Strategic Management of Tata Steel
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It includes the external and internal factor analysis, ansoff matrix , BCG matrix analysis , SWOT analysis and product portfolio
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Strategic Management of Tata Steel
- 1. Group-11 Amit Kumar 100 Arkadip Gupta 101 Dipayan Ghosh 102 Giri Seshadri 103 Sri Divya 104
- 2. Introduction Tata Steel, formerly known as TISCO Tata Iron and Steel Company Limited, is the world's sixth largest steel company. It is the second largest private sector steel company in India in terms of domestic production. Ranked 315th on Fortune Global 500. Vision statement: “To be the global steel industry benchmark for Value Creation and Corporate Citizenship” Mission: • Sustainable Growth • Differential value creation • Enhance employees' competencies • Continuous improvement of business processes • Being responsible corporate citizen
- 3. Time-Line • 1907: Tata Steel was established by Indian Parsi businessman Jamsetji Tata • 1935: Production of high-tensile steel commenced. • 1961: Industrial license is obtained by Tata Steel for an Alloy-Steel project 1963: The government approves in principle expansion by One-Million tons during the 4th Plan. • 1965: The Steel Ministry agrees to expansion to 4-Million Ingot tons with a Strip Mill. • 1974: Amalgamation with West Bokaro Limited for coal mine operations. • 1979: Five-year Rural Development programme for upliftment of the villagers near Jamshedpur taken up.
- 4. 1981: In 1981, Ratan was named Chairman of Tata Industries; the Group's other holding company. 1985: Merger with the Indian tube company 1986: Started export cell 2000: Company was recognized as the world's lowest-cost producer of steel. 2005: The company was also recognized as the world's best steel producer by World Steel Dynamics. 2007: Won their bid for Corus .The joining of the two will create the fifth largest steel company in the world
- 5. INDIAN STEEL INDUSTRY Step Analysis Social Factors: • Rehabilitation of people in mining areas. • Impact on economy and climate change. Technological Factors: • Popularity of Steel Portals. • Application of SML (Steel Markup Language). Economic Factors: • GDP Growth Rate. • Reduction in Customs Duty. Political Factors: • Recommendations on Captive Mines. • Mining Scams. Eg: Goa `
- 6. SWOT Analysis Threats Socio Political Scenario/ Cap on mining activity Advancing technology International Competition Regulatory requirements Rising prices of Coal Opportunities Competitive advantage by value of size Growth of Infra Sector in India Higher pricing opportunities in foreign markets Movement along Value chain front Strengths Access to Raw Materials Strong Brand Value Access to Corus talent pool Risk Mitigation Good Corporate Governance Weakness High debt loads Operational Inefficiencies Low demand for existing products Less product innovations High attrition rate
- 8. Michael Porter’s Five Forces Analysis Buyers’ Power(low) • Increasing Demand for Steel. • Low customer preference. Suppliers’ Power(high) • High Raw Material Prices. • Lack of Transportation. • Fragmented Coke Suppliers. Competitive Rivalry(very high) • Competition from Foreign Players. • Spurt in Merger and Acquisition Activities. Threat of New Entrants (moderate) • High Cost of Basic Inputs and Services. • Industry is Capital Intensive. Threat of Substitutes(moderate) • Use of Aluminium, Plastic, Carbon Fibre.
- 9. Factors Score(S) Weighta ge(W) Total weighted value(S*W) Threats Technology Risks 1 0.15 0.15 Raw Materials Security and Price Volatility 2 0.12 0.24 Forex, Credit, Liquidity and Counterparty Risk 2 0.07 0.14 Regulatory and Compliance Risks 2 0.06 0.12 Health, Safety and Environmental Risks 3 0.11 0.33 Opportunities Macro environment 4 0.18 0.72 Industry Cyclicality 3 0.15 0.45 Growth Projects 3 0.12 0.36 Financing 3 0.08 0.24 2.75 External Factor Evaluation Matrix Weighted score is 2.75 Tata Steel is externally somewhat strong.
