2019-20

Strategic analysis of Tata Steel

SUBMITTED BY-

SANJEEV SAHU
AASHIQ HUSSAIN
SHRUTI TIWARI
GOPI SHANKAR
SAGAR AGARWALLA
NIKITA SHAH
NAYANA CHURIWALA
SAGAR AGARWALA
ABOUT TATA STEEL
ABOUT TATA GROUP
The Tata Group was founded by
Jamsetji Nusserwanji Tata in 1868
and headquartered in India, the
Tata Group is a global business
conglomerate operating in over 100
countries across 5 continents. From
an early foray into steel and
automobiles, to staying abreast of
the latest technologies, the Tata
Group today has a strong presence
across diverse industries such as
agrochemicals, automotive, chemicals,
construction, finance, consumer products,
and hospitality.
Overview of the group
There are 29 publicly listed Tata
enterprises, which include Tata Steel,
Tata Motors, Tata Consultancy
Services, Tata Power, Tata Chemicals, Tata
Global Beverages, Tata Teleservices, Titan, Tata Communications
and Indian Hotels. The group has a combined market capitalization of
around $103.51bn (2016-17).
Tata companies have made significant investments in different
geographies. With ever-increasing international footprint, Tata group
is now reaching out to customers in the farthest corners of the world.

The Tata Group's value system directs the growth and business of all
sectors we operate in. Two-thirds of the equity of Tata Sons, the Tata
group holding company, is held by philanthropic Trusts that have
created national institutions for science and technology, medical
research, social studies and the performing arts.
Cutting-edge innovation, a stringent focus on quality, sustainable
operations and business excellence are the hallmarks of the trust the
Tata name is best recognized for.

ABOUT TATA STEEL

Tata Steel Limited, formerly Tata Iron and Steel Company Limited
(TISCO), is an Indian multinational steel-making company
headquartered in Mumbai, Maharashtra, India, and a subsidiary of the
Tata Group.
Tata Steel is currently the world’s second-most geographically
diversified steel producer. It is one of the few steel operations that are
 fully integrated – from mining to the manufacturing and marketing of
finished products.
Tata steel is one of the top steel producers in the world with total steel
production of 13.23 MTPA (FY 2019) and the largest steel company
in India with total
production capacity
of 27.5MnT.
Tata Steel operates
in 26 countries with
key operations in
India, Netherlands
and United
Kingdom, and
employs around
80,500 people.
HISTORY OF THE
ORGANIZATION
Tata steel formerly
known as Tata Iron and Steel Company was founded by Jamsetji
Tata and established by Dorabji Tata in 1907 and began producing
steel in the year 1912. By the year 1939, it operated the largest steel
plant in the British empire.
The company launched a major modernization and expansion
program in 1951. Later, in 1958, the program was upgraded to 2
million metric tons per annum (MTPA) project. By 1970, the company
employed around 40,000 people at Jamshedpur, and a further 20,000
in the neighboring coal mines.
In 1990, the company began to expand, and established its
subsidiary, Tata Inc., in New York. The company changed its name
from TISCO to Tata Steel Ltd. in 2005.

MACRO-ECONOMIC ENVIRONMENT
ANALYSIS
The macro-economic environment can be analyzed by analyzing
the market and non- market environments and by forecasting
megatrends, inflexion trends and weak signals.
The market and non-market environments can be analyzed using
PESTLE framework. PESTLE framework is an economic framework
which helps to monitor macro- economic factors that may have impact
on an organization’s performance.
PESTLE ANALYSIS OF TATA STEEL
• POLITICAL: (Low direct state involvement, High political
exposure)
1. Through different policies the government has been influencing the
business of TATA STEEL, such as taxation policy.
2. The international trade regulations are also enforcing changes in the
strategic implementation.
3. Tata steel has good relationship with the government and various
political parties which helps them in land acquisition deals for
increasing their production capacity.
4. There are no quantitative restrictions on import of iron and steel
items. Iron and Steel industry has been included in the list of `high
priority' industries for automatic approval for foreign equity investment
up to 100%.
5. Tata group has always had good relationships with foreign entities
which helps them to set their businesses easily in other countries.
Tata steel has businesses in over 26 countries. Example: United
Kingdom, Iran, Bangladesh etc.

