Tata Steel

SWOT Analysis of Tata Steel

(Earlier known as Tata Iron & Steel Company up to 2005)

Contents:
1. Tata Steel - Company Overview
2. Tata Steel - Business Description
3. Tata Steel – History
4. Tata Steel - Major Products and
Services
5. SWOT Analysis – Overview
6. Tata Steel – Strengths
7. Tata Steel – Weaknesses
8. Tata Steel – Opportunities
9. Tata Steel – Threats
10. Conclusion

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1. Tata Steel - Company

Overview
Tata Steel has always believed that the principle of mutual benefit -
between countries, corporations, customers, employees and
communities - is the most effective route to profitable and
sustainable growth.

Established in 1907, Tata Steel is among the top ten global steel
companies with an annual crude steel capacity of over 28 million
tonnes per annum. 

The Tata Steel Group, with a turnover of US$ 26.13 billion in FY

2011- 2012, has over 81,000 employees across five continents and
is a Fortune 500 company.

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2. Tata Steel - Business

Description
Tata Steel formerly known as TISCO and Tata Iron and
Steel Company Limited, is the world's seventh largest
steel company, with an annual crude steel capacity of
31 million tonnes. It is the largest private sector steel
company in India in terms of domestic production.
Currently ranked 410th on Fortune Global 500, it is
based in Jamshedpur, Jharkhand, India. It is part of
Tata Group of companies. Tata Steel is also India's
second-largest and second-most profitable company in
private sector with consolidated revenues of Indian
Rupee .Its main plant is located in Jamshedpur,
Jharkhand, with its recent acquisitions; the company has
become a multinational with operations in various
countries. The registered office of Tata Steel is in
Mumbai. The company was also recognized as the
world's best steel producer by World Steel Dynamics in
2005.The company is listed on Bombay Stock Exchange
and National Stock Exchange of India, and employs
about 82,700 people (as of 2007)

Tata steel:-

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Our Vision and our values

Our vision is to be the global steel industry benchmark
for value creation and corporate citizenship.

Our brand
The Tata brand is highly respected throughout the world.

Organisation & management

Tata Steel Europe is part of the Tata Steel Group. The
day-to-day management of the company is conducted
through the Executive Committee.

Procurement
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Procurement objectives are dominated by ensuring the
best value for the company, whilst ensuring security of
supply.

3. Tata Steel – History

TISCO was established by Dorabji Tata August 26, 1907, as part of
his father Jamsetji 's Tata Group In year 1939, it had largest steel
plant in the British empire. A modernization and expansion program
was launched in year 1951.

The origins of Tata Steel, which has culminated

into the century long history of an industrial
empire, The story of Tata Steel is a century old.
And so is the story of steel in India. Etched with
the visions and hardships of a single man, the
story has flowed through ages to redefine steel in
every way. The saga, which started in 1907,
completes a century of trust in 2007. Over the
years this one company has exposed the various
shapes and forms in which steel can be applied for
effective utilization.
The story of Tata Steel: The leading Indian
intellectuals of the 19th century believed that if
India were to keep pace with the world it would
have to master the modern scientific methods of
the West. In these times was born Jamsetji

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Nusserwanji Tata. Within his lifetime, Jamsetji was
to witness the birth of a revolutionary Indian
nationalism that would assist in the emergence of
independent India, which he helped to create and
whose presence could already be felt when he
died in 1904.

4. Tata Steel - Major Products

and Services
Products
Tata steel offer a wide range of standard and
differentiated products for different and demanding
markets worldwide such as ultra-high strength steel
for Automotive, speciality steels for Aerospace and
ultra-high hardness steels for Defence & Security.
All Products:-

