STM TataSteel Group7 SectionB

THE TEAM – Section B | GROUP 7 Krishna Sil

UM15088

Preeti Patnaik

UM15097

Trisha Anand

UM15120

Varanasi Arjun

UM15121

Yasasvi Santosh K

UM15123

Strategic Analysis of TATA STEEL Submitted To: Prof. Brajaraj Mohanty

1

Contents 1

Executive Summary............................................................................................................................................................... 5

2

Industry Overview.................................................................................................................................................................. 6 2.1

Nature and Size of the Industry....................................................................................................................................... 6

2.2

Key Growth drivers for the Industry................................................................................................................................. 8

2.3

Identification of Critical Success Factors (CSF)................................................................................................................ 8

2.4

Industry Benchmarks....................................................................................................................................................... 9

2.5

Import and Export Scenario in Indian Steel sector......................................................................................................... 14

2.6

PESTEL Analysis............................................................................................................................................................. 14

2.7

Porter’s Five Forces Analysis.......................................................................................................................................... 18

2.8

Strategic Group Mapping............................................................................................................................................... 23

2.9

Competitive Landscape................................................................................................................................................. 24

2.10 Market Segmentation.................................................................................................................................................... 25 2.11 Buying Criteria Analysis of the Industry......................................................................................................................... 26 2.12 Key trends and future developments............................................................................................................................. 28 2.13 Highlights Of Union Budget 2016 – Impact On Steel Sector.......................................................................................... 29 3

Company Overview.............................................................................................................................................................. 30

2

4

3.1

Company background.................................................................................................................................................... 30

3.2

Timeline with key milestones and their strategic impact............................................................................................... 31

3.3

Vision, Mission, Goals, and Strategic Themes................................................................................................................ 33

3.4

Key Product and Service Portfolio.................................................................................................................................. 35

3.5

Core Competencies of the firm...................................................................................................................................... 38

3.6

Business Model of the organization............................................................................................................................... 39

3.7

3rd Generation Balanced Scorecard (Amalgamation of 1st Generation BSC and Activity System Map)........................41

3.8

SWOT Analysis............................................................................................................................................................... 43

3.9

Competitor Analysis (identify competitors)................................................................................................................... 44

3.9.1

Based on Critical Success factors............................................................................................................................ 44

3.9.2

Based on Financial indicators.................................................................................................................................. 45

Future Growth Strategy for the organization........................................................................................................................ 45 4.1

Portfolio Analysis........................................................................................................................................................... 45

4.1.1

Based on BCG Matrix............................................................................................................................................... 45

4.2

Company’s Strategic Roadmap for future...................................................................................................................... 47

4.3

Re-imagining the Organization with the transformed business model or Use-case based on SMAC and IOE................50

4.3.1

Reimagining Business Processes............................................................................................................................. 50

4.3.2

Reimagining Customer Segments........................................................................................................................... 50

4.3.3

Reimagining Products & Services............................................................................................................................ 51

3

4.3.4

Reimagining Workplaces........................................................................................................................................ 51

4.3.5

Reimagining Channels............................................................................................................................................. 51

4

1 Executive Summary Past few years have been demotivating for the domestic steel industry in India. While the target set for 2030 is 300MT, industry is facing major capacity underutilization. This is expected to be a consequence of the business cycle that the steel industry is prone to. In addition to this, the dumping of steel by foreign players in domestic ground is also adding to our woes. According to the Steel Ministry's Joint Plant Committee (JPC), production of crude steel during April - December 2015 has been stagnant, growing at 0.9% compared to the same period last year, to 67 mt. The industry has also been facing a surge in imports which grew by nearly 30%. Tata Steel has been performing rather well given the market conditions. The fact that they can charge a premium on a few branded products, gives them a huge benefit while compared to other players. Consistent performance has led to shareholders’ faith. They are expected to grow in the encouraging future market demand scenario. The Union Budget 2016 has shown huge promise with inclusion of domestic steel sector in campaigns like Make in India and Smart cities. Major steel stocks like Tata Steel, SAIL and JSW Steel gained with the finance minister Arun Jaitley announcing higher investment on infrastructure. While Tata Steel was up 1.99%, Steel Authority of India Ltd (SAIL) gained 2.16% and JSW Steel jumped 1.54% on the BSE. As the business cycles and anti-dumping measures by Govt. fall in place, the industry is expected to grow. All major players have been planning on capacity enhancement and opening of new plants. The Union budget also has shown steps of encouragement to the sector. This is bound to increase the share prices and hence the market caps of the steel firms. As the industry will become highly competitive, players will have to be on toes to be in the market.

5

2 Industry Overview 2.1 Nature and Size of the Industry History and Evolution of the industry

The steel industry is the foundation industry of any economy especially in developing countries whose material intensity is likely to increase significantly in the future for infrastructure investment and growth in the manufacturing sector. Steel is crucial to the development of any modern economy and is considered to be the backbone of human civilization. The level of per capita consumption of steel is treated as an important index of the level of socioeconomic development and living standards of the people in any country. Tata Steel was established by Indian Parsi businessman Jamshetji Nusserwanji Tata in 1907 (he died in 1904, before the project was completed). Steel was the first core sector that was freed from License Regime (1990-91) and pricing and distribution controls. The Indian steel industry began expanding into Europe in the 21st century. In January 2007 India's Tata Steel made a successful $11.3 billion offer to buy European steel maker Corus Group. New Industrial Policy adopted by the Government has opened the Steel sector for private investment and exempted it from compulsory licensing. Import of foreign technology, FDI and other initiatives have given impetus to the private participation. A number of new/green-field steel plants have come up using modern, state of the art technologies.

Key Consumers of this industry and their changing needs

Steel industry works on a Business-to-Business mode of operation. Being a vital input in most industries steel has a huge consumption across sectors. Some of the key end consumer of steel are sectors such as Construction, Automotive, Machines & Engineering equipments, Aerospace, Railways, Energy, Consumer Goods etc. Steel industry does see some fluctuation in demand with the turn of events in the global economy. The crisis of 2007-08 resulted in a fall in Construction activity which resulted in a decline in steel consumption. However, the per capita consumption of total finished steel in India has risen from 51 Kg in 2009-10 to about 59 Kg in 2014-15. India's steel consumption for FY 2015-16 is estimated to increase by 7 per cent, higher

6

than 2 per cent growth last year, due to improving economic activity, as per E&Y's 'Global Steel 2015-16' report Stage in the Industry Life cycle

The Steel Industry highly depends on the business cycles. The demand is directly dependent upon how the global economy is performing- recession or boom in critical which effects expenditure in areas like construction, automobiles etc. By and large the steel industry as a whole is a mature industry, individual companies within it might be in the growth phase. Global player continue to vie for a greater share of an otherwise stagnant market. Also with steel being a critical raw material, the industry will always remain on the higher end of the S-Curve in the maturity phase. As steel sector has been suffering from over capacity and slow demand rise, there is a need to innovate and be more proactive than reactive. This might involve usage of new technology for lower cost and viable substitutes which might shift the position of the industry on the S Curve towards the Take-Off Stage. The outlook for steel industry is on the brighter side with demand being spurred by the emerging economies and there is scope for the industry to perform better.

