Current Approach of Tata Steel to Managing Environmental Drivers - Essay Example

?Discussing (Tata Steel) and its Current Approach to Managing Environmental Drivers in their Market Executive Summary The influence of external environmental factors can be considered as a common phenomenon for the marketers while they seek to expand business operations across the overseas countries. In this regard, the organisations in the present business environment can be widely recognised to develop effective business strategies to effectively deal with the environmental and industrial influencing drivers. With respect to the potential impact of the environmental factors, the report tends to critically analyse the five key environmental forces in relation to the international business operation of TATA Steel. In this context, the discussion of this report critically examines the major influencing factors along with the responses made by TATA Steel while performing its steel manufacturing processes in the global countries. Additionally, the discussion would also incorporate the major drivers within the present steel making industry, their potential impact on TATA Steel and provide relevant theoretical implications in order to effectively address the key driving factors in the respective business industry. Table of Contents Executive Summary 2 1. Introduction 4 2. Brief Description of the Company and its Exposure to Global Business 4 3. Introduction of the Chosen Framework and Evaluation of TATA’s Response 5 4. Analysing Major Influencing Drivers in the Steel Making Industry and TATA’s Response 6 4.1 Regulatory Process 6 4.2 Cost Reduction Strategy 8 4.3 Buyers’ Power 9 4.4 Suppliers’ Power 9 4.5 Competitive Rivalry 10 6. Conclusion and Recommendations 12 References 13 1. Appendix 18 1.1 PEST Analysis 18 1.1.1 Political Factor 18 3.1.2 Economic Factor 18 3.1.3 Social Factor 19 3.1.4 Technological Factor 19 1. Introduction The present business environment of global organisations is often identified to be influenced by various factors. In this regard, the influence of external environment is one of the major determinants for the modern business organisations, assisting them to successfully accomplish their desired business goals (Teodorescu & Costachie, 2011). Organisations are often recognised to highly comply with the influence of primary external environmental factors in performing various operational and corporate functions. In this regard, the political, economic, social along with environmental and legal aspects can be duly considered as the primary external influencing factors for any organisation, aiding it to build long-run sustainability in the competitive business market (Oxford University Press, n.d.). Keeping with the major influence of the external environmental factors in business, the primary objective of this report is to analyse the business operations of TATA Steel in the fiercely growing steel manufacturing and marketing business industry. In this regard, the report will identify the chief drivers of the steel industry and discuss how these drivers affect Tata Steel. Moreover, the report will also lay utmost focus upon evaluating Tata’s responses to the identified drivers along with providing appropriate actions to ensure sustainable success of the company. 2. Brief Description of the Company and its Exposure to Global Business Established during the mid of the year 1907, TATA Steel (TATA) is regarded as one of the leading steel manufacturing companies in the Indian and global business industry. It is one of the major subsidiaries of the TATA Group with a large number of market shares in producing and marketing of steel across overseas locations (Mahajan & Ives, 2003). The company attained greater success in the respective business industry due to its adoption along with execution of continuous diversification strategy in its various business fields. Currently, the organisation is involved in performing diverse operational functions that include motor vehicle manufacturing, steel production, chemical, financial service along with healthcare division and telecommunication service across diverse global nations (TATA Steel, 2012). In relation to determine the present business structure of TATA, it can be apparently observed that the company is rapidly allocating its business in diverse geographical regions throughout the globe. The growth and globalisation strategy of TATA is driven by continuous expansion approach through its well-built maintenance of profitability along with greater initiatives of mitigating risks. Over the preceding few decades, the company has been noted to focus on increasing the security of its raw materials and forming major joint ventures across various regions of the world where it operates. According to the present day context, the organisation can be viewed to operate in excess of ten nations globally (TATA Steel, 2005). 