1. Cold rolled

2. Metallic coated

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3. Direct rolled

4. Narrow Strip

5. Pre-finished steels

6. Packaging steels

7. Plated steels

8. Electrical steel

9. Hot rolled

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10. Tube

11. Sections

12. Special profiles

13. Rail

14. Wire rod

15. Speciality steel &

products

16. Plates
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17. Floors

18. Walls

19. Roofs

20. Modular

21. Building component

22. Structural steelwork

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5. SWOT Analysis – Overview

A SWOT analysis focuses on the four elements of the
acronym, but the graphic format you use varies depending on
the depth and complexity of your effort.
The purpose of performing a SWOT is to reveal positive
forces that work together and potential problems that need to
be addressed or at least recognized. Before you conduct a
SWOT session, decide what format or layout you will use to
communicate these issues most clearly for you.
We will discuss the process of creating the analysis below, but
first here are a few sample layouts-ideas of what SWOT
analysis can look like.
INTERNAL EXTERNAL

Strengths Weaknesses Opportunities Threats

Positives Negatives

strengths weaknesses
assets limitations

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resources restrictions
opportunities threats
prospects challenges
 

6. Tata Steel – Strengths

1. Mineral Reserves -
 Tata Steel has two collieries in West Bokaro and Jharia,
in the state of Jharkhand.
 The iron ore units are located in Noamundi, Joda and
Katamandi in the states of Jharkhand and Orissa.
 These mines are located at an approximate distance of
150 kms from Jamshedpur; home to the steel company’s
manufacturing facility.
 The Steel Company's iron ore units produce 9 million
tons per annum of various grades of high quality iron ore
including rich blue dust ore. The company in India is
having mines of 281 million tonnes reserves in its mines
in Jharkhand.

2. Information Technology -
 The entire mining operation of the Company is
safeguarded against accident occurrence. Proactive
measures are undertaken to ensure the employee's health
and productivity through ergonomically designed work
stations and by protecting them from occupational
hazards.

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 . All its mines are ISO-14001 -Environmental
Management System Certified. Tata Steel's collieries use
'Surpass', a state-of-the-art mine planning software that
estimates the volume of coal in every seam.
 This software is coupled with qualitative detailing that
focuses on output consistency. To maximize productivity
and utilization, a voice and data equipped Global
Positioning System is used.

3. Management Team -
 Tata Steel has a highly credible management team who
has displayed their skills in expanding the company
through inorganic route.
 The company has successfully acquired Nat Steel of
Indonesia, Millennium Steel of Thailand and more
importantly Corus.
 The company’s virtuosos of finance have been able to
find innovative ways to tackle the company’s
bludgeoning debt and keep the bottom line in the green
zone despite lowering demand and huge debts
accumulated.

4. Innovativeness of TATA Steel with

respect to its competitors -
 Tata Steel has the lowest operating cost for steel
manufacture in the world.

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 Further it has displayed effective means in adopting an
eco-friendly and sustainable approach towards the
manufacture of steel.

5. Adaptability of the company in the fast

change of the environment –
 Tata Steel has displayed immense agility in the recent
past during the global financial tsunami.
 Its virtuosos of various fields have adopted various
methods like lowering of production and even shutting
down of steel plant sowing to the lack of demand,
managing the balance sheet efficiently etc.
 The company has 70% of its procurement of raw
materials for its operations in Asia through long term
contracts.

6. Brand value -
 The TATA brand owing to its highly ethical and a
socialistic approach to business have made its name
synonymous to trust. After the acquisition of Corus
another powerful brand, the brand value of the company
has enhanced further.

7. Corporate governance-
 Tata Steel has had impeccable record for corporate
governance. It has set the benchmark in global corporate

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governance principles of transparency, accountability
and equity for others to follow.
 Tata Steel has been consistently receiving prestigious
awards at both the national and the international arena.
 The Best Governed Company Award for corporate
practices presented by Asian Centre for Corporate
Governance.

8. Excellent integration with Corus–

 Corus has a great reserve of around2000 metallurgists
and technology which could be exploited by Tata Steel
on several fronts.

9. Excellent procurement philosophy-

 Tata Steel has around 70% of its supplies through long
term contracts. Thus it can be shielded from the volatility
of the financial markets.

10. Spawning upon opportunities-

 Tata Steel has been amongst the earliest to spot the
escalation in the demand for steel in the forth coming
years. It has hence invested heavily in the expansion of
its existing facility at Jamshedpur and is setting up other
green field projects at Orissa, Jharkhand etc.

