Strategic Management

Project Report

Steel Industry: Tata Corus (Tata Steel Europe Ltd.)

Section B – Group 4

Submitted to: Submitted by:

Dr. Mahua Guha Akash Jain PGP07058
Dr. Rojers Joseph Harsh Vardhane PGP07073
Rishabh Patre PGP07088
Satyendra Singh PGP07092
Varun Bansal PGP07102

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 INDEX

TOPIC PAGE NO

Steel Industry 3

Porter’s 5 Force Analysis 6

PESTEL Analysis 8

About the Companies 10

SWOT Analysis 12

The Acquisition 13

Pre-merger Financials 13

Valuation of Corus PLC 14

Aftermath of The Deal 22

Vision, Mission and Values 26

Strengths and Strategies 27

VRIO Analysis 29

Competitor Analysis 29

Future Prospects of Tata Steel Group 32

References 33

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STEEL INDUSTRY
The steel industry is considered an indicator of economic progress. This is because of the critical
role played by steel in infrastructural as well as overall economic development.
In 1980, there were over 500,000 U.S. steelworkers. In 2000, the number of steelworkers fell
down to 224,000.
The economic boom in India and China has caused a huge increase in the demand for steel in
recent years. Now, between 2000 and 2005, world steel demand increased by 6%. Since 2000,
many Indian and Chinese steel firms rose to prominence, like Tata Steel (which bought Corus
Group in 2007), Baosteel Group and Shagang Group. ArcelorMittal is the world's largest steel
producer.
In 2005, British Geological Survey stated that China was the top steel producer with around one-
third of the world share; Japan, Russia, and US followed respectively.
In 2008, steel began to trade as a commodity on the London Metal Exchange. At the end of
2008, the industry faced a sharp downturn which led to many cut-backs.
The world steel industry peaked in 2007. In 2007, ThyssenKrupp spent $12 billion to build two
most modern mills in the world, in Alabama, Calvert, and Sepetiba, Rio de Janeiro, Brazil. The
worldwide Great Recession starting in 2008, sharply lowered demand and new construction, so
prices fell. ThyssenKrupp lost $11 billion on its two new plants that sold steel below the cost of
production.

The steel industry has a very rich history. It showed remarkable technological dynamism and
entrepreneurship and also enjoyed significant economic, political, and strategic importance. With
globalization and emergence of high technology sectors this industry has lost its clout. Western
nations now no longer dominate the industry because of changing costs and diffusion of
technology and favorable government policy by high growth developing countries.

RISE OF AN INDUSTRY
The modern era steel industry is inseparable from the second Industrial Revolution of the 19th
century. From simple and small-batch production, new technologies such as the Bessemer
process (developed in England in 1854) has contributed to the mass production of steel. The
industry diffused throughout Europe and the U.S. The depression of 1890s and subsequent
mergers consolidated the American industry. In 1901, U.S. Steel, the world’s largest company,
was formed. The scale of production increased dramatically in the 20th century with the large-
scale blast furnaces to melt iron ore, its reduction in an open hearth furnaces, followed by a
larger and more efficient basic oxygen furnaces which was developed in Austria in 1954, a
continuous casting of molten steel, and port-based mills (in Japan and South Korea), which relied
on huge ships which were capable of transporting imported raw materials and exports of the
finished steel products inexpensively. In the U.S. in 1980s, Kenneth Iverson adopted many
German innovations in electric arc furnace (EAF) technology. These mini-mills relied highly on
recycled scrap or natural gas–based which directly reduced iron (DRI) and thin slab casting.
Mini-mills’ smaller scale added to its flexibility and its competitiveness as compared to blast
furnace–based integrated producers.

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The geographical location of the steel mills was dictated by an availability of coal and iron ore.
For the U.S. in mid-1800s coal fields in eastern states such as Pennsylvania, New York, Ohio,
and New Jersey attracted major iron works. Parallel to it, the availability of iron ore and coal
around Alabama, Birmingham, and later in the late 19th century in Michigan and
Minnesota influenced the location of steel mills in the Great Lakes region with Chicago as a
major market. Such kind of patterns have been found in other countries like India and
Brazil, where mills were located near mines. However, in East Asian countries like Taiwan,
South Korea, and Japan, devoid of raw materials, a new pattern of plant location emerged, which
targeted coastal locations to source the raw materials from and export the finished steel to the
world economy.
The post-World War II (1939–1945), the American industry was characterized by oligopolistic
competition at home, little international competition and slow technological change. A handful
of firms which were led by U.S. Steel dominated the industry. Supportive Keynesian policies
propped up the United States economy, maintained industry profits, and also accommodated high
wages for steel workers. A major steel strike that happened in 1959 paralyzed the economy,
which was soon followed by the brief controls of steel prices during the Vietnam War under the
Kennedy administration (1961–1963) so as to stem inflationary pressures. He asked steel
workers to restrain their wage demands on a condition that steel corporations like the U.S. Steel
would not raise prices. While the workers kept their part of the bargain, the companies did not, as
prices increased by $6 a ton. An infuriated Kennedy found that action as “wholly unjustifiable
and irresponsible defiance of public interest” (Kennedy 1962). Such price control has been
maintained worldwide through subsidies as well as public ownership due to the industry’s dense
inter-sectoral linkages. Not only are the investments and employment encouraged in other
industries, but economy-wide inflation is also restrained. Steel is a strategic industry with direct
links to the defense sector as well.
GOVERNMENT POLICY AND SHIFTS IN THE INDUSTRY
The strikes in steel industry were commonplace because the conflict over wages and working
conditions became very paramount under rapid growth. The violent Homestead strike, 1892 in
Pennsylvania turned into an intricate battlefield with Andrew Carnegie using the scab African
American labor to crush the largest craft union, the Amalgamated Association of Iron and Steel
Workers. In 1919, the steel workers fought U.S. Steel and the movement was labeled as a “Red
Scare,” unleashing an anti-Bolshevik and anti-radical hysteria. In India and in Europe, pro-labor
social democratic governments as well as public ownership of many steel mills protected the
workers, whereas in South Korea unions were banned or they were co-opted by a government-
controlled Federation of Korean Trade Unions (FKTU), which was infiltrated by the Korean
Central Intelligence Agency as well. In the early 21st century, steel unions persist but most of
them have lost their clout because of global competition from developing countries, declining
membership, and also the relative insignificance of the industry in economies which are driven
by services and high technology. Unionization of the American workers as a whole also declined
from 50% in the 1950s to about 13% by 2004.
Reconstruction of Japan and Western Europe and the rapid adoption of the new steel
technologies around the world lead to erosion of the American industry’s competitiveness. The
industry has been promoted and protected by governments worldwide as it has dense backward
(coal, ore, heavy equipment) and forward linkages (construction, automobiles, machinery,