3. Introduction of the Chosen Framework and Evaluation of TATA’s Response The influence of the external environmental factors has long been identified to radically influence organisations, especially the steel manufacturing corporations. Therefore, a PEST Framework (refer to the Appendix) has been chosen to critically assess the business operations of TATA Steel and analyse the company’s response with respect to the influencing factors. The PEST framework aims at assessing the impacts of political, economic, social and technological aspects on an organisation, while it performs its business operations in the various locations. With regard to the PEST analysis of TATA (refer to Appendix), the steel manufacturing plants of the organisation have been observed to strategically comply with the governmental and political regulations. Moreover, the organisation also tends to align its HR policies associated with wage structure, compensation plan along with similar other policies in accordance with the changing political norms of the countries. In order to effectively deal with the influences derived from the economic factor, the organisation have also been identified to implement effective business strategies associated with the investments and expenses that are required in producing crude and other steel products. The financial and investment policy of the organisation, associated with the procurement of raw materials along with selling finished products in the international market also helps the organisation to effectively address the potential economic influences. In the context of the social aspects, the business strategy of the company also tends to operate in compliance with the regulatory social policies that incorporate gender equalities along with different cultural aspects. Moreover, the continuous application of community and environment awareness programmes also helps the organisation to effectively deal with the potential socio-cultural issues persisting in its field of operations. 4. Analysing Major Influencing Drivers in the Steel Making Industry and TATA’s Response 4.1 Regulatory Process Iron and steel producing process has long been witnessed to attain continuous success as compared to the other business industry. However, the industry has also faced certain radical challenges with respect to maintain trade regulations along with environmental policies across several countries (Environmentally Conscious Manufacturing Strategic Initiative Group, 2004). The steel making industry generally involves in producing mass pollution due to the processing of coke production while manufacturing steel products. Conceptually, one of the steel making functions generally involve liquefying iron from blast furnace during steel production, which tends to produce mass emissions within the environment. Therefore, the environmental concern is regarded as one of the leading primary aspects within the regulatory process, as the organisations tend to produce steel in several global countries. The steel making process tends to generate substantial level of ammonium compounds, coke oven gas along with sulphur and coke dust, imposing unfavourable impact upon the environment. In this regard, the strong regulatory process in the steel manufacturing industry is often regarded as one of the major constraints for the global marketers (Illinois Sustainable Technology Center, n.d). The steel making procedure can be better understood with the help of the following graphical representation. (Source: Illinois Sustainable Technology Center, n.d.) In relation to TATA’s response, the steel manufacturing plant of the company especially located in the European Nation and Netherlands have been identified to face major challenges relating to environmental based policies and practices. However, the continuous development of reducing a huge figure of harmful chemicals and carbon emissions certainly enabled the company to address and mitigate such challenges by a certain degree (Tata Steel Europe Limited, 2013). Moreover, the continuous effort of minimising potential environmental impact enabled the organisation to highly comply with the environmental policies and regulations in the global markets. Additionally, the global steel plants of TATA also incorporates adequate measures associated with carbon emission, energy efficiency, emissions to air, water and waste management activities (TATA Steel, 2013). The regulatory compliance of the organisation tends to demonstrate range policies and provisions that ensure the organisation to uphold honesty, transparency and integrity within each aspect of business, ranging from staff members, suppliers along with other counterparts. Moreover, the development of an all-inclusive regulatory framework, especially in the major manufacturing areas of TATA Steel including EU and India, has been focused on adequate compliance with the methodologies of World Steel Association. The adequate compliance of the methodology provides effective support to the company to strengthen its regulatory processes to avert different risks associated with producing a large volume of steel products (TATA Steel, 2011). 