Analysis Of Strategic Changes Of Tata Steel Group Marketing Essay

epitome Of Strategic Changes Of Tata trade name caller-out Marketing EssayFigure 1Tata sword su hope is a study player in global firebrand industry. In social class 2005 (Figure 1), Tata educate public presentation was mainly focused in Indian subcontinent and revenue generated was close to US$ 5.0 billion only. However their chess opening to expand their operations globally proved in truth successful over utmost vanadium course of studys. From being a mere local anesthetic stain producer, they transformed themselves into a major global player in leaf blade producers (Figure 2). They have been aggressively involved in contentedness enlargement by accomplishments and organic festering. business enterprise Standard once commented that Tata leaf blade moved into its next target to get going the demesnes second largest trade name company by 2012 with the help of its most pricy bet worth US$ 12.9 billion on Corus Group.Figure 2Table 1 Worlds Top Ten stain Producing Nations (in million tonnes) stick out two eld has been really difficult period to global chance upon industry because of worldwide recession. The global vernacular stigma widening for year 2009 was 1220.0 mpta (million tonne per annum) as reported by World vane connector miserableer by 8% against that of 2008. The decline in take away was out-of-pocket to deterioration in economy experienced by key leaf blade end users. Table 1, shows the growth/decline in terms of crude sword harvestingion for the top ten stigma producing nations.However, by acquisition of Corus and other ascurings, Tata firebrand now ranks among worlds top ten (Table 2) largest mark producers with current brace fruition subject of 32.0 mpta. After flipper years of its refinement programme, Tata Steel is now worlds second most geographically diversified trade name producers.Table 2 World Top Ten Steel Producing Companies rush StatementIn its mission statement Tata Steel expresses that while h binglesty and integrity argon the essential ingredient of a tight and persistent enterprise, favourableness interprets the main spark for scotch activity. Founded way back in 1907, Tata Steel stress on their core ideology in its vision statement by making accent on their people, supplier of choice, progressive approach and their conduct. Tata Steels vision statement is now became a tangible asset, which provide right direction to their managers and employees. Tata Steel has highly skilled employee asset of 81,000 circle over five continents. Tata Steel stress on creating una wish wellial set for their customer with help of continuous modifyment in their business unconscious process and product technology.Value Chain AnalysisThe value chain is an economic tool used to determine the strategic resources obtainable to a company. fundamental principle of the Value Chain Analysis is that the basis for a free-enterprise(a) vantage of a firm lies primarily in th e application of the chock up of valuable resources at the firms disposal. To transform a short-run competitive advantage into a sustained competitive advantage requires that these resources are heterogeneous in nature and not perfectly mobile (Barney, 1991, p105-106 Peteraf, 1993, p180). Effectively, this translates into valuable resources that are incomplete perfectly imitable nor substitutable without great effort (Barney, 1991, p117). Tata Steel has hardly a(prenominal) major strategic capabilities which are valuable, unique and non-substitutable.Tata Steels Strategic CapabilitiesTata Steels strategic capabilities are presented in Table 3, below.Table 3ResourcesCompetencesThreshold CapabilitiesThreshold ResourcesThreshold CompetencesSteel outturn plants at versatile geographical locations.Production and Sales management.Offices and buildings at heterogeneous geographical locations.All other general management skills. comfortable supply of tender literals for vane makin g.Sophisticated IT skills.Sufficient cash flow. safeguard management.Pool of skilled personnel. slender customer service.IT System in place. cost-effective management structure.Logistic, freight and shipment facilities.Effective employee welfare system.Capabilities for Competitive usefulnessUnique ResourcesUnique CompetencesVarieties of products which furnishs to industries like Infrastructures, Automobiles, Aviation, Energy etc.Very able sales team with high negotiation skills which create grocery store for their products.Tata and Corus brands.Excellent use of IT systems for very effective use in sales process. exceedingly capable management team.Continuous softening and upgrading new products to serve different industry levels.Online portal Metal junction for buyers.Highly skilled managers and directors who improve and support the company success.A century experience in steel making.Integrated supplier and buyer management.Strong financial backing from group. last(a) cost st eel producer in world.Very strong st fond man in India which is a big market place for their products.Enterprise hazard forethought (ERM) to eliminate risk associated with various processes.First mover advantage with innovative products processes.Continuous Improvement Process (CIP).Excellent RD for cutting asperity technology and products.Operational efficiency and excellent quality control.Many branded products much(prenominal) as Tata Tiscon etc.Long-term relationship with buyers and suppliers.Porters volt Forces AnalysisTata Steel has registered double digit growth in past few years except their European business. By applying Porters Five Forces analysis principal, we fuck evaluate the Tata Steels market competitiveness and its current and future strategy towards piercing competition faced at various fronts.Threat of New Entrants littleThreat to new entrants in any industry sector is a major challenge. However in steel industry entry restraint is high hence holy t error of new entrants are relatively low based on factors such as huge capital investment, economies of scale, brass policies and product eminences.Steel industry requires huge capital investment to set up an co-ordinated steel production facility plant which is soon close to US$ one billion/mtpa as per Steel Manufacturers