Tata Steel

Tata Steel

Type

Public

Traded as

BSE: 500470 BSE SENSEX Constituent

Industry

Steel

Founded

1907

Founder(s)

Dorabji Tata

[1] Headquarters Mumbai, Maharashtra, India

Area served

Worldwide

B Muthuraman Key people (Vice Chairman) Hermant M. Nerurkar (MD)

Products

Steel, flat steel products, long steel products, wire products, plates US$ 26.06 billion (2011)[2] US$ 1.97 billion (2011)[2]

Revenue

Profit

Total assets

US$ 30.38 billion (2011)[2] US$ 7.97 billion (2011)[2] 81,251 (2011)[2]

Total equity

Employees

Parent

Tata Group

Subsidiaries

Tata Steel Europe

Website

www.tatasteel.com

INTRODUCTION
Tata Steel Limited (BSE: 500470) (formerly TISCO and Tata Iron and Steel Company Limited) is a multinational steel company headquartered in Mumbai, India and subsidiary of Tata Group. It is the tenth-largest steel producing company in the world, with an annual crude steel capacity of 23.5 million tonnes, and the largest private-sector steel company in India measured by domestic production.[3] Tata Steel is also India's second largest and second-most profitable private-sector company, with consolidated revenues of $26 billion and net profit of over $1.9 billion in the year ended March 31, 2011.[4][5] Tata Steel is the eighth most-valuable Indian brand according to an annual survey conducted by Brand Finance and The Economic Times in 2010.[6] It is currently ranked 410th in the Fortune Global 500.[7][8] It has also been listed as World's most ethical companies by Forbes.[9] Tata Steel's largest 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.[10] The company is listed on Bombay Stock Exchange and National Stock Exchange of India, and employs about 80,000 people.[11][12] In August 2007 Tata Steel won the bid to acquire the UK-based steel maker Corus in what was, to date, the largest international acquisition by an Indian company. It made the Tata Group the world's fifth largest steel maker, and catapulted them to the global league.[13]
Tata Steel is a Private Sector Organisation that offers services in Iron and Steel with Annual Total Turnover of 5000+ Crs and with Employee Strength of 5001 & above.

History
TISCo was established by Jamsetji Tata in year 1907.[14]In year 1939, it had largest steel plant in the British empire. A modernization and expansion program was launched in year 1951. Later, the program was upgraded to 2 MTPA project. In 1990, it started expansion plan and established its subsidiary Tata Inc. in New York.[15] The company changed its name TISCO to Tata Steel in year 2005. layoffs.[16]

[edit] Global Network

Tata steel has presence in 50 countries with manufacturing operations in 26 countries. It has manufacturing operations in these locations:[17]
[edit] Asia

India malaysia Vietnam Thailand Oman

All through Acquisitions route.

Africa

Ivory coast Mozambique South Africa

Australia

Central Queensland

North America

Canada

Europe

United Kingdom The Netherlands France

Capacity Expansion
Acquisitions Corus
Main article: Tata Corus acquisition

On 20 October 2006, TISCO signed a deal with Anglo-Dutch company, Corus On 19 November 2006, the Brazilian steel company Companhia Siderrgica Nacional (CSN) launched a counter offer for Corus at 475 pence per share, valuing it at 4.5billion. On 11 December 2006, Tata preemptively upped the offer to 500 pence, which was within hours trumped by CSN's offer of 515 pence per share, valuing the deal at 4.9 billion. The Corus board promptly recommended both the revised offers to its shareholders. Wikinews has related news: Steel Industry: Tata buys Corus

On 31 January 2007 Tata Steel won their bid for Corus after offering 608 pence per share, valuing Corus at 6.7 billion.

Other acquisitions

In August 2004, Tata Steel entered into definitive agreements with Singapore based NatSteel Ltd to acquire its steel business for Singapore $486.4 million (approximately Rs 1,313 crore) in an all cash transaction. In 2005, Tata Steel acquired 40% Stake in Millennium Steel in Thailand for $130 million (approx. Rs 600 crore). In 2007 Tata Steel through its wholly owned Singapore subsidiary, NatSteel Asia Pte Ltd acquired controlling stake in two rolling mills: SSE Steel Ltd, Vinausteel Ltd located in Vietnam.

