Tata Steel Marketing Strategy

Tata trade name Marketing StrategyIn this report, Tata trade name Group (Tata trade name) has been chosen as an organisation to analyze the strategic changes made over past five eld including strategic positioning, strategic capability, SWOT and drivers behind these changes.Tata Steel soon is a major player in global brace industry. In year 2005 (Figure 1), Tata Steel operation was mainly focused in Indian subcontinent and tax revenue generated was close to US$ 5.0 billion only. However their initiative to expand their operations glob on the wholey proven really successful over last five years. From populace a mere local stigma maker, they transformed themselves into a major global player in marque producers (Figure 2). They bugger off been aggressively involved in capacity expansion by acquisitions and organic evolution. Business Standard once commented that Tata Steel moved into its next target to become the worlds second largest stigma smart set by 2012 with the help of its most expensive bet worth US$ 12.9 billion on Corus Group.Last two years has been very difficult full point to global steel industry because of worldwide recession. The global crude steel production for year 2009 was 1220.0 mpta (million tonne per annum) as reported by World Steel Association low-toneder by 8% against that of 2008. The decline in accept was due to deterioration in economy experienced by key steel end users. Table 1, shows the ingathering/decline in terms of crude steel production for the top ten steel producing nations.However, by acquisition of Corus and other(a) assets, Tata Steel at once ranks among worlds top ten (Table 2) largest steel producers with current steel production capacity of 32.0 mpta. After five years of its expansion programme, Tata Steel is direct worlds second most geographically alter steel producers.Mission StatementIn its mission statement Tata Steel expresses that while honesty and integrity ar the essential ingredient of a loyal and stable enterprise, profitability provides the main spark for scotch activity. Founded way back in 1907, Tata Steel stress on their core ideology in its vision statement by making emphasis on their people, supplier of choice, innovative 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 spread over five continents. Tata Steel stress on creating differential value for their customer with help of continuous improvement in their duty process and product technology.Value Chain AnalysisThe value cooking stove is an economic tool used to determine the strategic resources unattached to a confederation. Basic principle of the Value Chain Analysis is that the basis for a war-ridden advantage of a firm lies primarily in the application of the bundle of valuable resources at the firms disposal. To transform a short-run agonistical advantage into a sustained emulous 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 neither perfectly imitable nor synonymous without great effort (Barney, 1991, p117). Tata Steel has few 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 production intendts at variant geographical locations.Production and Sales management.Offices and buildings at various geographical locations.All other general management skills.Sufficient tag on of cranky(prenominal) materials for steel making.Sophisticated IT skills.Sufficient cash flow.Safety management.Pool of skilled personnel.Excellent customer service. IT carcass in place.Efficient management structure.Logistic, freight and shipment facilities.Effective employee welfare agreement.Capabilities for Competitive AdvantageUnique ResourcesUnique CompetencesVarieties of products which caters to industries resembling Infrastructures, Automobiles, Aviation, Energy etc. very(prenominal) competent sales team with high negotiation skills which create market for their products.Tata and Corus brands.Excellent use of IT systems for very effective use in sales process. passing capable management team.Continuous developing and upgrading impudent products to serve different industry trains.Online portal Metal junction for buyers.Highly skilled managers and directors who improve and body forth the company success.A century experience in steel making.Integrated supplier and buyer management.Strong financial backing from group. dispiritedest constitute steel producer in world.Very strong presence in India which is a big market for their product s.Enterprise Risk Management (ERM) to eliminate risk associated with various processes.First mover advantage through innovative products processes.Continuous Improvement Process (CIP).Excellent RD for cutting edge technology and products.Operational efficiency and comminuted quality control.Many proprietary products such as Tata Tiscon etc.Long-term relationship with buyers and suppliers.Porters basketball team Forces AnalysisTata Steel has registered double digit growth in past few years except their atomic number 63an business. By applying Porters Five Forces analysis principal, we can evaluate the Tata Steels market competitiveness and its current and future scheme towards intense competition faced at various fronts.Threat of New Entrants LowThreat to youthful entrants in any industry sector is a major challenge. However in steel industry entry barrier is high hence threat of new entrants are relatively low base on factors such as huge capital investment, economies of scale , government policies and product differentiations.Steel industry requires huge capital investment to set up an corporate steel production facility plant which is currently close to US$ one billion/mtpa as per Steel Manufacturers Associations recent estimate. This deters any new entrants entranceway in this field. By increasing their production capacity to 50mtpa and wide variety of products they can lower their cost, hence more profit, sustainability and these conditions are unfavourable to any new entrants.Raw