Total Available Market Size (National and Global)

India’s crude steel capacity reached 109.85 Million Tonnes (MT) out of which Tata Steel produced 26.20 million tonnes in 2014-15 and an overall growth of 7.4 per cent. Production of crude steel grew by 8.9 per cent to 88. 98 MT. Total finished steel production for sale increased by 5.1 per cent to 92.16 MT. Consumption of total finished steel increased 3.9 per cent to 76.99 MT. India produced 7.34 MT of steel in the month of September 2015, which was nearly equal to the country's steel production in September 2014. All major steel producers had a marginal surplus barring the US which showed a deficit of 16 million tonnes.

Total Serviceable Market Size (National and Global)

In 2014, the world crude steel production reached 1665 million tonnes (mt) and showed a growth of 1% over 2013. China remained the world’s largest crude steel producer in 2014 (823 mt) followed by Japan (110.7 mt), the USA (88.2 mt) and India (86.5 mt) at the 4 th position. WSA has projected Indian steel demand to grow by 6.2% in 2015 and by 7.3% in 2016 as compared to global steel use growth of 0.5% and 1.4%

7

respectively. Chinese steel use is projected to decline in both these years by 0.5%.

2.2 Key Growth drivers for the Industry Key Growth drivers

Rationale

Infrastructure spending

India lacks basic infrastructure amenities. The government has announced its intent to improve this. A lot of key projects, like high-speed railways linking major cities, highway construction, and housing for all citizens, have been planned by the new government.

Rising disposable incomes

The current GDP per capita (PPP) in India is only $5,350. This is more than 70% of China’s. India has been on a rising trajectory. Rising income increases the demand for automobiles and other appliances. This in turn increases demand for steel.

Urbanization

Rising incomes and better job opportunities mean people are moving to cities. This is leading to demand for housing, which increases steel consumption.

2.3 Identification of Critical Success Factors (CSF) Critical Success Factor identified

Rationale

CSF 1 Economic and Financial Factors

Higher Annual Net Income After Taxes(ANIAT) over Cost of Capital, High dividend and Capital Appreciation, Cost-cutting efforts, Domestic market growth, Expanding capacity, "Pricing Power" with large buyers, Threat from nearby competitors.

CSF 2 Customer Relationships

Efficient csrs and strong company image Quality products at a reasonable price

CSF 3 Knowledge and Learning

Enhanced competencies in the formulation and implementation of CSR Integration of cost consciousness in organisational culture and processes

CSF 4 Internal Process

Reduced Cash Operating costs, Liability for retired workers, Suitable location to procure

8

raw materials, a good number of Alliances, mergers, acquisitions and jvs, Product quality, Skilled and productive workforce and Efficient leveraging of maximum value/benefit of CSR and its cost

2.4 Industry Benchmarks Size of industry:

Category

Industry Level (National)

Activity Ratios

Indicator

Industry Average of Top 5 Firms or players serving 75-80% of the market

Market Leader

2011-12

2012-13

2013-14

2011-12

2012-13

2013-14

2014-15 (till Q3)

114894

119792

135990

76,315.18

81,121.1 9

87,274.7 7

92,874.14

Size as % of GDP

1.69

1.8

2

.406

.432

.46

.49

Inventory turnover

5.73

6.72

7.89

5.31

5.76

5.7

5.74

Receivables turnover

10.56

9.01

8.11

5.31

5.76

5.7

5.74

Payables turnover

4.87

6.83

8.76

8.95

9.33

9.91

9.52

Asset turnover

0.73

0.81

0.82

1.42

1.42

1.44

1.28

Market Size

9

Category

Liquidity Ratios

Solvency Ratios

Profitability Ratios

Indicator

Industry Average of Top 5 Firms or players serving 75-80% of the market

Market Leader

2011-12

2012-13

2013-14

2011-12

2012-13

2013-14

2014-15 (till Q3)

Current ratio

0.71

0.6

0.3

1.13

0.99

0.86

1.01

Quick ratio

0.34

0.23

0.20

0.74

0.69

0.65

.62

Cash ratio

NA

NA

NA

NA

NA

NA

NA

Debt-toassets ratio

0.33

0.35

0.33

0.31047

0.31942

0.29936

0.28221

Debt-tocapital ratio

0.47

0.49

0.48

1.23

1.68

1.74

2.28

Debt-toequity ratio

0.43

0.58

0.61

1.23

1.68

1.74

2.28

Interest coverage ratio

8.69

5.36

4.38

NA

NA

NA

NA

Gross profit margin

0.06

0.06

0.1

5.94

5.00

7.11

4.72

Operating profit margin

0.09

0.02

0.005

9.34

9.14

11.04

8.98

Net profit margin

10.51

7.54

7.53

4.05

-5.23

2.41

-2.81

10

Category

Valuation Ratios or Price Ratios

Valuation Ratios or Price Ratios

Valuation Ratios or Price Ratios

Indicator

Industry Average of Top 5 Firms or players serving 75-80% of the market

Market Leader

2011-12

2012-13

2013-14

2011-12

2012-13

2013-14

2014-15 (till Q3)

Return on assets (ROA)

3.487

3.92

3.487

438.79

351.85

417.33

322.79

Return on equity (ROE)

17.58

12.22

1.957

86.37

167.68

88.86

53.37

Price to Earnings (P/E)

11.1

12.7

13.89

7.85801

10.9047

9.5365

10.3529

PEG Ratio = (P/E Ratio) / Projected Annual Growth in Earnings per Share

NA

NA

NA

NA

NA

NA

NA

Price to Cash Flow

NA

NA

NA

NA

NA

NA

NA

Price to Book (P/B)

0.65

0.59

0.95

1.234782

1.615632

1.508638

2.12646

Price to Sales

NA

NA

NA

NA

NA

NA

NA

11

Category

Competitive Ratios

Indicator

Industry Average of Top 5 Firms or players serving 75-80% of the market

Market Leader

2011-12

2012-13

2013-14

2011-12

2012-13

2013-14

2014-15 (till Q3)