Greenfield and Brownfield Projects

Tata Steel has set an ambitious target to achieve a capacity of 100 million tons by 2015. Managing Director B. Muthuraman stated that of the 100 million tonne, Tata Steel is planning a 50-50 balance between Greenfield facilities and acquisitions.[18][19]

Overseas acquisitions have already added up to 21.4 million tonne, which includes Corus production at 18.2 million tonne, Natsteel production at two million tonne and Millennium Steel production at 1.2 million tonne. Tata is looking to add another 29 million tonnes through the acquisition route.[18][19] Tata Steel has lined up a series of greenfield projects in India and outside which includes[18]

1. 6 million tonne plant in Orissa, India: Tata steel is setting up 6 million tonne per annum capacity plant at Kalinganagar.[20] 2. 10 million tonne in Jharkhand, India: The capacity of Jamshedpur steel plant has already been increased to 6.8 MTPA. It is expected that its capacity will increase by 10 MPTA in near future.[21] 3. 5 million tonne in Chhattisgarh, India:Tata steel signed MOU with Chhattisgarh government in 2005 for setting up 5 MTPA plant. But, it is facing strong protest from tribal people.[22] 4. 3-million tonne plant in Iran 5. 2.4-million tonne plant in Bangladesh 6. 10.5 million tonne plant in Vietnam (feasibility studies underway)

Key Market Sectors

Tata steel serves customers in these market sectors globally:[23]

Automotive Construction Consumer goods Engineering Packaging Lifting and Excavation Energy and Power Aerospace Shipbuilding Rail Defence and Security

Competitors
Competitors of Tata Steel are ArcelorMittal, Essar steel, JSW steel, SAIL, VISA steel etc.[24]

Controversies
The company is facing increasing criticism that the drive for growth and profits is completely overshadowing its once famed philanthropy, and causing lasting social and environmental damage at various locations.[25] In response, Tata cites its programs for environment and resource conservation, including reduction in greenhouse emission, raw materials and water consumption. The company has increased waste re-use and re-cycling, and reclaims land at its captive mines and collieries through forestation. Tata Steel's chief, environment and occupational health, says, "Our capital investment in pollution-abatement solutions was in the vicinity of 4 billion in 2003-04."[26]
Dhamra Port

The Dhamra Port, a Joint Venture between Larsen & Toubro and Tata Steel, has come in for criticism from groups such as Greenpeace, Wildlife Protection Society of India and the Orissa Traditional Fish workers' Union. The port is being built within five kilometres of the

Bhitarkanika National Park, a Ramsar wetland of international importance, home to an impressive diversity of mangrove species, saltwater crocodiles and an array of avian species. The port will also be approximately 15 km. from the turtle nesting of Gahirmatha Beach, and turtles are also found immediately adjoining the port site. Aside from potential impacts on nesting and feeding grounds of the turtles, the mudflats of the port site itself are breeding grounds for horseshoe crabs as well as rare species of reptiles and amphibians. One such species, the amphibian Fejervarya cancrivora, is the first record for the Indian mainland.[27][28]

SWOTAnalysis of Tata Steel

Earlier known as Tata Iron & Steel Company upto 2005 Strengths of TATA STEEL: 1.Mineral Reserves Tata Steel has two collieries i n 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. Tata Steel Limited also has a manganese mines and dolomite quarries in 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 tones reserves in its mines in Jharkhand and thus having minerals to cater its needs for more than 20 years. The company has also been acquiring stake overseas in Canada, Mozambique, Australia etc. to boast its reserves for clean coking coal which is rarely available in India. 2.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 companys virtuosos of finance have been able to find innovative ways to tackle the companys bulgeoning debt and keep the bottom line in the green zone despite lowering demand and huge debts accumulated. 3.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. All its mines are ISO-14001 -Environmental Management System Certified. Tata Steel's collieries use 'Surpac', 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, which helps to supervise mining activity for machine movement and engine status. 4. Innovativeness of TATA Steel with respect to its competitors - Tata Steel has the lowest operating cost for steel manufacture in the world. Further it has displayed effective means in adopting an eco-friendly and sustainable approach towards the manufacture of steel thus proactive measures are undertaken to ensure the employee's health and productivity through ergonomically designed work stations and by protecting them from occupational hazards. 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 plants owing 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 and so its margins can be shielded from the nuances of the volatility of the financial markets. 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 an impeccable record for corporate governance. It has set the benchmark in global corporate 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. Recently it bagged 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 forthcoming 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.

