Tata Bluescope Ltd.

Avoiding the Commodity Trap

Challenges and analysis

Group 1
Ankur Garg (CGT19008)
Prabhat Kumar Singh (CGT19018)
Sakshi Sharma (CGT19024)
Sourabh Basu (CGT19027)
Sushil Kumar Tripathy (CGT19029)
 Agenda

• TBSL Journey Highlights

• Current Scenario and Target

• Challenges

• Strategy Evaluation

• Selection of an alternative

• Marketing mix and Solution

 Journey Highlights

• Presence in 7 countries, 12 sales offices & 5 manufacturing units

• Jamshedpur is one of the most sophisticated and automated plant of coated steel sheets

• 7 different brands across 3 business verticals by 2019

• Philosophy of Zero Harm to People, Plant and Environment

• Installed capacity of 2.5 L Tonnes per annum

• Current CAGR of 12%

 Current Scenario
Volume - Sales - EBIT-PBT
300
250
200
150
100
50
0
FY 11 FY 12 FY 13 FY 14 FY 15 FY 16 FY 17 FY 18 FY 19
-50
-100
-150
-200
EBIT (₹ Cr) PBT (₹ Cr) Volume (K MT) Revenue (₹ Cr/10)

▪ PBT became positive from FY16

*Source: Case Study

 Current Scenario
3 2500
Total Sales B2C B2B Revenue
2.5
2000
1969
2
1707
Lakhs Ton

1614 1500

Rs Cr
1438 1479
1.5 1326
1000
1 1005

500
0.5

0 0
FY13 FY14 FY15 FY16 FY17 FY18 FY19

▪ Increase in B2B sales has contributed in increase in total revenue over last seven years

*Source: Case Study

 Target

Projected Revenue (37% y-o-y growth)

6000
5,062.99
5000
Rs Cr

4000 3,695.62

3000 2,697.53
1,969.00
2000

1000

0
FY19 FY20 FY21 FY22
▪ 37.5% growth per year required to reach 5000 Cr revenue by 2022.

*Source: Case Study

 Challenges

Growth Scheme: No increase in Capacity

2500.00 2.51
B2C:B2B = 57:43 2.50 2.50 2.50
Premium in B2C is 35% 2.5
Premium in B2B approx. 17%
2000.00 2.49
2025.20
2.48
1500.00
1478.25 2.47
2.46
1000.00 2.45 1079.01
2.45
803.67 Revenue/Sales
500.00 2.44
Capacity (Lakh Tons) 2.43
0.00 2.42
FY19 FY20 FY21 FY22

▪ With same production capacity Revenue/Sales to be increased from 803.67 Rs Cr/Lakh Ton to 2025 Rs Cr/Lakh Ton

▪ With current premium on products, this target cannot be achieved

*Source: Case Study
 Challenges

Projection: CAGR B2B @ 7% and CAGR B2C @ 9%

3.5 2400
3.10
3 2.87 2,345.11 2300
2.65
2.45
2.5 2200
2,212.37
2 2100
2,087.14
1.5 2000

1 1,969.00 1900

0.5 1800
Total Sales B2C B2B Revenue
0 1700
FY19 FY20 FY21 FY22

▪ With increase in production capacity and with current market share, TBSL can reach up to Rs 2345 of revenue

▪ So, increase in market share is necessary to achieve target of 5000 Cr revenue

*Source: Case Study
 Prof. Jagdish Sheth’s idea of ‘Generalist’ and ‘Specialist’

▪ TBSL is in a dangerous position (near the ditch) with 10% market share

▪ TBSL cannot afford increase in market share by sacrificing premium

 Challenges

Limited Production Capacity (2.5 Lakh Ton)

