ASSIGNMENT STRATEGIC MANAGEMENT

SUBMITTED TO: PROF. DR. AVIJAN DUTTA

SUBMITTED BY DIPANWITA PATRA ROLL NO.-10/MBA/32

NATIONAL INSTITUTE OF TECHNOLOGY, DURGAPUR DEPARTMENT OF MANAGEMENT STUDIES

The Company Profile:

Tata Steel , formerly known as TISCO and Tata Iron and Steel Company Limited, was established in the year 1907 is the world's seventh largest steel company Established in 1907, Tata Steel is among the top ten global steel companies with an annual crude steel capacity of over 28 million tonnes per annum (mtpa). It is now one of the world's most geographicallydiversified steel producers, with operations in 26 countries and a commercial presence in over 50 countries. The Tata Steel Group, with a turnover of US$ 22.8 billion in FY '10, has over 80,000 employees across five continents and is a Fortune 500 company. Tata Steels larger production facilities include those in India, the UK, the Netherlands, Thailand, Singapore, China and Australia. Operating companies within the Group include Tata Steel Limited (India), Tata Steel Europe Limited (formerly Corus), NatSteel, and Tata Steel Thailand (formerly Millennium Steel). Tata Steel has always believed that the principle of mutual benefit - between countries, corporations, customers, employees and communities - is the most effective route to profitable and sustainable growth.

Vision Statement: The vision of the company is to be the global steel industry benchmark for value creation and corporate citizenship. They want to achieve their vision through: Our People By fostering teamwork, 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 Jamsedji Tata, Tata Steel strives to strengthen Indias 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.

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 Tata Group has always been driven by five core values: Integrity: We must conduct our business fairly, with honesty and transparency. Everything we do must stand the test of public scrutiny. Understanding: We must be caring, show respect, compassion and humanity for our colleagues and customers around the world, and always work for the benefit of the communities we serve. Excellence: We must constantly strive to achieve the highest possible standards in our day-to-day work and in the quality of the goods and services we provide. Unity: We must work cohesively with our colleagues across the group and with our customers and partners around the world, building strong relationships based on tolerance, understanding and mutual cooperation. Responsibility: We must be responsible and responsive to the countries, communities and environments in which we work, always ensuring that what comes from the people goes back to the people many times over.

Strategy: The Tata Steel remains consistent with their vision of the global steel industry benchmark for value creation and corporate citizenship. In this regard the company is consistently focusing on value creation with the pillars of quality of earnings and growth. The strategies followed by the company are being discussed as follows:

Quality of Earnings: 1. The company continues to be one of the most profitable steel operations in the world. It has several continuous improvement initiatives in place. Cumulative cost savings of `1,061 crores was achieved during the last financial year with areas such as slag rate reduction, raw material optimization and shared services being addressed. 2. Kar Vijay Har Shikhar(conquer every peak) is a new initiative launched during the year, focused on Tata Steels aspiration to improve its EBITDA. It is a multi-unit, multi-location, cross functional improvement programme that aims to excel across the entire steel value chain all the way from the raw materials mining to marketing and sales of finished steel.

3. Kar Vijay Har Shikhar Marketing and Sales is pursuing value creation in the Small and Medium Enterprise market space and has been launched in fl at products, long products, the wires and tubes divisions. 4. For strengthening its downstream capabilities, in January 2011 Tata Steel and Nippon Steel have signed a joint venture (51:49) agreement to set up Indias first Continuous Annealing and

Processing Line (CAPL) for the production of 600,000 tonnes per annum of automotive cold rolled steel at Jamshedpur. The project expected to come on stream in 2013 and aimed at improving automotive offering in India. 5. The Group is thriving towards technological leadership by continuous research and development. In this regard they have in the last financial year the Research and Development project portfolio has been tailored to meet customer needs and to align with our market sector needs.

