Tata Steel Final Project

8/13/2019 Tata Steel Final Project

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Strategic

Management

Company:- TATA STEEL

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Strategic Management

A logical starting in studying strategy formulation is a comprehensive look at the nature of

strategic management. Hundreds of studies have attempted to understand the nature of strategic

management decisions. Fortunately, the results from these studies are reasonably consistent

The theme that follows through and ties four chapters of this part together is effective the

strategic management process requires and understanding of what strategic managers do

and how they do works the way it does. In essence, strategic management is a set of

functions and processes. Effective strategic management is knowing about these functions

and processes and knowing when and how to implement them.

Introduction to Strategic Management

defines the scope of strategic management and sets out concepts that are basic to a working

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Introduction


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knowledge of this field Strategic Management is all about identification and description of the

strategies that managers can carry so as to achieve better performance and a competitive

advantage for their organization. An organization is said to have competitive advantage if its

profitability is higher than the average profitability for all companies in its industry.

Strategic management can also be defined as a bundle of decisions and acts which a manager

undertakes and which decides the result of the firm s performance. !he manager must have a

thorough knowledge and analysis of the general and competitive organizational environment

so as to take right decisions. !hey should conduct a S"#! Analysis $Strengths, "eaknesses,

#pportunities, and !hreats%, i.e., they should make best possible utilization of strengths,

minimize the organizational weaknesses, make use of arising opportunities from the business

environment and shouldn t ignore the threats. Strategic management is nothing but planning

for both predictable as well as unfeasible contingencies. &t is applicable to both small as well as large organizations as even the smallest

organization face competition and, by formulating and implementing appropriate strategies,

they can attain sustainable competitive advantage.Strategic Management is a way in which strategists set the ob'ectives and proceed about attaining

them. &t deals with making and implementing decisions about future direction of an organization. &t

helps us to identify the direction in which an organization is moving.

Strategic management is a continuous process that evaluates and controls the business and the

industries in which an organization is involved( evaluates its competitors and sets goals and strategies

to meet all e)isting and potential competitors( and then reevaluates strategies on a regular basis to

determine how it has been implemented and whether it was successful or does it needs replacement.

Strategic Management gives a broader perspective to the employees of an organization and they can

better understand how their 'ob fits into the entire organizational plan and how it is co*related to other

organizational members. &t is nothing but the art of managing employees in a manner which

ma)imizes the ability of achieving business ob'ectives. !he employees become more trustworthy,

more committed and more satisfied as they can co*relate themselves very well with each

organizational task. !hey can understand the reaction of environmental changes on the organization

and the probable response of the organization with the help of strategic management. !hus the

employees can 'udge the impact of such changes on their own 'ob and can effectively face the changes.
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!he managers and employees must do appropriate things in appropriate manner. !hey need to be both

effective as well as efficient.

#ne of the ma'or role of strategic management is to incorporate various functional areas of the

organization completely, as well as, to ensure these functional areas harmonize and get together well.

Another role of strategic management is to keep a continuous eye on the goals and ob'ectives of the

organization.

!he word +strategy is derived from the -reek word +strat gos ( stratus $meaning army%

and +ago $meaning leading/moving%.

Strategy is an action that managers take to attain one or more of the organization s goals.

Strategy can also be defined as +A general direction set for the company and its various

components to achieve a desired state in the future. Strategy results from the detailed

strategic planning process .

A strategy is all about integrating organizational activities and utilizing and allocating the

scarce resources within the organizational environment so as to meet the present

ob'ectives. "hile planning a strategy it is essential to consider that decisions are not

taken in a vaccum and that any act taken by a firm is likely to be met by a reaction from

those affected, competitors, customers, employees or suppliers.

Strategy can also be defined as knowledge of the goals, the uncertainty of events and the need to take into consideration the likely or actual behavior of others. Strategy is

the blueprint of decisions in an organization that shows its ob'ectives and goals,

reduces the key policies, and plans for achieving these goals, and defines the business the

company is to carry on, the type of economic and human organization it wants to be, and

the contribution it plans to make to its shareholders, customers and society at large.Features of Strategy

Strategy is Significant because it is not possible to foresee the future. "ithout a perfect foresight,the firms must be ready to deal with the uncertain events which constitute the business

environment.

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Strategy deals with long term developments rather than routine operations, i.e. it deals with

probability of innovations or new products, new methods of productions, or new markets to be

developed in future.

Strategy is created to take into account the probable behavior of customers and competitors.

Strategies dealing with employees will predict the employee behavior.

Strategy is a well-defined roadmap of an organization . &t defines the overall mission, vision

and direction of an organization. !he ob'ective of a strategy is to ma)imize an organization s

strengths and to minimize the strengths of the competitors.

Strategy, in short, bridges the gap between +where we are and +where we want to be .

COMPONENTS

0. Strategic Intent

An organization s strategic intent is the purpose that it e)ists and why it will continue to

e)ist, providing it maintains a competitive advantage. Strategic intent gives a picture

about what an organization must get into immediately in order to achieve the company s

vision. &t motivates the people. &t clarifies the vision of the vision of the company.

Strategic intent helps management to emphasize and concentrate on the priorities.Strategic intent is, nothing but, the influencing of an organization s resource potential

and core competencies to achieve what at first may seem to be unachievable goals in the

competitive environment. A well e)pressed strategic intent should guide/steer the

development of strategic intent or the setting of goals and ob'ectives that re1uire that all

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of organization s competencies be controlled to ma)imum value.

Strategic intent includes directing organization s attention on the need of winning( inspiring

people by telling them that the targets are valuable( encouraging individual and team

participation as well as contribution( and utilizing intent to direct allocation of resources.Strategic intent differs from strategic fit in a way that while strategic fit deals with harmonizing

available resources and potentials to the e)ternal environment, strategic intent emphasizes on

building new resources and potentials so as to create and e)ploit future opportunities.

2. Mission Statement

Mission statement is the statement of the role by which an organization intends to serve it s

stakeholders. &t describes why an organization is operating and thus provides a frameworkwithin which strategies are formulated. &t describes what the organization does $i.e., present

capabilities%, who all it serves $i.e., stakeholders% and what makes an organization uni1ue $i.e.,

reason for e)istence%. A mission statement differentiates an organization from others by

e)plaining its broad scope of activities, its products, and technologies it uses to achieve its

goals and ob'ectives. &t talks about an organization s present $i.e., +about where we are %. For

instance, Microsoft s mission is to help people and businesses throughout the world to realize

their full potential. !al-Mart s mission is +!o give ordinary folk the chance to buy the same

thing as rich people. Mission statements always e)ist at top level of an organization, but may

also be made for various organizational levels. 3hief e)ecutive plays a significant role in

formulation of mission statement. #nce the mission statement is formulated, it serves the

organization in long run, but it may become ambiguous with organizational growth and

innovations. &n today s dynamic and competitive environment, mission may need to be

redefined. However, care must be taken that the redefined mission statement should have

original fundamentals/components. Mission statement has three main components*a statement

of mission or vision of the company, a statement of the core values that shape the acts and

behaviour of the employees, and a statement of the goals and ob'ectives.

Features of a Mission

0. Mission must be feasi"le and attainable. &t should be possible to achieve it.

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&n order to realize the vision, it must be deeply instilled in the organization, being owned and

shared by everyone involved in the organization.

5. (oals and O")ecti%es

A goal is a desired future state or ob'ective that an organization tries to achieve. -oals specifyin particular what must be done if an organization is to attain mission or vision. -oals make

mission more prominent and concrete. !hey co*ordinate and integrate various functional and

departmental areas in an organization. "ell made goals have following features*

0. !hese are precise and measura"le .

2. !hese look after critical and significant issues.

4. !hese are realistic and challenging.

5. !hese must be achieved within a specific time frame.

6. !hese include both financial as well as non-financial components .

