Case Study TATA Steelium – A Success Story in B2B Branding (Vikalpa)

B2B – Case StudyGroup - VII

Sachin Kumar_ Viva IMS_ Virar

Company Background:

• TATA STEEL is the largest private sector steel marketer in India.

• Jamshedpur (India) Works has a crude steel production capacity of 6.8 million tonnes per annum.

• The company is aiming at enhancing its domestic steel capacity to about 30 million tonnes per annum by 2015.

• The Vision architect is clearly defined with goals like successful branding of steel, production of lowest cost steel, economic value creation and expansion have all contributed to company's growth.


Rise of Tata Steelium

• TATA STEEL' launched the world's first branded cold rolled steel (CRS) called 'TATA Steelium' in Goa.

• Branding will give rise to a customized product in terms of value, performance, and pricing that will meet our customers' & will also boost the element of brand recall, thereby creating a niche.

• ATA Steelium focused on product mix enrichment by making suitable grades and sizes available for different applications and sustaining price premium by strengthening product support services through distributors and dealers.

• TATA Steelium distributors handle the brand exclusively and because these distributors focused on servicing the identified set of major customers, they were encouraged to cultivate the relationship and the local ties and also contribute towards brand building.

• Efforts for enhancing the capabilities of distributors and dealers by installing dedicated service centres, professional training to distributors/dealers salespersons, implementing quality management systems at the distributors, and through office automation of the dealers, etc. For some, it is about assured availability; for others, it is about customization of size, and for still others, it is about dealing with a professional organisation.


Rise of Tata Steelium (Conti..)

• Strategy - CRS in the retail market against others in the industry and could achieve more market leverage related to pricing and negotiations.

• Sales and Distribution - The brand is sold only through the distributor-dealer network where about 80% of the total brand sales are made by the distributors directly to the customers and 20% of the total sales are handled by the distributor-dealer chain.• >> This is related to Pareto’s Principle (80-20Rule)


Important factors before brand launch

• Technology Selection –

Tata Steelium developed CRS facility which gave competitive edge over others. According to Table3 Key facilities (Coupled shallow bath hydrochloric acid pickling, Machine packing with thin plastic film, Electrolytic cleaning) give competitive advantage and also improved productivity, low energy consumption.


Important factors before brand launch (Conti..)

• Small Customer Focus.



• Small Customer Focus

Many small customers of CRS (mainly manufacturers and fabricators) were becoming key suppliers to the large volume prestigious customers of CRS who used to procure steel directly from steel majors. These small but growing customers could afford to pay higher prices for better materials and service.

Reason – Limited Sales Force used to market to big institutional customers and small customers of CRS.



Customer Opinion • Steelium saw this as an opportunity to increase their brand by

serving these small customers.Three major problems small customers were facing -• The competitors were also not able to provide raw material which

was required by small customers & Superior quality materials available from import were beyond the reach of small customers.

• The Small Customers regular requirements was not fulfilled as availability of materials with the retailers was never certain. And their quality complaints were also ignored. No proper communication channel for small customers to talk to CRS manufacturers.

• Inferior Products and Cheap substitutes were sold by dishonest retailers.


Overall Business Environment

• Manufacturer, wholesaler, and retailer was not aligned for each others goal achievement but only to gain self-interest this created environment where they did not trust each other.


• Manufacturers forecasting and production of monthly demand had errors and frequent mismatchManufacturers

• They were not expanding their network to other areas

• They were interested only in buying cheap and selling dear. They didn’t consider preferences and value added support services.

Distributors/ Wholesalers

• Small Retailers were increasing and the CRS was available only at specific locationsRetailers

Overall Business Environment (Conti..)

Pricing wars were regular –

Wholesalers and Retailers purchased in

larger qualities than they could sell

Manufacturers reduced

their prices further

Wholesalers and retailers would

start panic selling depressing


TATA Steelium Action Areas

To remove the distrust in business environment critical action areas were drawn as below -

• Price Uniformity - Tata monitored and got control over retail prices so that customers got fair and uniform prices at every location and the total channel profit was maximized. Tata started delivering the number of value added services with assured quality standard.

• Professionalism – People from various background were lacking in business professionalism.

• Service Levels - Improvement of service (level and quality) was long overdue in the retail sales of CRS.