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shipbuilding). Some of the leading steel firms in Western Europe, like British Steel and French
Usinor-Sacilor, have been state owned. In the late industrializing countries state ownership was
of routine as part of their import substitution industrialization strategy. China Steel Corporation
(CSC) in Taiwan, Siderurgia Brasileira (SIDERBRAS) in Brazil, Steel Authority of India
(SAIL) in India, and the highly successful Pohang Iron and Steel Corporation (POSCO) in South
Korea, were all state-owned. The former Soviet Union, Eastern bloc countries, as well as China,
though outside the capitalist world economy until the late 20th century, also relied on the
industry for the national development. The American industry was caught off guard by the new
mills, often with newer technologies. Since late 1950s, the U.S. has been a net importer of steel.
By 1987 South Korea and Japan supplied 28% of U.S. imports, generally in high value flat
products, whereas Western Europe, saddled with excess capacity, had a similar kind of U.S.
share. In mid-2000s imports constitute 21% of the U.S. market.
In the periods of high economic growth steel unions in the U.S. secured high wages, exceeding
the average industry wage. Employment in industry ensured working-class members middle-
class living standards. However, by 1970s the technological obsolescence in the U.S., excess
global capacity, and lower operating costs in Brazil and East Asia made the American steel jobs
insecure. As foreign companies targeted the large Unites States market in cyclical downturns, the
U.S. adopted a variety of protectionist policies. It all started with voluntary restraint agreements
(VRAs) in 1968, after that the Trigger Price Mechanism (TPM) during the Carter administration
(1977), and also additional VRAs during the Reagan, Clinton, and the Bush Sr. administrations
(1982–1992). TPM was designed to penalize countries selling below cost, whereas VRAs forced
foreign firms were designed to restrain exports to a preset market share. Plagued by cumulative
losses, including pension fund obligations and large debts, these policies merely deferred
restructuring but they did not prevent investments and plant shutdowns in non-steel sectors. The
ensuing production imbalance compelled United States producers to obtain new technologies
from capital surplus Japanese producers to supply a better quality steel to auto producers in the
U.S., including Japanese auto transplants, while debt-ridden countries like Brazil sought foreign
investments for steel exports. Unable to maintain a high-wage workforce, the American steel
industry shed around 300,000 steel jobs over the past quarter century and hence improved the
labor productivity considerably. United States productivity also increased because of the
diffusion of mini-mills. With a lower capital and labor costs compared to the integrated segment
and the hiring of non-union workers in the southern U.S., about 54% of American steel is
produced with a mini-mill technology.
STATE OF THE INDUSTRY AND FUTURE TRENDS
In mid-2000s the major steel-producing countries are Japan, China, the United States, South
Korea, and Russia with 113, 272, 99, 48, and 66 million metric tons respectively. Major
exporters are Ukraine, Western Europe, Russia, South Korea, Brazil and Japan. The most
noteworthy development is the unprecedented growth of Chinese economy since economic
liberalization in 1979. Not only does China produce two and a half times more steel than Japan,
but between 1998 and 2004 Chinese consumption of steel also increased from 111 to 265 million
metric tons. High demand in China moderates competition arising from an excess global capacity
and could prompt occasional shortages. While there is substantial intra-European steel trade,
Russia, Japan, and South Korea have found the Chinese market very attractive.