Weaknesses of TATA Steel1.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. With the inflation on a rise the central banks of most all the countries are intending to tighten in the liquidity in the money markets. As a result of which the interest rates are on a rise. In India the banks are mulling the option of a rate hike and most analysts feel that the RBI is going to increase the repo rate by almost 100 bps further after a CRR hike of 75 bps in late February this year. Thus it would add to the interest burden of the company which would further increase the liabilities of the company and thus degrade the quality of its balance sheet further. 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 viceversa. 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 demandThe 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. Hence the company had to close down its Tee Side plant. 4.Degradation in brand value owing to job lossesTATA group has made its name synonymous to job security of it employees. But the shutdown of its plants 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 subsidiariesThe 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.

Opportunities
1. Competitive position of the companyTata Steel is the second largest producer of steel in India and the sixth largest producer in the world. 2. Newer technologies i) The Corex process combines an iron melter/coal gasifier vessel with a pre-reduction shaft to produce a liquid product that is very similar toblast furnace hot metal. Coal, oxygen, and prereduced iron are fed into the melter/gasifier to melt the iron and produce a highly reducing off-gas. ii) The HIsmelt process Iron reduction and coal gasification take place in a liquid metal bath. The fundamental processes of HIsmelt began with early experiments in Germany with bottom-blown oxygen steelmaking 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 fieldIndia has geared up for rapid expansion in the field of infrastructure. The Government of India (GoI) 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 countrys iron 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, 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 labor is cheap in India and so is the cost of energy . Hence, Tata Steel's strategy is based on breaking up this value chain and putting each part where it's the most cost-effective. So primary steel will be produced in India, where there are large deposits of iron ore. But the Asian markets, now a key focus for Tata Steel, will be better addressed by taking the semi-finished steel to these countries for finishing and then selling there. For now, Jamshedpur will provide the semi-finished steel for the NatSteel bases. Tomorrow, it could well come from Iran or Ukraine; these countries have abundant iron ore and are therefore ideal for primary steel making. 7. Improvement in the quality of operations, products, i n v e n t o r y management 7.1 Strategic Sourcing Approach Tata Steels approach is based on the principle that strategic procurement is an exercise beyond cost reduction. Commodities used for steel-making processes and their allied services are being selected and prioritized for study using strategic sourcing tools, before their annual procurement, depending upon their annual purchase value and criticality of application. After the selection of the commodities, a Commodity Competence Team(CCT) is formed which is a cross-functional team wherein people from different departments such as User/Operation, Research and Development, Quality Control, MRO, Supply Management and Finance come together to formulate sourcing strategies for a commodity purely on a technocommercial basis. After the formation of the CCT, the commodity studies are carried out based on different technical and commercial parameters as

7.2 Strategic Sourcing Levers

Strategic sourcing requires the application and interpretation of sophisticated strategic sourcing tools and techniques. Tata Steel follows a variety of sourcing strategies, as shown in Figure 5, with multifarious objectives which are mentioned below: Decrease specific consumption and specific cost of commodities on lifecycle costing basis. Source consistent quality products. Ensure continuous supply of materials. To increase the productivity of blast furnaces or steel-Melting shops by decreasing the down time through the use of improved quality, cost-effective materials, wherever applicable. 7.3 Total Refractory Management Concept To ensure the quality of refractory, proper service and the life of cast house runners which are directly related to the hot metal production and also to decrease the total cost of ownership on a life-cycle costing basis, a strategic decision was taken to go for total refractory management. In the total refractory management of cast house troughs for high-capacity blast furnaces, the supplier is responsible for the supply of the entire refractory material for all the locations of cast house troughs, initial installation, regular supervision, maintenance of troughs through casting till guaranteed throughput hot metal is achieved and the supply of all kinds of equipments required for installation and maintenance of cast houses. 7.3.1 Vendor Selection through comparative assessment A comparative analysis of the suppliers was carried out based on parameters, which includes total throughput commitment of hot metal, throughput of hot metal committed in between two repairs, total down time of trough runners, a reference list of a suppliers customers, quality of refractory to be used and life-cycle cost of refractory in terms of Rs/ ton of hot metal (Rs/thm). 7.3.2 Reduction of Life-cycle cost A reduction of the total life-cycle cost. Of refractory, in terms of Rs/thm, hasbeen done by proper selection of material, optimization of its amount toachieve the guaranteed throughput and finally by knowledge-basednegotiation.