• ECONOMIC

1. Steel industry is a core industry. Steel is a commodity has low

differentiation and is generally a further raw material for other
industries. When there is a slowdown in an economy, when macro-
economic variables like consumption suffers, the steel industry also
suffers.
2. Exchange rates also affect the steel companies and especially Tata
steel because tata steel heavily exports its surplus. So, exchange
rates play a huge role in international trade.
3. Differential growth rates around the world also affects tata steel
because it has commercial presence in over 50 countries and every
country is different from each other and has different demands
depending on their economic conditions prevailing in the nation.

• SOCIAL

As mentioned earlier steel is a raw material for other industries so if

economic factors like income distribution, lifestyle changes, culture and
fashion will have an effect in steel industries as demand for other
products increase the demand for steel will also increase.

• TECHNOLOGICAL
1. Tata group companies are known for their innovation and Tata steel
is no different. Tata steel constantly innovates by spending heavily in
R&D to constantly improve their process efficiency and quality of their
products.
2. Tata steel constantly comes with new products which helps the other
equipment manufacturers, is a testament of their innovation and
technological prowess.
 • ECOLOGICAL
1. To reduce the CO2 emission in the environment tata steel has
invested heavily with the research of ultra-low carbon steel.
2. Tata steel also spends heavily for social and environmental causes.
Tata steel invests in saving aquatic lives by saving sea turtles and
saltwater crocodiles.
3. Tata steel plants 400,000 saplings every year near the locations of its
manufacturing units.

• LEGAL
1. Tata steel ensures the EHS (Environmental health and safety) under
which every employee’s activity is managed by the EHS framework.
2. Tata steel has strict ethical norms across all business functions and
processes which has led Tata steel to one of the best governed
companies in India.

FUTURE OF STEEL INDUSTRY

The Indian steel industry is a stable industry, with few major players
in the country and well-defined set of customers makes steel industry
less prone to radical changes.
But given the nature of the product, the changes in other industries
can affect the steel industry. Example- Automobile industry,
agriculture industry etc.
If a company must survive these challenges, they should sense these
market changes well in advance.
A few tools can help a company to forecast these changes, some of
them are:
1. Forecasting under situations of uncertainty
2. Directions of change
3. Scenario analysis
 Directions of
Forecasting Scenario analysis
change
• electric vehicles • Megatrends: as • With poised to
might use less the cost of grow rapidly in
steel to improve production future, the
the performnace reduces construction
and reduce costs. aluminium could segment of tata
• to comply with replace steel. steel will face stiff
emission and • Inflexion points: competiton.
safety norms with vehicles • with vehicles
aluminium could getting smaller getting smaller
replace steel in the steel the steel
future. consumption consumption
could get very could get very
low in future. low in future.

THE INDIAN STEEL INDUSTRY

▪ India was the world’s second-largest steel producer with
production standing at 106.5 MT in 2018. The growth in the Indian
steel sector has been driven by domestic availability of raw
materials such as iron ore and cost-effective labor. Consequently,
the steel sector has been a major contributor to India’s
manufacturing output.
▪ The Indian steel industry is very modern with state-of-the-art steel
mills. It has always strived for continuous modernization and up-
gradation of older plants and higher energy efficiency levels.

Industry and sector analysis can be done by studying the various factors
which makes an industry attractive. One such tool which helps us in
identifying the industry attractiveness is Michael Porter’s five forces
framework.
 PORTER’S FIVE FORCES FRAMEWORK ON TATA STEEL

Medium to high: because of huge

THREAT OF investments requirement and approvals
NEW by government. Mining norms to be
ENTRANTS
followed to ensure environment is not
damaged.

BARGAINING BARGAINING
COMPETITIVE
POWER OF POWERS OF
RIVALRY
SUPPLIERS BUYERS

Low: because steel companies have their Low: steel is a commodity and doesn’t
own raw materials from their won ore have much product and price
mines. differentiation.
THREAT OF
SUBSITUTES

Medium to low: Only aluminum usage has been

rising continuously, but it doesn’t pose any
significant threat because of its high prices and
can’t be used everywhere.