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Globalization and the neo-liberal policies have increased steel trade, privatization of state firms
and cross-national investments and mergers. Mittal Steel, which is founded by an Indian
entrepreneur, has become the largest steel company in the world through its acquisition of mills
in the United States, Central Asia, Mexico and Europe. In 2006 after many rebuffs, Mittal Steel
acquired Arcelor, the revenue-wise world’s largest steel firm, located in Luxembourg. Arcelor
itself is a product of a merger between Spanish Aceralia, Luxembourg’s Arbed and French
Usinor. Arcelor-Mittal is the largest steel venture in the world with considerable expansion plans
in India and elsewhere. In 2005 POSCO, South Korea, with several steel ventures in Latin
America and Asia announced a $12 billion iron and steel project in India. With the declining
steel intensity (share of steel to gross domestic product) in the mature economies such as the
U.S., the growth of services, high technology industries (new economy), and material
substitutions, the steel industry is not likely to witness a major resurgence in OECD economies.
Both environmental concerns and investment requirements have dampened construction of large
steel mills. The Clean Air Act which is implemented by the U.S. Environmental Protection
Agency has made a substantial improvements in the steel plant emissions. Smaller plants using
alternative technologies are feasible, but the supply of natural gas, scrap, and electricity may
limit their diffusion in the developing countries.
As long as mature economies are saddled by excess capacity, trade conflicts will definitely
persist. The use of Section 201 to assist American steel workers injured by subsidized steel
imports is perceived by foreigners as hypocritical since trade barriers and bailouts of firms of
their pension obligations slow down industrial adjustment. Higher steel prices arising from
protection could lead to job losses in steel-using industries, benefiting the shareholders rather
than the workers. In the end, shared global prosperity is likely to ease adjustment process, while
any slowdown in China will worsen the excess capacity problem. High growth developing or
exporting countries such as India, Brazil and China are good candidates for future expansion of
the industry, while South Korea and Japan will remain important global suppliers of steel and
related technologies.
PORTER’S 5 FORCE ANALYSIS
Backed by the robust volumes as well as realizations, the steel Industry has registered a
phenomenal growth across world over the past few years. The situation in the domestic industry
was no exception. It enjoyed a double-digit growth rate backed by a robust growing economy.
However, the current financial crisis has created medium term hiccups. Using Michael Porter's
five-force model, we have analyzed the domestic steel sector to understand the competitiveness
of the sector and pointed out the initiatives taken by Tata Steel to safeguard its position from all
the five forces.
Barriers to entry: HIGH
 In terms of Capital Requirement: Tata Steel has made sufficient efforts to safeguard
itself in this context. It has a lineup of Greenfield projects which it plans to establish in
domestic markets (Orissa, Chhattisgarh and Jharkhand) and also internationally (Iran,
Vietnam Bangladesh). Besides that, it has completed its expansion capacity of existing
plant from 5 mtpa to 6.8 mtpa at Jamshedpur with investment of Rs 5,000 crore, while it
is in process of expanding the capacity from 6.8 mtpa to 10 mtpa with an investment of
around Rs 15,000 crore. The company has invested Rs 8,000 crore and it expects to

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 achieve 10-mtpa capacities by 2011-12. It would prove to be difficult for any new entrant
to come up with such huge investment.
 In terms of Economies of scale: Tata Steel, an integrated steel company has its own
mines for key raw materials like iron ore and coal that protects them from potential threat
of new entrants to a great extent. Tata Steel owns raw material assets like limestone and
coal mines through joint ventures or with the assets spread across different countries like
Oman, Mozambique and Australia.
 In terms of Government Policy: Tata Steel, a century old company under the flagship of
Tata Sons that is known for its CSR already enjoys a respectable position in front of the
Indian Government. The Jharkhand government on 24th May, 2009 has granted a
prospecting licence (PL) to Tata Steel for Ankua iron ore mines. A senior company
official said, “Tata Steel has been allocated 1,800 hectares for prospecting in the Ankua
area.” Another 10,000 acres of land will be allocated to Tata Steel for their project in
Ranchi.
 In terms of Product differentiation: Tata Steel enjoys a premium for their products
because of its quality and its brand value which was created more than 100 years back.
Tata Steel has introduced brands such as Tata Steelium (the world's first branded Cold
Rolled Steel), Tata Tiscon (re-bars), and Tata Bearings, Tata Shaktee (Galvanized
Corrugated Sheets), Tata Agrico (hand tools and implements), Tata Pipes (pipes for
construction), Tata Structura (contemporary construction material) and Tata Wiron
galvanized wire products. Apart from these brands, the company also has a service brand
called "steel junction".
Bargaining power of suppliers: LOW
The bargaining power of suppliers is low for the fully integrated steel plants because they have
their own mines of raw material like coal and iron ore like Tata Steel. But, those who are non-
integrated or semi integrated, they have to depend on their suppliers like SAIL, which imports
coking coal.
Globally, the Top three mining giants which are BHP Billiton, CVRD and Rio Tinto supply
around two-thirds of the processed iron ore to the steel mills and hence very high bargaining
power. In India too, NMDC is a major supplier to standalone, semi-integrated and non-integrated
steel mills.
A considerable amount of raw materials has to be imported since domestic raw material sources
are insufficient to supply the Indian steel industry. For example, India's hard coal deposits have
sufficient amount, low quality plus the prices of non-coking and coking coal are ever increasing.
Due to this, hard coal imports have increased in the last 5 years by a total of 40% to around 30
mn tons. About half of this is coking coal. The rising output of electric steel is leading to a sharp
increase in demand for steel scrap. About 3.5 million tons of scrap have already been imported in
2006, as compared with only 1 mn tons in 2000.
In order to safeguard itself from high bargaining power of the buyers, Tata Steel has into the
strategy of 'Backward Integration' much earlier.
Competition: HIGH

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The steel industry is global in terms of competition with large producing countries such as China
significantly influencing global prices by aggressive exporting. The 4 major domestic rivals are
SAIL, ESSAR STEEL, ISPAT and JSW, the rests are all small mills which together accounts for
30 % of the total market share.
Currently, two Global Steel majors namely Arcelor- Mittal, which is the world's largest and
POSCO, are considered to be the biggest threat as they plan to enter Indian Steel Industry soon.
Threat of substitutes: HIGH
Plastics and composites pose a high threat to Indian steel in one of its biggest markets -
automotive manufacture. For automobile industry, the other material at present with the
capability to upstage steel is aluminum. The most attractive alternative to stainless is perhaps,
aluminum. Stainless producers are offering the customers a range of alternatives to prevent
business being lost to non-ferrous or carbon steel materials. Such kind of options include lower-
nickel duplex grades and ferrite types. Now, nickel's fluctuations will continue to create
problems for stainless industry worldwide.
At present, Steel has already been replaced in some large volume applications: domestic water
tanks (PVC tanks), large diameter water pipes (RCC pipes), small diameter pipes (PVC pipes),
and railway sleepers (RCC sleepers). The substitution is more prominent in the manufacture of
automobiles and consumer durables.
Bargaining power of Buyers: MEDIUM
Some of the major steel consumption sectors such as automobiles, power generation, shipping,
consumer durables and oil & gas enjoy high bargaining power and get favorable deals. But,
small and retail consumers who are scattered and those who consume a significant part do not
enjoy these benefits.
PESTEL ANALYSIS
Political
The government has taken many initiatives to increase the inflow of foreign investment in steel
sector.
National Steel Policy is one such initiative which aims is to fill the gap between the steel’ s
demand and supply and to maximize the production. The government is also allowing private
ownership and foreign investment that has increased the capital inflow. Also, the ownership of
crude steel operations is now approximately evenly divided between public and private entities.
Steel is also the first industry to have pricing and distribution control removed. Earlier, the prices
didn’t reflect the production cost or product quality. Also, regulations on distribution prevented
the industry to implement efficient logistics.
Economic
STEEL industry is considered as a booming industry from past decades. Under the various
economies schemes such as custom policy, the government has reduced the duty which is
payable on the inputs to steel production, capital equipment and finished steel products. The