Dividend Yield

2.11

3.18

2.76

120

80

100

80

Dividend Pay-out Ratio

23.19

37.94

31.06

13.63

-67.68

11.14

46.63

Enterprise 8.30 value(market capitalisatio n plus debt minus cash)/ EBITDA

10.5

12.31

NA

NA

NA

NA

Staff Turnover or Industry Attrition Rate

NA

NA

NA

NA

NA

NA

NA

Staff Cost/ Salary as percentage of Sales

0.168

0.190

0.198

NA

NA

NA

NA

Operating Expenses as percentage of Sales

0.85

0.81

0.88

0.66652

0.71932

0.69644

0.7783

12

Category

Industry Average of Top 5 Firms or players serving 75-80% of the market

Indicator

Market Leader

2011-12

2012-13

2013-14

2011-12

Depreciation as percentage of Sales

3.89%

4.24%

4.73%

0.03393

0.04294

0.04624

0.04781

Fixed Assets to Sales Revenue

1.060

0.999

0.879

2.24897

2.12362

2.09237

2.22267

Advertising as percentage of Sales

0

0

0

0

2012-13

0

2013-14

0

2014-15 (till Q3)

0

13

2.5 Import and Export Scenario in Indian Steel sector Indian steel industry : Imports (in million tonnes) Category 2010-11 2011-12 2012-13 Total Finished Steel (alloy + non alloy) 6.66 6.86 7.93

2013-14 5.45

2014-15 9.32

Indian steel industry : Exports (in million tonnes) Category 2010-11 2011-12 2012-13 Total Finished Steel (alloy + non alloy) 3.64 4.59 5.37

2013-14 5.98

2014-15 5.59

2.6 PESTEL Analysis Category Political

Description

Key factors for analysis  





Rationale

Anti-Dumping duties on cheap steel import will benefit Tata Steel Tie ups with the Govt. on campaigns like ‘Make In India’ are boosting the visibility and reach of the Tata Steel brand High amount of risk by investing in the countries like Bangladesh, Iran, and Thailand. E.g. Bangladesh and Iran projects are getting delayed due to political issues



Continuous infrastructural development bound to decrease costs



With delicensing and decontrolling of capacity restrictions, Tata Steel has come a long way and produces 29 mn. tonnes today



100% FDI allowed in the Steel sector has given a huge boost to the industry as a whole



Advance Licensing Scheme allows duty free import of raw materials for exports.

Iron and Steel industry has been included in the list of



Price and distribution of steel were

14

`high priority' industries for automatic approval for foreign equity investment up to 100%. 

deregulated from January 1992. 

The Planning Commission has



approved a total outlay of US$ 9.5 billion for the development and promotion of the iron and steel sector. The scheme for the promotion of

The National Steel policy 2005 targets indigenous production of 110 million tonnes (mt) by 2019-20 against targeted consumption of 90 mt by 2019-20.



Economic

Analysts predict tough 2016 for the steel industry worldwide but expect India to

 

Slowdown in Chinese economy may benefit Tata Steel Steel industry faces cyclical economic condition because if consuming industries like automobiles, appliances face

research and development in the iron and steel sector has been approved with a budgetary provision of US$ 24.6 million to initiate and implement the provisions of the scheme. Apart from this restrictions on the import and export have been reduced



Reduction in import and tariff reduced from the 105%im year 1992-1993to 30% in the year 19961997.



Cost of acquisition for Corus was beyond financial expectation. Huge debt on liability side will need to be reduced Subprime crisis in US and Europe led to huge losses in opportunity



15

remain more profitable than its Asian peers.

Social

Technological

Environmental

any downturn steel companies also may share the losses

Tatas have been known to be ethical and socially active. They have been proemployees and industry analysts attribute their success to the same



Known for its ethical behavior and employee-care Tata steel was awarded the GOLDEN PEACOCK GLOBAL AWARD



800 villages in Jharkhand, Orissa and Chhattisgarh are benefitted on issues like healthcare, economic wellbeing and education. E.g. Hospital on wheels

Although Tata Steel is one of the most modern steelmakers in India, they are still behind the state-of-art practices.





cost for Tata steel as the Netherlands, United Kingdom and Germany are the main markets for CORUS 

They have responsibly helped in habitation of slum areas in urban developing cities.

Metal Junction, an e-portal to sell steel online in collaboration with SAIL, the biggest market for the purchasing and selling of the steel in the world.



Tata Steel invests in R&D to reduce energy consumption in the production process.

To reduce the emersions of the



Tata steel is designing a programme

16

co2nin the environment the Tata steel is on with the research of the ultra-low carbon steel. Legal

 



Issue of land acquisitions in Singur, West Bengal From past 100 years the company work is not disturbed because of any kind of the strikes and internal issues Tata steel ensures the EHS (Environmental health and safety) under which each and every employee’s activity is managed by the EHS framework.







in which Tata steel would be able to reduce the co2 emersion by 20 %. A JV with L&T for the protection of the Olive Ridley sea Turtles at Dharma port 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 % 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. 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.

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2.7 Porter’s Five Forces Analysis Porter’s Five Forces

Description

Buyer Power

Although, steel industry’s products are used in the wide range of industry, the number of suppliers is comparatively low. The products are more or less standardized hence the prices are competitive. Only few can claim premium like TATA Steel on account of its brand image earned over the years and as they have branded products like Tiscon and

Key factors for analysis 

Rising no. of substitutes



Switching Costs



Scales of buyer purchases



differentiated products



Competition between buyers



Availability of information



Threat of backward integration



Concentration of buyer power

Rationale The bargaining power of buyers is high due to various factors. First, there is low level of product differentiation thus low switching cost for buyers. Competition is basically on price. Second, there are many manufacturers in the market thus buyers have many choices. Third, due to cyclical demand for steel, there tend to be (sometimes) oversupply and this gives additional bargaining power to buyers. Bargaining power of suppliers is also high due to scarcity of raw materials especially scrap metals whereby suppliers are raising the price.

18

Shaktee Supplier Power

Existing Competition

The bargaining power of suppliers is low for the fully integrated steel plants of Tata Steel mostly have captive mines of key raw material like iron ore coal. This takes away supplier power to a great deal

 

It is medium in the domestic steel industry as demand still exceeds



  

Competition in Supplier Industry substitutes of suppliers' products Importance of buyer to the supplier Switching costs for suppliers' products Threat of forward integration by suppliers



The easier it is to switch suppliers, the less bargaining power they have. Low supplier switching costs positively affect Steel Industry. These statements will have a short-term positive impact on this entity, which adds to its value. Low Cost of Switching Suppliers is a difficult qualitative factor to defend, so competing institutions will have an easy time overcoming it. Low Cost of Switching Suppliers will have a long-term negative impact on this entity, which subtracts from the entity's value.