7.3.3 Benefit to Tata Steel Reduced down time of the trough runners leading to higher rate of production. Reduced specific consumption of refractory in terms of kg/thm. Reduced overall cost of ownership due to higher campaign life of refractories and also due to higher rate of production, as the productivity of the blast furnace largely depends on the quality of refractories used at the cast house. Different Sourcing Levers Applied for Procurement of High Value and Critical Commodities 8. Time for diversificationWith the demand for various products of steel soaring presents us with the right time for upstream diversification.

Threats faced by Tata Steel1. Resources to cushion the from business environmental changeTata Steel is a company floated by Tata Sons whose assets are valued at

Fig 5 around 108 billion USD and thus the company has enough reserves to cushion itself from market fluctuations. 2. International competitionCompanies like the Indian Steel magnate Lakshmi Mittals Arcelor Mittal, 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 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 normsThe 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 picketingIndia is plagued with violent agitation against land acquisition. The land acquisition process of the companys 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 companys expansion plans of the future. 7. Decrement in the sales volumesSome 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 productsTata 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 Steels 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, which represented about 12 per cent of its total steel sales, as against 265,000tons, representing 9 per cent of total steel sales, the previous year. This year the company plans to more than double its volume of branded steel. Although the resultant increase in turnover of branded products will be enormous, there are miles to go before Tata Steel can rest on its laurels.

SWOT Analysis of Tata Steel

Four quadrants of SWOT analysis are strengths, weaknesses, opportunities and threats.
SWOT analysis is an examination of the strength, weakness, opportunities and threats faced by a company during its phase of operation. A SWOT analysis is important for Tata Steel to evaluate its current position and formulate strategies to tackle its competitors.

1. Strengths of Tata Steel

o

Tata Steel is the pioneer of steel business in India and thus enjoys brand equity. Tata Steel has a multiple companies under the same banner, which gives it an advantage of value-chain efficiency, whereby the company can utilize products made in its sister companies to process raw materials and increase efficiency.

Weaknesses of Tata Steel

o

The biggest weakness of Tata Steel is its increasing debt-to-equity ratio. Most of its assets are financed by debt, which can be dangerous in the long-run. Tata Steel largely depends on domestic and a few international markets for generating business. This over-dependence can prove to be fatal in times of economic crisis.

Opportunities for Tata Steel

o

Tata Steel is branching out to overseas market. The company has recently signed a deal with Corus group, which provides access to European markets. Tata Steel will now be in a position to utilize the R&D facility and the patents owned by the Corus group. Exposure to new technologies and markets is a big advantage for the company.

Threats to Tata Steel

o

In the current scenario, the biggest threat for Tata Steel is to maintain the Co2 emission standards when it starts its operations in Europe. The sudden overseas exposure along with a possible economic slowdown is the biggest challenge faced by Tata Steel in the present circumstances.

Strategy of SWOT Analysis

Successful businesses are a result of strategic planning, extensive analysis and carefully planned decisions. Businesses that consider every detail and attempt to foresee unexpected circumstances take the upper hand in long term survival and overall growth. Once of the most important considerations for a business is its SWOT analysis. SWOT is an acronym for the analysis of Strengths, Weaknesses, Opportunities and Threats.