4.2 Cost Reduction Strategy The fierce competitive scenario in the steel making business industry has certainly made the organisations to reduce significant amount of operational costs. In relation to the manufacturing process, the organisations are likely to bear a huge figure of costs in procurement of raw materials, coke processing along with deployment of various sorts of machinery equipments. Moreover, the rising cost in purchasing raw materials along with increasing price of the machinery items broadly impacts the organisations to meet their desired financial goals. Therefore, the organisations seek to reduce cost of their production units. Moreover, the cost reduction strategy is also adopted by the organisations to deal with the threats generating from extreme business market competition in the respective business field (Ernst & Young Global Limited, 2013). In relation to TATA Steel, the company had faced continuous threats from its global competitors due to higher purchasing power of the customers. In this regard, the development in the regulatory processes and producing quality products having minimum impact upon environment among others can be duly considered to empower TATA in accomplishing superior competitive position. In response, it can be affirmed that the cost reduction initiatives of TATA Steel includes deployment of advanced machinery equipment, developing plant infrastructure and minimising inventory costs among others (Srivastav, n.d.). The cost reduction initiatives of the organisation are generally deployed in order to increase the operational efficiency and improve the performance of the manufacturing plants in the organisation. In this regard, the deployment of advanced machinery equipments within the plant help the manufacturing process of TATA Steel to reduce a significant amount of cost required for producing quality-based crude and other steel products. Additionally, the wide network of supply chain management structure also helps TATA Steel to reduce a large amount of costs associated with delivering raw materials to the production units and finished goods to the ultimate customers. In this context, the manufacturing process along with supply chain management functions in the South-East Asian region significantly ensures to mitigate different cost related issues and increase the operational efficiency of the organisation on the whole (1TATA Steel, 2011). 4.3 Buyers’ Power The bargaining power of the buyers is also a major influencing driver in the steel making business industry. In relation to the rising competition in the global steel making industry, it can be viewed that the presence of extensive dominant marketers along with increased level of emerging new entrants have eventually raised buyers’ bargaining power at large. Therefore, the situation leads towards making the buyers switching into other similar product of dissimilar organisations belonging to the respective industry. Therefore, it can be affirmed that buyers’ power is relatively higher in the present steel making business industry (Renda, 2013). With regard to the rising numbers of dominant marketers along with new entrants in the global steel manufacturing industry, it can be stated this particular aspect impose considerable impact on TATA Steel to maintain its leading position. Therefore, higher amount of customer switching cost is one of the major influencing drivers for the company to strengthen its sustainability in the global steel manufacturing industry (Cole & Bruch, 2006). In order to mitigate the potential risk from the increasing bargaining power of the buyers, the business strategy of TATA Steel is highly focused on enhancing product quality along with conducting effective marketing and promotional activities while offering its steel products in the global markets (TATA Steel, 2012). In order to effectively deal with the rising challenges from the global competitors, the up-keeping efforts in quality of the products along with strong marketing channels, crucially support TATA Steel to attain a large number of loyal customers across the South-East Asian and European markets. Moreover, the strong brand value and highly competitive market share tends to leverage TATA Steel in striving the challenges associated with the increasing bargaining power of the customers (Dua & et. al., n.d.). 4.4 Suppliers’ Power The suppliers’ power can also be regarded as one of the major influencing drivers in the steel manufacturing industry, as the organisations require huge raw materials and other related components while producing the final product. This requirement in the respective business industry leads to build a strong affiliation between the manufacturers and the suppliers. However, in the present business scenario, the steel manufacturing organisations are often recognised to face certain challenges due to rising power of the suppliers. It can be stated that this scenario emerged due to gaining momentum of suppliers in the global steel producing industry (National Taipei University, n.d.). Therefore, the rising power of the suppliers can be duly considered as a major threat for TATA steel in the global business environment. In response, the company possesses the capability in obtaining adequate raw materials along with required equipments from diverse suppliers through building strong interrelation with them on a global context (TATA Steel, 2012). Moreover, the company’s owned key raw material resources, including iron-ore and coal can be considered as one of the major and most effective aspects that have enabled TATA Steel to have significant advantages over the suppliers’ bargaining power. In precise, the fully integrated plant infrastructure of TATA Steel empowers the organisation to gain substantial opportunities than the other global marketers as it incorporates raw material resources and mines in the South-East Asian region. The ownership of key raw materials along with simultaneous development of the production units can further be regarded as the key success factors of TATA Steel to take the advantages in the lower number of suppliers as it also helps the organisation to effectively deal with the increasing threats from the rising bargaining power of the customers (Dua & et. al., n.d.). 