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government introduced special economic zones to create internationally competitive regions in
which the exporting businesses can base their operations.
The compound annual growth rate of the global steel industry is negative. The reason for this
market contraction is large oversupply of steel that has forced the prices down.

Socio-culture
The socio culture an important aspect in the analysis of the industry as it describes the impact of
a particular industry on society. The steel industry gives encouragement to permanent
employment of people.
The working conditions the people which are employed in the steel industry face many health
problems which are incurable in the nature. The steel industry is very hard to work in due to
hazards ranging from noise to chemical to physical to ergonomics.
Technical
The traditional technologies are being used from many years in the steel industry. There is very
less innovation in the technique used in the production process. The basic technologies which are
used in the production process are induction furnace, electric furnace and basic arc which are
outdated in the nature.
SAIL, one of the leading steel industry in India is planning to set up a plan with PASCO for
using the latest technology. Similarly, Tata Steel in other company which is innovation driven.
Environmental
Steel production has a number of impacts on the environment, such as air emissions (CO, SOx,
NOx, PM2), wastewater contaminants, solid wastes, and hazardous wastes. The major
environmental impacts from integrated steel mills are from iron making and coking.
Climate change
Virtually all greenhouse gas emissions which are associated with steel production are from the
CO2 emissions related to energy consumption.
Emissions to air
Coke production is the major pollution sources from steel production. Air emissions like coke
oven gas, naphthalene, ammonium compounds, crude light oil, coke dust and sulphur are
released from coke ovens.
Emissions to water
Water emission comes from the water which is used to cool coke after it has finished baking. The
quenching water becomes contaminated with coke breezes and other compounds. Though the
volume of contaminated water can be great, quenching water is easy to reuse. Most pollutants
can be removed using filtration.

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Waste
The limestone, slag and iron ore impurities which are collected at the top of the molten iron,
make up the largest portion of by-products in iron-making. Hydrogen sulfide and sulfur dioxide
are volatized and captured in air emissions control equipment and the slag is sold to the
construction industry. While this is not technically a pollution prevention technique, the solid
wastes don’t reach landfills.
Gaseous emissions and metal dust are the most prevalent sources of waste from electric arc
furnaces.
Legal
Government is introducing the various rules and regulations of this particular industry. The
government is about to paying the more attention to the health policies of the employees which
are working with the steel industry. Special health incentives and rules are introduced in the steel
industry. There are other legal rules and policies that the industry must abide to such as export
policy, national steel policy etc.
ABOUT THE COMPANIES
Tata Group
The Tata group was established by Jamsetji Tata in 1868. It is a global company, with
headquarters in Bombay House (Mumbai, India) comprising over 100 autonomous operating
organisations. The Tata group operates in over 100 nations, across 6 continents, with a mission to
improve the quality of life of the communities which they serve globally, through a long-term
stakeholder value creation, based on ‘Leadership with Trust'.
Tata Sons is the principal investment holding organisation and promoter of Tata companies. 66%
of the equity share capital of Tata Sons is held by philanthropic trusts, which bolster education,
health, livelihood generation & art & culture. In 2015-16, the revenue of all Tata companies,
combined together, was $103.51 billion. These companies collectively recruit more than 660,000
people.
Each Tata company operates autonomously under the direction and supervision of its own board
of directors and stakeholders. There are 30 publicly-listed Tata enterprises with combined market
capitalization of about $116.41 billion (as of March 31, 2016). Tata companies with significant
scale are: Tata Steel, Tata Motors, Tata Consultancy Services, Tata Power, Tata Chemicals, Tata
Global Beverages, Tata Teleservices, Titan, Tata Communications and Indian Hotels.
Tata Steel
Tata Steel Limited (formerly Tata Iron and Steel Company Limited (TISCO)) is an Indian multi-
national steel-production organisation headquartered in Mumbai, Maharashtra, India. It
manufactures and distributes steel, welded steel tubes, cold rolled strips, bearings, and other
related products. Tata Steel was the 10th largest steel producing organisation in the world in
2015, with an annual crude steel capacity of 25.3 million tonnes, and the 2nd largest steel
company in India (measured by domestic production) with an annual capacity of 9.7 million
tonnes after SAIL.