#b'ectives are defined as goals that organization wants to achieve over a period of time. !hese

are the foundation of planning. :olicies are developed in an organization so as to achieve these

ob'ectives. Formulation of ob'ectives is the task of top level management. ;ffective ob'ectives

have following features*

7. !hese are not single for an organization, but multiple .

8. #b'ectives should be both s&ort-term as well as long-term .


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the influencing of an organization s resource potential and core competencies to achieve what

at first may seem to be unachievable goals in the competitive environment. A well e)pressed

strategic intent should guide/steer the development of strategic intent or the setting of goals

and ob'ectives that re1uire that all of organization s competencies be controlled to ma)imum

value.



participation as well as contribution( and utilizing intent to direct allocation of resources.

Strategic intent differs from strategic fit in a way that while strategic fit deals with harmonizing





stakeholders. &t describes why an organization is operating and thus provides a framework

within which strategies are formulated. &t describes what the organization does $i.e., present
















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a. Mission must be feasi"le and attainable. &t should be possible to achieve it.

b. Mission should be clear enough so that any action can be taken.c. &t should be inspiring for the management, staff and society at large.

d. &t should be precise enough, i.e., it should be neither too broad nor too narrow.

e. &t should be uni#ue and distinctive to leave an impact in everyone s mind.

f. &t should be analytical ,i.e., it should analyze the key components of the strategy.

g. &t should be credi"le , i.e., all stakeholders should be able to believe it.

4. $isionA vision statement identifies where the organization wants or intends to be in future or where it

should be to best meet the needs of the stakeholders. &t describes dreams and aspirations for

future. For instance, Microsoft s %ision is +to empower people through great software, any

time, any place, or any device. !al-Mart s %ision is to become worldwide leader in retailing.

A vision is the potential to view things ahead of themselves. &t answers the 1uestion +where we

want to be . &t gives us a reminder about what we attempt to develop. A vision statement is for

the organization and it s members, unlike the mission statement which is for the

customers/clients. &t contributes in effective decision making as well as effective business

planning. &t incorporates a shared understanding about the nature and aim of the organization

and utilizes this understanding to direct and guide the organization towards a better purpose. &t

describes that on achieving the mission, how the organizational future would appear to be.

An effective vision statement must have following features*

a. &t must be unam"iguous .

b. &t must be clear .

c. &t must&armonize with organization s culture and values.

d. !he dreams and aspirations must be rational'realistic .

e. 9ision statements should be s&orter so that they are easier to memorize.

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5. (oals and O")ecti%esA goal is a desired future state or ob'ective that an organization tries to achieve. -oals specify

in particular what must be done if an organization is to attain mission or vision. -oals make



a. !hese are precise and measura"le .

b. !hese look after critical and significant issues.

c. !hese are realistic and challenging.

d. !hese must be achieved within a specific time frame.

e. !hese include both financial as well as non-financial components .





f. !hese are not single for an organization, but multiple .

g. #b'ectives should be both s&ort-term as well as long-term .

h. #b'ectives must respond and react to changes in environment, i.e., they must

be fle*i"le .

i. !hese must be feasible, realistic and operational .

0. Strategic Intent

An organization s strategic intent is the purpose that it e)ists and why it will continue to e)ist,

providing it maintains a competitive advantage. Strategic intent gives a picture about what an

organization must get into immediately in order to achieve the company s vision. &t

motivates the people. &t clarifies the vision of the vision of the company. Strategic intent

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helps management to emphasize and concentrate on the priorities. Strategic intent is, nothing

but, the influencing of an organization s resource potential and core competencies to achieve

what at first may seem to be unachievable goals in the competitive environment. A well

e)pressed strategic intent should guide/steer the development of strategic intent or the setting

of goals and ob'ectives that re1uire that all of organization s competencies be controlled to

ma)imum value.



participation as well as contribution( and utilizing intent to direct allocation of resources.

Strategic intent differs from strategic fit in a way that while strategic fit deals with harmonizing





stakeholders. &t describes why an organization is operating and thus provides a framework

within which strategies are formulated. &t describes what the organization does $i.e., present














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a. Mission must be feasi"le and attainable. &t should be possible to achieve it.

b. Mission should be clear enough so that any action can be taken.

c. &t should be inspiring for the management, staff and society at large.

d. &t should be precise enough, i.e., it should be neither too broad nor too narrow.

e. &t should be uni#ue and distinctive to leave an impact in everyone s mind.

f. &t should be analytical ,i.e., it should analyze the key components of the strategy.

g. &t should be credi"le , i.e., all stakeholders should be able to believe it.

4. $ision

A vision statement identifies where the organization wants or intends to be in future or where it

should be to best meet the needs of the stakeholders. &t describes dreams and aspirations for

future. For instance, Microsoft s %ision is +to empower people through great software, any

time, any place, or any device. !al-Mart s %ision is to become worldwide leader in retailing.

A vision is the potential to view things ahead of themselves. &t answers the 1uestion +where we

want to be . &t gives us a reminder about what we attempt to develop. A vision statement is forthe organization and it s members, unlike the mission statement which is for the

customers/clients. &t contributes in effective decision making as well as effective business

planning. &t incorporates a shared understanding about the nature and aim of the organization

and utilizes this understanding to direct and guide the organization towards a better purpose. &t

describes that on achieving the mission, how the organizational future would appear to be.

An effective vision statement must have following features*

a. &t must be unam"iguous .

b. &t must be clear .

c. &t must&armonize with organization s culture and values.

d. !he dreams and aspirations must be rational'realistic .

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e. 9ision statements should be s&orter so that they are easier to memorize.



5. (oals and O")ecti%es

A goal is a desired future state or ob'ective that an organization tries to achieve. -oals specify

in particular what must be done if an organization is to attain mission or vision. -oals make



a. !hese are precise and measura"le .

b. !hese look after critical and significant issues.

c. !hese are realistic and challenging.

d. !hese must be achieved within a specific time frame.

e. !hese include both financial as well as non-financial components .





f. !hese are not single for an organization, but multiple .

g. #b'ectives should be both s&ort-term as well as long-term .

h. #b'ectives must respond and react to changes in environment, i.e., they must

be fle*i"le .

i. !hese must be feasible, realistic and operational .

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TATASTEEL

>acked by 0?? glorious years of e)perience in steel making, !ata Steel is the world@s 7th largest

steel company with an e)isting annual crude steel production capacity of 4? Million !onnes :er

Annum $M!:A%. ;stablished in 0=?8, it is the first integrated steel plant in Asia and is now the

world s second most geographically diversified steel producer and a Fortune 6?? 3ompany.

!ata Steel has a balanced global presence in over 6? developed ;uropean and fast growing Asian

markets, with manufacturing units in 27 countries.

TATASONS

!ata Sons is the promoter of all key !ata companies and holds the bulk of shareholding in thesecompanies. !he chairman of !ata Sons has traditionally been the chairman of the !ata group.

About 77 per cent of the e1uity capital of !ata Sons is held by philanthropic trusts endowed bymembers of the !ata family. !he biggest of these trusts are the Sir Borab'i !ata !rust and the SirCatan !ata !rust, which were created by the families of the sons of Damset'i !ata.

Areas of business

!ata Sons is the owner of the !ata name and the !ata trademark, which are registered in &ndiaand several other countries. 9arious !ata companies in relation to their products and services usethese. !he terms of use of the group mark and logo by !ata companies are governed by the>rand ;1uity and >usiness :romotion Agreement, which is signed by !ata Sons and individualgroup companies.Apart from this, the companyEs activities are

!o maintain shareholding in main operating companies !o invest in operating companies to facilitate growth !o promote the groupEs entry into new businesses

!ata Sons has two divisions

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!ata Guality Management Services Helps !ata companies achieve business e)cellence

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through the !ata >usiness ;)cellence Model !ata Financial Services &n*house financial consultancy which carries out long* and short*

term financial planning for !ata companies

INDUSTRYOVERVIEWGlobal Steel in ustr!