4.5 Competitive Rivalry Competitive rivalry is viewed to be one of the decisive factors in the fiercely growing steel manufacturing industry. In recent times, TATA Steel has been facing certain challenging situations due to increased level of business market competition in the respective industry globally. The existence of the dominant marketers including ArcelorMittal, JSW Steel and Essar Steel among others can be identified as few of the major competitors of TATA Steel in the global steel manufacturing industry. In response, the company adopted effective strategies in mitigating this challenging situation in the form of producing quality steel products and offering these to the customers on a timely basis in a cost-effective manner (Hoover’s Inc., 2013). In relation to the recent scenario, within the steel industry of the South-East Asian region, the company has been significantly facing threats from a number of competitors that included the publicly listed as well as privately owned steel organizations. Few of the major competitors such as SAIL, ESSAR and JSPL among others can be considered to increase challenges for TATA Steel to dominantly perform in the respective industry. However, the integrated plant infrastructure, continuous development of the manufacturing operations along with extensively wide supply network of TATA Steel, have significantly assisted the organization to compete with the challenges raised by the rivals (Dua & et.al, n.d.). Thus, on the basis of the above discussion, it can be affirmed from a broader outlook that the responses of Tata against the aforementioned drivers would certainly enable the company to attain superior competitive position in the respective industry. 6. Conclusion and Recommendations In relation to the present competitive business environment of the global steel manufacturing industry, the business operations of TATA Steel have long been witnessed to attain continuous success in gaining market values with the capacity of producing crude steel as 3.5 million tons per annum. The company is envisioned with the purpose of managing adequate clarity regarding diversity across its different business fields. With regard to the primary objective of the business, the company can be widely accepted in preserving diversity management across its different business locations in the globe. In relation to the critical analysis of the major environmental forces, it can be viewed that the organisation tends to practice effective business strategies in order to proactively address the potential issues associated with the influencing factors. However, the raising instability in economic conditions along with increasing environmental regulations can be duly considered to significantly impact the organisation in its overseas steel manufacturing plants. In this concern, it can be recommended that effective forecasting of investments can help the company to cope with the economic slowdown condition in the global nations where it operates. In this context, the financial projection in procurement of raw materials and machinery items, identifying trends in global customers and minimising inventory costs would certainly enable the company to minimise potential risks arising from worldwide financial downturn. Moreover, the continuous development of environmental protection policies and deployment of advanced technological features can further facilitate TATA Steel to mitigate environmental related threats while performing global steel manufacturing operations in various nations. References Brooks, I. & et. al., 2010. The International Business Environment: Challenges and Changes. Financial Times Prentice Hall. Cole, M. S. & Bruch, H., 2006. Organizational Identity Strength, Identification, and Commitment and their Relationships to Turnover Intention: Does Organizational Hierarchy Matter? Journal of Organizational Behaviour, Vol. 27, pp. 585-605. Chao, G. & et. al., 2007. 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[Online] Available at: http://www.tatasteeleurope.com/file_source/Functions/Finance/Documents/annual-report-2011-12.pdf [Accessed November 18, 2013]. TATA Steel, 2012. Corporate Governance Report for the year 2011-12. Annual Report 2011-2012, pp. 111-131. 1TATA Steel, 2011. Tata Steel registers `5,347 crores (US$1.2 billion) Profit After Tax in Q1. Press Release. [Online] Available at: http://www.tatasteel.com/usernewsroom/viewfile.asp?filename=WhatNew_2011_8_16_42_7_650.pdf [Accessed November 18, 2013]. TATA Steel, 2011. Corporate Citizenship Report. Regulatory Framework. [Online] Available at: http://www.tatasteeleurope.com/file_source/StaticFiles/Functions/HSE/Group_CCR_2010-11.pdf [Accessed November 18, 2013]. Tata Steel Europe Limited, 2013. The Cornerstones of Sustainability. 