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Tata Steel runs manufacturing activities in 26 countries, including Australia, China, India, the
Netherlands, Singapore, Thailand and the United Kingdom, and employs approximately 80,500
individuals. Its biggest plant is located in Jamshedpur, Jharkhand.
It was ranked 486th in the 2014 Fortune Global 500 ranking of the world's biggest corporations.
It was the 7th most valuable Indian brand of 2013 according to Brand Finance.
In 2007 Tata Steel acquired the UK-based steel maker Corus.
The 20th century happened to be an extremely boisterous time of self-restoration and
development for Tata Steel. A broad technological overhaul, a several improvement ventures,
cost control measures, advancing IT support and a solid customer/client driven approach were all
instrumental in finding the correct direction for evolving outlooks. At the turn of 2000s, Tata
Steel had earned the complete trust of the entire world and rose as a strong company in the
worldwide steel industry. This millennium's first decade has been set apart by Tata Steel's
conspicuous part in the overall advancement of the nation, even amid periods of financial
turbulence and its decisive venture into more global territories. Intense strategic thinking over
future developments, plans for organic growth and initiating new undertakings are some
highlights in Tata Steel's growing and more penetrative roles in the bigger perspectives. The
securing of NatSteel in 2004 was Tata Steel's first abroad acquisition and the sequence of joint
ventures and mergers that took after found a pinnacle when they acquired Corus, occurred in
April 2007. Yet, in each positive stride that the Company has taken towards development and
extension, including diverse cultures, societies and geologies, Tata Steel has never disregarded
its great legacy of community & social responsibility.
The long adventure of Tata Steel has seen the Company re-characterize its performance
parameters in various approaches to end up distinctly the worldwide steel industry benchmark
for value creation and corporate citizenship. It guarantees an aggregate duty to its moral business
practices (business ethics) and a people-inclined vision.
Corus Group
Corus Group PLC was established on 6th October 1999, via a merger of two organisations,
British Steel and Koninklijke Hoogovens, after the privatization of many steel works companies
by the U.K. government as a result of the British Steel Act 1988. Corus Group consists of four
divisions, which include: Strip Products, Long Products, Aluminum and Distribution and
Building Systems. Having global headquarters in London, Corus operates as an international
organisation, meeting demands of numerous steel customers worldwide. Its core business
consists of manufacturing, development & allocation of steel and aluminum products and
services. The organisations has wide variety of services & products which comprise of the
manufacturing of electrical steel, plates, packaging steel, narrow strip, plated steel strip, semi-
finished steel, wire rod, tube products, and rail products & services. The organization is also
engaged in providing a variety of services including design, technology and consultancy
services. Corus' products and services are used by customers from diverse fields such as
commercial and military aerospace ventures, construction, automotive, engineering, defense and
security, along with rail and shipbuilding industry. In terms of performance, the organization is
deemed as the largest steel producer in the UK.
It is headquartered in London, UK & employs around 21,200 people. The group recorded
revenues of £9,732 million during the fiscal year ending December 2006, an increment of 6.3%

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over 2005. The operating profit was £457 million, a decrement of 28.9% over 2005. The net
profit was £229 million in fiscal year 2006, a decrement of 49.2% over 2005.
In March 2006, Corus announced that it would be selling the aluminium rolled products &
extrusions businesses to Aleris International, Inc. (Europe) for $696 million. Corus Group was to
retain the smelting operations & provide supplies to Aleris bound by a long-term agreement. On
1st August, the sale was completed.
In 2006, the Mannstaedt works (i.e. Troisdorf, Germany, special profiles, which were acquired
by BSC in 1990) was sold to GMH Holding.
SWOT ANALYSIS
Tata Steel
Strengths
 Strong market position
 Pioneer of steel business in India, thus enjoys brand equity
 Integrated steel operations in India
 Strong research and development (R&D) capabilities
 Tata Steel has multiple companies under the single same banner, which gives an
advantage of value chain efficiency
 Lower operating costs for steel manufacture in India
 Low debt to equity ratio
 Easy access to raw materials in India
Weakness
 Dependence on third party suppliers for raw material in Europe
 Dependence on Europe
 Certain products in the portfolio are lacking demand (e.g. aerospace steel, cast products)
 Non-availability of latest R&D facilities (in Europe specially)
Opportunities
 Expansion in India
 Joint ventures to develop mining activities
 India has geared up for rapid expansion in the field of infrastructure
 Anticipated demand for steel in India
 If the deal goes through, Tata Steel will be able to use R&D facility and patents owned by
Corus Group
Threats
 Consolidation in the global steel industry
 Environmental regulations: They’ll have to maintain CO2 emission standards, especially
when operating in Europe
 Adverse effects of land acquisition picketing in India
Corus Group

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Strengths
 Diversified product portfolio
 Presence of operating facilities spread in whole Europe
 World’s ninth largest and Europe’s second largest steel producer
 Triple the size of Tata Steel in terms of production
 Strong technology: Corus owns a number of patents and R&D facilities
 Diversified geographic presence
Weakness
 Rising expenses: High operational costs
 Weak returns
 Lack of access to cheaper raw materials
 Section 201 tariff imposed by Bush in 2002 led to loss in Corus’ clientele
Opportunities
 Access to Indian ore reserves through Tata
 Growing Chinese steel market
 Get access to growth markets and raw materials through merger or joint venture
Threats
 Economic slowdown in the US and Eurozone
 Consolidation in the global steel industry
 Increase in energy and fuel costs
 International competition
THE ACQUISITION
TATA gained Corus on the second of April 2007 at a cost of $12 billion making the Indian
organization the world's fifth biggest steel maker. This procurement procedure has begun long
back in the year 2005. In any case, Corus was included in an impressive number of Merger and
Acquisition (M&A) arrangements and joint endeavors (JVs) before Tata. This procedure began
in the year 2000 and with Tata it arrived at an end. In a time of seven years Corus was included
in 14 bargains separated from Tata. In 2005, when the arrangement was begun the cost per share
was 455 pence. Be that as it may, amid the season of obtaining held in 2007, the cost per share
was 608 pence, which is 33.6% higher than the primary offer. For this arrangement Tata has
financed just $4 billion, in spite of the fact that the aggregate cost of this arrangement was
$12billion.
PRE-MERGER FINANCIALS
Equity Capital from Tata Steel Ltd. Rs. 17,850 Crore (US$ 4.10 bn)
Quasi - Equity / long term funding Rs. 11,570 Crore (US$ 2.66 bn)
Total Equity and Quasi-Equity contribution (a) Rs. 29,420 Crore (US$ 6.76 bn)
Non-recourse long-term debt at Corus (b) Rs. 26,730 Crore (US$ 6.14 bn)
Total (a+b) Rs. 56,150 Crore (US$ 12.90 bn)

