This study is objectively aimed at showing a place analysis of Tata Steel. Business faculty constructs and techniques have been employed to show an in-depth analysis of the issues and challenges confronted by Tata Steel.
For the digest of Data on Tata Steel the undermentioned Research Technique was adopted:
Secondary Research: mentions from e-books, web sites and diaries for informations digest and analysis besides faculties presented by the University.
The undermentioned concern tools have been employed for this analytical presentation:
Porter ‘s Five Force Model
BGC Product Portfolio Matrix
Position Analysis of TATAA Steel
1. Application of Business Strategy Model ‘s to TATA Steel
10.1 SWOT Analysis
SWOT analysis is conducted for an organisation in order to grok its overall Strengths, Weaknesses, Opportunities and Threats. Once these facets are clearly understood in the right position it becomes easy of an organisation to capitalise on its strengths, devices schemes to cut down or extinguish failings and research all the chances available to better its market place and standing. A SWOT analysis of Tata Steel would help in groking the current place of the organisation and the challenges and issues faced by it. Besides the negative aspects the positive facet could be ascertained.
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Tata Steel has its mines which guarantee a steady supply of natural stuff chiefly iron ore thereby doing the organisation ego sufficient in footings of its natural stuff demands for production intents.
Tata Steel has a Research and Development section which is consequence oriented and dedicated. Research is carried out in continuity and experiments conducted in countries of procurance of natural stuff, development of merchandise, steel devising processs, blast furnace and other countries. Hence, resultantly Tata Steel merchandises are the best in the Indian every bit good as planetary market.
The organisation has a strong and turning market in South East Asia and India. Until the recent yesteryear, Tata Steel was the lone provider of value added steel to the Indian Auto Industry.
By the twelvemonth 2011, it is expected that Tata Steel have a capacity of 10 million metric tons per annum by manner of production.
The internal control system of Tata Steel is extremely efficient. The Corporate Audit section of the company continuously supervises the internal control system. The primary map of this section is to supply the Board of Directors of the company with updates about the effectivity of the company ‘s hazard direction policies, place chances to better on the growing chances of the company, place bad sectors and supply recommendations in footings of new policies to accomplish organisational ends.
Tata Steel has had a raid of good and productive amalgamations and acquisitions and has geographically entered into new geographical districts.
Enterprise Risk Management ( ERM ) is a new procedure which is being worked upon by Tata Steel to hold a more defined hazard direction attack. The cardinal aims of ( ERM ) are the undermentioned:
To hold an integrating of all procedures of planning and determination devising
To hold a proper model to supervise hazards at all degrees of the organisational hierarchy
To guarantee an effectual procedure wherein the Board of Directors and Stockholders are on a regular basis updated about critical occurrence in the organisation impacting the involvements of the Company
Greater stableness is expected to be brought about by Tata Steel on history of the structural alterations the organisation is traveling through presently.
The really best of engineering is adopted by Tata Steel to guarantee that all the production procedures are environmentally friendly, cost and quality effectual.
By the acquisition of Corus and Greenfield Ventures, Tata Steel has diversified all the hazard entailed in the procedure of Iron and Steel industry.
Endemic Lacks: Tata Steel is confronted with this failing as they are built-in in the quality of some of the necessary natural stuffs. In cooking coal available in India the content of ash is comparatively high and this affects the production of Fe and this leads to a demand to import. Nickel, Ferro-molybdenum which happens to be a necessary ingredient fails to be available.
There is a deficit of Fe ore sedimentations and arises the job of deficient natural stuffs. The quality of difficult coal sedimentations is inferior and the cost of coking and non coking coal is ever on the rise doing a rise in the cost of production.
The organisation has to do proviso for sustainable methods of production of steel as the resources for natural stuff are in a province of depletion and are non-renewable.
The inordinate power deficits in India have resultantly led to a lessening in the productive end product of the works.
Low cargo capacity and deficiency of good web of transit has farther led to retard the growing of the Indian Steel Industry of which Tata Steel happens to be a major participant.
Though India has cheap labour but the productiveness of this labour is low and hence inexpensive labour tends to be expensive in the procedure as overall productiveness of the organisation is affected.
The cost of basic input and services are high. Electricity is 10 cents in India compared to 3 cents in U.S.A. Freight costs from Jamshedpur to Mumbai is 50 dollars per ton whereas from Rotterdam to Mumbai it is hardly 34 dollars.