Growth: The second pillar in the vision of Tata Steel is selective growth with an aim to strengthen its position in emerging markets like India and increase the level of raw material integration and energy self-sufficiency across the Group. 1. Increase the production with the growing needs of the customers worldwide. The 2.9 mtpa project to expand crude steel capacity at Jamshedpur from 6.8 mtpa to 9.7 mtpa is making good progress and is scheduled for completion in FY 2011-12. The project involves the installation of a 3million tonne Blast Furnace, a 6 million tonne Pellet plant, two 700 k tonne stamp-charged coke oven batteries and a 2.4 million tonne thin slab casting and rolling facility. 2. The green field project at Kalinganagar, to be developed in two 3 million tone phases, is the most advanced. The Companys application for an iron ore mine lease is still awaiting government approval.
3.

To leverage its current mining capability to invest in mining projects outside India to increase the groups level of self-sufficiency in raw materials, as raw materials prices remain at all time highs. It includes i. A joint venture with Riversdale Mining Limited for the development of the Benga and Tete coking coal tenements in Mozambique. A joint venture with New Millennium Capital Corporation, a listed entity in Canada, for development of Direct Shipping Ore Project in Canada was incorporated in October 2010. Tata Steel shall participate in the development of a feasibility study of the Taconite Project and contribute towards 64% of the costs related thereto. It is on the basis of the agreement signed between New Millennium Capital Corporation on 6th March, 2011 for the development of the LabMag and KMag iron ore deposits, known collectively as the Taconite Project.

ii.

iii.

SWOT ANALYSIS: SWOT analysis is a strategic planning method used to evaluate the strengths, weaknesses, Opportunities, and Threats involved in a project or in a business venture. It involves specifying the objective of the business venture or project and identifying the internal and external factors that are favorable and unfavorable to achieve that objective. The technique is credited to Albert Humphrey, who led a convention at Stanford University in the 1960s and 1970s using data from Fortune 500 companies. Setting the objective should be done after the SWOT analysis has been performed. This would allow achievable goals or objectives to be set for the organization.

Strengths: characteristics of the business, or project team that give it an advantage over others Weaknesses (or Limitations): are characteristics that place the team at a disadvantage relative to others Opportunities: external chances to improve performance (e.g. make greater profits) in the environment Threats: external elements in the environment that could cause trouble for the business or project

Identification of SWOTs is essential because subsequent steps in the process of planning for achievement of the selected objective may be derived from the SWOTs.

The SWOT analysis of Tata Steel:

Strengths: 1. Tata Steel is also India's second largest and second-most profitable private-sector company, with consolidated revenues of $26 billion and net profit of over $1.9 billion in the year ended March 31, 2011.Tata Steel is the eighth most-valuable Indian brand according to an annual survey conducted by Brand Finance and The Economic Times in 2010. It is currently ranked 410th in the Fortune Global 500.It has also been listed as World's most ethical companies by Forbes. 2. If we analyze the financial position of the business we find that the company has recovered the financial crisis and the Profit after tax at 6,866 crores during the financial year 2010-11 was higher by 36% as compared to the financial year 2009-10(5,047 crores), the net sales and other operating income has been shown an increase of 17% in the year 2010-11. 3. The finished goods has been increased from 8,137 crore to 6,655crore. In FY 11 working capital has gone up by 7,175 crores mainly due to increase in TSEs working capital (including working capital infused during the year through Global ProCo), the increase being in inventories (due to increase in prices) and also in receivables. 4. The crude steel capacity at its existing steel plant in Jamshedpur will have increased by almost 3 million tonnes to 9.7 million tonnes in the financial year 2011-12 (production in FY 2010-11: 6.855 million tonnes). The company is 100% self sufficient in iron ore and around 50% in coal.

