Tata Steel - Current Position and Future Opportunities - Example

work: Introduction to Business By of the of Table of Contents 0 Executive Summary2.0 Report 2.1 Business Segments of the Company 2.2 The Market of Tata Steel 2.2.1 Customer Challenges 2.2.2 Competitive Advantage of Tata Steel 2.3 PEST Analysis 2.3.1 Political Factor 2.3.2 Economical Factor 2.3.3 Socio-cultural Factor 2.3.4 Technological Factor 2.4 Porter’s Five Forces 2.4.1 Threat of New Entrants 2.4.2 Competitive Rivalry 2.4.3 Bargaining Power of Suppliers 2.4.4 Threat of Substitutes 2.4.5 Bargaining Power of Buyers 2.4.6 Diagram of Porter’s Five Forces 2.5 SWOT Analysis 2.5.1 Strengths 2.5.2 Weaknesses 2.5.3 Opportunities 2.5.4 Threats 2.6 Conclusion Executive summary: Steel is an essential and unique element that encompasses all spheres of modern life. It is a key constituent in the infrastructure. From canned foodstuff to computers, from buses to buildings, almost everything we see around us is either made using steel or made of steel. Thus, it becomes clear that steel is highly significant to modern society. Tata Steel is the second biggest steel manufacturer in Europe and has its chief steelmaking plants in Holland and UK. It supplies steel and associated services to main industries such as production, vehicle manufacture and packaging. The European operations are a supplementary of Tata Steel Group, one of the world’s top ten steel manufacturers. The joint Group has approximately 80,000 employees. A dedication to environmentally-sound practices is an important part of many businesses’ promise to act responsibly. Social responsibility refers to company’s responsibilities to take advantage of its long-term positive impacts and reduce its negative impacts on society. This paper is in the form of a report of its current approach to managing environmental drivers in their market. The impact of five key environmental drivers, namely, the effects of urbanization, generation of energy, transportation, agriculture and tourism, on the organization is also incorporated in this report. Report: Tata Steel Europe Ltd is a multinational company making steel, which is headquartered in London, UK, and is a completely owned subsidiary of Tata Steel. It is the second biggest steel-maker in Europe. “Today, it is one of the largest steel producers in the world with over 80,000 employees across five continents” (The World of Steel n.d.: 11). The company functions two main integrated steel plants in the UK, at south Wales, Scunthorpe Port and Talbot, north Lincolnshire, and one in IJmuiden, the Netherlands. Started in 1907, and at present the company is among the top ten global steel manufacturing companies with a crude steel capability of over 28 million tonnes per annum. The company is also engaged in activities relating to discovering, prospecting, and mining iron ore, ferro alloys, coal and other minerals; manufacturing and designing plants and equipment for oil, steel and natural energy, gas and power, mining, ports, railways, aviation, and agricultural implements and space industries. “The manufacturing facilities at Tata Steel Europe comprise of manufacturing hubs” (The journey towards enduring sustainability 2013: 16). It is at the present, one of the worlds most geographically-diversified producers of steel, with operations in 26 nations and a commercial presence in over 50 nations. The Tata Steel Group Company, in FY 2012- 2013 with a turnover of US$ 24.82 billion, has over 81,000 workers across five continents and is a Fortune 500 business. “By carefully identifying and articulating the drivers of social performance and measuring and managing the broad effects of both good and bad performance on the corporation’s various stakeholders, managers can make a significant contribution both to their company and to society” (Epstein & Roy 2001: 585). Vision of the Tata Steel is to be the world’s steel business benchmark through the excellence of its citizens, its modern approach and overall conduct. Supporting this vision is a performance culture dedicated to aspiration targets, protection and social responsibility, constant improvement, transparency and openness. Tata Steel’s larger manufacture facilities comprise those in India, Singapore, the Netherlands, China, Thailand, the UK and Australia. Operating companies in the Group incorporates Tata Steel Limited (India), NatSteel, Tata Steel Europe Limited (previously Corus) and Tata Steel Thailand (previously Millennium Steel). The Tata Group was established on the principle that its activities must always advantage society. At present, Tata Steel is guided by the same long-term vision. The company functions in a method that is safe for citizens and attentive to the atmosphere. Business Segments of the Company: Bearings Segment: Produces ball bearings, magneto bearings, twofold row