1. Strengths
o

Understanding the power and effectiveness of your businesses is the first step to SWOT analysis. You must understand not only what your company's strengths are, but how or where the company gets the strength. If analysis shows that your company excels in selling purple cloth, for instance, but is poor at selling yellow cloth, you must consider the strength of the purple cloth and understand why you excel in that product. Consider the area of customer concentration for each product and the staff that produces the cloth. If the purple department is separate from the yellow department, what does the purple department do differently that makes their product better? Make a SWOT checklist as your research your information. List your strengths and sub list the reasons for the strengths.

Weaknesses
o

To truly excel in business, regardless of the industry, you must have a clear understanding of your company's weaknesses. Start internally, reviewing struggling areas of business. Why are these areas producing or selling less than other departments in your business? What limitations or restrictions does the company encounter when attempting to produce? These areas are important considerations, and resolutions and alternate options should be considered to resolve or improve the weakness. For instance, at one point, Dell's SWOT analysis pointed out that many customers sought out additional PC accessories, software and televisions to complement their Dell system purchases. This meant

that their customers left their store or site and purchased accessories from competitors. SWOT must always be considered from the customer's standpoint in order to effective for the company. Dell's analysis showed that their customers were annoyed by the inconvenience of searching out these additional items with other companies. In turn, Dell lost the business of these potential purchases. The declared resolution to this weakness was to introduce a line of accessories, printers, televisions and software to meet the customer's needs in one convenient location.

Opportunities
o

With good analysis, a company's opportunities can be presented while reviewing your SWOT weaknesses. Understand the weaknesses and present resolutions. The opportunities represent the favorable conditions that could produce positive aspects for the company. They are situations that exist but must be acted upon in order for the company to see a benefit. In our example, we find Dell's weakness or its lack of product offerings turning into an opportunity to introduce new products and services. The weakness' resolution to introduce new products only became an opportunity because Dell acted upon the favorable conditions.

Threats
o

Threats in SWOT analysis are barriers that prevent the company from reaching its goals. Unlike opportunities, threats must be acted upon in order to prevent the company from limiting it capabilities. Threats can be environmental forces, industry competition or economy changes, just to name a few. One of Dell's threats is its competition with other competitive and equally qualified server and technology companies. As the Dell Company grows, it continues to strive to maintain its position as one of the best companies with the most advanced technology. One effort many technology companies currently strive for is to provide green technology that uses reduced power and recyclable parts. Dell continues to develop and introduce their green items to maintain its competitiveness amongst its competitors.

Analysis Review
o

Once you have considered and mapped your company's strengths, weaknesses, opportunities and threats, you will begin to determine what steps you can take to improve its overall standings. If you have more strengths than weaknesses and more opportunities than threats, your company is well on its way to success. If you find that your company's SWOT leans more to the weakness and threat aspects, you have many considerations to undertake. Either way, you must tackle your weaknesses first. Try to turn your weaknesses into opportunities. Gather your opportunities and take action on them. Introduce new products or services or tweak existing ones. Always consider your analysis from a customer standpoint. This will help you to increase your potential of success and customer

demand. Attempt to eliminate your threats by understanding why they are threats. If, for instance, your biggest threats are industry competition, take steps to understand what the competition does better or differently than your company and make the appropriate adjustments. Customer surveys and feedback help greatly in SWOT analysis. Speak with customers to understand their opinions.

LABOR MARKET :- The market in whichworkers compete for jobs and employerscompete for workers. It acts as the externalsource from which organizations attractemployees. These markets occur becausedifferent conditions characterize differentgeographical areas, industries, occupations,and professions at any given time. Labor Market Related Terms 1- Labor Market: A labor market is defined as a pool of all potential workers whocompete for jobs. It also includes the employers who competefor workers. Labor markets are based on the supply anddemand of labor in a country or a specific location that are ableand willing to work. 2- Labor Force: Labor force includes all persons classified either as employed orunemployed during a specified period of time, usually a day ora week. Labor force can be categorized as self-employed, wageand salary earners, casual workers and unemployed. 3- Casual Workers: Casual workers are those workers who are generally employed bysmall entrepreneurs on daily or weekly basis on a low wage rate.They are not entitled to any paid holiday leave or paid sick leaves. 4- Unemployed persons: The persons in the labor market who are without work, that is, without paid employment or self-employment and are currently either available for work or are seeking any work are considered to beunemployed. 5- Employment rate: It is ratio of employed persons to the total labor force. It is the percentage of working age people who have jobs or are employed.