!he current global steel industry is in its best position in comparison to last decades. !he price

has been rising continuously. !he demand e)pectations for steel products are rapidly growing for

coming years. !he shares of steel industries are also in a high pace. !he steel industry is en'oying

its 7th

consecutive years of growth in supply and demand. And there is many more merger andac1uisitions which overall buoyed the industry and showed some good results.

!he subprime crisis has lead to the recession in economy of different countries, which may lead

to have a negative effect on whole steel industry in coming years. However steel production and

consumption will be supported by continuous economic growth.

!he countries like 3hina, Dapan, &ndia and South orea are in the top of the above in steel

production in Asian countries. 3hina accounts for one third of total production i.e. 50=m ton,

Dapan accounts for =I i.e. 00CAK&L, J accounts for the ma'or chunk of the whole growth

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Figure +, ,(lo"al Steel Production

!he world steel industry outlook is promising with production seen rising to 0.6 billion tonnes in

2??=, up from 0.5 billion tones, in 2??C&3% were leading growth with an e)pected increase of 00.0

per cent for 2??< and 0?.4 percent for 2??=. 3hinaEs apparent steel use is e)pected to grow by

over 0? percent in 2??< and by 0? percent in 2??=. 3hina accounted for 46 percent of the world

total this year.

&n the ;uropean Jnion a total of 20? million tonnes of steel were produced in 2??8, up 0.7

percent from the previous year. "orld steel production capacity is seen increasing by nearly 0=

percent between 2??8 and 2?0?. !he steel industry has undergone a few structural changes in the past 4*5 years. So, the outlook for the ne)t few years is likely to be driven by the kind of

consolidation that has taken place in the past few years. !he other factor that is likely to affect

outlook is the e)tent of demand emerging from >C&3 countries.

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&n addition to these two ma'or factors, a cost*push is coming from raw material

suppliers. Hence, steel manufacturers have to contend with strong demand on one hand, and

cost*push on the other. !he outlook for the domestic industry looks bright, since &ndia has good

iron ore deposits, skilled manpower and growing demand for steel. !here is an apprehension that

if 3hina slows down, it may dump its surplus steel into &ndia. An analysis of global data shows

that even if an economy slows down, steel consumption does not fall dramatically.

&n the case of 3hina, a slowdown can mean that the growth rate may fall from 0=*2?I to a lower

level. >ut that doesn@t means growth will not take place. 3hina produced around 58? million

tonnes $mt% of steel last year, out of which, 77 mt was e)ported and the rest was consumed

within the country. !he measures undertaken by the 3hinese government recently will reduce

e)ports significantly in the current year. !here is also a change in the consumption pattern. Forinstance, if construction activity slows down, the consumption of white goods will pick up and

demand for flat steel products will go up.

!he new capacities coming up in 3hina are on the flat products side and not on the long products

side. #verall, the impact on the supply side will be less. Similarly, the cost of production is very

high it costs around N6?? per ton to produce more than 0?? mt of steel in 3hina. Since the

cost of production is very high and e)ports are not allowed, many of these plants will be closeddown by @?=*0?.!his will reduce the supply of steel.

!here@s a feeling that &ndia doesn@t have much iron ore,

considering the recent capacity e)pansion plans of

domestic and foreign steel companies in &ndia.

!here is a possibility that if we continue e)porting iron

ore, we may run out of reserves. 3urrently, we e)port =?*

0?? mt every year and this is steadily increasing. &deally,

we should increase our steel production capacity we are a net importer of steel so that

rather than e)porting iron ore, we can add value to it

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In ian Steel In ustr!"An O#er#ie$

&ndia has traditionally been one of the ma'or producers of steel in the world. !ill the 0==?s the

steel industry of &ndia was regulated and controlled by government policies. After the economic

reforms of the early 0==?s, the &ndian steel industry has evolved significantly to conform to

global standards.

&ndia has set a vision to be an economically developed nation by 2?2?. !he steel industry is

e)pected to play a ma'or role in &ndiaEs economic development in the coming years. !he steel

industry of &ndia has a very high growth potential and is e)pected to register significant growth

in the coming decades. &ndia is e)pected to emerge as a strong force in the global steel market incoming years.

The two major aspects that are expected to play a significant role in the growth of the steel

industry in India are -

Abundant availability of iron ore in the country

!he country as well established facilities for steel production. Steel production in &ndia

has grown from 08 M! in 0==? to 47 M! in 2??4. &t is e)pected that by 2?00, the steel

production in &ndia will grow to 77 M!.The major sectors where consumption of steel is expected to grow in the coming years are-

3onstruction

Housing

-round transportation

Hi*tech engineering industries such as power generation, petrochemicals, fertilizers

!he current scenario of the &ndian steel industry indicates that there is huge growth potential in

this industry. !he per capita*consumption of steel in &ndia, according to latest available

estimates, is only 2= kg. !his is much less compared to the global average of 05?kg. !he per

capita consumption level of developed nations like the Jnited States of America is 5??kg. &n this

respect, one of the ma'or initiatives that need to be taken is to focus on increasing theconsumption of steel in the rural areas of &ndia. !he potential for the growth of

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consumption of steel in the rural areas of &ndia for purposes like rural housing, rural

infrastructure, etc is high which needs to be tapped efficiently.

&n order to realize the growth potential in the steel industry of &ndia, it is essential to ensure that

the industry can remain competitive. #ne of the ma'or aspects in this regard is the availability of

inputs. Shortage of inputs like coke has led to increase in costs earlier. Moreover proper

infrastructure facilities like transport infrastructure, power etc are of prime importance in

maintaining the competitiveness of the industry.

Most developed countries have regulations that are aimed to protect the domestic steel industry.

!he &ndian steel industry has comparatively much lesser protection through regulations. :roper

regulatory measures should be adopted by the government to protect the domestic steel industry.

!he performance of the &ndian steel industry has been 1uite satisfactory over the last decade.

Aided by the cutting*edge technology, the steel industry in Asia has made advancements in allareas of operation. !here has been a substantial increase in demand for &ndian steel products in

the global market in the recent times.

!his has helped in the growth of &ndian steel industry. !he industry recorded the highest growth

rate in the period from 2??5*2??6, when the growth rate of the steel sector was 5I. !he

increased consumption of the finished steel products in the domestic market acted as a positive

catalyst in the growth process of the &ndian steel industry. !he favorable market condition has

helped the companies operating in &ndian steel industry to e)pand their operations and earn huge

profit.

Figure +,., Steel Production in India

&ndia continually posts phenomenal growth records in steel production. &n //+ , &ndia produced

.,00 million tones of finished carbon steels and ,1/ million tones of pig iron. Furthermore,

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the steel production capacity of the country has increased rapidly since 0==0 O in +223 , &ndia

produced nearly .4,151 million tones of finished steels and .,0/0 million tones of pig iron.

>oth primary and secondary producers contributed their share to this phenomenal development,

while these increases have pushed up the demand for finished steel at a very stable rate.

&n 0==0, a substantial number of economic reforms were introduced by the &ndian government.

!hese reforms boosted the development process of a number of industries O the steel industry in

&ndia in particular O which has subse1uently developed 1uite rapidly.

&n //+6 the total consumption of finished steel was .,3. million tones . &n+223 , the total

amount of domestic steel consumption was .0,/+1 million tones . "ith the increased demand in

the national market, a huge part of the international market is also served by this industry. !oday,

&ndia is in seventh position among all the crude steel producing countries. !he top companies of

the &ndian steel sector mostly operate in four different forms like producers of pig iron, producers

of stainless steel, producers of finished steel products, and producers of semi*finished steel. !he

companies functional in the steel industry of &ndia are both public sector companies and private

sector companies.

S o m e of the leadi n g c ompa n ies in I n d ian ste e l i n d u st r y are a s follo w s:

>okaro Steel :lant Steel manufacturer.

;ssar Steel :roducer of sponge iron, steel and iron ore pellets.