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The Company proposes to inject USD 4.1 billion as value to part fund the exchange. The value
will include USD 700 million from interior sources, USD 500 million of outside business
borrowings, USD 640 million from the particular issues of value shares to Tata Sons Ltd. in
2006-07 and 2007-08, USD 862 million from a rights issue of value shares to the shareholders,
USD 1000 million from a rights issue of convertible inclination offers and about USD 500
million from a remote issue of value related instrument.

VALUATION OF CORUS GROUP PLC

The net amount of the Corus securing was around Rs. 59,850 crores (USD 13.75 billion), which
incorporates its proceeding with obligation of Rs. 3,700 crores (USD 0.85 billion). The
Enterprise Value/ton of the Corus securing works out to around Rs. 32,700/ton (USD 751/ton) in
light of Corus' genuine rough steel creation of 18.3 million tons in 2006 and Rs. 28,250/ton
(USD 649/ton) in view of its unrefined steel limit.

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AFTERMATH OF THE DEAL
Following graphs shows how the acquisition dented the fortune of the Tata Steel group:

The share of Tata Steel Europe's turnover in the aggregate turnover of the gathering has declined
steadilty from 2007-08, when it remained at 76.2 percent. In 2014-15, the share was down to
57.3 percent. While Tata Steel bunch saw a 6 percent development in turnover over the period,

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Tata Steel Europe saw a 20 percent decrease in turnover. Obviously, Tata Steel Europe has been
a delay the gathering.

To the extent working benefit is concerned, Tata Steel bunch saw a decrease of 30 percent
between 2007-08 and 2014-15. TATA Steel Europe, in the interim saw a more keen 53 percent
decrease. In 2007-08, a year before the worldwide budgetary emergency began, the outside
auxiliary had a 50 percent commitment to general Ebitda. The business never backpedaled to that
level of working benefit after that.
The partake in 2014-15 remained at 33.6 percent. In 2015-16 up to December, the gathering's
combined EBITDA remained at Rs 11,165 crore. TATA Steel Europe, then, announced a
working oss of Rs 339 crore.

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In the event that there is one number that has developed amazingly for the gathering, it is debt.
From Rs 53,625 crore in 2007-08, it has grown 40 percent to Rs 75,118 crore in 2015-16 (up to
December).

The group's income as far back as the procurement has yo-yoed amongst benefit and misfortune.
In 2007-08, the gathering enrolled a net benefit of Rs 12,350 crore. This fell 60 percent to Rs
4,951 crore in the following year. At that point there was lost Rs 2,009 crore and in 2010-11, the
gathering swung back to benefit of Rs 8,983 crore. Over the span of nine money related years,
the gathering was in benefit in 6 times.

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TATA Steel share cost on the BSE has more than divided from Rs 693.15 in 2007-08 to Rs 324.4
as of now. Its market top dissolved 38 percent amid the period from Rs 50,640 crore to Rs
31,506 crore at present. After the organization reported the choice to offer the UK business the
stock has increased 5.26 percent.

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The over two design demonstrate how the Tata Steel Europe languished as request over steel
kept on being frail after the worldwide budgetary emergency. The organization's creation never
hit 20 million ton recorded in 2007-08. Actually, the yield drifted around 13-15 million ton
throughout the previous seven years. Generally, the yield saw a 24 percent fall more than eight
years from 2007-08. Shipments, in the interim, declined a more honed 41 percent.
VISION
We aspire to be the global steel industry benchmark for Value Creation and Corporate
Citizenship.
We make a difference through:
 People: By, fostering team-work, nurturing talent, enhancing leadership capability and
acting with pace, pride and passion.
 Our Offer: By becoming the supplier of choice, delivering premium products and
services and creating value for our customers.
 Our Innovative Approach: By developing leading edge solutions in technology, processes
and products.
 Our Conduct: By providing a safe workplace, respecting the environment, caring for our
communities and demonstrating high ethical standards.
MISSION
Consistent with the vision and values of the founder Jamsetji Tata, Tata Steel Corus strives to
strengthen Tata Groups’ 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.