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7. Tata Steel –Weaknesses

1. Huge debt burden
- Tata Steel is having a total debt of 10.2 billion USD in
its books. It has a debt equity ratio 0f 1.6 which means
that the assets of the company is largely financed
through debt.

2. High attrition rate

- Tata Steel has traditionally faced the brunt of high
attrition rate. In its Jamshedpur plant many engineers
constantly change their jobs to SAIL in Bokaro and
vice-versa. Thus the formation of a core team
of capable individuals across all departments is
very difficult as the size of the team is ever changing.

3. Products in the portfolio lacking

demand
- The company has certain products in its portfolio like
aerospace steel which lacked demand in the recent
past. Primarily due to the slow down of the aviation
sector which led to delay in the delivery of aircrafts as
a result of cutting of capacity by airlines. The company
also had certain Cast products largely marketing in
the UK which has been witnessing slowdown in demand
since 2001

4. Degradation in brand value

owing to job losses
-TATA group has made its name synonymous to job
security of it employees. But the shutdown of its plants

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in the UK and The Netherlands will dent its image to a
certain extent. As a result of which around 1600
employees would lose their daily livelihood.

5. Low cost recovery

– There are specific products like the aerospace
steel and cast products which has received feeble
response in the past. The company has failed to
recover costs in this business front.

6. Laggard in technological front

- Companies like SAIL has efficiently introduced the
XRF (X-Ray Fluorescence) in its plants at Durgapur and
Bokaro over 12 months back which the Tata Steel has
failed to do.

7. Bad raw material procurement

philosophy of its subsidiaries
- The largest subsidiary of Tata Steel,
Corus has high exposure to spot prices and
a higher operational gearing among the larger European
steel companies. Hence it has the risk of volatility
associated with pricing, one of the key elements
in determining profitability of a commodity company.

8. Tata Steel –Opportunities

1. Competitive position of the company-
 TataSteel is the second largest producer of steel in India and the sixth largest
producer in the world.

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2. Newer technologies –
i. The Codex process
Combines an iron meter/coal gas if vessel with a pre-reduction shaft to produce
a liquid product that is very similar to blast furnace hot metal. Coal, oxygen,
and pre-reduced iron are fed into the meter/gas to melt the iron and produce a
highly reducing off-gas.
ii. The His melt process
Iron reduction and coal gasification take place in a liquid metal bath. The
fundamental processes of HI smelt began with early experiments in Germany
with bottom-blown oxygen steel making converters (LD, LD-AC, KMS, among
others) to allow for coal, lime, and/or iron ore injection through the bottom
nozzles.
iii. Direct Iron Ore Smelting
(DIOS) process in Japan and the AISI direct steelmaking process in North
America produced two similar routes to hot metal production. Both processes
utilize a smelting reactor where the primary reactions occur in a deep slag bath
as opposed to in the metal phase.

3. Opportunities in the field-

 The Government of India has earmarked Rs.1, 70,000 crore
for infrastructural spending for the fiscal year 2010- 2011 and
the trend is set to escalate up to the fiscal year 2025 when
India is slated to become the third largest economy in the
world. Further many private players either independently or
by undergoing public private partnerships (PPP) has also
come into the fray. The consumption of steel has been steadily
increasing with the rapid investment in the infrastructure and
real estate projects. The annual steel production of India has
touched 200MT and according to governments steel policy is
expected to touch around 250 MT by 2013-2014. The demand
for Indian made steel is escalating overseas out of the 200
MT of steel currently produced in India around 50% of it is
exported. In the first six months of the fiscal year 2009-2010
the Indian steel export almost doubled to 9.3MT from 4.4MT
in the same period the previous fiscal year. The country’s iron

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ore exports during April-October 2009 period grew 20 per
cent over the year ago period to 53 million tons.

4. Acquisition opportunities -
In the aftermath of the financial tsunami various mineral
assets are available globally at a price which is just a shade of
their prime valuations. The government of various countries
has been putting up coal blocks under the hammer. Tata
Steel has been very active in the asset acquisition space and
has bagged various coal blocks in Asia, Africa etc. which is
essential for its security of raw materials.

