Achieving High Performance

Through Integration
Tata Steel Wires Business
July 2010

© 2010 Hay Group. All Rights Reserved

 Overview of the integration journey

• TSL acquires a majority stake in SSL to enable Wires Business’ presence across the region
downstream value creation
1984

• SSL merges with TSL to enhance both upstream and Company: Wuxi Jinang Metal
Products Co
downstream value creation, leverage TSL’s brand Product: PC Strand, PC Wire, PHC
2002 strength to fuel to growth plans and avoid tax liabilities Company: Tata Wires Division Bar, PE Unbonded Strand,
Product: Tyre, Spring, Spoke, Capacity: 82,000 MT
LRPC, PC Wire, Cable Amour,
ACSR, Card Clothing,
Galvanized, Welding
• Creation of growth story for the wires business. Capacity: 240,000 MT
Consolidation drive in wires business to increase pan-
2002 - India market share e.g. ISWP acquisition in Jamshedpur. Company: Siam Industrial
2004 Wire
Product: PC Strand, PC Wire,
PE Extruded, Wire Mesh, Cold
Drawn
• Foray into overseas markets through acquisition of Sri Capacity: 153,000 MT
Lankan steel manufacturer which had 70% market share.
Company: Lanka Special
Growth strategy and business plans (of LSSL) were
2004 aligned to India.
Steels Limited
Product: GI Wire
Capacity : 7,000 MT

Strategic priorities for integration

• Acquisition of NatSteel but the acquired entities were
still being managed independently
2005
• Global Wires Business formally announced. The wire
manufacturing units were carved out as a separate
2006 - virtual entity within TSL and all entities would report into
2008 the EIC GWB in a formal manner
• Growth story of the Steel and Wires business was different and
focus on the wires business was getting diluted in the larger
scheme of things
• Removal of competition between entities by clearly demarcating
markets thus leading to enhanced focus on increasing the footprint
of the wires business
• Sharing best practices in production and processes to enhance
operational efficiency
• Rationalization in the overall logistics cost by exploiting the
geographic benefits of each unit

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GWB has developed a robust structure and coordination
mechanism to create value through integration

Business reporting Tata Steel Ltd

structure of GWB Governance Structure
• The Global Wires Business is a virtual entity within the
NatSteel Asia Tata Steel organization i.e. it is an integration of entities in
similar businesses and serves as the corporate centre for
Global Wires the integrated business
Business
• From a business reporting perspective, the MD of each
unit reports into the Executive In-Charge of GWB who is
ultimately head accountable for the overall performance of
LSSL – Sri Wire Division SIW Thailand WJMP China the business
Lanka India • MDs of each unit are also fully responsible for the
performance of their own units
• From a functional perspective, the GWB consists of Heads
Functional reporting of various functions i.e. Marketing, Production, Logistics
EIC - GWB
structure of GWB etc
• These GWB function heads are the existing function heads
in the units and therefore have a dual reporting
Head Logistics Head Marketing Head Head Other
relationship - to the MD of the Unit and the EIC of GWB.
Production
Eg. Head BD of GWB also serves as the Head of BD for the
Indian unit
MD LSSL MD Wires MD SIW MD WJMP • The GWB function head is responsible for resolving all
Division conflicts in the function, regular conducting review
meetings and spreading best practices across all the units
Head Logistics Head Logistics Head Logistics Head Logistics Coordination Mechanism
• GWB function heads regularly undertake review meetings
Head Marketing Head Marketing Head Marketing Head Marketing (annual and monthly) to assess function performance
• GWB function heads also serve as the final decision making
authority for their function in the event of conflict
Head Others Head Others Head Others Head Others
• Regularly inter-unit development projects are undertaken to
ensure collaboration, knowledge transfer and cross cultural
sensitization 3
© 2010 Hay Group. All Rights Reserved
 How integration has changed the way Wires Business
operates

Markets Units

ANZ • Each market is served by multiple units depending on pre-defined factors thus ensuring value
maximization