Associations new estimate. This deters any new entrants entering in this field. By increasing their production capacity to 50mtpa and wide contour of products they potbelly lower their cost, hence much profit, sustainability and these conditions are unfavourable to any new entrants.Raw substantive is a major issue with corruption related to mining allocation and put down acquisition, it makes difficult to new entrants to come in this field. Various regulatory head and environmental issues also pose big barriers to new entrants. Entry barriers in terms of product differentiation are very low in steel industry.Competitive Rivalry HighThe steel industry is unfeignedly global in terms of competition with large steel producing countries like china solidly influencing global bells through their aggressive exports. In steel industry, branding is not very common hence little differentiation exists between their competing products. Tata Steel faces stiff competition with their competitors such as Arcelor Mittal, POSCO etc. talk terms Power of Suppliers HighTata Steel enjoys greater autonomy in bleak materials supply as they own mines for raw material supply. Tata Steels full integrated supply chain system keeps abundant supply of raw material for their plants. However, other steel producers, who dont have their own mines, have to rely on raw material suppliers. On global level raw material market is dominated by the leash mining giants BHP Billiton, CVRD and Rio Tinto. They make mineral market as oligopolistic and supply two-thirds of the processed iron ore to steel producers hence command very high bargaining big businessman. Other steel producers, who dont have their own mining operations, must buy raw material at market prevailing price and pass that hike to pick outrs which makes them less(prenominal) competitive.Threat of Substitute Products LowNew materials may pose threat to viability of steel. Aluminium, plastics and other composite materials are being considered as substitute in sectors like auto, air travel etc. Concrete is another substitute material that may pose threat to use of steel in foundation and energy sectors. Some of the substitute materials such as aluminium itself are very costly, hence doesnt pose very big threat against steel producers. However the growth led by infrastructure sector, automobile sector, aviation sector and consumable goods will keep demand up for steel hence to a greater extent growth for Tata Steel.Bargaining Power of Buyers AverageBargaining power of buyers is very limited due to their fragmentation. Big players of the major steel consumers in sectors such as aut o, aviation, energy etc may squeeze greater heart of bargain. On the other hand these bulk consumers may prolong long term procurement offer to the company hence more revenue generated. However, small and retail consumers are scattered, though they consume significant amount of steel production, dont have the same bargaining powers as in case of big players.Tata Steel Group fancy up AnalysisSWOT analysis of any firm provides knowledge about the challenges and opportunities faced by Tata Steel group in future. They are detailed below.StrengthsTata Steel has acquired considerable mineral reserves which is a key to their operations. These reserves can cater their raw material demand for next three tenners. Tata Steels mineral reserves are located at various strategic geographical locations such as India, Australia, Canada, Mozambique, Oman, Ivory Coast etc.Tata Steel has very capable, thinkable and reliable top management. Their successful global expansion plan in last five years proved this. Tata Steel has successfully acquired and integrated Corus Europe, NatSteel Indonesia and Millennium Steel Thailand.Tata Steel uses custom made state of maneuver integrated information management system for their routine operation. Their advanced RD efficacy has improved and by acquiring Corus which is world renowned for its product innovation.Tata Steel uses Tata Groups strong distribution and retail network. Its Groups demand for steel is very high due to their presence in most of the sectors.Currently Tata Steel produces 32 mpta of steel and by completion of DPCL project its total capacity will reach to 50mpta which will make it second biggest steel producer in world.Tata Steel has structured risk management process in place in their operation known as Enterprise Risk Management (ERM). ERMs key function is to identify risk at any level and mitigate the same.Tata Steel mitigates very well the cyclicality situation which occurs in steel industry occasionally by its broad spectrum of its product portfolio.Tata Steel expansion plan has consolidated its position worldwide and by diversifying its portfolio and market is in process to become a pioneer in steel industry.Tata Steel has very strong brand value for its products. This has strengthened further by acquiring Corus which itself is a big brand. Their successful desegregation with Corus was a benchmark in corporate history.WeaknessTata Steels substantial debt burden of US$9.8 billion is a major weakness. Their debt equity ratio is currently 1.77, which reflects company finances are met by debt due to Corus acquisition.Its European business (Corus) has a high exposure to spot price and a high operating(a) gearing thus creating very high risk of price volatility.Tata Steel relies for some raw material on international suppliers, which expose their profitability in case of steep rise in their prices.Tata Steels Indian operation is very much hampered by lack of infrastructure, shortage in power supply, lesser productivity, bureaucratic hurdle in export etc. redundant levies and tax imposed by local government put them in less profit making situation. The subsidies provided by some nations (China etc) will make their product less competitive in price hence slim down their demand.OpportunitiesCurrently the emerging economies are undergoing huge infrastructural developments, which require significant amount of steel in all sectors. In India the scope for expansion of its steel products are enormous in every sector, which Tata Steel can go very well with its increased production capacity. As per World Steel Association estimate, the consumption