material is a major issue with corruption related to mining allocation and land acquisition, it makes difficult to new entrants to come in this field. confused regulatory clearance 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 truly global in terms of competition with large steel producing countries like China significantly infl uencing global prices 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.Bargaining Power of Suppliers HighTata Steel enjoys greater autonomy in raw materials supply as they bear mines for raw material supply. Tata Steels fully 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 three 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 negociate power. Other steel producers, who dont have their own mining operations, must buy raw material at market prevailing price and pass t hat ascent to consumers which makes them less 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, aviation etc. Concrete is another substitute material that may pose threat to use of steel in infrastructure and zilch 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 more 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 auto, aviation, zippo etc may squeeze greater amount of bargain. On the other hand these bulk consumers may offer 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 SWOT AnalysisSWOT analysis of any firm provides knowledge about the challenges and opportunities faced by Tata Steel group in future. They are detailed below.(S)trengthsTata Steel has acquired vast mineral reserves which is a key to their operations. These reserves can cater their raw material demand for next three decades. 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, credible 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 art integrated information management system for their routine operation. Their advanced RD capability has improved further 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 center 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 every 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 proc ess 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 integration with Corus was a benchmark in corporate history.(W)eaknessesTata Steels real(a) 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 operational 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.Additional levies and tax compel by local government put them in less profit making situation. The s ubsidies provided by some nations (China etc) will make their product less competitive in price hence reduce their demand.(O)pportunitiesCurrently 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 exploit 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 merchandising strategy are a key factor in capturing market share and increasing their financial performance. They can implement Coruss advanced automation technology in their own plants to improve productivity, economies of scale, cost reduction, increased output and operational efficiency to achieve better performance. by-line recent recession, various assets (minerals, plants facilities etc.) are procurable 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.(T)hreatsSteel Industry is major source of greenhouse gas emission, which makes them very vulnerable against many litigation and statute law in future.The raw materials used in steel production are non-renewable and their source is depleting very fast.Due to rising cost of steel products, the end users are looking for substitutes of steel which can be a major threat to Tata Steels business.Intens e 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 OutlookFollowing 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(a) East. By 2025, as per forecast BRICS countries will have 46% of global population and will consume 65% of the global production and will have three quarter of the global GDP.The raw materials for steel making are going at record due to high d emand, higher freight place 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 constructive results.Tata Steels upstream integration process ambition will lead them to achieve 100% self-sufficiency in India and around 50% self-sufficiency in Europe in next 5 years. Tata Steel is investing heavily in RD to get breakthrough technologies and develop new product s and services that reduce the production cost and environmental impact over the product lifecycle. To improve its processes, priority is given to energy conservation schemes in technology break-through such as Ultra Low Carbon Steel making and in other innovative projects where the Group has proprietary 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 formulated and proved business strategy has shown resilience and ability to withstand the unprecedented highs and lows of a future that often comes unheralded. They have taken proactive initiative across all geographies to minimise aftermath shock of recession. Their strategy began to pay off towards the last quarter of year 2009, when they rebounded to profit after the turmoil 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 neer letting go of its core values. This is the philosophy that has underpinned its growth over the years and one that remains its key driving force.The strategy adopted by Tata Steel during last five years to become a global player paid 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 investment 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 ListTata Steel Group one-year Report 2009-10G Johnson, K Scholes R Whittington (2008), Exploring Corporate Strategy, 8th Edition Text Cases, Harlow Financial Times Prentice Hallhttp//www.tatasteel.comBarney, J. 1991. Firm Resources and sustained competitive advantage, Journal of Management, 17 (1) pp99-120.Barney, J.1995. Looking 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 Business Review, January, 78-93.Porter, M.E. (1996). What is Strategy? Harvard Business Review, Nov-Dec, 61-78.