In all sectors of the Indian Industry there avails a good range of increasing steel ingestion and Tata Steel stands to profit from this occurrence.
India has about 700000 1000 small towns and there is enormous untapped potency in the rural countries for marketing steel merchandises. The organisation could tap the chance of heightening steel application in these countries and advance the ingestion of steel and steel merchandises in the rural countries as on history of their big population they present good chances of high gross.
The car sector, technology industries, H2O and irrigation endeavors are the countries where the organisation could concentrate on advancing steel ingestion as the industries are on varied phases of development and steel signifiers a necessity in their production procedures.
It is predicted by concern analysts and economic experts that the universe ingestion of steel would treble up in the following few decennaries. Tata Steel could strategies with long term aims to finally rule the universe market in footings of steel production, distribution and sale.
The acquisition of Corus has brought in high engineering which could be utilized by Tata Steel to better production procedures.
The worldwide dining substructure has brought in greater demand for steel and this chance to advance growing and gross revenues could be tapped by Tata Steel.
Global heating has led to greater environmental costs and the menace to the environment creates a demand for Tata Steel develop a greater sense of duty as the natural stuffs for production of steel are extracted.
Scarcity of natural stuffs and high input costs threaten the really being of the industry.
There is a parallel turning menace of replacements. Plastic and complexs are replacing steel in the trim parts industry of cars. Aluminum is another metal which is making a menace to the being of steel but at the minute the high cost of aluminium extraction in footings of electricity charges has brought the menace under control.
Steel pipes have been replaced by PVC pipes and RCC pipes in many applications doing immense gross losingss particularly to Tata Steel.
Porter Five Forces Model
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In the last several old ages, Tata Steel has been registering significant growing in the domestic market every bit good as the international market. The planetary economic system prior to recession was robust enabling Tata Steel to turn copiously but with the liquidness crisis, there have been reported average term hiccoughs. Tata Steel ‘ domestic sector has been analyzed through Porters Five Forces Model to grok the fight of the steel sector and understand Tata Steel attempts and enterprises to safe guard its place for five major menaces which predominate being as follows:
New Entrant Threats: Barriers to entry barricading new entrants and the willingness to get the better of the same. Barriers such as governmental policies, economic systems of graduated table, merchandise distinction.
Competition among the bing rivals in the market and the strength of the same
The Suppliers ‘ bargaining powers
Substitute merchandises presenting menaces
Menace of Substitutes
Dickering power of purchasers
Entry barriers: High
Capital Requirement: Steel industry is extremely capital intensifier and the demand of set up of a concern would be around 30 bn dollars and this excessively depends on location of works and public-service corporation of engineering.
Tata Steel has safeguarded itself in this regard with a batting order of Greenfield undertakings aimed at domestic and international constitution. The domestic constitutions would include countries such as Jharkhand, Orissa and Chhattisgarh and on the international scenario there is Bangladesh, Iran and Vietnam.
Presently, Tata Steel has successfully expanded its capacity from an bing 5 mtpa to 6.8 mtpa at Jamshedpur with and investing of 5000 crore. The organisation is now in the procedure of farther up step of the bing works with farther capacity from 6.8 mtpa to 10 mtpa. The expected investing is amounted to be 15000 crores.
The affair of the fact is that any new endeavor can non vie with Tata Steel in footings of investing, growing or enlargement at the fiscal inputs of Tata Steel is well high.
Economies of graduated table:
Tata Steel enjoys complete economic systems of graduated table as the organisation owns mines for critical natural stuff required for production procedures. Lower costs, Research and Development and dickering power of the organisation constitutes economic systems of graduated table. Coal and limestone mines are in ownership of the company. Through joint ventures and on its ain Tata Steel owns assets in states like Australia, Oman and Mozambique.
The governmental policies of India in context to steel manufacturers are favourable but there are few draw dorsums with respects to set down acquisition and Fe ore mines acquisitions. For new concerns, regulative issues pose a hurdle. But Tata Steel is a concern organisation which is more than a 100 old ages of age working successfully and has acquired reputability and acknowledgment from the Government of India.
The authorities favours steel makers in footings of policies. But it should be noted that there are certain disagreements embracing the allotment of Fe ore mines and land acquisitions. Furthermore, there exist hurdlings in the signifier of the regulative clearances.