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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.
VALUES
The five brand values are the moral compass and run through everything Tata Steel Corus does.
They are shared by all Tata companies throughout the world and guide the 580,000 employees
across the Tata group.
The five values are:
 Excellence: We act professionally. We set challenging goals, encouraging innovation and
speed. We get it right first time. We share, learn and improve continuously.
 Understanding: We grow our knowledge and gain customer intimacy by understanding
their business. We are led by facts and measure what we do.
 Responsibility: We show personal leadership in health and safety. We act responsibly
towards the environment and community. We demonstrate commitment and ownership.
We act decisively, empower and lead change.
 Integrity: We role model the Tata Values and debate openly and transparently, building
trust and earning respect. We act ethically.
 Unity: We create the greatest value when we work together in the interests of our
customers. We take a ‘one company’ approach. We value diversity and gain strength
from our blend of functions, nationalities and skills.
STRENGTHS AND STRATEGIES
Resource based Strengths
 Geographical Advantage: Before the acquisition TATA steel was 56th in the world in
terms of steel manufacturing capacity and after the acquisition it became the 5th most
geographically diversified company globally, which provided it with huge competitive
and advantage and brand value.
 Raw Material: Tata Steel own iron ore mines in India in Jamshedpur region which gives
them low-cost advantage, which CORUS was on the lookout for. Also, Tata Steel had
acquired some greenfield iron ore mines in the mineral rich states of Orissa, Chattisgarh
and Jharkhand, which provided both the companies with much needed synergy and low-
cost competitive advantage.
 Deriving Synergies: Tata steel being the low-cost steel producer in a rapidly developing
region of the world and Corus being the value product manufacturer in the part of the
world that demands high value product. Both, combined together make them competitive
enough to compete the largest steel manufacturer in the world. Also, technology
exchange drove the synergies between the two to a new height.
 Cultural: Tata Steel’s and Corus’ continuous improvement programs, viz., Aspire and
The Corus Way were based on similar core values. While, Tata steel focused more on
trusteeship, integrity, respect for individual, credibility and excellence, Corus’ program
was centered around code of ethics, integrity, creating value in steel, customer focus,
selective growth and respect for our own people. Both the organizations had utmost
respect for integrity and respect for people. Which makes them a perfect fit.

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  Sharing Complimentary Strengths: Corus had a strong R&D, the best in the world and it
developed value added products for the automotive, construction and product packaging
industries which was complimented by the operating areas of Tata steel in the rapidly
growing emerging markets.
 Distribution Network: Tata steel’s superior distribution network in India, SE Asia and
other emerging Asian markets provides the European manufacturer an in-road to the
developing markets, thus, providing a robust network of resources availability and
distribution of finished products.
Strategies
Tata Steel Corus strives to become the benchmark in terms of value creation and corporate
citizenship in the global steel industry. The five strategic priorities that provide them with a
competitive advantage to realize their mission are:
 Customer Focus:
o Their sales and marketing strategy tire to solve the problems in world’s most
demanding markets, including automotive, construction, packaging, rail, lifting &
excavating, energy & power, and aerospace
o They also invest in projects to improve the product mix and service offering and
transforming the internal supply chain to improve customer service levels
o Sales representatives and teams work closely alongside customers to better
understand their needs to dictate their production, supply chains and delivery
activities.
 Innovation:
o The organization follows a market differentiation strategy, which involves
maximizing the proportion of differentiated products and services in the sales –
products and services that few or no others can offer.
o Research programs aimed at developing cutting-edge manufacturing and product
technology and at improving the sustainability of steel products through their life
cycles.
o Also, working as closely as possible with our customers to develop the new
products and services needed by them to succeed in their own markets.
 Operational Excellence:
o Continuous investment to upgrade manufacturing and distribution facilities to
improve performance and cost competitiveness.
o Establish best practices in manufacturing, supply chain management and delivery
to provide maximum benefits to customers.
 Responsible Behavior:
o Green, lean and conservative manufacturing to with a special attention to waste
utilization, emission reduction and land reclamation.
o R&D to develop technologies to tackle the challenges of carbon emissions.
o Support to communities around which the organization operates by promoting
sports and encouraging economic, environmental, educational and social
empowerment.
 People:
o Safety primary priority.

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 o Committed to those who help the organization succeed.
o Training programs to engage employees and help employees develop themselves.
o Inculcate team work, nurture talent, enhance leadership capability and
encouragement to act pace, pride and passion.
VRIO ANALYSIS
This analysis aims to give a better view of substitutability versus inimitability of either different
or similar resources to better control them for the maximum competitive advantage;
(V) Valuable
 The resources are used for maximum optimization
 Favor local economic independence
 Highly available but located in rare locations
(R) Rare
 Tata group’s competitive superiority and advantage
 Resources located a rare and limited locations
 Corus as value product offering
(I) Inimitability
 Lack of competition
 Low cost and value based product, hard to copy
 High R&D costs
 High entry costs
 Infrastructure setup
 High fixed costs
(O) Organization
 Tangible brand benefits: Tata and Corus
 People centric organizations
 Highly valued values and principles
 Synergy between the values and the culture of both the organizations.
COMPETITOR ANALYSIS
The major competitors of Tata steel globally are Arcelor Mittal, ThyssenKrupp, POSCO,
Baosteel group, Nippon steel/Sumitomo metal, JFE Steel, Nucor, U.S. Steel etc.

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Top steel companies in revenue in 2015

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Let’s deep digger into some of the major competitors. Focus will be on competitor strategy and
objectives, strength and weaknesses and market outlook.
European competitors

1. ArcelorMittal

ArcelorMittal was founded in Avenue de la Liberté, Luxembourg was formed by the merger of
Arcelor and Mittal Steel in 2006. With about 232,000 employees, ArcelorMittal is operating in
more than 60 countries. It produces about 10% of the world's steel and plays a major role in
supplying it to the markets includes automotive, packaging, household and construction. Europe
produces 47% of the total steel, America produces 35% and other regions (Kazakhstan, Ukraine
and RSA) produces 18%.

It has bid for the largest steel plant in Italy which will increase its market share to 40% from the
current 33%.

2. ThyssenKrup

ThyssenKrupp AG is a German multinational conglomerate, based in Duisburg and Essen and

divided into 670 subsidiaries worldwide. It is among one of the world's largest steel producers; it
was tenth-largest worldwide by revenue in 2015. The company is the result of the 1999 merger
of Thyssen AG and Krupp, and now has its operational HQ in Essen. The largest shareholder is
the Alfried Krupp von Bohlen und Halbach Foundation, a major German philanthropic
foundation, created by Alfried Krupp von Bohlen und Halbach, former owner and head of the
Krupp company, once the largest company in Europe.