RESOURCES AND CAPABILITIES IN TATA STEEL

Every company has some resources and it’s the resources that enables
a firm to superior performance and contribute to its long-term survival.
Resources help organizations to have a competitive advantage in the
future, so it becomes necessary to analyze the resource and
capabilities.
The resources and capabilities can be analyzed by an economic
framework known as the VRIO framework.
VRIO FRAMEWORK ON TATA STEEL
Here are some the important resources that Tata steel has:
❖ Financial resources
❖ Manufacturing resources
❖ Intellectual resources
❖ Human resources
❖ Nature resources

FINANCIAL RESOURCES

Cash generated
from Net debt to Basic EPS
operations equity
90.41
19,726 0.42 Rupees
crores

VRIO ANALYSIS
• VALUE: the turnover during current period was 70,611 crores.
Tata steel is part of Tata sons’ group of companies. Its financial
prowess is next to none. It gives them a financial advantage
which is matched to none. This has been proved time and again
when Tata steel has been able to take advantage of
opportunities and neutralize threats. This in turn helps them to
provide value to their customers.

• RARITY- financial prowess is not rare in the steel industry

because companies that enter steel industry ought to have
financial capability. But if we compare Tata steel to other steel
companies Tata steel still has an advantage.

• INIMITABLITY- is not difficult because all steel companies have

good financial strength but managing the resources is also
crucial. Very few companies can match Tats steel’s
management skills.

• ORGANIZATIONAL SUPPORT- Very few companies can

match Tata steel’s management processes and systems.
MANUFACTURING RESOURCES
• Acquisition of Bhushan steel- 5.6 MNTPA
• Kalinga nagar phase 2- 5 MNTPA
• Record production at Tata steel- 13.23 MNTPA

VRIO ANALYSIS
• VALUE- the efficient manufacturing processes at Tata steel are
critical to meet growth aspirations and address the evolving needs
of the customers. Tata steel is a cost leader in the steel industry
which helps them to provide products at a relatively cheaper price.

• RARITY- manufacturing efficiency is not rare to Tata steel only.

Other steel companies also have efficient manufacturing
processes.

• INIMITABILITY- its very difficult to imitate manufacturing

processes of this scale. It takes years to learn from the mistakes
and implement the changes.

• ORGANIZATIONAL SUPPORT- the organizational support for

manufacturing processes at tata steel is unparalleled.

INTELLECTUAL RESOURCES
• R&D expenditure- 216 crores
• Patents granted- 72
• New products launched- 114

VRIO ANALYSIS
• VALUE- tata steel is one the top 5 ranked steel companies. Tata
steel tries continuously to innovate and adapt to change. It helps
them to keep up with changing customer needs and deliver better
value to its customers.

• RARITY - Tata steel has many patents which makes this resource
a rare one.

• INIMITABILITY- Like said before Tata steel is a 112 years old

company, Tata steel has pioneered in this field so well and has so
many patents, information and technology that other companies
 can never achieve and it also possess the brand Tata which it can
leverage which is Inimitable.

• ORGANIZATIONAL SUPPORT- Tata steel spends 1.5% of their

revenue on Research and development department which shows
how supportive they are in their stand to improve and sustain their
intellectual resources

HUMAN RESOURCES-
• 32,984 employees in India
• 49% reduction in LTIFR in last 10 years
• ~6.5% women in workforce

VRIO ANALYSIS
• VALUE- Tata groups are known to be well respected in the
industry for treating their employees right from the very beginning
even before any unions were made. Tata steels support and care
towards their employees with schemes such as Health insurance,
sufficient holidays, Tie up with Big hotels and other service for
subsidies, Great work life balance and amazing facilities sports.

• RARITY- a diversity and inclusion initiative– covers four aspects,

gender, Person with Disabilities (PwDs), LGBTQ+, and different
sections of society (e.g., Affirmative Action Community). 32% of
management trainees hired from top business schools are female,
a result of our diversity-focused recruitment processes.

• INIMITABILITY- Culture of Tata steel is very unique as Highest

importance are given to the employee due to which high morale is
attainted and this is reflected in the low employee turnover over
and a score of 3.29(out of 4) on happiness index

• ORGANIZATIONAL SUPPORT- Tata Steel also pioneered

several labour welfare benefits. These include an eight-hour
working day, free medical aid, establishment of a welfare
department, leave with pay, workers' provident fund scheme,
workmen's accident compensation scheme, maternity benefits,
profit sharing bonus and retiring gratuity. Seen in this context, it is
hardly surprising that the company hasn't seen a single strike since
1929.
NATURAL RESOURCES
Tata steel’s business is heavily depended upon the upon the
natural resources without which Tata steel would cease to exist.
Hence Tata steel takes upmost responsibility to use the resource
sustainability and efficiently.