Merchandise distinction: A
Steel is a trade good which fails to hold a major monetary value differentiation as it does categorise as being luxury merchandise or a trade good under forte class. Tata Steel is a concern house in ownership of high trade name value and has acknowledgment and hence Tata Steel enjoys a premium for their merchandises on history of the quality the merchandise it possesses. The following trade names have been introduced by Tata Steel which is as follows:
Tata Steelium- the really first sort of Cold Rolled Steel in the universe
Tata Shaktee- Galvanized Corrugated Sheets
Tata Tiscon ( re-bars )
The primary menace in footings of completion are faced by Tata Steel are in the signifier of Global Steel Industries or Giants such as Arcelor-Mittal and POSCO. Penetrating the Indian Markets is the purpose of these Global Steel Business Houses.
A state of affairs of high competition has arisen on history of China which greatly influences planetary monetary values by exporting to states all over the universe its green goods and owing to this the steel industry being planetary faces menace and competition with China on the head.
In context to the pricing of steel, there fails to be any difference between the merchandises which are viing in the markets. Tata Steel has rivals in the signifier of four other houses in the domestic markets. The viing houses with Tata Steel are houses such as SAIL, JSW, ISPAT and ESSAR STEEL.
Besides these few rivals there are a well immense figure of little houses into steel production consisting 35 % of the entire domestic market portion.
The market portions of the 5 major participants in the Indian
Steel Industry is:
As per the theory of Economics, the concentration ratio of a concern house is used to bespeak of the size of concern house with respects to the industry taken as a whole. This may be of aid in set uping the market signifier of any specific industry. The vastly employed concentration ratio is basically the four-firm concentration ratio, which encompasses of the concern ‘s market portion, in per centum signifier, of the four large concern organisations in footings of market portion in the steel industry sector. Generally, the N-firm concentration ratio equates the percentile of market end product generated by the N biggest organisations in the industry
The 4 house concentration ratio of the Iron and Steel Industry is statistically understood as 71 % .This presents the fact that there is oligopoly in this sector as it is dominated by few immense concern houses. Large per centum of market end product is created by the 4 largest concern organisations in the industry.
A All the major domestic rivals like SAIL, ESSAR, JSW, and JSPL have presented strategically immense enlargement programs in the recent times which are as follows:
SAIL has publically stated that it will make a mark capacity production of 35 Million Tonss by 2015.
JSW has schemes to spread out its production to 35 Million Tonss by 2015
Other houses such as JSPL, ESSAR have alike production enlargement programs which would lend in entire accomplishment of 200 Million Tons steel industry by the twelvemonth 2025.
Dickering power of providers: High
A The providers ‘ power to deal is comparatively low for the wholly incorporate steel workss as they posses their ain mines of critical input natural stuff like Fe ore coal for the interest of illustration Tata Steel. But, the houses that are non-integrated or semi integrated have to trust on providers. An illustration could be SAIL, which makes an import of coking coal.
A As in-house or local natural stuff beginnings are non plenty to supply supply to the Indian steel industry, a good sum of natural stuffs demands to be imported. For illustration, the sedimentations of Fe ore are limited and there are issues in excavation needed sums of it. India ‘s difficult coal sedimentations are of inferior quality. Owing to this ground difficult coal imports have multiplied during the old four by a entire amounting to 40 % to about 40 million dozenss. About half of this is coking coal. India is positioned at being the universe ‘s 6th largest coal importer. The of all time increasing end product of electric steel is besides taking to a steep addition in demand for steel bit. Some 2.5 million dozenss of steel bits have been imported in 2006, which is high in comparing with merely 1 million dozenss in2001. In the Forth coming old ages imports are expected to go on to lift owing to capacity additions.
Internationally, the wining three excavation giants BHP Billiton, CVRD and Rio Tinto supply about 70 % of the processed Fe ore to Millss of steel and bid from the market a really steeply high bargaining power. With respects to India, NMDC is a large provider to standalone and non-integrated steel fabrication houses.
With a position to safeguard itself from the enormous bargaining power of the purchasers, Tata Steel has strayed or instead moved much earlier into the strategic programs of ‘Backward Integration ‘ . “ Ownership of natural stuffs and a uninterrupted improvisation in fabrication has been the key to Tata Steel ‘s increasing gross or net incomes. In world, the house has been in ownership natural stuffs for the past 100 old ages, ” quoted pull offing manager B Muthuraman while discoursing at length on the century-old company ‘s market standing.