6- Labor force participation rate: It is the number of persons in the labor force as a percentage of the workingage population. The working-age population is the population above a certain referenceage like 15 years old and over or 1564, etc 7- Unemployment rate: It is the ratio of unemployed people to the total labor force 8- Underemployed persons: who are employed, but not in the desired capacity, whether in terms of compensation,hours, or level of skill and experience. The skills of such persons are underutilized,for example paying low wages to a highly skilled employee. Underemploymentalso refers to a situation where a major portion of labor force is unemployed. 9- Underemployment rate: It is the ratio of underemployed to either total labor force or total employment. Labor Market in India The Indian labor market can be categorized into three sectors: Rural workers, who constitute about 60% of the workforce Organized of the formal sector, that constitutes about 8% of the workforce. Urban unorganized or informal structure which represents the32% of the workforce. Categories of Labor force Self Employed Workers Wage And Salary Earners Casual Workers Unemployed Workers Estimated Increase In Labor Force The chart below describes the estimated increase in the number of labors from1977-78 to 2004-05. The labor force has grown from 276.3 million to 385.5million between 1977-78 and1993-94 showing an annual growth rate of 2.1%.During the year 1999-2000, the workforce was estimated to be 407 million. In2004-05 the labor market consisted of 430 million workers and has grown up to500 million in 2006.

The Labor Force In Year 2006 It has grown up to 509.3 million out of which 60% are inagriculture, 12% are employed in industries and theresidual 28% are in services.

LABOUR TURNOVER : Turnover means change. A change in the financialstatus of an organization is called the financialturnover. A change in the number of employees of an organization is called The labor turnover REASONFOR LABOUR TURNOVER: Avoidable Reasons (low job satisfaction, low pay, risky or repetitive worketc.). Unavoidable reasons (death, retirement, accident, poor health etc.).

Methods Used To Estimate Turnover: Every good organization prepares a report of labor turnover to refer and rectify theavoidable causes of turnover. Below are methods used to estimate turnover:Average No. = (No. of employees at start + No. of employees at end) / 2 1- Separation Method/Rate: (Number of employees separated in a period / Average number of employees in the period ) * 100 2- Replacement Method/Rate: (Number of employees replaced in a period / Average number of employees in the period) * 100 3- Flux Method/ Rate: (No. of employees separated + No. of employees replaced) / Average number of employees in the period } * 100 Factors could be the cause of a high level of LabourTurnover : a) Dissatisfaction on account of insufficient wages leading toemployees moving to competitors b) Low level of motivation from employers side and poormorale within the workforce in a specific industry. c) Recruiting and misplacement of employees resulting intheir mobility in search of suitable employment. d) A floating local labour market offering better andmore attractive opportunities to employees. HOW TO REDUCE LABOUR TURNOVER Following action may be taken to reduce labour turnover: Pay Problem increasing pay scale & improving pay structure toremove inequities Employees Learning to further their Career providing better careeropportunities& ensuring the job, opportunities for training &development program, implement promotion Employees Leaving due to Conflict more effective procedure forhandling grievances & improving communication, using resolution &teambuilding techniques, reorganisation of work. The Induction Crisis improving recruitment & selection process,ensure job requirement, developing better induction & initial trainingprogram

Shortage of Labour improving recruitment , selection & training, intoducing better method of planning & scheduling work smooth out peak loads. PRESENTEEISM Presenteeism is a term used by human resource professionals to describe circumstances in which employees come to work even though they are ill, posing potential problems of infection and lower productivity. When employees go to work sick they risk infecting their co-workers and will most likely not be as effective or productive in their work Stress Shift work. ABSENTEEISM : In every organisation an employee / worker has some definite working hours with certain responsibility (work assigned)and if the worker is not present in their working hours that called absenteeism in the organisation. FACTORS IN ABSENTEEISM : Moral Work schedule flexibility 1- Alternative Work Arrangements 2. Compressed Work Week 3. Job Sharing, and 4. Telecommuting CAUSES OF ABSENTEEISM : Personal Factors -age, marital status, health, education, hobbies, extra curricular actitvites. Work Environment working conditions, relation with coworkers & seniors and their attitude Home Conditions distance from residence, mode of conveyance, family size, family problems & responsibilities Economic Issues subsidiary economic interests Regional Aspects legislations, politics, geographical situations Organisational Features type & size of company, work load, nature of work, shift arrangements, management attitude, personnel policies, leave facilities and medical benefits Social Reasons religion, community obligations, customs festivals, marriage and death.