105th Annual Report. [Online] Available at: http://www.tatasteeleurope.com/file_source/Functions/Finance/Documents/annual-report-2011-12.pdf [Accessed November 18, 2013]. Teodorescu, C. & Costachie, S., 2011. Analysis Strategies of External Environment Influence on Tourism Companies in Romania Establishing the Interest Classes in Tourism and the Relation with Tourism Companies in Romania. Journal of Studies and Research in Human Geography, pp. 93-97. 1. Appendix 1.1 PEST Analysis 1.1.1 Political Factor Political factors can have a major bearing upon a business organisation towards efficiently coordinating its number of vital operations (Chao & et. al, 2007). Political disturbances along with imbalances and unsympathetic governmental regulations can also impose considerable impact on the organisations while seeking to expand business operations in the global nations. The factor also denotes the level of freedom associated with the expression and the association of business conducts in foreign nations (Oxford University Press, n.d.). In relation to the response of TATA Steel concerning the political influence, Tata Steel has been widely accepted to comply with the governmental regulations of diverse nations throughout the globe wherein the company operates. In this similar context, it has been viewed that global human resource (HR) policies of the company plays a decisive role in aligning appropriate wage structure, designing effective compensation policies and working hours dimensions in accordance with the political and governmental regulations of the countries, where it operates (Brooks & et. al, 2010). 3.1.2 Economic Factor The economic factors, as a part of PESTEL analysis, generally refer to various aspects that are related to economic stability. These aspects comprise interest rates portfolio, taxation programmes, exchange along with inflation rates, economic growth in accordance with Gross Domestic Product (GDP) rates and other economic constraints (Chernev & Kotler 2008).These factors have also major bearing upon the organisations towards successfully making effectual operational and financial decisions. The determinants including interest rates, taxation policies along with exchange and inflation rates significantly impacts on the cost of exporting by the organisations, which further affects the supply and the price of commodities in the overseas nations (TATA Steel, 2012). In relation to the global business strategy of TATA Steel, it has been apparently observed that the organisation highly prioritises the primary attributes associated with the economic factors. The financial and investment strategy of the company incorporates adequate policies in accordance with the changing economic conditions while exporting raw materials for producing crude steel and selling them in the international business markets. However, the company has been facing threats in the global crude steel production industry due to prolonged economic downturn in the developed countries including European Union and the territories underneath the United Kingdom (TATA Steel, 2012). 3.1.3 Social Factor The social factors often tend to create significant barriers for the organisations in terms of efficiently practicing business functions in any global nation. In relation to the influence of social factors, it can be identified that cultural variance and perseverance of convenience among others are few of the major determinants for the marketers while conducting business in the overseas countries. Moreover, the other social factors such as individual interests, values along with attitudes and behavioural aspects also unfavourably impact the organisations to attain their respective expected business goals (Koumparoulis, 2013). In relation to the case of TATA Steel, it can be viewed that the company has experienced severe challenges associated with the disparities in social along with cultural perspectives of the stakeholders across different international markets where the company operates. However, the company has been recognised to cope with the challenges associated with social determinants through developing its business policies in line with the values, attitudes and behavioural aspects of the global nations (Cole & Bruch, 2006). 3.1.4 Technological Factor Technological developments are immensely taking place within various organisations in this modern day context in order to augment the pace of producing quality based products in a high volume with low cost (Porter n.d.). In relation to increasing pace of modern technological transformation, technical attributes have been identified to significantly influence aligning the production costs with the actual financial goals of the organisations (Koumparoulis, 2013). The intervention of advanced technological attributes has long been witnessed as the primary consideration of TATA Steel in producing its huge quantity of steel in its different production plants across several overseas locations. In the context of the overseas production plants, the company deployed advanced technological equipments in manufacturing steel. It employs renowned available technological attributes from different global suppliers and groups in order to maintain adequate balance of producing steel in various production plants that are located in diverse overseas nations (Tata Steel Europe Limited, 2013). Read More