Tata Steel and state-owned SAIL have enormously been able to protect themselves from natural stuff monetary value fluctuations due to the ownership of their confined Fe ore mines. Tata Steel is positioned as one of the lowest cost markers of steel internationally. Other private steel houses, hit by high Fe ore and coal rates, have transferred on the hikings to the consumers taking the authorities to force down on monetary value additions to command the rate of rising prices.
The concern is dependent on imports for a big part of its natural stuff – Fe ore and coking coal demands. Tata Steel is extremely self-sufficing to the proportion of 25 per cent for Fe ore demands. With supplies bring forthing in from its new mines at New Millennium Corporation in the parts of Canada and besides from the Ivory Coast over a big periodical term, its Fe ore militias would easy boost to around 72 per cent by 2020. On the whole, the security of natural stuff will hit 60 per cent by 2016 and travel up to about 70 per cent by 2019.
A It is besides measuring several other mineral undertakings in Brazil and Australia
Heading with the end of deriving logistics control, Tata NYK Shipping Pte Ltd, and Nippon Yusen Kabushiki Kaisha ( NYK Line ) , a transportation major of Japan have initiated a into a long-run charter for eight supramax/panamax vass and the gross returns on such capital assets, weakening the chances of US growing and in add-on involvement rate cuts. The primary opposite number to the attendant lowering of the dollar has been the addition in value of the euro, the hankering, and other planetary drifting currencies such as the Canadian dollar and some lifting economic system currencies. Corus acquisition is in world being funded by a great sum of debt. This applies huge force per unit area on the organisation ‘s policy line, and in the event of the concern environment worsening, the demand to refund this debt could keep Tata Steel in its hereafter enterprises and organisational programs of enlargement. To add to this, this could besides restrict the Company ‘s inorganic development options.
On history of recession in U.S, there has been tremor in the planetary concern universe specifically the developed states and this makes the place of Corus riskier. UK, Germany, Netherlands form the premier market for Corus merchandises and they excessively are being confronted with apprehensiveness of recession on negative growing.
A Corus is into the policy of holding long period supply contracts with natural stuffs providers. Owing to this there could be a great periodical spread between differences in rates under purchase contracts and the clip when Corus could ease an disposed monetary value alteration under its gross revenues contacts with its clients. Besides, Corus might non be in a place to reassign on the hiked natural stuffs costs to its clients. Such occurrences would take to a downside of Tata Steel ‘s evaluation.
Steel production procedures are reliant on energy and monetary value fluctuation in energy market would in conformity affect Tata Steel ‘s bottom line.
A Tata Steel has emerged to the place of being the 6th biggest Steel Producer globally post-Corus acquisition but the fact to be noted is that the cost of the integrating goes far beyond the fiscal elaboratenesss. There are other factors which will add to overall integrating costs such as:
Cross Cultural Integration
Tata Steel has committed a significant support plan of investing in politically unstable states such as Thailand, Iran, Bangladesh and Mozambique. The complete procedure of puting up program is beyond agenda on history of deficiency of gas supply in the state of Bangladesh. On the other manus, Iron ore mine rental in Iran is forcing up the full Undertaking cost.
Rise in substructure disbursement by the Indian Government and development of web of roads could bring forth good sum of nest eggs in cargo and transit outgo, doing steel companies and other industries of the state of India internationally competitory.
Tata Steel Ltd is the receiver of the Golden Peacock Global Award for Corporate Social Responsibility
( CSR ) for the functional twelvemonth 2009. The award represents the house ‘s continual committedness by concern to ethical behaviour, to economic development and to bettering the quality of life of the workers and their family, every bit good as to engagement with local societal group.
Right from organisational policies on corporate answerability, intoxicant and narcotic, and preventative steps for HIV, to a Code of Conduct that reaches out up to stakeholders, moralss and duty are intertwined in the day-to-day working class of Tata Steel ‘s concern.
Tata, the globally is recognized and appreciated for its ethical patterns, CSR ( Corporate Social Responsibility ) is non merely a formality but for the kernel of the concern. It is really difficult to happen any debatable state of affairs in TATA ‘s century old history with respects non-ethical patterns or behaviour. But in recent times Company is enduring from Land Acquisition issues in Singur, West Bengal. Even though it ‘s non an issue in direct context to “ TATA STEEL ” but the dilution in trade name “ TATA ” has a important impact on the stock monetary values of Tata Steel.
10.4 BCG Product Portfolio Matrix
Tata Steel has stable market growing but has a comparatively high market portion so it comes under hard currency cow.
This implies it is bring forthing adequate gross that can be pooled into “ stars ” and “ inquiry grade ”
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