Absenteeism and Labor Turnover Presentation Transcript

1. HUMAN RESOURCE MANAGEMENT IICHAPTER 5: ABSENTEEISM AND LABOUR TURNOVER 2. CHAPTER 5 MEANING OF ABSENTEEISM Each employer/any organization expectsemployees to be present in work place as pertimings or schedule fixed for the purposeAny deviation from the fixed time reportingentails loss to the organization. When an employee fails to report for duty ontime without prior intimation or approval, thenthe employee is marked as absent. 3. CHAPTER 5 TYPES OF ABSENTEEISM Absenteeism is of four types: Authorised Absenteeism Unauthorised Absenteeism Wilful Absenteeism Absenteeism caused by circumstances beyond ones control 4. CHAPTER 5 FEATURES OF ABSENTEEISM The rate of absenteeism is the lowest on pay day and increases considerably on the days following the payment of wages and bonus Absenteeism is generally high among the workers below25 years of age and those above 40 years of age The rate of absenteeism varies from department to department within an organization. Generally it is high in the production department Absenteeism in traditional industries is seasonal in character 5. CHAPTER 5 CALCULATION OF ABSENTEEISM RATE Absenteeism can be calculated with the help of the following formula: Absenteeism Rate Frequency Rate Severity Rate Absenteeism Rate=(Number of mandays lost)/(Number of mandays scheduled to work) * 100 Frequency Rate=(Total number of times in which the leave was availed)/(Total number of mandays scheduled to work) * 100 Severity Rate (Total number of days absent during a period)/(Total number of times absent during the period ) * 100 7. CHAPTER 5 CAUSES OF ABSENTEEISM Maladjustment with the Working Conditions Social and religious Ceremonies Unsatisfactory Housing (conditions at the workplace) Industrial Fatigue Unhealthy Working Conditions Poor Welfare Facilities Maladjustment with the Job demands Alcoholism Indebtness Unsound Personnel Policies Inadequate Leave Facilities Low level of Wages 9. CHAPTER 5 CATEGORIES OF ABSENTEEISM Entrepreneurs The Status seekers The Epicureans Family-oriented The Sick and the Old 10. CHAPTER 5 SOME MEASURES TO MINIMISE ABSENTEEISM Selecting the employees by testing them thoroughly regarding their aspirations, value systems, responsibility and sensitiveness Adopting a humanistic approach in dealing with the personal problems of employees Following a proactive approach in identifying and redressing employee grievances Providing hygiene working conditions, welfare measures, fair and competitive remunerations, training and development 11. CHAPTER 5 LABOUR TURNOVER: MEANING External mobility means shifting of employees into and out of an organization. It is defined as the rate of change in the employees of an organization during a definite period . It measures the extent to which old employees leave and new employees enter into an organization . 12. CHAPTER 5 TYPES OF LABOUR TURNOVER