self-aligning bearings, tapered roller bearings for two wheelers and clutch release bearings, water pumps, fans, etc. “Ferro Alloys and Minerals” (Tata Steel 2013: 1) Segment: Functions chrome mines and has units for making ferro manganese and ferro chrome. It is one of the major players in the global ferro chrome market. Agrico Segment: Tata Agrico is the first structured producer in India regarding hand apparatus and implements for relevance in agriculture. “Tata Growth Shop (TGS)”(TGS Inside Out 2011: 1): It has designed, manufactured, developed, commissioned and erected thousands of tones of tools ranging from overhead cranes to high ranking precision parts, containing a rocket launch pad for the research organization. Tubes Segment: Being the major steel tube producer with the largest market share, it aims to reinforce its market presence by modernizing and expanding its precision commercial tube manufacturing ability. Wire Segment: A pioneer in the production of steel wires, it manufactures uncoated and coated wires, branded as Tata Wiron. Wide product range of Tata Steel, incorporated steelmaking facilities and widespread processing and distribution networks, in combination with a consumer focused approach generate opportunities for development across all sector of the markets. By focusing particularly on the most demanding industries, the group is aiming to raise the sales of differentiated products in portfolio by over 50% by 2016. In Europe, Tata Steel makes and sells a wide-range of high-quality steel products, consisting of long and flat products, in addition to construction products, for example, systems components and developed particularly for the building envelope marketplace. The Market of Tata Steel: Small number of global players with worldwide footprints. Highly steel intensive division. Compound supply chain. Significant expansion forecast: Fuelled by product extraction, manufacture demand and industrial development in developing markets. Demand development by 31% among 2009 and 2012 (developed markets) Commodity cost boom leading to surge in mining tools demand in emerging economies. “Tubes employ 1,800 people at its locations throughout the UK and the Netherlands.” (Tata Steel Europe creates a simpler, more flexible messaging infrastructure 2011: 1) Customer challenges: Increasing business consolidation. Rapid development of emerging markets. Rise of Chinese players into the global market Competitive advantage of Tata Steel: Offering different products. Global reach. Functional knowledge and expertise. Downstream ability. “As a leading global steelmaker, tata Steel combines metallurgical expertise with rail-industry knowledge and a collaborative ethos, enabling it to manufacture finished steel products that directly address customer needs” (Rail Technical Guide 2013: 3). To completely support the requirements of its clients, Tata Steel has allied its marketing and sales teams with targeted steel end-use markets, making eleven market segment teams. The business is the only one in Europe to have organized itself in this consumer- driven method, with both supply and production chain activities organized so as to react to the market sectors’ needs. “The management of Tata Steel was introduced by DuPont to its proven process in contractor safety management” (A Safety Culture Beyond Employee Protection -A Proven System for Effective Contractor Safety 2009: 3). The market sector teams proposes individual consumers with a single dedicated account team to guarantee they have best possible access to the company’s broad product range and scientific, logistical and research and development resources. To draw attention to this new approach and its resulting advantages to consumers, Tata Steel considers that the motto ‘jointly create the difference’ summarizes the company’s dedication to building jointly advantageous partnerships that generate real benefits, for example, enhancing consumers’ product performance, processing competence, light weighting capacity or sustainability performance. PEST analysis: The PEST analysis of TATA STEEL contains the “political, economic, socio-culture and technical” (PEST Analysis 2011: 1) features from which the industry is influenced. Political aspect: Political aspect includes the government interference in the specific sector. Though Tata steel made the different acquisitions for the development of the industry and for the cause of the growth of the company, they took an excessive amount of risk by investing in various countries. Economical factor: Due to the subprime disaster in the US, European markets faced the troubles of the recession, and this led to negative impact on the Tata Steel as the United Kingdom, Netherlands and Germany are the major markets for the Corus Company. Steel industry might get affected due to the recurring economic