance, sales and support of the products or services to be supplied.
These activities consist of the following elements:

Inbound Logistics

These are all processes that are involved in the receiving, storing, and internal
distribution of the raw materials or basic ingredients of a product or service. The
relationship with the suppliers is essential to the creation of value in this matter.

Production

These are all the activities (for example production floor or production line) that convert
inputs of products or services into semi-finished or finished products. Operational
systems are the guiding principle for the creation of value.
Outbound logistics

These are all activities that are related to delivering the products and services to the
customer. These include, for instance, storage, distribution (systems) and transport.

Marketing and Sales

These are all processes related to putting the products and services in the markets
including managing and generating customer relationships. The guiding principles are
setting oneself apart from the competition and creating advantages for the customer.

Service

This includes all activities that maintain the value of the products or service to
customers as soon as a relationship has developed based on the procurement of
services and products. The Service Profit Chain Model is an alternative model, specific
designed for service management and organizational growth.

Support activities of the Value Chain Analysis

Support activities within the Porter’s Value Chain Analysis assist the primary activities
and they form the basis of any organization. In the figure dotted lines represent linkages
between a support activity and a primary activity. A support activity such as human
resource management for example is of importance within the primary activity operation
but also supports other activities such as service and outbound logistics.

Firm infrastructure

This concerns the support activities within the organization that enable the organization
to maintain its daily operations. Line management, administrative handling, financial
management are examples of activities that create value for the organization.
Human resource management

This includes the support activities in which the development of the workforce within an
organization is the key element. Examples of activities are recruiting staff, training and
coaching of staff and compensating and retaining staff.

Technology development

These activities relate to the development of the products and services of the
organization, both internally and externally. Examples are IT, technological innovations
and improvements and the development of new products based on new technologies.
These activities create value using innovation and optimization.

Procurement

These are all the support activities related to procurement to service the customer from
the organization. Examples of activities are entering into and managing relationships
with suppliers, negotiating to arrive at the best prices, making product purchase
agreements with suppliers and outsourcing agreements. Organizations use primary and
support activities as building blocks to create valuable products, services and
distinctiveness.

PESTAL Analysis

Political

1. As part of their business expansion, Tata Steel made some high risk investments in
countries such as Bangladesh, Iran. E.g. the plan set up in the Bangladesh is getting
delayed by the question of gas supply, whereas the issue of lease of the mining of the
iron ore in the Iran country is responsible for the increase in the cost of the production.

2. By improving the infrastructure of the country, Tata Steel and other steel companies
can save some amount, as they spend huge amounts on the freight and transportation.
3. There are no quantitative restrictions on import of iron and steel items. The only
mechanism regulating the imports is the tariff mechanism .Advance Licensing Scheme
allows duty free import of raw materials for exports. Iron and Steel industry has been
included in the list of `high priority' industries for automatic approval for foreign equity
investment up to 100%. Price and distribution of steel were deregulated from January
1992.

4. The government acts as a resource allocator (the mining policies of the Government),
as Competitor (the public sector steel companies) and as Regulator to TATA Steel.

Economic

1. Due to the subprime crisis in US, European markets faced the problems of the
recession this creates the bad impact on the Tata steel as the Netherlands, United
Kingdom and Germany are the main markets for the CORUS.

2. Steel industry may got affected because of the cyclical economic condition because
many industries like automobiles, appliances and construction depends on the steel
industry and if industries faces any kind of downturn in the economy Tata steel also may
also face the losses .

3. Steel production process are completely dependent on the energy market which can
affect the Tata steel in the economic manner. With the acquisition of CORUS company
gained the growth prospective in nature but, the cost of acquisition goes beyond the
financial expectations.

4. The Government introduced ‘Special Economic Zones’ (SEZ) in June 2005, with the
aim of creating competitive economic regions. TATA Steel plants in the SEZs are not
subject to restrictive normal laws for the purpose of export operations and also receive
additional advantages including tax holidays. Freedom to source inputs domestically or
externally without any specific approval or duty payable and sales tax reimbursement on
domestic purchases.
Socio-Cultural

1. Tata Steel got awarded for the commitments in the business ethical behaviour and
improving the lives of the employees and their families. For this purpose Tata steel got
awarded by the GOLDEN PEACOCK GLOBAL AWARD.

2. Tata Steel also focused to create the social environment. They constantly made the
improvements in the health issues, economic wellbeing and education facilities provided
to the nation. This policy works out in near 800 villages in Jharkhand .Orissa and
Chhattisgarh.

3. Hospital on wheels is the basic innovation of the Tata’s whereas Tata is also
responsible for the habitation in slum areas in urban developing cities.

4. ‘Operation Muskaan’, a project initiated by Tata Steel, under which hundreds of

people born with cleft lips or cleft palates were operated for free of cost.

Technological

1. ‘METAL JUNCTION’, an e-portal system started by Tata Steelwhich is helpful for not
only to Tata steel but also to entire industry. With the help of this technology e-market is
the biggest market for the purchasing and selling of the steel in the world.

2. To reduce the emission of the co2 in the environment Tata steel has invested hugely
with the research of the ultra-low carbon steel.

3. Tata is also engaged with the objective of the energy conservation schemes where
Tata is doing research to reduce the energy consumption in the production process.

4. Captive iron ore is one of the biggest competitive advantages of Tata Steel. But this
raw material has phosphorus content at .080 per cent, which is not acceptable by many
buyers. By changing the converter blowing regime, bottom injection practice, and the
lance geometry, Tata Steel took the level down in stages, thus using technological
innovation to build on the competitive advantage.
Environmental

1. The Dhamra port is the joint venture of the Larsen & Toubro and Tata Steel, which
came into existence for the protection of the Olive Ridley sea Turtles. Dhamra port is
also supporting for the saving in the saltwater crocodiles as well as it is contributing the
help to save the wildlife in India. It is also providing the breeding grounds for the horse
shoe crabs and other rare species of the reptiles and amphibians.

2. TATA steel aims to reduce CO2 emission from 1.8 to 1.5 tonnes per tonne of liquid
steel (9%) by 2012, under its global initiative called eco-citizen.

3. The Company raises 400,000 saplings every year across various locations and it
involves the local community in this process of sapling plantation in the area. Tata Steel
Rural Development Society (TSRDS) has created and supported many ‘Save Forest
Groups' in Noamundi and Joda, to safeguard existing forestland. TSRDS has
encouraged local people to protect the forest as a valuable sustainable resource.

Legal

1. Tata Steel, with its captive mines in Orissa and Jharkhand meet its entire requirement
of iron ore and 65 per cent of its coal needs.

2. Mines and Minerals (Regulation and Development and Regulation) Bill, 2010,
requires mining companies to share 26% of its profit with local inhabitants. Royalties
accounted for 3.4 per cent of Tata Steel's stand-alone expenses last year. The new
charges could account for nine per cent of their total expenditure and cost them 5-6 per
cent of their operating profits.

3. Tata steel ensures the EHS (Environmental health and safety) under which each and
every employee’s activity is managed by the EHS framework.

4. Unstable government in Jharkhand and various tribal protestors are creating some
legal issues for the Tata steel to set up 12 MTPA green field plant.