of steel will be doubled in next two decades.By Acquiring Corus and improving its own RD activities, Tata Steel moved towards a better product differentiation and enhanced product portfolio which provide them new opportunities over its competitors.Their geographical locations with integrated operations and trade strategy are a key f actor in capturing market share and increasing their financial performance. They can implement Coruss advanced mechanisation technology in their own plants to improve productivity, economies of scale, cost reduction, increased output and operational efficiency to achieve better performance.Following recent recession, various assets (minerals, plants facilities etc.) are available at a very low price due to their financial difficulty. Tata Steel, with strong backing from its parent group can secure future supplies of raw materials for steel making.With increased steel production capacity of 50 mpta, they will be the second largest steel manufacturer after Arcelor Mittal and most geographically diversified company with wide variety of product mix.ThreatsSteel Industry is major source of greenhouse turgidness emission, which makes them very vulnerable against many litigation and legislation in future.The raw materials used in steel production are non-renewable and their source is depl eting very fast.Due to rising cost of steel products, the end users are aspect for substitutes of steel which can be a major threat to Tata Steels business. strong competition among international steel player and cheap steel available from China are another major threat to Tata Steels performance.Tata Steels huge debt is one of major threats against them. The rising interest will increase their debt burden.Future aspectFollowing two years of worst global economic downturn, the world seems to be regaining some economic stability. There is moderate growth from developed world however emerging economies are registering very strong and sustainable growth with robust domestic market.Before recession, the steel demand was very strong with over 6% growth during last decade this is primarily driven by robust growth in BRICS nations (Brazil, Russia, India, China and South Africa), South East Asia and Middle East. By 2025, as per point BRICS countries will have 46% of global population and will consume 65% of the global production and will have three tail assembly of the global GDP.The raw materials for steel making are going at record due to high demand, high freight rates and monopoly of three big natural resources companies. The effects of the above factors are reflected in higher steel price and decrease in profit margin of steel companies. However Tata Steels strategy adopted over last five years for securing long term contract for raw materials supply or acquiring new raw material mines at various geographical location has helped them to keep their prices competitive and making whole operation as viable. Tata Steels integration with Corus has completed successfully and producing better result than expected. Tata Steels strategic effort of capacity expansion and effort to secure raw materials source at various geographical locations yielding positive results.Tata Steels upstream integration process rivalry will lead them to achieve 100% self-sufficiency in In dia and round 50% self-sufficiency in Europe in next 5 years. Tata Steel is investing heavily in RD to get breakthrough technologies and develop new products and services that reduce the production cost and environmental uphold over the product lifecycle. To improve its processes, priority is given to energy saving schemes in technology break-through such as Ultra Low snow Steel making and in other innovative projects where the Group has patented technology.ConclusionsIt was the best of times, it was the worst of times, this famous quote meant a lot to Tata Steel. Five year back, just after starting of their ambitious global expansion plan, they were hit by worldwide financial tsunami which tested their resilience. Their well hypothecate and proved business strategy has shown resilience and ability to withstand the infrequent highs and lows of a future that often comes unheralded. They have taken proactive initiative across all geographies to minimise aftermath shock of rece ssion. Their strategy began to ease up off towards the last quarter of year 2009, when they rebounded to profit after the ruckus of recession. Undeterred by the economic turbulence, the Company continued to place emphasis on working practices in health, safety and corporate citizenship, with specific initiatives taken in all these areas.In addition, a continued focus on engineering solutions for customers is helping it maintain its position of a product pioneer. Tata Steel believes in staying alert to future opportunities while never letting go of its core values. This is the philosophy that has underpinned its growth over the years and one that system its key driving force.The strategy adopted by Tata Steel during last five years to become a global player paying off. They increased their revenue and production by six fold by capacity expansion or acquisition. They achieved raw material self-sufficiency of 50% by year 2010 and by year 2012 they aim to increase it to 60% by more i nvestment in mines acquisition. In last five years Tata Steel became a global player from a local steel producer with currently global presence in 50 markets and manufacturing operations in 26 countries.Appendix A Reference identifyTata Steel Group Annual Report 2009-10G Johnson, K Scholes R Whittington (2008), Exploring Corporate Strategy, 8th Edition Text Cases, Harlow Financial Times learner Hallhttp//www.tatasteel.comBarney, J. 1991. Firm Resources and sustained competitive advantage, Journal of Management, 17 (1) pp99-120.Barney, J.1995. facial expression inside for competitive advantage, Academy of Management Executive. 9(4). Pp49-61.Peteraf, M. A. (1993). The cornerstones of competitive advantage A resource-based view, Strategic Management Journal, 14 (3), 179-191Porter, M.E. (2008). The five competitive forces that shape strategy, Harvard affair Review, January, 78-93.Porter, M.E. (1996). What is Strategy? Harvard Business Review, Nov-Dec, 61-78.