Marketing
North America China

UK & EU
• Although branding is still different for each unit, for each market there exists a single point of
contact for the customer for all the units. The corporate takes the final decision on who will
Middle East & Africa Thailand
service the contract on the basis of pre-defined criteria
ASEAN
• While inter-unit conflicts are discussed in the review meetings to arrive at an amicable solution,
South East Asia India
GWB serves as the final decision making authority
India

Auto Constru Power Retail • Integration has led to the sharing of best practices and processes across the region. GWB
ction
Manufacturing

benchmarks the various processes which is then implemented across all the units to enhance
India √ √ √ √ productivity e.g. replicating Thailand’s maintenance practices across units to increase machine
uptime
Thail √ • Units are better placed to negotiate with equipment manufacturers and get hands on experience
and at another unit even before the machinery is delivered at their own unit. E.g. Knowledge of
Srila √ existing issues in the Thailand plant with the same equipment led to a better negotiation for the
nka same equipment for the Tarapur plant.
• Manufacturing heads also meet yearly to undertake joint projects thus enhancing collaboration
across all the units
Logistics

• There is review forum for procurement and logistics which undertakes initiatives to optimize
logistic costs e.g. Indian unit now serves the Middle Eastern market (instead of China) because of a
lower freight cost.
• Restructuring manufacturing capacity from west to east to significantly reduce logistics costs and
serve customer on a pan-India basis

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Impact of integration on the business value chain

Integration has had a value creating impact across almost all the elements of Global Wires
Business’ value chain

Integration has led to the Integration has allowed the sharing of best Integration has led to stocking points being serviced by
formation of a well defined practices in production and R&D across the multiple units on the basis of pre-defined arrangements
and cost effective region. Benchmark processes and practices thus enabling GWB to reliable customer service and
procurement strategy. For are applied uniformly to reduce overall maximize group level profitability
e.g. SIW procures either from production costs and improve efficiency.
China or Tata Steel Thailand E.g. reduction in wire loading time through
depending on the market it adoption of Chinese wireloading technique.
services

Wires
Billets Wirerods PC Strand Stocking Points Sales
manufacturing

Because of integration, GWB has been able to optimize

its logistics costs. Freight cost is a very significant cost Integration has enabled GWB to compress its sales
element in the value chain; India now services the Middle structure. Currently, there is only 1 sales representative
East market and SIW services the Australian market per geography taking orders for all the 4 entities rather
because of a low logistics cost for the former and a FTA than 1 individual per entity.
Freight costs and
duties as agreement for the latter.
applicable

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© 2010 Hay Group. All Rights Reserved
The positive impact of integration
Marketing/ Finance
“Regional MDs have the option
to refuse an order if it is not
profitable. Also, all financial
and sales related conflicts are
openly discussed and resolved
in the review meetings”
Marketing/ Finance
“Integration has given the
smaller entities the financial
strength and expertise of our
steel business to expand the
product portfolio, assimilate
technology better and enhance
their market share through
better channel management”
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Finance
“SSL was suffering financially
and another unit had cash
surplus which it wanted to
park profitably. We ensured
that this surplus of the latter
was provided to SSL thus
rescuing the former and
creating value for the latter.”
Culture
“Indian managers are excellent
long term planners and their
Chinese counter parts are
excellent at short term
planning. We now leverage
both of them to achieve both
long and short term
objectives”
Logistics
“It is cheaper to service some
Indian stocking points from
Thailand through the sea
route. We can consider this
option because we are an
integrated organization”
Strategy
“Integration has led to the
alignment and harmonization
of the business plans and
strategy of all the units with
the Global Wires Business
thus enabling us to service
ourcustomers better”
Strategy/ Marketing
“NatSteel China and Thailand
were not collaborating and
were competing for the same
customers. Integration allowed
us to harmonize relations and
ensure that both the units
leverage their unique
strengths to serve different
markets”
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