condition because a lot of industries related with appliances, automobiles, and construction are dependent on the steel business and if firms face any type of recession in the economy, Tata steel also might also face the losses. The production processes of steel are totally reliant on the energy market that can influence the Tata Steel in the economic terms. Socio-culture factor: Tata steel got awarded for the obligations in the business ethical behavior and increasing the lives of the workers and their families. For this reason Tata steel got the “Golden Peacock Global Award (Golden Peacock Global Award for Excellence in Corporate Governance n.d.: 1) Tata Steel also concentrates to make the social environment better. They continually made the developments in the economic wellbeing, health issues and education services given to the nation. Hospital on wheels is the essential novelty of the Tata’s while Tata is also dependable for the habitation in slum regions in urban developing cities. Technological factor: Technological aspects must be always in the nature of altering as per the new conditions. Tata steel started the system of e-portal in the middle of the year 2000. This technology is also identified as the metal junction that is useful for not only the company but also the whole industry. With the help of this tool e-market has become the major market for the selling and purchasing of the steel in the globe. Tata is engaged with the purpose of the energy conservation systems where Tata is conducting studies to decrease the consumption of energy in the production method. PORTER’S FIVE FORCES: Porter five forces analysis is a framework for industry analysis and business strategy development. Porters five forces include “the character of the rivalry, the threat of new entrants, the threat of substitute products or services, the bargaining power of suppliers and the bargaining power of buyers.” (Williams Champion & Hall 2011: 117) Threat of New Entrants: “Threat to new entrants” in every industry sector is a most important challenge (Hall Hodgson & Sun 2009: 7). On the other hand, in steel industry entry barrier is high therefore threat of new entrants are comparatively low based on factors such as economies of scale, huge capital investment, product differentiations and government policies. “It is in a company’s interest to create barriers to prevent its competitors to enter to market.” (Porter’s 5 Force’s Analysis 2008: 2) Steel industry needs vast capital investment to set up an included steel production service plant that is presently close to about US$ one billion as per Steel producers Association’s recent estimate. This deters several new entrants coming in this field. By raising their capacity of production to about 50mtpa and large variety of goods, they could lessen their cost, therefore lead to extra profit, sustainability and these circumstances are adverse to any new entrants. Raw material is a main issue with corruption connected to land acquisition and mining allocation, it creates not easy to new entrants to come in Tata steel. Different regulatory clearance and environmental issues also create large barriers to new entrants. Competitive Rivalry: The steel industry is really international in terms of competition with huge steel manufacturing countries like China considerably affecting global costs through their aggressive exports. In the case of Tata steel industry, branding is not much general, therefore slight differentiation exists between their competing products. Tata Steel faces rigid rivalry with their competitors for example “POSCO, ArcelorMittal” etc. (Elliot Agarwal Assis Stall Managers & Beifus 2013: 32) Bargaining Power of Suppliers: Tata Steel enjoys better autonomy in resources supply as they have mines for the supply of raw material. Tata Steel’s completely integrated supply chain methods ensure a rich supply of resource for their plants. On the other hand, other steel manufactures, which do not have their own mines, must rely on suppliers of raw material. On international level, raw material market is controlled by the three mining giants they are “BHP Billiton and Rio Tinto” ( The World Iron Market 2005: 1). Other steel manufactures, which do not have their own mining operations, have to buy raw material at market prevailing cost and pass that hike to customers that make them less competitive. Threat of Substitute Products: New materials might pose threat to feasibility of steel. Plastics, Aluminium and other combined materials are being measured as substitutes in areas like aviation, auto etc. Concrete is an extra substitute material, which can pose threat to utilization of steel in energy and infrastructure sectors. The development led by aviation sector, automobile sector, infrastructure sector and consumable goods will maintain demand up for steel, therefore