Brand Engineering for Tata Steelium


Product

• Steelium CRS has best quality and specifications so together all these mean cost savings to the customer during processing, ensuring superior performance, and premium price

Packaging

• Steelium packets are usually painted in blue and there are distinct identifiable TATA STEEL tags and unique blue seals on the packaging which help identify the source of the material. This was not been provided by any competitor.

Pricing

• Location-wise floor price, below which the item cannot be sold by the distributors or dealers. Removed conflict conflict between the channel members.

Brand Engineering for Tata Steelium


Salespersons

• Key Account Managers spend time with distributors & solve their issues and queries to improve operations

Channel Design

• Appointment of dealers based on the guidelines issued by the Tata, channels operates strictly within their territory

• 'TATA Steelium Parivaar,' secured online portal has been designed for effective intercommunication within the channels.

Distributor Selection

• Level-l screening is based criteria like investment capabilities, interest in exclusive dealership, registration with statutory authorities, and market reputation.

• Level-2 screening is again considers business experience, turnover, knowledge, and quantum of sales.

• Level-3 based on their ratings and scores in level-l and level-2

Distributor's Capability Improvement


DCI

SCM

HRD

KAMRetail

Manag.

Yearly Meetings


1. SCM – Improvement of supply chain efficiency and effectiveness through the theory of constraints (TOC)

• TATA STEEL would monitor the flow of its product through the distributors' warehouses, and decide what to ship to the distributor, and when to ship it.

• Benefitted Distributors by reducing inventory cost, more control and visibility to Tata

2. HRD - Human resource development initiatives for employees working with channel partners –

Distributors are given sales management training; they also have to follow standard HR practices for remuneration, yearly performance evaluation, recognition and rewards.



3. KAM - Key account management (KAM) process among distributors.

“Vijeta” special programme where Tata recognises distributor's key customers who are been continuously monitored customer satisfaction. Based on volumes the Manager gets recognition and reward.

4. Retail value management - Ensures that the customers' experience of buying a brand is convenient. Distributors and dealers will be able to transact with their key customers using e-commerce.

5. Yearly Meetings - Meets of Distributors are arranged according to categories for more interaction.


Evaluation of Distributors

• Surveys are been done to evaluate distributors this helps improve performances and better support services to customers.


The dimensions of performance

scorecard include:

Sales compliance

Quality of feedback

Inventory management

Market receivable management

Customer visits

Margin monitor

The dimensions of capability

scorecard include:

Market understanding

Quality of service centre

Service capability

Quality of HRM practices

Implementation of quality

management systems

Work on special projects

Value Proposition

1. Excellent functional quality –'Help Shape your Dreams' superior shaping and superior quality.2. Dream customer service –Through highly capable distribution: Efficient order management supply period, inform order status from time to time, inform availability, collect payment, extend credit in selected cases, and arrange door delivery.3. Customer Intimacy –Installing effective systems of dealing with customers to solve problems, regular contact, smooth transaction.


Value Proposition


Customer Intimacy

Dream Customer

Service

Excellent Functional Quality

Application of Porter’s Model

•

• No threat to input materials

• Small unorganised retail buyers

• Less knowledge about market dynamics

• Import of CRS by small buyers

• Thicker CRS to be substituted by thinner HRS

• Fibre glass, aluminium, plastics

• Entry of global & experienced players

• Strong brand names

• More than enough funds.

Threat of New

Entrants-Increasing

Threat of Substitutes-

Mixed

Threat from Suppliers-

Weak

Threat from Buyers-

Medium to High

Rivalry-Increasing

Swot Analysis: Tata SteeliumSTRENGTHS: High functional quality of the product High awareness & preference Highly capable & motivated Channel Partners High quality service centre & Value addition Established enduring relationship with customers by dealer/distributors Special trust & Association

WEAKNESSES: Limited Availability with increasing demand Production located at only one place, Jamshedpur Steelium logo & Brand Loyality

OPPORTUNITIES: Contract production by quality Steelium has room for expansion Improvement of sales by increasing the supply Value can be created by innovative marketing strategies, branded furniture Service & sustaining competitive advantage

THREATS: Loosing important customers & distributors Retention of channel members and customers & investment Absence of real differentiation

Challenges from TATA Steelium point of view

Competitors are about to bring CRS of equal or superior functional quality to the domestic market soon.• SAIL-Bokaro major competitor.• Essar Steel was likely to enhance its volume of equivalent

quality• Jindal South West was on the verge of bringing new age CRS in

theSolution: According to Table No 6 we can analyse that SAIL, Essar, Bhushan, Uttam, Hero Cycles are the competitors for Tata Steelium. Even though they have capacity to manufacture high volumes and are improving good quality steel none of them have the strong distribution network as Tata has developed.