Dindal &ron P Steel :roducer of galvanized steel products.

Dindal Steel P :ower Manufacturer of mild steel slabs and sponge iron.

Steel Authority of &ndia Manufacturer of steel and iron.

Tata Steel7 Producer and supplier of wire rods6 "ars6 and steel flats,

9izag Steel :roducer of pig iron and steel.

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!he rate of production of steel in &ndia has been going up at a steady rate in the last few

years. &n the recent times #rissa and Dharkhand have been identified as the potential steel

destinations of &ndia * the ones that would provide the &ndian steel industry with its necessary

raw material.

!here are also a number of steel companies in &ndia like !ata and Arcelor*Mittal that are either

coming up or have established themselves as prominent forces in the world steel scenario.

&n the recent times a lot of foreign direct investment is being made in the &ndian steel industry. &n

fact the rate of investment has increased in the last few years and, to a certain e)tent, this

increase has been contributed to by the growth potential of the steel industry of &ndia that is

thought of as being impressive in the international steel circle.&n the recent years a number of ma'or steel corporations of the world have come flocking to &ndia

to avail the benefits of the flourishing steel industry of &ndia. !he number of steel pro'ects in

&ndia has increased as well and this implies that the number of companies lining up to participate

in these pro'ects would be increasing too.

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%om&an! 'rofile " TATASTEEL

(a)*groun

!ata Steel, formerly known as !&S3# and !ata &ron and Steel 3ompany limited, is the world@s

si)th largest steel company, with an annual crude steel capacity of 4? Million !onnes :er Annum

$M!:A%. &t is the second largest private sector steel company in &ndia in terms of domestic

production. Canked 406 th on Fortune -lobal 6??, it is based in Damshedpur, Dharkhand, &ndia.

&t is part of !ata -roup of companies in private sector with consolidated revenues of Cs.0,42,00? crore and the net profit of over Cs.02,46? crore, during the year ended March 40 st,2??


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!hrough investments in 3orus, Millennium Steel $renamed !ata Steel !hailand% and

QatSteel Holdings, Singapore, !ata Steel has created a manufacturing and marketing network in

;urope, South ;ast Asia and the pacific*rim countries. 3orus, which manufactured over 2?

M!:A of steel in 2??elgium.

!ata Steel !hailand is the largest producer of long steel products in !hailand, with a

manufacturing capacity of 0.8 M!:A. !ata Steel has proposed a ?.6 M!:A mini blast furnace

pro'ect in !hailand. QatSteel Holdings produces about 2 M!:A of steel products across its

regional operations in seven countries.

!ata Steel has lined up a series of -reenfield pro'ects in &ndia and outside which includes

a% 7 million tonne plant in #rissa $&ndia%.

b% 02 million tonne plant in Dharkhand $&ndia%.

c% 6 million tonne plant in 3hhattisgarh $&ndia%.

d% 4 million tonne plant in &ran.

e% 6 million tonne capacity e)pansion at

Damshedpur $&ndia%.

f% 5.6 million :lant in 9ietnam $feasibility studyunderway%.

!he iron ore mines and collieries in &ndia give the 3ompany a distinct advantage in raw

material sourcing. !ata Steel is also striving towards raw materials security through 'oint

ventures in !hailand, Australia, Mozambi1ue, &vory 3oast $"est Africa% and #man. !ata

Steel has signed an agreement with Steel Authority of &ndia Limited to establish a 6? 6? 'oint

venture company for coal mining in &ndia. Also, !ata Steel has bought 0=.=I stake in Qew

Millennium 3apital 3orporation, 3anada for iron ore mining.

2%


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+ERITAGE

T+E,OUNDER

-ams.e /i Nusser$an/i Tata 01234"14567

At the age of 54, Damshed'i Qusserwan'i !ata read a report by a

-erman geologist, Citter 9on Schwartz on the, availability of iron

ore in 3handa district in the central :rovinces, which gave him the

idea of giving &ndia a steel plant. Damshed'i Qusserwan'i !ata

formed the !ata &ron and Steel 3ompany Limited in 0=?8 at

Mumbai.

Ratan Tata 014387He is the present chairman of !A!A S!;;L. "ith his efficient leadership !A!A is soaring new

heights.

!ata Steel is &ndiaEs largest integrated private sector steel company.

;stablished in 0=?8, its steel plant at Damshedpur produces four

million tonnes of hot and cold rolled flat and long products.

!he company has backward integrated with owned iron ore mines

and collieries. "ith its competitive advantage in raw materials,

efficient operations and the benefits of a recently*completed N2.4

billion programme of modernization, !ata Steel is among the lowest

cost steel producers in the world.

Mission Statement 7 3onsistent with the vision and the vision of the founder Damshed'i !ata,!ata Steel strives to strengthen &ndia@s industrial base through the utilization of men material.

!he means envisaged to achieve this are high technology and productivity, consistent with

modern management. !ata Steel recognizes that, while honesty and integrity is essential

2&


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ingredient of a strong and stable enterprise, provides the main spark for economic

activity. #verall, the company seeks to scale heights of e)cellence in all that it does in an

atmosphere free from fear and one which encourages innovativeness and creativity.

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Global Points of Presence of TATA STEEL

Courtesy7 w w w ,t a t a st ee l, c o m

Strategic Business nits

Apart from the main steel division, !ata SteelEs operations are grouped under the following

strategic business units.

> e a ri n g s Bivision s Manufactures ball bearings, double row self*aligning bearings, clutch

release bearings and tapped roller bearing for two wheelers, fans, water pumps, etc.

Fe r ro All o y s a nd Min e r a ls Bivisio n #perates chrome mines and has unit for makingferro chrome and ferro manganese. &ts one of the largest players in the Cin g s a nd A g ri c o

Bivi sion global ferro chrome market.

1
http://www.tatasteel.com/http://www.tatasteel.com/http://www.tatasteel.com/


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0. ! a ta A g ri c o is the first organized manufacturer in

&ndia of hand tools and implements for application in

agriculture.

2. ! a ta - r o wth S hop $ ! - S % 7 Has designed, developed,

manufactured, erected and commissioned thousands

of tonnes of e1uipments ranging from overhead

cranes to high precision components, including a

rocket launch pad for the &ndian Space and Cesearch #rganization.

" ire Bivisio n A pioneer in the manufacture of steel wires in &ndia, it produces coated

and uncoated wires, branded as !ata "iron. !he division also operates a wholly owned

subsidiary

SriLanka.

!ub e s Bivisio n !he biggest steel tube manufacturer with the largest market share in the country 6

it aspires to strengthen its market presence by e)panding and modernizing its commercial and

precision tube manufacturing capacity

TATA STEEL VISION AND MISSIONSTATEMENT

Vision

R"e aspire to be the global steel industry benchmark for 9alue 3reation and 3orporate3itizenshi p

"e make the difference through

#ur people, by fostering team work, nurturing talent, enhancing leadership capability and

acting with pace, pride and passion.2


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#ur offer, by becoming the supplier of choice, delivering premium products and

services, and creating value with our customers.

#ur innovative approach, by developing leading edge solutions in technology, processes

and products.

#ur conduct, by providing a safe working place, respecting the environment, caring for

our communities and demonstrating high ethical standards ,

Mission statement

Achieve sustainable, profitable growth in steel and related businesses.

3reate differential value for our customers through innovative offerings. 3ontinuous improvement of business processes and technologies.

Foster partnership with key stake holders.

;nhance employeesE competencies to create a high performing and innovative

organization. >e a responsible corporate citizen and enhance the 1uality of life of

employees and key community.

T.ree &.ases of Tata Steel

!here are three phases in !ata SteelEs history. !ata Steel is =8 years old, having being founded on

27 August 0=?8.

,irst &.ase!he first phase is the years up to 0==0. !ata Steel was the first steel company( there were price

controls * an administered control of the economy. !ata Steel was not greatly innovative, notgreatly business*minded * !ata Steel was a good citizen of the country. !here were no challenges

of business. &nstead, there were challenges of starting a company in >ritish &ndia. 3onsultants

used to say that !ata Steel was a dead company. !echnology*wise, !ata Steel was a dead

company by 0==0.