Dilemma between Market Share and Premium product

Competition through 800+ Roll Formers in unorganized sector

Competition through other brands in organized sector

Information Asymmetry among buyers, domination of experts

 Evaluation of suggested strategies
Strategy Pros
Roofing sector is price driven
and user not well informed
The Nirma way about quality so, playing on
price will improve market
share
Organic growth is consistent
with philosophy and required
Slow and steady
for market growth.
wins the race
Quality consistency will be
maintained
Cons
• Loose chance to earn
premium on TATA brand and
production advantage
• Beyond certain point, price
will only help in increasing
market share but not profit.
• Slow growth will have
danger of missing the
opportunities of partnering
with
• Take more time to achieve
growth target (5 years in
place of 3 years )
Remarks
BlueScope volume is
limited by production

capacity, which cannot be
increase immediately and
requires huge capital
• Blue scope can partner
with roll forming in
markets far away from
manufacturing hub,
✓
ensuring price
competitiveness.
• Will have less roll
formers and hence
quality can be
controlled
 Evaluation of suggested strategies
Strategy Pros Cons Remarks
• Too many brands and prices
will cause feeling of • Since roofing and building solution is for
Create more
price points
This will
maximize
producer surplus
confusion to customer
• Lose on opportunity to
create premium brand and
long term so people might not buy cheaper
price option .
• Since BlueScope production capacity is

charge premium price limited so this strategy is not suited .

• Focused
market Focus on few niche opportunities to
• Risk is more
• increase brand awareness

✓
segment
Select the • Growth opportunity is
• Market where • Cater to expected high demand created due
niches limited
you have to initiatives like Swachch Bharat,
• Premium is less
quality affordable housing for poor
advantage
BlueScope should
• Create different brands for different

✓
Most effective if
segments, namely retail/project
HYBRID planned and Difficult to plan and execute
• Create different verticals for
executed properly
• warehouse solution
• small house /office/shop
 Chosen Alternative: HYBRID Model

Increasing Volume
▪ Collaborate with Roll Formers in markets far away from manufacturing hub, ensuring
price competitiveness.
Augmented
▪ Ensure Quality Control Product

Create a new market segment

▪ Creating new opportunities by moving to solutions model e.g., nest-in like solutions
Actual
Product
Core
Increase market share in the greater premium earning segment Product

▪ Analyze the market share of the premium generating segment and try to maximize
 Capture the market share of competitors

3. In the long run, maintain buyers

Buyer is 1 in Quadrant 2 by creating
2 perceived risk, this will maximize
more Brand has low
Brand has role role of brand.
informed role

2. BlueScope would like to

Buyer is 3 4 move from quadrant 3 to
less Brand has a Brand has a quadrant 4, by increasing
informed role role perceived risk to buyer

• Advertising Product quality

1. In current market, the buyer has features
less information so brand has Low High
perceived risk perceived risk • Comparison with competitors on
important role to play . We are in cost criteria while focussing on
quadrant 3. one-time cost
• Quality signalling -
marking/tagging on product like
hologram, barcode
• Creating experience centres
 Marketing mix- 4P’s

• Features: Rain
• Sales Promotion proof/Heat proof
• Advertising • Quality: best in
• Public Relations class
• Direct marketing
Promotion Product
• Branding:
• Packaging
• Services:
Marketing • Warranties
mix
• Channels
• Price strategy
• Market coverage
Place Price • Pricing
• Assortment
• Allowances
• Location
• Discounts
• Inventory
• Payment terms
• Transport
 Marketing mix- 4P’s

Product Target segment Product quality Place

Durashine • Residential • Rain proof • Distributor at each
• Small industries • Vibrant colour cities
• Small commercial project • Different sizes • Tying up with tata
• Tie up with nest in steel for distribution
network
Lysaght • Industrial and infrastructure • Rain proof • Direct
project • Low heat mass
• Long lasting
• One stop shop to get Re- • Pre-punched to aid faster erection
Roofing done on turnkey at site.
basis.i.e replacement of old • Saving of 40-60 % steel in
Asbestos/ steel sheets. comparison with Angle and
Channel
Zincalume Light pre • Low heat mass • Direct
(non coloured ) • Light pre engineered building
Colorbond Warehouse through eco-build • Low heat mass • Direct

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 Marketing mix- 4P’s
Product Price Promotion
Durashine • Premium price • Ad focus on tata name
• Discount through builders/architect • Model house in mela
• Experience centre
• Educate customer about quality through ,
television ad / newspaper
• Compare competition product
• Tie up with architected
• Tie up with builders and fabricator

Lysaght • Price/volume • Educate customer through seminars

• Tie-up with builders and project execution team
Zincalume Integrated solution Educate customer through seminars
(non colored )
Colorbond • Premium price • Educate customer through seminars
• Discount through builders/architect

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Thank You