5. With 95 operating companies (31 of them publicly traded) and 230,000 employees, it is India's largest private-sector employer, its biggest taxpayer, and its greatest foreign-exchange earner. It operates India's largest private steel manufacturer. The employees strength in Indian operations increased to 34,912 as on 31st March, 2011 as against 34,440 as on 31st March, 2010. 6. Its strength lies on its resources and capabilities (People and Raw Material), vast experience (Steel and Automobile) and the business model.The tangible and intangible resources and with the help of these resources they are able to perform at the level required to survive. In the case of Tatas acquisition of Daimler Chrysler, Mr. Tata said, Hopefully, we can turn the Company around faster than GM and Ford will take. In our analysis, there is only room for two of the Big Three to survive (Richter, 2007). 7. They compete on the basis of lower cost than their rivals or on the basis of differentiation where they provide some unique and superior value. 8. In August 2007 Tata Steel won the bid to acquire the UK-based steel maker Corus in what was, to date, the largest international acquisition by an Indian company. It made the Tata Group the world's fifth largest steel maker, and catapulted them to the global league. 9. The Company was conferred the Indian Most Admired Knowledge Enterprise award for sustained excellence in field of knowledge management. 10. The company focused on branding and increased our market penetration by reaching smaller consumption centres which enabled us to realise a premium in the market over the secondary steel manufacturers. 11. There is a significant decrease in Net Debt/EBITDA (Annualised) for the FY 2011. The value has been tremendously decreased from 5 to 3 which show a positive growth of the company. 12. The Tinplate Company of India Limited (TCIL) is now a subsidiary of Tata Steel. TCILs core activity is the manufacture of tin mill products Electrolytic Tinplate (ETP) and Tin Free Steel value-added steel products, considered tailor made for packaging processed edibles. Weakness: 1. The company has to look forward toward strengthening its distribution channel as it is one of the major concerns of the company. 2. Another major concern for the company is related to its value chain innovation. The company has to consider the upstream and downstream value chain activities and strengthen them to better serve the customers. 3. Controlling the emission of CO2 to the desired level and thus fulfilling the environmental concerns. CO2 emission (direct + electricity) in the Indian operations during FY 2010-11 at 2.44 ton per ton of crude steel was almost at the same level as the last year (2.41 ton per ton of crude steel.) 4. A key challenge of the Group is to ensure that its plants are equipped with updated technologies in order to serve clients, secure cost competitiveness and maintain R&D leadership.

Opportunities: 1. The green field project in Odisha, India, is progressing and capacity is planned to increase by 6 million tonnes in two phases of 3 million tonnes each, the first phase to become operational by 2014. 2. Global demand surpassed the pre-crisis peak in the financial year 2010-11, driven by strong demand in the developing economies, notably China. Prices for iron ore and metallurgical coal spiked, exacerbated by supply disruptions due to flooding in Queensland, Australia. The Indian operations benefitted from strong domestic demand and achieved record output at 6.855 million tonnes. 3. Growth prospects of steel industry in India were huge, given the over young India and the demand for urbanization. While infrastructure development had a great potential for boosting steel demand the slow growth in infrastructure was becoming a bottleneck in goods movement and demand per se. 4. In the present scenario growth was in penetrating the rural India which consumed only 13 kg of steel per capita (and where 70% of India still lived) and making steel a small retail item rather than a bulk item. 5. Increase in the custom duty from 5% to 7.5% on the import of Flat rolled HR and CR steel will come as positive news for the industry which has been reeling under the pressure of slowdown in demand globally. 6. By increasing the freight rates, the Indian government has tried to protect the steel industry from the foreign steel players who are currently looking to de-stock their inventory at cheaper rates due to global slowdown. 7. There are indirect benefits that one can expect from the budget which may include a hike in infrastructure spending and timely implementation of the infrastructure projects such as highways, ports and power projects, etc. During the Twelfth Plan period, infrastructure investment will go up to Rs 50 lakh crores, of which the private sector is expected to contribute half of it. 8. Trade in steel products has been on the upswing with the production facilities of both the developed and the developing countries complementing each other in the making of steel of different grades and specialty for the world market. 9. Technological innovations have provided the competitive edge to the technologically strong companies. Smooth and quick transfer of technology has, however, meant an increasingly competitive pressure on the companies to be ahead of the others in the race for technological superiority to maintain and, if possible, to strengthen the bottom lines. 10. The Indian steel industry comprises of the producers of finished steel, semi-finished steel, stainless steel and pig iron. Indian steel industry, having participation from both public sector and private sector enterprises, is one of the fastest growing markets for steel and is also increasingly looking towards exports as driving the growth of the industry.