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Se)on '.ase!he ten years from 0==0 to 2??0 was about laying business foundations. !ata Steel threw out the

old furnaces and scrapped capacity. !ata Steel spent Cs. 0?,??? crores doing all this. !ata Steel

re*engineered its business processes. !owards the end of 2??0, !ata Steel became one of the

lowest*cost producers and one of the most modern companies in the world.

T&ird P&ase

9ery recently, in 2??0, !ata Steel started thinking of growth and globalization. !o start with,

!ata Steel concentrated on growth, and in the last 4*5 years, !ata Steel has been trying to

concentrate on globalization. !hat is the third phase.

Tata Steel9s :e! Strategi) %.allenges

!ata Steel s strategic challenges include*

0. Caising production

2. ;nsuring availability of raw material at lowest cost

4. Finding ways to grow in key strategic locations

5. Jnlocking ma)imum value out of its value chain

6. 3ontaining costs

7. :ositioning itself as a solution provider in the global steel arena.

Tata Steel9s Strateg!

Like any manufacturing industry, steel has its own value chain. For the sake of simplicity, let us

divide it into two * primary steel*making and finishing. !ata SteelEs strategy is based on breaking

up this value chain and putting each part where it is the most cost*effective. So primary steel will

be produced in &ndia, where there are large deposits of iron ore. >ut the other Asian markets like

!


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!hailand, 9ietnam, Shanghai, etc., are now a key focus for !ata Steel and will be better

addressed by taking the semi*finished steel to these countries for finishing and then selling there.

For the last few years, !ata Steel has been doing some thinking on the central strategy of growth.

A long value chain is there in any business and each part of this value chain has a cost incidence.

Qot all countries have iron ore and coal. #nly five or si) countries have these resources. Qot all

countries have natural gas. Qot all countries demonstrate the same e)tent of growth potential.

Bemand in countries like the JS, Dapan and South orea has flattened and growth will take

place only at 0.6 per cent to 2 per cent * for replenishment of consumption. 3ertain other

countries like 3hina and &ndia will show robust growth. So the customers are going to be in the

developing world. !here is iron making, steel making, rolling, finishing, the customer and

demand * all these things are not at the same place. &n 3hina, there is no iron ore but there is steelconsumption. &n South*east Asia, there is no iron ore but consumption is growing. !ata Steel

believes globalization is a method by which you put the right part of the value chain in its right

place in the world and link it up properly * finishing facilities in places where customers e)ist,

and primary manufacturing facilities in places where manufacturing is competitive.

TATA STEEL SWOTANALYSIS

STRENGT+S

0. !ata Steel@s &ndian operations are self*sufficient in the case of its ma'or raw material iron

ore through its captive mines.

2. 9ery advanced Cesearch and Bevelopment wing which is carrying out researches and

e)periments in the areas of raw materials, blast furnace productivity, steel making,

product development, process improvement etc.

4. !ata had a strong retail and distribution network in &ndia and S; Asia. !ata was a ma'or

supplier to the &ndian auto industry and the demand for value added steel products was

growing in this market."


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5. !he 3ompany is on its way to reach a crude steel capacity of 0? million tonnes

per annum by FT 2?00. !he first phase of reaching the crude steel capacity of 7.< million

tonnes per annum, >rown field pro'ects, is nearing completion

6. !he 3ompany has in place ade1uate internal control systems and procedures

commensurate with the size and nature of its business. !he effectiveness of the internal

controls is continuously monitored by the 3orporate Audit Bivision of the 3ompany.

3orporate Audit@s main ob'ective is to provide to the Audit 3ommittee and the >oard of

Birectors, an independent, ob'ective and reasonable assurance of the ade1uacy and

effectiveness of the organisation@s risk management, control and governance processes.

3orporate Audit also assesses opportunities for improvement in business processes,

systems P controls and may provide recommendations, designed to add*value to theorganisation. &t also follows up on the implementation of corrective actions and

improvements in business processes after review by the Audit 3ommittee and Senior

Management

7. !ata Steel has been on a path of accelerated growth with foray into several geographies

and markets through aggressive mergers and ac1uisitions.

8. !ata Steel now is in the process of implementing a structured approach in risk

management called ;nterprise Cisk Management $;CM%. !he key ob'ectives of the

3ompany through ;CM are

!o enshrine the process of ;CM as a usual >usiness :rocess and integrate into all

decision making and planning processes.

!o ensure that all levels of Management identify and monitor risks through a properly

defined framework.

!o provide periodic information and updates to the >oard and the Shareholders on the

significant risks and the ways of mitigating the same.


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industry itself has been undergoing some structural changes with

3onsolidations. !hese changes are e)pected to bring in greater stability to prices.

=. 3orus ac1uisition brings !ata Steel 0= million tonne of capacity at once and at a cost,

which is roughly little more than half the cost of the -reenfield site.

0?. &t gives the steel ma'or access to very matured and developed markets in ;urope where it

can go downstream much more than in a developing country like &ndia and even to some

e)tent 3hina.

00. !ata Steel with its modernization plans has ensured that it deploys the best technologies

to ensure 1uality, cost*efficiency and environment*friendly processes. !hrough

ac1uisition of 3orus and with new -reenfield ventures, !ata Steel has ensured that it has

diversified the concentration risk in single technology of &ron P Steel making.

02.!ata Steel has two collieries i n "est >okaro and Dharia, in the state of Dharkhand. !heiron ore units are located in Qoamundi, Doda and atamandi in the states of Dharkhandand #rissa. !ata Steel Limited also has a manganese mines and dolomite 1uarries in#rissa. !hese mines are located at an appro)imate distance of 06? kms fromDamshedpur, home to the steel companyEs manufacturing facility. !he Steel 3ompanyEsiron ore units produce = million tons per annum of various grades of high 1uality ironore including rich blue dust ore. !he company in &ndia is having mines of 2


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focuses on output consistency. !o ma)imize productivity and utilization, a voice and datae1uipped -lobal :ositioning System is used, which helps to supervise mining activity formachine movement and engine status.

06. 8dapta"ility of t&e company in t&e fast c&ange of t&e en%ironment * !ata Steel hasdisplayed immense agility in the recent past during the global financial tsunami. &tsvirtuosos of various fields have adopted various methods like lowering of production andeven shutting down of steel plants owing to the lack of demand, managing the balancesheet efficiently etc. !he company has 8?I of its procurement of raw materials for itsoperations in Asia through long term contracts and so its margins can be shielded fromthe nuances of the volatility of the financial markets.

07.9rand %alue * !he !A!A brand owing to its highly ethical and a socialistic approach to business have made its name synonymous to trust. After the ac1uisition of 3orus

another powerful brand, the brand value of the company has enhanced further.

08.Corporate go%ernance * !ata Steel has had an impeccable record for corporategovernance. &t has set the benchmark in global corporate governance principles oftransparency, accountability and e1uity for others to follow. !ata Steel has beenconsistently receiving prestigious awards at both the national and the international arena.Cecently it bagged the >est -overned 3ompany Award for corporate practices presented

by Asian 3entre for 3orporate -overnance.

0


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WEA:NESS

0. ;ndemic Beficiencies

!hese are inherent in the 1uality and availability of some of the essential raw materials

available in &ndia, e)., high ash content of indigenous coking coal adversely affects the

productive efficiency of iron*making and is generally imported. Advantages of high Fe

content in indigenous ore are often neutralized by high basicity inde). >esides, certain

key ingredients of steel making, e)., nickel, Ferro*molybdenum are also unavailable

indigenously.