The cost of the raw materials tend to fluctuate greatly and therefore in the long run, players with captive sources of inputs will be better insulated against the rising prices and better equipped to withstand downturns in the market. Players like Tata Steel have entered into contractual agreements with Miners for procurement of iron ore.

Listed/Large competitors in Th The top 4 firm concentration ratio of the Iron and Steel Industry is 71%. ascending order of size This implies that there is oligopoly in the o JSW Steel industry as it is dominated my few major players. Major percentage of market o SAIL

19

the supply. India is a net importer of steel. However, a threat from dumping of cheaper products from foreign players does exist. Threat to new entrants

The threat to new entrants is moderate. This depends to a great extent on the four policies mentioned. These four policies also define

o Jindal (Hisar) o Visa Steel o Manaksia Steels 

Unlisted

output is generated by the 4 largest firms in the industry. Large no of unorganized players Major players are competing among themselves

o Rashtriya Ispat Nigam Limited

   

Capital Requirement Economies of scale Government Policy Product differentiation



Capital Requirement: Steel industry is a capital intensive business. It is estimated that to set up 1 mtpa capacity of integrated steel plant, it requires between Rs 25 bn to Rs 30 bn depending upon the location of the plant and technology used.



Economies of scale: As far as the sector forces go, scale of operation does matter. Benefits of economies of scale are derived in the form of lower costs, R& D expenses and better bargaining power while sourcing raw materials. It may be noted that those steel companies, which are integrated, have their own mines for key raw materials such as iron ore and coal

20

and this protects them for the potential threat for new entrants to a significant extent. 

Government Policy: The government has a favorable policy for steel manufacturers. However, there are certain discrepancies involved in allocation of iron ore mines and land acquisitions. Furthermore, the regulatory clearances and other issues are some of the major problems for the new entrants.



Product differentiation: Steel has very low barriers in terms of product differentiation as it doesn't fall into the luxury or specialty goods and thus does not have any substantial price difference. However, certain companies like Tata Steel still enjoy a premium for their products because of its quality and its brand value created more than 100 years back. Bargaining power of buyers: Unlike the FMCG or retail sectors, the buyers have a low bargaining power. However, the government may curb or put a ceiling on prices if it feels the need to do so. The steel companies

21

either sell the steel directly to the user industries or through their own distribution networks. Some companies also do exports. Threat to substitutes

Effect of Complementors

The price of steel cans is constrained by the price of glass bottles, aluminium cans, and plastic containers. These containers are substitutes, yet they are not rivals in the same industries.



Buyers propensity to substitutes



Relative price and performance of substitutes



Cost of switching to substitutes

Coke

Strong Demand Growth Driven by increased Focus on Fuel Diversification

Limestone

553 limestone mines existed way back in 2011-2012 in India

It is medium to low. Although usage of aluminium has been raising continuously in the automobile and consumer durables sectors, it still does not pose any significant threat to steel as the latter cannot be replaced completely and the cost differential is also very high.

The demand for these two complementary products are being led in the Asian geography by India and China. With China’s GDP and internal demand declining, India is expected to have huge gains

22

2.8 Strategic Group Mapping

Name

Market Cap.

Sales

Capacity

JSW Steel

27,639.71

46,087.32

14300000

Tata Steel

24,965.09

41,785.00

29000000

SAIL

14,828.59

45,710.78

15400000

Jindal (Hisar)

669.28

7,401.44

8000000

Visa Steel

152.35

922.16

465,000

23



Capacity wise, Tata Steel is the largest private player as represented by the size of the bubble



Market cap wise, Tata Steel and JSW Steel are quite competitive and lie on the upper end



Sales wise, all 3 i.e. SAIL, Tata Steel and JSW Steel are competitive as per the latest information

2.9 Competitive Landscape  

Value propositions ( Low Cost, Differentiation, Niche) Competitive Strength Assessment (Normal and Weighted) o NORMAL

MEASURE

Long Term Contracts for Raw Materials Low Production Costs Export Capability Value added Services o

Tata Steel

SAIL

JSW

Jindal Steel

Essar Steel

Norm al ratios

RATIN RATIN RATIN RATING RATIN G G G G 9 9 6.5 3 1 9

8

7.5

7

6

9

7

4

4

2

8

8

5

4

2

31.58 % 24.00 % 34.62 % 29.63 %

WEIGHTED

24

MEASURE

WEIG HT

Long Term Contracts for Raw Materials Low Production Costs Export Capability Value added Services Scores

Tata Steel

SAIL

JSW

Jindal Steel

Essar Steel

RATIN SCOR RATIN SCOR RATIN SCOR RATIN SCOR RATIN SCOR G E G E G E G E G E 0.50 9 4.5 9 4.5 6.5 3.25 3 1.5 1 0.25 0.25

9

2.25

8

2

7.5

1.875

7

1.75

6

1.5

0.15

9

1.35

7

1.75

4

0.6

4

0.6

2

0.3

0.10

8

0.8

8

4

5

2.5

4

2

2

1

8.9

12.25

8.225

5.85

3.05

2.10 Market Segmentation Key Products and/or Services Flat Products - Hot Rolled - Cold Rolled - Metallic Coated - Direct Rolled - Tubes - Pre-finished Steels - Packaging Steels - Electro Plated Steels - Electrical Steels - Narrow Strip Agricultural Implements Bearings Processes

Long Products - Sections - Special Profiles - Rail- Wires - Wire Rod - Speciality Steels and Bar - Plates - Rebars Construction Products - Structural Steel - Floors - Walls - Roofs - Modular

Regions 

India



Asia excluding India



Europe



Rest of the world

25

- Building Components

2.11 Buying Criteria Analysis of the Industry Parameter

Details

End-user Segments

Significance Attached (Low, Medium, High)

Strength of Steel

It is a measure of the tensile strength of the steel. The automobile sector has shown an increased demand for HSS(High Strength Steel) and UHSS (Ultra High Strength Steel) in the recent years. The prime reason for using steel in the body structure of an automotive is its inherent capability to absorb impact

Automobile Sector Construction Industry Individual Customers

High High Low

26

energy in a crash situation . This, in combination with the good formability and joining capability, makes these materials often a first choice.