Threats: 1. Along with uncertainty in demand, what was plaguing all steel makers is the rise in raw material prices, due to lower supply and an oligopolistic raw material market which a fragmented steel industry found difficult to cope with it. 2. In spite of all the growth in steel industry, India was still a net importer and while capacity additions were underway, India was yet to reach the peak by overcoming global competition. 3. Through its global operations, the Group operates in several currency areas. The major currencies used in its sales and procurement activities are the US Dollar, Euro, Sterling and the Indian Rupee. Volatility in the currency markets can adversely affect the outcome of commercial transactions and cause trading uncertainties. 4. The steel industry is subject to cyclical swings arising from factors such as excess capacity, regional demand & supply imbalances and volatile swings in market demand and prices, more recently exacerbated by quarterly pricing for iron ore and metallurgical coal. 5. The Group operates in multiple geographies and thus has compliance obligations with diverse and complex laws and regulations. In countries where the political systems are still evolving, frequent changes to investment and economic policies are common and any unforeseen changes can expose the Groups businesses. 6. The global steel industry continued to face an unprecedented increase in the price of iron ore and coking coal, accentuated by short-term supply disruptions. These have created pressures on the viability of the steel industry and consequently the competitiveness of the user industries.

TOWS Matrix:

S-O STRATEGIES: 1. The company being the leading producer of steel should explore the opportunities offered by Govt. of India by increase in the custom duty from 5% to 7.5% on the import of Flat rolled HR and CR steel will come as positive news for the industry which has been reeling under the pressure of slowdown in demand globally. So, the company should try to explore the opportunity. 2. The company should also go for utilization of the opportunities coming up due to increasing the freight rates. The Indian government has tried to protect the steel industry from the foreign steel players who are currently looking to de-stock their inventory at cheaper rates due to global slowdown.

3. There are various opportunities coming up in the field of infrastructure. Indirect benefits that one can expect from the budget which may include a hike in infrastructure spending and timely implementation of the infrastructure projects such as highways, ports and power projects, etc. During the Twelfth Plan period, infrastructure investment will go up to Rs 50 lakh crores, of which the private sector is expected to contribute half of it. The company using their resource and competencies can explore the opportunities in the field of infrastructural development.

S-T STATEGIES: 1. The company having strength in it resources i.e. raw materials can resolve the problem that all steel makers are facing. The rise in raw material prices, due to lower supply and an oligopolistic raw material market which a fragmented steel industry found difficult to cope with it. The company can nullify this threat by means of its strength in terms of raw materials. 2. The steel industry is subject to cyclical swings arising from factors such as excess capacity, regional demand & supply imbalances and volatile swings in market demand and prices, more recently exacerbated by quarterly pricing for iron ore and metallurgical coal. The company can try to reduce this treat by means of cost differentiation strategy which makes it distinctly ahead from others.

W-O STRATEGIES: 1. In the present scenario growth was in penetrating the rural India which consumed only 13 kg of steel per capita (and where 70% of India still lived) and making steel a small retail item rather than a bulk item. The company by strengthening its distribution channel can enhance the opportunities in rural India. 2. The Indian steel industry comprises of the producers of finished steel, semi-finished steel, stainless steel and pig iron. Indian steel industry, having participation from both public sector and private sector enterprises, is one of the fastest growing markets for steel and is also increasingly looking towards exports as driving the growth of the industry. By enhancing its value chain activities the company can penetrate more to the customer base.

W-T STRATEGIES: 1. A key challenge of the Group is to ensure that its plants are equipped with updated technologies in order to serve clients, secure cost competitiveness and maintain R&D leadership. Thus, the company should try to increase their competitiveness by enhancing the R&D and securing cost competitiveness. 2. The steel industry is subject to cyclical swings arising from factors such as excess capacity, regional demand & supply imbalances and volatile swings in market demand and prices, more recently exacerbated by quarterly pricing for iron ore and metallurgical coal. The company should try to enhance its value chain in order to overcome the threat.