2. &ndia is deficient in raw materials re1uired by the steel industry. &ron ore deposits are

finite and there are problems in mining sufficient amounts of it. &ndiaEs hard coal deposits

are of low 1uality and the prices of coking and non*coking coal are ever increasing

4. Caw materials for steel production are rapidly depleting and are non renewable, company

has to come up with sustainable methods in steel production.

5. Steel production in &ndia is also hampered by power shortages.

6. Insufficient freight capacity and transport infrastructure impediments too

hamper the growth of Indian steel industry.

#. !ata Steel is having a total debt of 0?.2 billion JSB in its books. &t has a debt e1uity ratio?f 0.7 which means that the assets of the company is largely financed through debt. "ith theinflation on a rise the central banks of most all the countries are intending to tighten in theli1uidity in the money markets. As a result of which the interest rates are on a rise. &n &ndiathe banks are mulling the option of a rate hike and most analysts feel that the C>& is going toincrease the repo rate by almost 0?? bps further after a 3CC hike of 86 bps in late February

&


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this year. !hus it would add to the interest burden of the company which would furtherincrease the liabilities of the company and thus degrade the 1uality of its balance sheetfurther

7 . !ata Steel has traditionally faced the brunt of high attrition rate. &n its Damshedpur plantmany engineers constantly change their 'obs to SA&L in >okaro and vice*versa. !hus theformation of a core team of capable individuals across all departments is very difficult asthe size of the team is ever changing

8 . !he company has certain products in its portfolio like aerospace steel which lacked

demand in the recent past. :rimarily due to the slow down of the aviation sector which led

to delay in the delivery of aircrafts as a result of cutting of capacity by airlines. !he

company also had certain 3ast products largely marketing in the J which has been

witnessing slowdown in demand since 2??0. Hence the company had to close down its

!ee Side plant.

=. !A!A group has made its name synonymous to 'ob security of it employees. >ut the

shutdown of its plants in the J and !he Qetherlands will dent its image to a certain

e)tent. As a result of which around 07?? employees would lose their daily livelihood.

0?. !here are specific products like the aerospace steel and cast products which has received

feeble response in the past. !he company has failed to recover costs in this business front.

00. !he largest subsidiary of !ata Steel, 3orus has high e)posure to spot prices and a higher

operational gearing among the larger ;uropean steel companies. Hence it has the risk of

volatility associated with pricing, one of the key elements in determining profitability of a

commodity company.

02. &ndia the advantages of cheap labour get offset by low labour productivity(

e)., at comparable capacities labour productivity of SA&L and !&S3# are 86 t/manyearand 0?? t/man year, for :#S3#, orea and Q&::#Q, Dapan the values are 0456 t/man

year and =


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disadvantage( about 56I of the input costs can be attributed to the administered costs of

coal, fuel and electricity, eg, cost of electricity is 4 cents in the JSA as compared to 0?

cents in &ndia( and freight cost from Damshedpur to Mumbai is N6?/tonne compared to

only N45 from Cotterdam to Mumbai.

O''ORTUNITIES

0. !he biggest opportunity before &ndian steel sector is that there is enormous scope for

increasing consumption of steel in almost all sectors in &ndia.

2. Jne)plored Cural Market!he &ndian rural sector remains fairly une)posed to their multi*faceted use of steel. !he

rural market was identified as a potential area of significant steel consumption way back

in the year 0=87 itself. However, forceful steps were not taken to penetrate this segment.

;nhancing applications in rural areas assumes a much greater significance now for

increasing per capital consumption of steel. !he usage of steel in cost effective manner is

possible in the area of housing, fencing, structures and other possible applications where

steel can substitute other materials which not only could bring about advantages to users

but is also desirable for conservation of forest resources.

4. ;)cellent potential e)ist for enhancing steel consumption in other sectors such as

automobiles, packaging, engineering industries, irrigation and water supply in &ndia. Qew

steel products developed to improve performance simplify manufacturing/installation and

reliability is needed to enhance steel consumption in these sectors

5. &t is estimated that world steel consumption will double in ne)t 26 years.

Guality improvement of &ndian steel combined with its low cost advantages will

definitely help in substantial gain in e)port market.

6. !he !ata Steel -roup is leveraging the -roup@s collective Cesearch and Bevelopment

e)perience in the -roup@s various geographies to further enhance the -roup@s

performance and also the integration process.

!1


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7. 3orus ac1uisition brings in a tremendous technological advantage by access to best

practices in global steel industry.

8. -lobal MPA brought in following synergies

-reater productivity leading to increased output and market size.

-reater economies of scale leading to cost reduction through combined buying

3ross fertilization of Cesearch and Bevelopment capabilities and operational best

practices, leading to greater innovation and operational efficiencies.

ooming infrastructure has opened up high demand for steel worldwide

=.Newer tec&nologies :

U T&e Core* process combines an iron melter/coal gasifier vessel with a pre*reduction shaft to produce a li1uid product that is very similar to blast furnace hotmetal. 3oal, o)ygen, and pre*reduced iron are fed into the melter/gasifier to melt theiron and produce a highly reducing off*gas.

U T&e ;Ismelt process &ron reduction and coal gasification take place in a li1uidmetal bath. !he fundamental processes of H&smelt began with early e)periments in-ermany with bottom*blown o)ygen steelmaking converters $LB, LB*A3, MS,among others% to allow for coal, lime, and/or iron ore in'ection through the bottomnozzles.

U oth processes utilize a smelting reactor where the primary reactions occur in a deep slag bath as opposed to in the metal phase.

!2


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T+REATS

0. &n the developed world, industries have been facing rising environmental costs due to the

increased concerns on -lobal "arming. &t is, therefore, a challenge and responsibility forthe Steel industry to be the trustee in conservation of nature for future generations

2. &t is recognised that the steel and aluminium industries are significant contributors to

man*made greenhouse gas emissions as the manufacture of steel produces carbon dio)ide

$3#2%, and the manufacture of primary aluminium generates both 3#

2and

perfluorocarbons $:F3s%.

4. High raw material input cost and scarcity of non renewable raw materials are a threat to

the industry.$ eg 3oal, limestone etc%5 Cesources to cushion the from business environmental change*

!ata Steel is a company floated by !ata Sons whose assets are valued at around 0?< billion

JSB and thus the company has enough reserves to cushion itself from market

fluctuations.

6 &nternational competition* 3ompanies like the &ndian Steel magnate Lakshmi Mittal s

Arcelor Mittal, :osco has landed in the shores of &ndia and have proposed to set up < M!

and 02 M! respectively. !hese are amongst the largest steel producers in the world and

have a high chance of eating into the market share of !ata Steel. &ndian market is also

plagued with cheaper 3hinese made steel which is ubi1uitously available and is

significantly munching through the pie of all &ndian steel makers including !ata Steel

7. Financial Crises - !ata Steel is having a huge debt of 0?.2 billion JSB in its books and

hence a huge interest burden. "ith the volatility of the financial markets and the

tightening of the li1uidity by the central banks this rate is slated to go up and hence

would further increase the interest burden of the company

8. 8dopta"ility of t&e company to tec&nological c&anges : !ata Steel has shownimmense integration abilities in the past. "ith the ac1uisition of it has been able to

imbibe the high end technological knowledge to its

production facilities and hence has been able to produce high 1uality steel at least prices

and significantly bettered its operating margins.

!


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,INAN%IALANALYSIS

Return on e;uit!

Ceturn on e1uity is been arrived at by dividing net profit with total share holder@s fund. !his ratio

tells that how much profit is been earned by each share of a company. &f we look at the graph of

C#; we will find that the return for the year 0===, 2???, 2??0 has been showing a steady

increase but in the year 2??2 we see a small dip and this is because the e)penditure has increased

by around 6I. !hen in the year 2??4 we see a big 'ump. !his 'ump is because the revenue has

increased by around 4?I. !hen we can see that there is a sudden dip in the year 2??7. !his is

because there was a bumper profits in the year 2??6 and that was used for purchasing gross

block which has resulted into increasing the reserves and in turn increasing the shareholders fund

hence the dip.