Formability

Resistance to corrosion

With HSS, there can be a tradeoff between strength and formability; in other words, the stronger a steel is, e.g., in resisting stretching (tension), the more difficult it can be to forge into shapes, particularly the stylistically and aerodynamically optimized shapes needed for new vehicles. Steel suppliers are therefore developing steels with a range of properties that give engineers more flexibility in selecting an ideal grade of steel for any given application. The automobile and construction sectors prefer different alloys of stainless steel as it provides them better resistance to corrosion.

High Automobile Sector

Automobile Sector Construction Sector

High

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Price/Value

The value attached to the product bought by a customer by paying a particular price.

Individual Customers B2B Clients

High High

On Time Supply

Most of the clients are B2B customers, have a preplanned schedule. In case

B2B clients

Low

the order is not completed on time, then it could result in payment of the large amount as a penalty. Therefore, on time supply of top quality of steel is needed so the production isn’t affected.

2.12 Key trends and future developments Key Trend

Impact on Industry (Low, Medium, High)

Certainty of Impact (Low probability, medium probability, high probability)

Increased Domestic Competition: The incumbent and challengers in the sector have announced 71 MTPA of steel capacity between 2012 and 2017 through both Greenfield and Brownfield

Medium. An increase in capacity and supply needs to be matched with a growing demand for greater profitability. Steel firms have been making losses and operating with

Medium Probability. With the government announcing an increase in public expenditure in the Union Budget on infrastructure and housing there would be greater demand for steel.

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projects.

negative cash flows.

Muted Global Demand for Steel : Global steel demand to continue to grow at 2-4% p.a. Recent recession and economy slowdown impacted steel industry growth.

Medium-High. Steel demand is expected to flatten in OECD economies and other heavy weight economies as signs of recovery are slow. Structural shifts in China resulting in over capacity can impact other regional players in Asia including Indian players resulting in lesser margins.

Increasing Mergers& Acquisitions: Facing myriad challenges like demand volatility, over supply, under utilisation of capacity, steel makers will fight for survival. Taking cue from takeovers such as Tata-Corus and Arcelor-Mittal, there is likely to be an increase in M&A acitivity. Limited access to capital would also force some closures and invitation for mergers.

Medium. Increased M&A would result in rationalisation of the sector. Cut down of over production, better capacity utilisation. Might also result in portfolio optimisation as steel makers would assess the assets and tweak as per demand ( sectoral demands).

However, land acquisitions and regulatory clearances prove to be hurdle. Medium Probability. A McKinsey report puts the CAGR growth of global steel demand at 3.5% between 2013-20. However the report also states that the next cycle of growth would come from the developing economies- Asia, Africa and Latin America. With a pro reforms government in seat and rising GDP figures for emerging economies one can see a gradual peak in demand. India’s demand to grow at 56%p.a. Low-Medium Probability. With 80% of global steel industry operating with negative cash flows over the past 3-4 years, a big merger or acquisition is less likely especially as demand is muted. However, aggressive players from emerging economies might find this a lucrative opportunity to expand business. This would also provide the opportunity to increase their asset base and product diversity.

2.13 Highlights Of Union Budget 2016 – Impact On Steel Sector    

Budgetary proposals will help the industry meet its growth target and reach its full potential However, doubling of Clean Energy Cess from Rs 200 to 400 per ton would further increase the input cost for domestic producers "The domestic steel industry will continue to play an important role to the Government of India's schemes of 'Make in India' and 'Smart cities' as it is a key material supplier to the allied industries. Outlay for the road and rail projects amounting to about Rs 1.8 lakh crore would boost the ailing steel industry by inducing steel demand,

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 

However, the industry has been bogged down by a deluge of imports and predatory pricing over the last 18 months. Long term measures to create a level playing field are required to firewall the domestic steel industry from global overcapacity and dumping

3 Company Overview 3.1 Company background Tata Steel Group is one of the top 10 global steel companies with an annual crude steel capacity of over 29 million tonnes per annum. It was established in 1907 as Asia's 1st integrated private sector steel company. It is now world's second-most geographically-diversified steel producer, with operations in 26 countries and a commercial presence in over 50 countries. The Tata Steel Group, with a turnover of Rupees 1, 48,614 crores in the financial year 2014, has over 80,000 employees across 5 continents and is a Fortune 500 company. Backed by 100 glorious years of experience in steel making, Tata Steel is the world’s sixth largest steel company with an existing annual crude steel production capacity of 30 Million Tonnes Per Annum (MTPA). It was the vision of Jamsetji Nusserwanji Tata that on February 27, 1908, the 1st stake was driven into the soil of Sakchi. His vision helped Tata Steel overcome several periods of adversity and strive to improve against all odds. Tata Steel`s Jamshedpur Works has a crude steel production capacity of 6.8 MTPA which is slated to increase to 10 MTPA by 2010. The Company also has proposed 3 Greenfield steel projects in the states of Jharkhand, Orissa and Chhattisgarh in India with additional capacity of 23 MTPA and a Greenfield project in Vietnam. Tata Steel has created a manufacturing and marketing network in Europe, South-East Asia and the pacific–rim countries. Corus, which manufactured over 20 MTPA of steel in the year 2008, has operations in the United Kingdom, the Netherlands, Germany, France, Norway and, Belgium.

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Tata Steel Thailand is the largest producer of long-steel product in Thailand. It has a manufacturing capacity of 1.7 MTPA. Tata Steel has proposed a 0.5 MTPA mini blast furnace project in Thailand. NatSteel Holdings produces around 2 MTPA of steel products across its regional operations in 7 countries. The iron ore mines and collieries in India give the company another advantage in raw material sourcing. Tata Steel is also striving towards raw materials security through joint ventures in Thailand, Australia, Mozambique, Ivory Coast and, Oman. Tata Steel has signed an agreement with SAIL (Steel Authority of India Limited) to establish a 50:50 joint venture company for coal mining in India. Tata Steel has also bought 19.9% stake in New Millennium Capital Corporation (Canada) for iron ore mining. In Tamil Nadu(India), exploration of opportunities in titanium dioxide business, ferro–chrome plant in South Africa and setting up of a deep sea port in coastal Odisha (India) are integral to the ‘Growth and Globalization’ objective of Tata Steel. Tata Steel India is the 1st integrated steel company in the world, outside Japan, to be awarded the Deming Application Prize 2008 for excellence in Total Quality Management.

3.2 Timeline with key milestones and their strategic impact 1907: Tata Iron & Steel Co Ltd was established by Jamsetji Tata. Iron making commenced in Bihar where rich iron ore (deposits) had been identified in the early 1900s. 1911: Blast Furnace operation at Sakchi begins. 1919: The iron and steelmaking factory in Sakchi and adjacent township was later named Jamshedpur. 1912: At this time, a 12 hour working day was the legal requirement in Britain. 1920: Leave-with-pay introduced. This practice was rare pre-1940s. 1924: TISCO close to closure as a result of 1920s Depression.