VRIO ANALYSIS
• VALUE- Tata steel is investing in technologies to achieve the
highest environmental performance standards. They plan to
achieve this by adopting breakthrough technologies for raw
materials management, higher utilization of LD slag, setting up the
steel recycling business, achieving zero water discharge, carrying
out lifecycle assessments of their products and embedding the
principles of circular economy in our operations.

• RARITY-
Restoring the flora diversity
Optimized the plantation program in terms of precise type and number of
native species to be used. The diversity of the native species being used
for plantation activity increased by 22% and plantation of primary
keystone species increased by 5 times.
Completed the mapping distribution of invasive species at the Joda East
iron mine and had restoration plan is now being implemented
Planted over 2 lakh saplings of native species across Raw material
location

• INIMITABILITY- The Paris agreement aims at arresting the global

warming to <2 degrees Celsius for which the key requirement is to
make CO2 emission net zero by 2050. The steel industry
contributes to about 6-8% of global emission and is considered to
be a ‘hard to abate sector’ since carbon is used as a reductant in
the steelmaking process and low carbon steelmaking technologies
are yet to be commercialized. Cognizant of India’s commitment
and the sectoral requirements, Tata Steel has set an aspirational
goal of <2 tCO2/tcs emission by 2025.
• ORGANIZATIONAL SUPPORT- Tata steel to be more responsible
towards environmental performance is an inherent element of their
business strategy and these practices help them achieve a
leadership position in the industry. In Financial Year 2018-19, they
spent ₹286 crore on environmental management efforts focused
on the four pillars of emission, water management, circular
economy and biodiversity.

STAKEHOLDER MAPPING AND INDICATIVE

CULTURE
The Founder of the Tata Group, Jamsetji Tata conceived Tata Steel
to be a conduit to the economic freedom for the people of India. He
emphasized on considering the interests of the shareholder, and the
health and welfare of employees as the sure foundation of success.
This defined the purpose and nature of Tata Steel’s relationships with
its stakeholders.
A stakeholder approach to business
Tata Steel identifies its stakeholders based on voluntarily accepted
obligations and those whose interests it must address in the value
creation process. Strategic planning and risk management processes
systematically collect and analyses information on existing and
emerging stakeholders and continually define organizational priorities.
In Europe, the Company has adopted a common pan European
system that allows it to identify, map and target the most relevant
stakeholders. The Company’s Public Affairs team also conducts
regular reviews of stakeholder lists across the European operations.
Communicating with stakeholders on the impact of the
Company's actions
Tata Steel engages with stakeholders prior to the implementation of
policies or actions that are likely to have an impact on them. Here is
an overview of the communication process: •
• Customer concerns regarding cost, delivery, value added
products, quality complaints and safety and environmental
issues are addressed through special
customer meets, satisfaction surveys and dedicated customer teams.
• The Company helps suppliers and vendors increase their
capability through various training sessions, vendor meets and
surveys.
• For employees, issues such as career planning, compensation,
growth training and development are addressed through
dialogues, Joint Development Councils, Performance
Management System, etc. For issues related to health and
safety, the Company focusses on the Safety Excellence
 Journey, the Wellness Workplace programme and other training
events.
• The Company interacts on a regular basis with
the community, through public hearings and meetings with
various groups such as the Zila Parishad, Senior Citizens, tribal
leaders and groups, and local leaders.
• The Company uses the forums of the Annual
General Meeting, analyst meetings and investor road
shows to meet with investors and address issues of
performance, long-term strategy and growth plans.
• Tata Steel regularly holds meetings with Governmental
bodies that are connected to the steel industry, for example, the
Pollution Control Boards, Tax Departments, Central and State
Ministries and other influential groups.
• As a publicly listed company, Tata Steel interacts with
the media, releasing information as required on various
issues on compliance with the listing agreement.
• Tata Steel is an active and important member of various
industry forums in India and around the world and plays an
important role in policy formation and business development.