5. Opportunities for demand of higher prices-

The demand for steel is on arise both domestically and internationally
as a result of the enhanced focus upon infrastructural development.
Secondly with other steel projects of international giants POSCO,
ARCELOR MITTAL stalled due to land acquisition problems
the prices of steel are slated to soar. In the month of April 2010 the
steel prices were increased by Rs.2500/ton and this is just the brink of
the U-Shaped economic recovery and the prices are slated to rise
further in the near future.

6. The movement of Tata Steel in the value chain front-

India is the only country in the world where steel can be made
cheaper and there is consumption. Then there are other countries like
Ukraine, Iran, Brazil, Australia and Bangladesh where steel can be
made cheap because of the availability of iron ore and coal. Tata Steel
has been to Iran, Ukraine, and Bangladesh - all in the last year and is
looking at China for finishing capabilities Ukraine is like India, where
the factors of production are competitive. The sustainable level of
demand in Ukraine is 12 million tons (MT), but one can make
much more steel because of the availability of ore. Secondly, the
labour is cheap in India.

9. Tata Steel –Threats

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1. Resources to cushion the from business environmental

change-
Tata Steel is a company floated by Tata Sons whose assets
are valued at around 108 billion USD and thus the company
has enough reserves to cushion itself from market
fluctuations.
2. International competition-
Companies like the Indian Steel magnate Lakshmi Mittal’s
Arcelor Mittal’s, Posco has landed in the shores of India and
have proposed to set up 8 MT and 12 MT respectively. These
are amongst the largest steel producers in the world and have
a high chance of eating into the market share of Tata Steel.
Indian market is also plagued with cheaper Chinese made
steel which is ubiquitously available and is significantly
munching through the pie of all Indian steel makers including
Tata Steel.
3. Financial Crises -
Tata Steel is having a huge debt of 10.2 billion USD in its
books and hence a huge interest burden. With the volatility of
the financial markets and the tightening of the liquidity by the
central banks this rate is slated to go up and hence would
further increase the interest burden of the company.
4. Adoptability of the company to technological changes –
Tata Steel has shown immense integration abilities in the
past. With the acquisition of it has been able to imbibe the

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high end technological knowledge to its production facilities
and hence has been able to produce high quality steel at least
prices and significantly bettered its operating margins.
5. Regulatory norms-
The government of India has chalked a strict norm for the
clearance of a plant through environmental impact assessment
(EIA). To get clearance from the concerned authority
demands more than eight months thus leads to delay and
project cost escalation. Albeit the governments’ steel policy
has been pro industry in order to increase the steel capacity at
a brisk pace.
6. Adverse effects of land acquisition picketing-
India is plagued with violent agitation against land
acquisition. The land acquisition process of the company’s
plant in Orissa has been stalled primarily due to the uprising
of the land losers in the concerned area. Albeit the company is
providing with attractive compensation packages, the uprising
is primarily due to the cheap politics of the local leaders to
come into the limelight. This will severely dent the company’s
expansion plans of the future.
7. Decrement in the sales volumes-
Some of the Tata Steel products (like aerospace steel) have
witnessed a severe reduction in sales and as a result of which
the production facilities of the company in the UK and The
Netherlands is facing the brunt of shut down.
8. Brand equity of the products-

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Tata Steel brand is a very powerful one, can only take a
product very far. Beyond that it will be necessary for the
Product to strike ahead with its own brand. He says, "A
villager who goes to buy steel in the marketplace does not
know what Tata Steel is bringing to this steel. All he knows is
that it is a Tata product." That villager needs to be told about
the superiority of Tata Steel’s product over others. This is the
work of the brand. Branding has begun to yield rich
dividends. Last year Tata Steel sold about 345,000 tons of
branded steel,

10. Tata Steel-Conclusion

Tata Steel has shown that it is committed to
sustainable and environmental practices as part
of its overall aim to act responsibly. It shows
commitment and progress towards key targets
of sustainability as well as encouraging
sustainable decision-making in its customers
and within their markets.
The key to the success of this approach is to
recognise the unique properties of steel as a
recyclable material and to ensure that
measurements of sustainability are taken over
the entire life cycle of a product, not just the
use-phase.

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