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1971: Government attempt to nationalize TISCO fails. 1987: Collaboration started with Timken in bearings production. 1987: Collaboration with the Timken Co (USA) was in the setup of Tata Timken for the manufacture of industrial bearings. 1996: Tata Ryerson was a joint venture that would provide industrial materials management services in India. 2001: Announces closure of steelmaking in Llanwern, South Wales. 2004: An online trading and procurement platform was launched (website: www.mjunction.com). It is a joint venture of Tata Steel and SAIL (Steel Authority of India) 2005: TISCO changed its name to Tata Steel. 2007: Expansion in Vietnam by Tata Steel was affected through NatSteel Asia Pte Ltd (Tata's wholly owned Singapore subsidiary). 2007: Bid for Corus commenced in 2006 with a deal signed by Tata Iron & Steel and Corus. Around 1 month after this deal was signed; Brazil's CSN launched a counter offer to Corus. Within a few weeks, Tata Steel increased their original offer which was matched within a few hours by a yet higher offer from CSN. Around 6 weeks later, Tata Steel won the bid - albeit at a markedly higher price than Tata's original offer. 2010: Mothballing of the Teesside plant was regarded as necessary after the consortium involved in the steel off take contract (for which a 10-year deal was signed in 2005) pulled out of the steel slab purchasing arrangement, soon after the financial and steel market crisis of summer in 2008. Thailand's SSI later purchased Teesside plant. 2011: Mothballing of Llanwern intended as a temporary measure, with HSM restart [it was subject to steel market demand conditions] anticipated at the end in 2012. 2013: Tata Steel Europe reports record GBP 1.2 billion losses. 2015: With the decision (August 2015) to close Llanwern hot strip mill, production of HRC was to be centred on Port Talbot. 2015: Mothballing of Tata Steel's Scunthorpe plate mill, closure of the Dawes Lane coke oven complex, closure of steel plants in Dalzell and Clydebridge in October 2015. Other in October 2015 steel plant closures in the UK included Redcar in Teeside.

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In October 2015 the UK's Caparo Industries also went into administration. Cheap Chinese steel imports, high energy costs, a strong pound, and other cost burdens [e.g. excessive business rates] were cited as the main reasons for these closures. 2015: December 2015, Tata announced that it had exclusive talks with Greybull Capital to sell a number of plants including its steelworks in Scunthorpe and also mills at Dalzell and Clydebridge in Scotland. 2016: Announces 700 job losses at Port Talbot in South Wales.

3.3 Vision, Mission, Goals, and Strategic Themes The journey of Tata Steel has seen the Company re-define its performance parameters constantly to become the global steel industry benchmark for value creation and, corporate citizenship. Tata Steel ensures a total commitment to its ethical business practices and a people oriented vision: 3.3.1 Vision Tata Steel aspires to be the global steel industry benchmark for Value Creation and Corporate Citizenship Tata Steel makes the difference through: People: By fostering teamwork, nurturing talent, enhancing leadership capability and acting with pace, pride and passion. Offer: By becoming the supplier of choice, delivering premium products and services and creating value for its customers. Innovative Approach: By developing leading edge solutions in technology, processes and products.

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Conduct: By providing a safe workplace, respecting the environment, caring for its communities and demonstrating high ethical standards. 3.3.2 Mission Consistent with the vision and values of the founder Jamsetji Tata, Tata Steel strives to strengthen India’s industrial base through the effective utilization of staff and materials. The means envisaged to achieve this are high technology and productivity, consistent with modern management practices. Tata Steel recognizes that while honesty and integrity are the 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 that it does in an atmosphere free from fear, and thereby reaffirms its faith in democratic values.

3.3.3 Goals and Strategic Themes Tata Steel has taken several strategic initiatives to leverage its strength and counter challenges in all its geographies. • Some key initiatives in India include the greenfield expansion project at Odisha; entry into the steel doors segment under the brand name Pravesh; Kar Vijay Har Shikhar (KVHS) operations programme led to improvement projects across the value chain resulting in savings of `1800+ crores; Shikhar 25, expected to achieve 25% EBITDA in next 3-4 years and the ‘Find itOwn it- Fix it’ Safety Campaign. • In Europe, the Company's market differentiation strategy will help develop a sustainable long-term position in its chosen markets; and the New Product Development pipeline is enabling the launch of new products. 30 new products were launched during Financial Year 2013-14. In Financial Year 2014-15 another 35 products were launched. In addition, an innovative new iron making technology is being piloted which could improve resource efficiency.

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• Various initiatives in Thailand include tighter working capital management; increasing proportion of rebar sales in regional areas; developing differentiated products and services; an increase in volume of downstream products; completion of Procurement Excellence Project along with Renoir. • NatSteel is countering Chinese slowdown by sourcing billets at competitive prices and addressing pressure on margins with a two pronged strategy: - Enhancing value to customers by moving towards 100% value-added products. The Singapore downstream sales grew 3.7%. It continues to enhance its downstream products and services offering to create further value. The introduction of a new Carpet Reinforcement product is an example. - Growing its downstream business in Xiamen (China), Johor Bahru (Malaysia), as well as set up a new JV in Hong Kong; expand its rebar/wire rod exports into higher margin regions to maximize profitability.

3.4 Key Product and Service Portfolio Tata Steel products are manufactured using the most advanced technology. A disciplined production process is followed at all Tata Steel production units to ensure the products are superior in quality and consistent in mechanical and chemical properties. All products as well as the production units are certified as per the highest national as well as international standards and carry the same trust that the brand Tata commands. As Steel is an essential commodity in many industries and across sectors hence the key products and offerings of TATA Steel are used across them. Tata Steel serves customers in all major market sectors globally, and recognises that each sector (E.g. automotive or construction or packaging) requires different solutions to meet its specific needs. Depending on market, region and specification of the product the offerings might vary. Some of the sectors are: 1. 2. 3. 4.

Automotive Construction Consumer Goods Aerospace

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5. 6. 7.