- 10. TATA STEEL INDIA Reduced growth, reduced consumption Long steel growth remain prospective, Cash cows TATA STEEL EUROPE Fall in demand; increase in diversified product offering Star –question mark TATA STEEL SE ASIA High demand, High growth opportunity, High y-o-y growth Star NAT STEEL Automation implementation, up gradation of production units, increased performance, obtained multiple projects Question mark Iron Ore Project Canada Ramping up of coal production, succesful completion of Direct shipping Ore project Question mark (2013) TATA STEEL GLOBALLY
- 11. Profit Pools Brownfield expansion Increase in capacity, more production, more dedicated production to flat steel Cash Cows Global wire business Largest wire manufacturer, Revenue US$ 496 M Cash Cows TATA growth shop Increased savings Agrico Present in market for over 80 yrs, high popularity, high product diversification Cash Cows Tinplate Company of India Ltd Largest producer, high growth opportunities y-o-y 14% Star cash cows TATA Sponge Iron Ltd Improve synergies, future alternative Question mark star GreenField expansion Future growth opportunity for furthur product diversification Question Mark
- 13. Balance Scorecard • Financial • Turnover at 1,34,712 crores by 2013 • EBITDA is at 12,654 crores by 2013 • PAT is at -7058 crores by 2013. • India leads in geographical distribution of revenue at 29% and in capital employed by geographies by 46% for Tata Steel. • Customer • Diversified customer base. • Automotive ,Construction , Engineering , Consumer goods industries etc are major customers. • Increasing marketing efforts in industries like Railways , Ship Building , Defense etc.
- 14. Internal business processes • Kar Vijay Har Shikhar ,a Continuous improvement programme, a well-defined six step process involving TQM and statistical tools for improving quality. • Some of the key themes through which process improvements are taken up are – Throughput, Value-in-use, Energy Efficiency, Opportunistic Plays, Logistics & Supply Chain • Adoption of National Voluntary Guidelines to enforce transparency , ethics and care for the community. Learning and Growth • Presence of four research centers supporting cutting edge R&D in steel. • Tata Steel Group Process Improvement Teams deployment for continuous process improvements. • Growth of the company as a whole has been affected by weak global economy in 2013.
- 15. Internal Factor Evaluation Matrix Weighted score is 2.56.Tata Steel is internally somewhat strong.
- 16. Business Model Analysis Key Partners • Nat Steel • Millenniu m Steel • Corus Key Activities • Mining • Extraction • Manufacturing Value Proposition • “Trusted Brand” • Highly valued by all stakeholders Customer Relationships • Strong Base • Value driven Customer Segments • Automotive • Constructio n • Engineering • Consumer goods Key Resources • Access to Raw Material • Strategic Alliances Channels Traditional supply channels direct to customers Cost Structure • Processing Costs • Interest on Debts Revenue Streams • Steel, Tubes and Alloys • Sale of minerals & bearings • Sale of Power and water
- 17. Major players in Steel Sector Main Producers (SAIL plants, Tata Steel and Vizag Steel/RINL), Major Producers (Essar Steel, Jindal Steel & Power and Ispat Industries) Other Producers Total production value : Sector Production Public Sector 12.579 M tonnes Private Sector 38.015 M tonnes Total 50.594(89% cap util)
- 18. Major player in Steel Sector NAME MAJOR PRODUCTS TOTAL CAPACITY (million tonnes) REVENU E (Billion US$) Tata Steel wire rods, bars, and steel flats 28 6.9 Jindal Steel & Power mild steel slabs and sponge iron 20 3.2 Essar Steel sponge iron, steel and iron ore pellets 14 5.6 Rashtriya Ispat Nigam Ltd liquid steel 30 1.7 Bhushan Power & Steel Ltd iron Ore beneficiation 12 (incl of the expansions) 1.32 Lloyds Steel corrugated sheets and steel coils Steel Authority of India Limited Stainless steel and iron 25 7.8 Mahindra Ugene Steel Corporation 1.8 0.210
- 21. Market Share MarketGrowth HighLow LowHigh Ferro Alloys and Minerals Division Bearings and Tubes Division Steel Division
- 22. External factor based decisions • Updating frequently on the latest technological advancements • Improving storage facilities • Cash management and treasury management techniques Internal factor based decisions • Improving operational efficiency. • Merging with high technology foreign companies in similar line of business. • Incentivizing employees for long term association with the company.
- 23. ANSOFF MATRIX Market penetration: Bearings and tube division Product development: Steel coils and Corrugated steel Market development : International markets Alliance and Mergers Diversificatio n: Not diversifying in the near future
- 24. Long Term Strategic plan 2012 2020 28 mtpa 60+ mtpa Fewer Intnl Markets Strong Intnl presence
- 25. Thank you !!