more expansion for Tata Steel. Bargaining Power of Buyers: “Bargaining power of buyers” ( Peng 2012: 41) is restricted due to their fragmentation. Big players of the main steel customers in sectors, for example auto, energy, aviation etc might squeeze better amount of bargain. Conversely these bulk customers might offer enduring procurement to the Tata Steel, and therefore, make it more revenue generated. Diagram of porter’s five forces: (Lima 2006: 1) SWOT analysis: SWOT analysis of the firm gives knowledge about the opportunities and challenges faced by Tata Steel Group in present and future. Strengths: Tata Steel has obtained huge mineral reserves that are important to their operations. These reserves could cater their raw material demand for coming decades. Tata Steel’s mineral reserves are situated at different strategic geographical locations for example India, Canada, Australia, Mozambique, Ivory Coast and Oman etc. Tata Steel has highly credible, capable and reliable top management. Tata Steel utilizes Tata Group’s strong retail and distribution network. The group’s demand for steel is extremely high due to their attendance in the majority of the sectors. Tata Steel has controlled risk management method in place through the method known as “Enterprise Risk Management (ERM)” (A Structured Approach to Enterprise Risk Management and The Requirements of ISO 31000 2010: 2). ERM’s basic function is to recognize risk at all levels and mitigate them. Tata Steel mitigates splendidly the cyclicality condition that happens in steel industry occasionally by its wide range of product portfolio. Weakness: Tata Steel’s considerable debt burden of about US$9.8 billion is the main weakness. Their debt equity ratio is presently about 1.77 that reflects firm finances are met by arrears owing to Corus acquisition. Its European dealing has a high contact to spot cost and a high operational gearing therefore making very high risk of cost volatility. The company relies for several raw materials on global suppliers that expose their productivity in case of steep increase in their prices. Opportunities: Presently, the rising economies are undergoing vast infrastructural growths that need important quantity of steel in every sector. In India the range for growth of its steel products are huge in all sectors, which Tata Steel could exploit very well with its increased manufacture capacity. “Tata Steel gave an opportunity to other pipe manufacturers like Zenith Tubes, Gujarat Steel Tubes and the like to capture sizable market at lower prices” (Management Accounting- Strategic Management 2011: 10). By obtaining Corus and developing its own R&D measures, Tata Steel moved towards improved product portfolio and product differentiations that gave them new opportunities over their competitors. Threats: In the present scenario, the main threat for Tata Steel is to keep the Co2 emission standards when it starts its processes in Europe. The organizational threats of the company include mainly “overdependence on limited number of buyers” (Herschel 2009: 15). The unexpected abroad exposure along with a probable financial slowdown is the main challenge faced by Tata Steel under the current conditions. Conclusion: Tata Steel considers staying responsive to future opportunities and never letting go of its core principles. This is the attitude that has underpinned its development over the years and thus it remains as the company’s important driving power. The plan adopted by Tata Steel throughout last five years to turn into an international player has paid off. They raised their production and revenue by six fold by capacity acquisition or expansion. They achieved raw material self-support of about 50% by year 2010, and in 2012, they aimed to enhance it to about 60% by more savings in mines gaining. Over the last five years, Tata Steel has become a worldwide player from a local steel creator, with presently manufacturing operations in about 26 countries and international presence in about 50 markets. Furthermore, it is also evident that the five key environmental factors of urbanization, agriculture, generation of energy, transportation and tourism, significantly impact the organization and further accelerate their progress, as the firm constantly strives to make best use of available resources, thereby promoting the development of the economy. Reference List The World Steel. Repro, pp.1-48. Retrieved November 19, 2013, from 2013. The journey towards enduring sustainability. Quadrum Ltd., pp.1-222. Retrieved November 19, 2013, from Epstein, M. J. & Roy, M. J. 2001. Sustainability in Action: Identifying and Measuring the Key Performance Drivers. Long Range Planning, Vol. 34 pp.585-603. Retrieved November 19, 2013, from 2013. Tata Steel. Power Bull Stocks, pp.1-6. 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