Energy Defence and Nuclear Equipment Ship and Railways building

1. Automotive: The automotive sector accounts for roughly 16% of all European steel consumption, and for a rapidly growing proportion of steel demand in India and other developing countries. Steel makes up more than half the weight of a car and is used not only for the body and chassis but also the powertrain, gearbox, wheels and tyres. Products: Main Brands: Galvano Galvatite® HyPerform® - advanced Dual Phase steels MagiZinc® Auto Precision Tubes Vegter Model Vegter Lite Ymagine® Ympress® Tata Wiron® Tata Bearings Tenform

2. Construction: From helping to build the world’s most impressive buildings to providing the metal and expertise for infrastructure projects, Tata Steel has the products and services to meet the needs and standards of the global construction sector. The construction industry is Tata Steel’s largest single market globally, and produces an extensive and innovative range of steel construction products and systems, all manufactured to the same high quality. Tata Steel offers a range of products and systems that can be segmented according to their primary function – the structural Main Brands: Advance® Structural sections, Aquatite® ,Bor Lor Sor ,Catnic® Celsius® 355 Colorcoat HPS200 Ultra®, Colorcoat Prisma™ , Colorcoat Urban® ,ComFlor®, Confidex® Contiflo™ Durbar® Hybox® Infire Kalzip® ,MagiZinc®, Slimdek® Strongbox® Tata Shaktee®, Tata Tiscon® ,Tata Tubes, Tata Structura, Tata Wiron®

3. Consumer Goods:

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Tata Steel manufactures and processes steel for a wide range of customers across the Consumer Goods sector worldwide. The product and service solutions vary: from hot rolled coil through to high-gloss pre-finished steel perforated blanks. These products are primarily used in domestic appliances, lighting, furniture and office equipment, racking and shelving, battery cases, bake-ware, enamel-coated applications and decorative pre-finished metals. Customers in this sector want a variety of quality products – often tailored individually to their specifications – from a single point of contact; reliability and flexibility in supply and service; innovation, and technical support to provide them with differentiation and competitive advantage. Products: Advantica® Galvano HIBRITE® HILAN® MagiZinc® Motiva® NICOR® Tata Steelium® Tata Wiron® Ymagine 4. Engineering: General Engineering Tata Steel manufactures a range of steel products, encompassing hot rolled and cold rolled sheets, wire rod and wire, sections, plate, bearings and tubes, which serve a multitude of small and medium-sized engineering companies in Europe, India and South East Asia. A variety of high-quality agricultural implements marketed as Tata Agrico are widely used throughout rural India. Similarly a range of wire products has many applications in farming and fencing. Engineering Services, Plant & Equipment Multidisciplinary engineering expertise relating to the design, manufacture and supply of high- precision equipment is offered to various industry sectors. . Products: Celsius®355 Galvano Hybox® 355 Tata Steelium® Tata Wiron® Tata Bearing. The most important brands under Steel Products are -

Tata Shaktee - Tata Steel’s most important brand in the field of Galvanised Corrugated Sheets Tata Tiscon - First Thermo Mechanically Treated (TMT) Rebar in India Tata Steelium – World’s 1st branded Cold Rolled Steel (CRS) Tata Astrum - Best-in-class Hot Rolled Sheets (HRS) & Coils offered by Tata steel Tata Structura - Lightweight Hollow Steel Sections that ensure high durability GalvanoTM - Galvanised Plain Steel Sheet and Coils with superior corrosion resistance properties

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-

Tata Pipes - Commercial tubes mainly used for carrying liquids and low pressure gases Tata Precision Tubes - Robust precision tubes catering to automotive, boiler and general engineering segments Tata Automotive Steels - Products ranging from strips to tubes, and welded blanks to automotive(advanced) steels

3.5 Core Competencies of the firm The TATA Group lives by its mission and vision of Improving the Quality of Life. Hence all the TATA companies derive strength as also the core strategy from that. Some of the instances are cited below:

-Typically, Tata’s business competes on the basis of their available tangible and intangible resources and the skills. The skill resources are in essence the group’s core competences. It is said that “at corporate or strategic levels of management the core competencies are difficult to manage” The Tata’s Core Strategies of exploiting its resources and competence to meet the challenge of external environment are somehow similar to the dimensions of business excellence. The dimensions relates to the pattern in the sequence of strategic action taken by the group. The group built their strengths and core competences and never diversifies far away from these. The senior management has a clear understanding of their business as well as micro and macro environment. The Group’s knowledge and experience provides the basics of their management intuition and credibility. They only do what they know and avoid what they don’t. - If we take the example of TATA Steel, the group sticks to the steel industry as the main aim of strategic development to achieve cost leadership. -The group actively is a Customer and Market Oriented corporate, listens to the customers and place excellent emphasis to deliver quality, reliability and high level of service. -Tata sets very high standard in these regards and ensures their achievement through reward system that includes emotional rewards. The strategic approach is to involve the customers. - The other value drivers of the group to successfully exploit the resources are the productivity through the people and liberty and entrepreneurship.

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- The group empowers people to make decisions about their own jobs, the culture values are that the people are not penalized for failures they should be educated and led them to continuous improvement. - The group also express concern for the feeling of their employees and try to foster attitude in which people perceive themselves as belonging to an extended family.

Today TATA Steel has a more aggressive strategy with an eye on the global map and a new path of expansion to become a benchmark in the global steel industry and that is through JVs and M&As.

3.6 Business Model of the organization Key Partners

  

NAT Steel Millenium Steel Corus Steel

Key Activities

   

Mining Extraction Manufacturing Customising

Value



Trusted Brand

Motivations for partnerships  More capital/fund is available and the business has more borrowing power.  Partners share the decision making and can help each other out when they need to.  That people will need to stay or work in better spaces and dress better.  Reward to risk ratio will increase  To leverage synergies between Tata Steel and Corus and accelerate performance improvement through learning and sharing, a Performance Improvement (PI) Committee has been constituted.  Under this committee 7 PI groups have started functioning, identifying Key Performance Indicators (KPI’s) to be improved and improvement projects to be undertaken across various sites of the Tata Steel Group.  Over the years, Tata Steel has placed a continuous emphasis on

39

Propositions

 

Highly Valued by all Stakeholders Variety of Products

Customer Relationship s

  

Strong Base Value Driven Employee Friendly practises

Customer Segments

        

Automotive Construction Consumer Goods Aerospace Rail and Ship building Defence purposes Access to Raw Material Strategic Alliances Skilled Manpower

Key Resources

improving processes, with a view to consistently increasing efficiencies, enhancing quality, and thereby achieving better performance benchmarks in all areas.  The various initiatives taken by the several companies in its operations across the world have seen the development of several models that have sustained over the years and have now become institutions.  These initiatives typically have been designed to encompass in their fold all the people down the line, so that process improvement becomes a way of life. The process of value creation at Tata Steel is based on five key actions.  Customer need identification through a number of active listening and learning mechanisms.  Analyses and prioritisation of inputs. • Evaluation of ‘potential value for customers’ and feasibility checks.  Implementation of pilot projects through cross functional teams.  Monitoring of projects.  The Company’s Long Product Division launched RAISE (Responsible Architectural Initiatives and Structural Engineering), an initiative promoted with INSDAG, to engage with architects and structural engineers across India.  The programme aims at driving responsible construction practices and creating brand ambassadors in the process. 