Tata steel is in talks with ThyssenKrup for a potential merger. This will increase the market
share of Tata Steel to 25% from current 13%.

Global Competitors

ArcelorMittal and ThyssenKrup are also their major global competitors. Apart from them the
other major global competitors are-

1. Nippon Steel & Sumitomo Metal Corporation (NSSMC)

Nippon Steel & Sumitomo Metal Corporation (NSSMC) was created by the merger of Nippon
Steel and Sumitomo Metal in 2012. It is the second largest steel provider in the world. In more
than 15 countries with nearly 83,000 employees, NSSMC is producing an extensive range of
steel products for areas like automobiles, construction, civil engineering, energy, resources and
railways.

2. Hebei Iron and Steel Group

Hebei Iron and Steel Group Company Limited is a state owned enterprise. It was founded in
2008. HQ in Shijiazhuang, Hebei, China. HBIS is the largest steel provider in China with a

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capacity of producing 30 million tonnes of steel per annum. With over 125K employees, it
mainly produce the product like wire rods, cold-rolled plates, hot-rolled steels, bars, hot rolled
plate, five vanadium oxide, galvanized plate, welded pipe and more other products relying on the
market demand.

3. Baosteel

Founded in 1978, Baosteel Group Corporation is headquartered in Pudong, Shanghai, China.

Heading in the top list, Baosteel is one among the largest providers of steel in the world. With
more than 130,404 employees, it is producing three main steel products - stainless steel, special
steel and carbon steel which is being exported to more than 40 countries. It supplies for areas
such as automobile, petrochemical, transportation, nuclear power, household appliances,
metalwork, energy, manufacture of machinery, electronic instruments and astronautics.

4. Wuhan Iron and Steel Group

Wuhan Iron and Steel Group Corporation headquarted in Wuhan, Hubei, People's Republic of
China. It was formed in 1958. Renowned as China's first big giant steel and Iron complex,
Wuhan gives silicon products, cold-rolled product, hot-rolled product, profile products, plate
product and wire rod product etc.

5. Posco

Pohang Iron and Steel Company, which is POSCO was formed in 1968. With the production of
39.1 million tons of crude steel in 2011, it has become one of the world's largest and biggest steel
manufacturers. HQ in Pohang, South Korea, POSCO operates two world's biggest mills located
in Pohang and Gwangyang. They jointly produces 33.7 million tons of steel per year. Flat steel,
long steel and plates and wires are its major products.

FUTURE PROSPECTS OF TATA STEEL GROUP

 Scale-up differentiated solutions and services to customers.
 Improve dispatch cost by reaching benchmark performance in KPIs; reduction in
procured raw material and services cost.
 Seed digital initiatives via organization-wide mobilization, pilots and capability building.
 Continue to be a benchmark in environmental performance by reducing CO2, Dust
Emission and increase Solid Waste Utilization.
 Continue with the “Committed to Zero” principle to improve the safety performance.
 Improving employee productivity through various capability building initiatives.
 Engage on Policy Advocacy.
 Touch the lives of people through strong focus on livelihood, education and health as part
of its Corporate Social Responsibility activities.
 Merger and Acquisitions to further expand and move closer to its vision.
 Potential merger with ThyssenKrup

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REFERENCES
http://www.tatasteel.com/corporate/vision.asp

http://www.tatasteel.com/corporate/ethics.asp

http://www.tatasteeleurope.com/en/about%E2%80%93us

https://en.wikipedia.org/wiki/Tata_Steel

https://en.wikipedia.org/wiki/Tata_Steel_Europe

http://steel.gov.in/policy.htm

http://www.bdlaw.com/industries-23.html

http://www.greenspec.co.uk/building-design/steel-products-and-environmental-impact/

http://www.sciencedirect.com/science/article/pii/S0959652615013797

http://www.tatasteel.com/corporate/innovation.asp

http://www.tms.org/pubs/journals/jom/0110/manning-0110.html

https://www.worldsteel.org/steel-by-topic/safety-and-health.html

http://www.ilo.org/safework/info/standards-and-instruments/codes/WCMS_112443/lang--
en/index.htm

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Discussions and implications
The objective of the study was to explore the impacts of store attributes on CBRE dimensions.
The impact of nine store

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 Model Summary
Adjusted R Std. Error of the
Model R R Square Square Estimate
1 .714a .510 .420 1.07741786400
0000
a. Predictors: (Constant), A9, A7, A1, A4, A6, A8, A3, A5, A2

Coefficientsa
Standardized
Unstandardized Coefficients Coefficients
Model B Std. Error Beta t Sig.
1 (Constant) .856 .743 1.153 .255
A1 .105 .106 .108 .986 .329
A3 .412 .114 .474 3.608 .001
A4 .205 .117 .240 1.752 .086
A5 .008 .118 .009 .064 .949
A6 .216 .110 .237 1.964 .055
A8 .201 .100 .250 2.000 .051
a. Dependent Variable: AW

Model Summary
Adjusted R Std. Error of the
Model R R Square Square Estimate
1 .641a .411 .303 1.03275014900
0000
a. Predictors: (Constant), A9, A7, A1, A4, A6, A8, A3, A5, A2

Coefficientsa
Standardized
Unstandardized Coefficients Coefficients
Model B Std. Error Beta t Sig.
1 (Constant) 2.517 .712 3.537 .001
A2 .198 .117 .275 1.698 .096
A4 .253 .112 .338 2.250 .029
A6 .168 .105 .211 1.597 .117
A7 .071 .103 .098 .693 .492
A9 .188 .090 .278 2.101 .041
a. Dependent Variable: AS

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