Challenges Ahead

Challenge#1: • The potential for the volume growth of the brand is limited due to

fixed production capacity.• Fairest-priced CRS with its brand features and associations. Should

the brand premium be reduced or the company must find avenues to add more value through tangibles or intangibles?

• Reduction of price will surely mean reduction in profit for the whole chain while adding new values will require further research and possibly new competencies.

Solution#1: Keep it premium brand and then add new product Thinner HRS which is demanded – Setup New plant as expansion strategy.


Challenges Ahead

Challenge#2: • The next important concern is to protect the distributors' and dealers' loyalty.• Should the company motivate these distributors and dealers to sell its other

brands or should it start a new venture of manufacturing and market its own range of high quality, innovative line of stylish yet affordable steel furniture using Steelium, for home and office?

• If the existing distributors and dealers product like furniture, the market will be new to the company as well as to the distributors. All participants will require new skills and a proper understanding of the product, market, customers, collaborators, and competitors.

Solution#2: Distributor & dealer will be loyal unless the market share of competitor is increasing, profit margins are falling, distributors quality issues (to counter complaints), order management - lead time is longer, Tata has internal organisations conflicts of employees, better products and better brands are introduced. • Internal company issues are change of management who will affect the

dealer and distributor relations, which will have to start from new.


Challenges Ahead

Challenge#3:

• Capacity addition is forthcoming plan.

• With entry of multinationals will bring good quality steel but also extraordinary support services.

• Multinational will use same strategy of relationship initiative and customer intimacy.

• The company may seriously think whether the current relationship-oriented initiatives are worth reinvesting in or whether the company should prepare to launch a stripped-down version of the brand in standard specifications offering lower prices and only essential services. Second option will make Indian market little unattractive to the new entrants. Third option continual improvements will be required and the evolutionary path, that will help the brand to sustain its competitive advantages.

Solution#3: Dilution of our company would be not wise decision as lot of resources, time and work invested by Tata to develop relationships with the channels.


Concept of Customer- Relating Capability

Three tightly connected components

• Orientation towards relationship

• Information about relationships

• Configuration


Concept of Customer- Relating Capability

1. Orientation towards relationship• Customer retention is shared goal throughout Tata Steelium.• The Sales Force are continuously communication with distributors to understand

their needs and requirements.• Orders are taken in advance to ensure smoother supply of material.• Tata also provides assistance to setup HR management practices at distributor.2. Information about relationships• “Vijeta, AdvantEdge ” special programme which are hubs for knowledge and

communication among channels.• In short, competitive advantage means outperforming rivals during all stages of

market learning & communication process.3. Configuration• This component includes structure, systems & processes that enable information

to be applied within the organization.• Tata is designed the best distributor/dealer network having control over it. It

focused customers rather than positioned only by products & functions.


Recommendations

• Association with Intangible Qualities - CSR

Tata group is involved in Social causes and CSR activities. This should be highlighted often by the company. It works in field of education, livelihoods, health, sports, and environment.

ASSOCHAM Has Honoured Tata Steel

For Its Exemplary Contribution to CSR


Recommendations

• Rejection Material Policy/Reverse logistics -

Company should formulate certain norms or policy for rejected material which will ensure the customer is not affected in terms of their manufacturing schedules. This gives assurance to customers that Tata is caring for their customer deliveries.

• Credit Worthiness -

Company should have credit policy designed for distributors/dealers on basis previous record and payment transactions which will facilitate other distributors and dealers to improve their payments.

• Exclusive Contracts –

No brand association with competitors. Distributors / Dealers have an agreement with Tata to restrict other competitors to convert into their distributors as multi-brand.


Recommendations

• EDI & Online System

Tata should integrate its internal EDI systems to Online Portals so that all the enquires, complaints and disputes are directly been addressed by the Tata employees and record of same is maintained. Online Tenders and Automatic Quotations will ease distributors as it will lessen time for execution of ordering and documentation. It will also bring transparency among Tata & all the channels.


Thank You


Date post:	21-Jan-2018
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Case Study TATA Steelium – A Success Story in B2B Branding (Vikalpa)

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