A holistic approach to the use of natural resources led to improvements in the productivity of customers who manufacture continuous electrodes for the auto industry from WR3M / Low Ca ER70S6 grades of wire rods. The 100% increase in speed and productivity has led to a reduction in power consumption and water that makes up for consumption in different parts of the product’s value chain.

40

Channels



Cost Structure

  

Traditional supply chains directly to consumer Processing Costs Interest on Debt Raw Material Extraction.





Revenue Streams

   

Steel Tubes Alloys Sale of Minerals & Bearings Sale of power and water.

    

Steel prices are now increasingly aligning to global export prices as markets strike a balance between imports and domestic demand. China’s waning demand and resultant rise in exports poses a risk to leveraging improving domestic demand in South Asia and Europe. Further, movement of currencies against US$ would also have a significant impact on the movement of global steel and raw material prices. Annual sales in the Automotive segment at a record 1.37 million tonnes, as against 1.17 million tonnes in the previous year. Annual Tata Tiscon sales at a record 1.23 million tonnes, as against 1.09 million tonnes in the previous year. Annual Tata Shaktee sales at a record 0.23 million tonnes, as against 0.21 million tonnes in the previous year. Annual Durashine sales at a record 100k tonnes (20% more than the previous best). Annual sales in the LPG segment at a record 85k tonnes and a market share of 36% (23% in the previous year).

3.7 3rd Generation Balanced Scorecard (Amalgamation of 1st Generation BSC and Activity System Map) Financial:

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-Turnover at 1, 65,000 Cr by 2015. -EBITDA at 15,000 Cr by 2015. - PAT is at -5000 Cr by 2015. -India leads in geographical distribution of revenue at 29% and in capital employed by geographies at 46% for TATA Steel.

Customer: -

Diversified Customer Base Diverse Sectors & Usage: Automotive, Construction, Consumer goods, Defence etc Increasing marketing efforts in Rail Ship, Aerospace, Nuclear etc.

Internal Business Process: -

Adoption of TATA Business Excellence Model (Malcolm Balbridge Model) –gives strategic direction and process improvement. Well defined TQM Standard for controlling defects and improving quality. Statistical Process Control measures in check. Some of the key themes through which quality is controlled are: Throughput, Value in Use, Energy Efficiency, Logistics and Supply chain. Adoption of National Voluntary Guidelines to ensure transparency, ethics and care for community.

Learning & Growth: -

Presence of four R&D centers across India to promote cutting edge technology and product variation. TATA Steel Group Process Improvement Techniques deployment for continuous process improvement.

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-

Growth of company has been slow due to recent global slowdown owing to Subprime Crisis. Effected by economic cycles.

3.8 SWOT Analysis STRENGTHS Experience, Micro Environment, Business Model, Expertise, Resources and Capabilities, Culture, Access to raw materials Opportunities Exports, New Products, New Markets, Mergers and Acquisitions, Growth of Infrastructure.

WEAKNESS Value Chain, Distribution, Macro Environment.

THREAT Free Market, Globalisation, Economic Cycles- recession in global economy, rising coal prices.

A SWOT analysis is important for Tata Steel to evaluate its current position and formulate strategies to tackle its competitors.

Strengths of Tata Steel 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.

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Weaknesses of Tata Steel 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 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 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.

3.9 Competitor Analysis (identify competitors) 3.9.1 Based on Critical Success factors

MEASURE

WEIGHT

Tata Steel RATING

Long Term Contracts for Raw Materials Low Production Costs Export Capability

0.50 0.25 0.15

SAIL

JSW

SCORE RATING SCORE RATING SCORE 9 4.5 9 4.5 6.5 3.25 9 2.25 8 2 7.5 1.875 9 1.35 7 1.75 4 0.6

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Value added Services

0.10

8

0.8 8.9

8

4 12.25

5

2.5 8.225

3.9.2 Based on Financial indicators Steel Authority of India

Tata Steel Limited

Bhusan Steel

Ispat Industries]

JSW Steel

Jindal St & Pwr

Welspun Gujarat

Adhunik Metaliks

Market Cap (Rs Cr)

60,303.84

23,093.28

2,635

2,078.08

8,949.82

29,260

2,320.29

508

Sales (Rs Cr)

8,920.63

4,802.14

1,119.95

1,123.55

3,573.61

1,781.07

1,456.63

258.97

Net Profit Margin (%)

18.16

23.43

10.09

0.41

14.92

22.79

8.7

7.96

4 Future Growth Strategy for the organization 4.1 Portfolio Analysis 4.1.1 Based on BCG Matrix Focus on improving the product and service portfolio, has led Tata Steel to be uniquely positioned to serve the growth markets globally. Also, it has given special focus on value engineering activities. Over the years, the Tata

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Steel Group has placed a continuous emphasis on improving its processes, so as to consistently increase efficiencies, enhance quality and thereby achieving better performance benchmarks in all its areas of operations. Tata’s first brand building endeavours have always been directed at building assurance, reliability and value creation for products in every segment. There are twelve market sectors in which all the TATA steel products are divided. These sectors include construction, automotive, consumer goods, energy and power, agriculture, lifting and excavating, engineering, packaging, aerospace, shipbuilding, rail, defence and security. BCG Matrix of the products is:

STARS 

Ferro alloys and minerals division Infrastructural investment in Asia resulted in improvement in the demand for stainless steel. The first oversees hub of Tata Steel was established in South Korea. In India. This division of Tata Steel is the market leader in Ferro Chrome Business with a market share of around 27%. TATA Steel attained the status of being the largest producer of Manganese Alloys in India

QUESTION MARKS 

Bearing division and the tubes division They are growing rapidly but have low market product share. This division has the potential to gain market share and become a star. It can also become cash cow when the market growth slows down after reaching its potential

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CASH COWS 

Steel division The steel division without doubt places itself in the cash cow section due to continued revenue returns and churn cycles

DOGS 

No products As on date, all products of TATA Steel have a good market share and hence none of them fall into Dogs category. But recent economic recession in China has impacted the commodity market as a whole and hence the picture may change in the near term, but the Moody’s rating after the Union Budget on 29th February, gave a positive outlook for Indian steel industry as a whole.

4.2 Company’s Strategic Roadmap for future

Growth Areas

Near Term (