STAKEHOLDER MAPPING OF TATA

STEEL
 BUSINESS AND CORPORATE
STRATEGIES OF TATA STEEL
Tata Steel continually re-defines performance parameters in its journey
towards becoming the global steel industry benchmark for value creation
and corporate citizenship.
Today, Tata Steel is amongst one of the few steel companies that has its
operations fully integrated – from mining to manufacturing and marketing
of finished products.
Their manufacturing strategy has always focused on ensuring raw
material security. This goes a long way in enabling cost competitiveness
and efficiencies and has enabled Tata Steel to become the lowest cost
producer of steel in Asia.
The raw Material Division operates captive iron ore and coking coal
mines in the Indian states of Jharkhand and Odisha. Key manufacturing
functions are performed by the raw materials and iron making groups,
while shared services provides support for a smooth production. The
downstream and allied business activities are structured into profit
centers such as Ferro-alloys and Minerals, Tubes, Wires, Bearings,
Agrico, Industrial By-products Management & Tata Growth Shop.
STRATEGIC PLANNING PROCESS OVERVIEW AT TATA STEEL

VISION MISSION VALUES

MATERIAL STRATEGY Leadership ENTERPRISE RISK

DEVELOPMENT direction MANAGEMENT
ISSUES Identification
Strategic objectives Assessment
and enablers long-term Mitigation
INTERNAL External context Review and monitoring
strategy
CONTEXT

STRATEGY DEPLYOMENT
Long- term plan
Annual business plan
STRATEGIC OBJECTIVES
While Tata Steel has consistently been one of the most profitable and
lowest cost producers of steel in the world, the company needs to
address challenges such as improving productivity, maintaining cost
competitiveness, and being agile and innovative in a rapidly evolving
business environment. Tata Steel aspires to further strengthen its
leadership position, and for this purpose, has defined a set of Strategic
Objectives (SOs). To achieve the SOs, we have also identified a set of
core capabilities, known as ‘Strategic Enablers’.

• STRATEGIC OBJECTIVE -1
INDUSTRY LEADERSHIP IN STEEL
Scale of operations is a pre-requisite for steel industry leadership.
• STRATEGIC OBJECTIVE- 2
CONSOLIDATE POSITION AS A GLOBAL COST LEADER
Tata steel aspires to be a global benchmark in operational
efficiency, ensure raw material security and strengthen our
logistics network.

• STRATEGIC OBJECTIVE – 3
INDUSTRY LEADERSHIP IN CSR AND SHE
Tata steel aspires to be a leader in sustainable business practices.
As a responsible organization, we are committed towards creating
and providing a safe working environment for our people, carrying
out environment-friendly business operations and improving the
quality of life of the communities we operate in.

• STRATEGIC OBJECTIVE – 4
INSULATE REVENUES FROM STEEL CYCLICITY
The steel industry is cyclical in nature. It is essential to build a
portfolio of products and services that can provide protection from
cyclicality and lend stability and momentum to our revenues and
profitability.
STRATEGIC ENABLERS

• EMPLOYER OF THE CHOICE

People are key for an organization aspiring to strengthen its
leadership position and being an employer of choice is a significant
aspect of their strategy.

• LEADERSHIP IN STEEL TECHNOLOGY

To prepare for disruptions in the future, our ability to innovate and
develop new products, improve processes, develop technologies
and transform business models is critical.

• AGILITY AND INNOVATION

It is essential to focus on creating the right organizational culture
that encourages agility and innovation.

• LEVERAGE DIGITAL TECHNOLOGY

Digitalization is critical for attaining technology leadership in the
Industry 4.0 era and drive innovation.

RECENT STRATEGIES OF TATA STEEL

1. Tata steel is working on a strategy to raise the share of value-
added steels to 30% of its total production, as part of an
initiative to insulate itself from the cyclicality of steel business.
The company also said it is planning to add new materials like
Graphene, Carbon fiber reinforced polymer and Advanced
ceramics that would constitute over 10% of its revenue by 2025.

2. The company’s acquisition of Bhushan and Usha Marin was a

step towards adding more value-added steels in its portfolio.
This will be reinforced by deploying more capital in value added
downstream assets and venture. It would also pursue a plan of
divestment, strategic restructuring and monetization of non-
synergistic ventures.

3. Due to the automobile slowdown in in current financial year, the

automotive steel demands were low. The automobile
manufacturers started producing less automobiles as the
demand for consumer vehicles was low. But tata steel
countered the sagging sales in automobile sector by logging
 higher volumes in other segments- branded products and retail
industrial products. This helped tata steel to achieve 16 percent
overall spike in sales to 3.66 million tonnes, outpacing industry
average of 7%.

4. Tata steel terminated its plan to sell-off its South-East Asian

operations to Chinese HBIS.