External mobility is of two types: Accessions: Additions of new candidates to the existing employees. Separations: Termination of employment or Employee turnover which includes Voluntary quitting or resignations by employees Layoff or Lack of Work Disciplinary Lay-off or Discharge Retirement and Deaths 13. CHAPTER 5 COMPUTATION OF EXTERNAL MOBILITY Rate of external mobility is generally computed in terms of accession rate, separation rate and compose rate Accession Rate=(Total Accessions per year)/(Average number of employees for the year) * 100 Separation Rate=(Total Separations per year)/(Average number of employees for the year) * 100 Composite Rate = [(Total accessions per year + Total Separations per year)/2] / (Average number of employees for the year ) * 100. These formulae are useful to compute and compare the rates with those of other organizations for the same period and of the same organization for the past years. This comparison shows the trends in mobility rates and the place of the organization in the community in respect of turnover. It also shows the magnitude of the problem and indicates the effects of external mobility 15. CHAPTER 5EFFECTS AND CONTROLLING OF EXTERNAL MOBILITY Certain degree of external mobility is inevitable and also desirable to enable flow of efficient human resources into the organization Though external mobility is for the betterment of the employees in some cases, it causes problems to employees in many cases. Personnel managers have to analyze the causes for mobility and find means to control it in view of its adverse effects on the organization and employees. Personnel managers have to analyze the causes of mobility before suggesting measures to reduce it . The management has to forecast the vulnerable areas of external mobility and apply appropriate measures. Reduction of excessive employee mobility by identifying the areas and applying measures is the responsibility of the executives at all levels inthe organization .

QUESTIONNAIRE
(1)Name : (2)Age : (a) Below 35 (b)Above 35 (3)Gender : (a) Male (b)Female (4)DESIGNATION : (5)Are the person employed in your organisation are best qualified? (a)YES (b)NO (6)Do you take necessary steps to retain the deserving employees? (a)YES (b)NO (7)What type of facilities and oppurturnities provided for the personal growth of an employee? (a)Insurance (b)Leave with salary (c)Family benefits (8)What is the main source of recruitment in your organization? (a)Internal recruitment (b)External recruitment (9)which of the following preferred the most? (a)Qualification (b)Experience (10)Is the sufficient job securities provided for the employees?

(a)YES (b)NO (11)What will be the main part of absenteeism in your company? (a)Nature of work (b)Lack of interest (c)Poor management system (12)Women tend to be more absent in you organisation? (a)YES (b)NO (13)Is the rate of absenteeism is likely to be high in days before and after holidays (a)YES (b)NO (14)Do the employees take extra holidays in addition to the holidays given/permitted by the organization? (a)YES (b)NO (15)Do the employees come to the office on regular basis? (a)YES (b)NO (16)Is the work environment satisfactory for the employees? (a)YES (b)NO (17)Is the working pattern in your organization satisfactory? (a)YES (b)NO

Employee Turnover Definition

Employee Turnover is the number of permanent employees leaving the company within the reported period versus the number of actual Active Permanent employees on the last day of the previous reported period (physical headcount). The number of leavers, that are included in Employee Turnover, only includes natural turnover (resignations, termination, retirement etc); it does not reflect any redundancies. Planned redundancies are reported and explained separately if relevant for Employee Turnover. Formula for Employee Turnover rate:

Regretted Employee Turnover Definition

Regretted Employee Turnover is the number of permanent high potential employees leaving the company within the reported period, versus the number of actual Active Permanent high potential employees on the last day of the previous reported period (physical headcount). The number of leavers, that are included in Regretted Employee Turnover, only includes natural employee turnover (resignations, termination, retirement etc); it does not reflect any redundancies. High potential is an employee rated as Meets and Exceeds job requirements and employee who's readiness for the job is Ready for Promotion or Fully owns the job with high performance rating. Formula for Regretted Employee Turnover rate:

Reasons of Employee Turnover

There can be one or more reasons for employee leaving the company. Those reasons are related to different factors like job description, salary, organizational culture, local economy, workload, duration on current position, personality etc. One of the predominant reasons for leaving of position is the local economy and ratio of demand for employees and number of employees that are looking for a job. If there are more jobs available, than the employee turnover rate is higher, since employees are trying to get the better offer. The Maslow's Hierarchy of Needs explains the structure of human needs. If they are not fulfilled, the employee will look for the environment that will satisfy his/her needs.

Healthy Employee Turnover

The Exit Interview shows the reasons of the employee turnover. The employee turnover should be managed by the company in order to keep it at acceptable level. The certain employee turnover is desirable, since the new employees are more motivated and open to demands of their job. Old employees gives experience, but at same time they tend to be more resistant to change and new requirement. The healthy employee turnover depends from the company organisation and business objectives, but anything up to 5% on annual level is acceptable. Too high employee turnover may cause organizational problems, while to low or no turnover is causing lack of idea generation and resistance to changes.