!"


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Asset turno#er ratio

Asset turnover ratio tells that how much is the profit earned on every 0 rupee spent on asset. &t is

been arrived at by dividing the total profit with the total asset. &f we take a closer look at the ratio

we will find that the ratio starts with .70. it shows a steady increase. &t goes more than 0 then it

again dips back. !his dip is happening because the company has purchased a lot of fi)ed assets

recently and the profits on the other hand has not increased proportionately. !he ideal asset

turnover ratio is 0 0.

%urrent ratio

!#


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!his ratio is arrived at by dividing current assets with current liabilities. !he ideal current ratio is

2 0. &f we look at the current ratio graph closely we will find that in the year 0=== and 2??? the

ratio was more than 0 and it keeps on dipping and in the year ?4 it goes below 0 which is

certainly not a sign of a sound company. !his ratio of less 0 continues till 2??7 and it improves

in the year 2??8 and 2??


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Debt ser#i)e ratio

Bebt service ratio or interest coverage ratio is a ratio which tells us that how many times is my

total net profit of my total interest. !he ratio has to be more than 0. &n the case of !A!A steel

they have always been more than 0 with an e)ception of the year 0=== and 2??2. &f we look at

the graph we@ll find that in the year 2??< the ratio has dipped to around 6I. !his has happened

because they have increased their debt by around 0??I which has resulted into increase in the

total interest payment and hence the ratio has dipped.

Worl steel &ro u)tion

!%


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Looking at the bar chart we can say that the global world production has been increasing everyyear with an e)ception of 2??


50/60

"'


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Enhancing Business-Community Relations Tata Steel Case Study, India

Tata Steel : Corporate (o%ernance and Community Initiati%es

=esearc& Pro)ect 9ac>ground

!his case study is one of ten that were chosen as part of the @;nhancing >usiness*3ommunityCelations pro'ect in &ndia implemented in collaboration with !he ;nergy and Cesources &nstitute$!;C&% . !hese cases document e)amples of engagement between businesses and communities andcan be used as learning tools for the promotion of responsible business practice and sustainabledevelopment.

!he ;nhancing >usiness*3ommunity Celations pro'ect is a 'oint international initiative betweenJnited Qations 9olunteers $JQ9% and the Qew Academy of >usiness. &mplemented in sevendeveloping countries, the purpose of the initiative was to collect and document information on

business *community practices as perceived by all stakeholders, build partnerships with them and promote corporate social responsibility practices. &t is also intended to enhance internationalunderstanding of business*community relations through information sharing and networking withother countries especially those participating in the pro'ect * >razil, -hana, &ndia, Qigeria,:hilippines, South Africa and Lebanon.

!he findings and recommendations reflected in the case study are those of the author and do notnecessarily reflect those of JQ9, !;C& or the Qew Academy of >usiness. &t is important to note thatthese cases were written as e)amples of business*community initiatives. !hey do not constitute acomprehensive assessment of the company s social responsibility.

, Introduction!he !ata -roup is a giant family of businesses that dominates &ndian markets. !here is a long

history of corporate responsibility within the group, and it is no surprise that all !ata companieshave adopted a !ata 3ode of 3onduct as well as many international standards.

!his case study concerns initiatives undertaken by !ata Steel, as e)amples of those implemented by the wider organisation. 4 &t is divided into two broad sections( the first of which discussescorporate responsibility during the business process $entitled @3orporate -overnance %( the secondof which discusses social investment and philanthropy undertaken with the use of company profitsand donations. >ecause !ata Steel appears to choose and implement pro'ects of its own design, thelast section contains discussion of the dangers $and benefits% of +targeting .

+, Company Profile

!ata Steel is one of twenty*eight ma'or corporations within the !ata -roup. Founded in 0=?8, it isthe largest private sector steel company in &ndia, with a capacity of 4.6 million tonnes per annumcrude steel production. 5 #perations are spread across the country, with the steel manufacturing unitat Damshedpur, and other manufacturing and mining activities situated in the states of Darkhand and#rissa at eight locations. Head1uarters are based in Mumbai, Maharastra.

"1


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!ata s stock is listed and traded on the >ombay Stock ;)change and the Qational Stock ;)changein Qew Belhi. ;)ports are primarily to Dapan, the JSA, the Middle ;ast and South ;ast Asiancountries. &t manufactures products including rods, pipes, tubes and rings. However it also providesservices such as personnel and technical training, &! and Besign and ;ngineering.

!he company employs appro)imately 5


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-ood +corporate governance should be an integral part of all of these processes, not 'ust $as oftenassumed% social responsibility and corporate citizenship. After all, a good corporate citizen needs to

be accountable to stakeholders while conducting business as well as when investing in thecommunity at a later date.

!ata Steel has gone some way in ensuring corporate governance at all stages of the business process. ;very year the company aims to e)ceed its targets on the ;mployee and 3ustomer

Satisfaction &nde)es, and the 3orporate 3itizenship &nde). &n order to improve its internalmanagement systems it has also adopted two systems of evaluation(

V Tata Code of Conduct : Follows guidelines established by the JQ -lobal 3ompact $towhich !ata is also a signatory%. A company signing to the !ata 3ode of 3onduct entitlesthat company to use the !ata brand name. &t prescribes principles by which allemployees are e)pected to act.

V 8udit Committee

, , , En%ironmental Sustaina"ility

!ata Steel was the first integrated iron and steel plant in &ndia to have been certified with the &S#*05??0 ;nvironmental Standard, and one of only a few in the world to have this accreditation in2???. &t operates its own ;nvironmental Management System $;MS%, aimed at increasingefficiency and limiting environmental impact at all stages of steel production. !his system focuses onimproved staff education $including contractors%, instituting a system of waste segregation and itseco*friendly disposal, the safe disposal of industrial waste and where possible, a 0?? per centrecycling of hazardous wastes such as tar sludge, oil soaked 'ute, and waste acid from batteries.

0, ,+,


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0,+, , Tata Council for Community Initiati%es ?TCCI@

!33& is a product of the !ata -roup s commitment to the community. &t serves to help the !atacompanies in their business*community relations, by drawing up @!ata -uidelines for 3ommunityBevelopment, 8 designing programmes then implementing them. :rogrammes include trainingcourses in which !ata companies conduct technical $&!, vocational% training to members of thecommunity. !his is done with the help of company volunteers, often management staff. Aforthcoming pro'ect involves forming a !ata 3orps of 9olunteers, under which employeevolunteering will play an increasingly important role in developing business*community relations.

0,+,+, Tata Social E%aluation6 =esponsi"ility and 8ccounta"ility ?E=8@

;CA is a procedure by which !ata s community pro'ects are evaluated for their impact on the

target communities and their level of accountability. Although ;CA is not independent of !ata, such

procedures are influential in improving programme delivery and ensuring continuing self*evaluation

and learning.

0,+,0, (lo"al 9usiness Coalition ?(9C@ 3

!he -lobal >usiness 3oalition on H&9/A&BS aims to check the growth of the disease with the helpof over a hundred ma'or international companies. >elieving that business holds the necessarymarketing skills, management and infrastructure to be able to raise awareness in rural communities,the ->3 encourages companies to campaign with imagination and consistency.

!ata Steel has done 'ust that, and won an award in Dune 2??4 for +>est &nitiative. &nitially !atafocused on educating employees, but now targets over 7?? villages in the State of Darkhand. !his isdone through the dissemination of mass media, as well as more inventive schemes, such as studentworkshops which employees are trained to deliver, or travelling street plays in local languages thatreach the rural illiterate. !ata paid for si) condom*vending machines in the city of Damshedpur in

public places, which are also proving to be a success. At one of these locations, a busy coach station,there is also a clinic where passers*by can have free check*ups and learn more about H&9/A&BS.

0,+,., $olunteer


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part*finances the running of one blood bank, two rehabilitation centres and five homeopathic clinics.Bonations to the clinics and centres are regular and on a long*term basis, which does indicate amove from ad hoc sponsorship to a more strategic social investment. !his is organised by theFamily "elfare department.

0,+,4, Culture and Education

;ducation and Touth Bevelopment :rogrammes have built and maintained infrastructure for sportsacross Darkhand. #ver 0,6?? young people are currently training at !ata Steel s two sportingacademies, si) training centres or their Adventure Foundation. Awards are given to employees whoe)cel in sports. A !ribal 3ultural 3entre was built in 0==4 and a Dubilee Amusement :ark in 2??0 toenrich the cultural heritage of the city of Damshedpur.

!ata Steel has also invested in education, part*financing eleven schools and colleges that teachnearly 0?,??? students per year.

0,0, Aoo>ing to t&e future

Along with the !33& s forthcoming pro'ect to formalise employee volunteering, !ata Steel alsohopes to align more with global standards and initiatives. &n 2??0 !ata Steel produced a 3orporateSustainability Ceport following guidelines established by the -lobal Ceporting &nitiative. !his isanother step forward for the company looking to make its mark on the new corporate responsibilityagenda.

., Bey Issues and Aessons Aearned

!ata Steel has provided many e)amples of how business*community relations are approached bythe private sector in &ndia at the present time. Summaries of !ata initiatives reveal that the companyis working to improve both +before and +after*profit practice.

3orporate governance is being tackled through increased transparency in business operations,illustrated in the establishment of an Audit 3ommittee. !he !ata 3ode of 3onduct also means thatthe company holds certain principles, based on value 'udgements, that influence its policies and

procedures. #ne result of this has been the adoption of various organisational structures that areresponsible for targeting particular issues, such as the Family "elfare and ;nvironmentalManagement Bepartment.

Moreover, !ata Steel has seemingly pushed back the boundaries of what is e)pected from+corporate social responsibility $3SC% in &ndia at this time. Qot only has it given donations to local

education, health and sports pro'ects, but it has also demonstrated longer*term commitment in theestablishment of the !ata 3ouncil for 3ommunity &nitiatives $!33&%. &ts participation in the -lobal>usiness 3oalition to raise awareness of H&9/A&BS has earned international recognition over asustained period. !his is indicative of a move towards +social investment, which heralds a moreserious commitment to 3SC than donations or sponsorship.

!ata Steel s dalliance with employee volunteering is, however, of the most interest for this research pro'ect. &t seems that the volunteer database enables the company to match volunteers withcommunity positions easily and 1uickly. !he e)perience then is more beneficial to everyone. &twould be interesting to learn if employees are given incentives for volunteering, or if they are

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rewarded afterwards. !his would have implications on the +real motivation behind employeesgiving up their time for a local cause. "ould this make a difference of the 1uality of workW Bovolunteers need e)tra motivation anyway, or is altruism and personal satisfaction enoughW

Another issue that arises from !ata s employee volunteering scheme is the manner in which +'obs

and communities are chosen. #n the !ata website, it is claimed thatCompanies are encouraged to design and implement programmes that help improve thehealth and hygiene of the various communities that are adopted.

:rioritising health and hygiene programmes seems like a good idea, because it targets thecommunity s +basic needs. !he doubts appear because the companies are e)pected to design their

own pro'ects. Moreover, the term +adopted implies that the communities themselves had littlechoice in the matter. 0? All of a sudden it seems the company is dictating development programmes.

"hile this might be a misinterpretation, there are dangers in +top*down approaches, especiallywhen initiated by the private sector. &n the first instance, the private sector might not have thetechnical knowledge to identify cause and solution. &t is also possible that community pro'ects areimplemented in a manner similar to a business pro'ect. !his might be by following a blueprint plan,rather than opting for a more fle)ible approach. &t might lack community participation. Alternativelyit might try to engage in community participation but have an inade1uate understanding of powerdimensions within the community that affects the outcome of the pro'ect.

&n short, a business might not have the technical or sociological knowledge to implement asuccessful community pro'ect. Moreover, the community does need to have some opportunity tovoice their complaints, for these to be heard and then challenged by way of a community pro'ect Oalthough it is worth bearing in mind that often those who are able to +speak out are not

powerless. 00 !ata s paternal +adoption of communities is therefore worrying, the implication beingthat the +targeted communities have minimal input into their future relations with the company.Although !ata Steel s initiatives have served communities on many levels, a means of enhancing

business*community relations in the future would re1uire communication between both sectors,when both parties are able to contribute to pro'ect selection and planning procedures

"#


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"$

Since the opening of the &ndian economy in 0==0, !ata has been sub'ect to globalcompetition, making it imperative for the group to become competitive in &ndiaagainst the new entrants. !o gain scale, reduce their e)posure to the cyclicality of &ndia s economy, survive, and achieve a sustainable competitive position inindustries that are globalizing, most !ata companies then looked overseas. !ata srecent e)perience is an e)cellent case for analyzing @acceleratedinternationalization $Matthews 2??2%. As it pertains to a challenger conglomeratefrom formerly peripheral areas that goes international in order to access resources,the !ata group has been driven by multiple factors, including the need to accessnew markets $e.g., in >:# services%, the opportunity to integrate the value chain$e.g., in steel%, and the 1uest for brand control $e.g., in tea%. !his strategy provedfeasible because !ata possesses strong leadership combined with vision( cane)ploit the possibility of leveraging increasingly developed financial markets in&ndia, a large domestic market, and global li1uidity( and reacted fast to the openingof specific opportunities at given times.!he process of growth, especially when it takes form through internationalac1uisitions, has considerable conse1uences on the nature of corporations, their internal characteristics, and their relationship with stakeholders. 3hanges take timeto unravel and loops may originate whereby target companies pass their BQA tothe ac1uirer and modify the latter s basic features. Such transformational dynamics

is likely to be more comple) in the case of emerging economies multinationals.#n the one hand, these companies may use ac1uisitions in order to accessresources they do not have, rather than to deploy un*imitable ones in the way thatis predicted by the standard models of traditional multinationals. #n the other hand, for this very reason emerging economies multinationals are likely toconclude their deals in more developed economies, where firms are not veryamenable to adopt management methods and values developed in poorer countries.#perating across borders and time zones and integrating diverse managementteams and corporate governance practices do not seem to have modified the !ataimprinting. #f particular interest is the fact that !ata has not blindly embracedready*made recipes to face the challenges of multinational management, preferring

instead organizational solutions aimed at fostering mutual recognition andknowledge e)change within the multinational conglomerate.A praise for this wayof managing the group came from Standard P :oor s, which in Becember 2??7e)pressed the view that the +policy to support its companies and the improvedfinancial profile of its entities also enhances the overall financial fle)ibility


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"&

!A!A Motors. &n the case of 9SQL, a strategic link with !3S has given the advantage

of offering customers a single partner option that can deliver a combined &! andtelecom solution. Another !ata advantage is the fact of being run by a verysuccessful minority, the :arsis, without stirring anger amid the ma'ority of the

population $as is tragically common in other countries, see 3hua 2??2%. !his gentleapproach may distinguish !ata from counterparts that produce much noise in their e)pansion.

!he process of internationalization of large corporations from non*"esterncountries O be they in some kind of East like 3hina, &ndia, or Cussia, or in some

kind of South like Latin America, South Africa, or !urkey O is more than a passingfashion. Future research will inevitably focus on detailed case studies of key firms,to analyze a broad variety of issues, from management practices and industrialrelations, to the organization of CPB function and innovation. Mimicking thetra'ectory of the history of industrial nations business, the issue of hybridization O i.e. the process whereby corporate models, far from converging on a single model,take multiple and diverging roads to innovate and become increasingly open to theglobal economy O will figure prominently in the research agenda. !his paper hasoffered a first modest contribution in this direction, especially in analyzing the timeand geographic dimensions of diversification.

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Tata Steel Final Project

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