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Tata Material Marketing Strategy

Keywords: tata metal swot, tata metallic five forces

In this report, Tata Steel Group (Tata Metallic) has been chosen as an company to investigate the tactical changes made over past five years including tactical positioning, strategic capacity, SWOT and individuals behind these changes.

Tata Steel currently is a significant player in global metallic industry. In 12 months 2005 (Body 1), Tata Material procedure was mainly centered in Indian subcontinent and revenue generated was close to US$ 5. 0 billion only. However their effort to develop their operations internationally proven very successful over previous five years. From being a mere local steel producer, they changed themselves into a major global player in metallic producers (Number 2). They have been aggressively involved with capacity extension by acquisitions and organic and natural growth. Business Standard once commented that "Tata Metal relocated into its next goal to be the world's second greatest metallic company by 2012 by making use of its most expensive bet well worth US$ 12. 9 billion on Corus Group".

Last 2 yrs has been very hard period to global metal industry because of worldwide downturn. The global crude material production for yr 2009 was 1220. 0 mpta (million tonne per annum) as reported by World Metallic Relationship lower by 8% against that of 2008. The decline popular was credited to deterioration in market experienced by key steel end users. Desk 1, shows the growth/decline in terms of crude metal production for the top ten steel producing nations.

However, by acquisition of Corus and other belongings, Tata Material now ranks among world's top ten (Desk 2) largest metallic manufacturers with current steel development capacity of 32. 0 mpta. After five years of its expansion programme, Tata Steel is currently world's second most geographically varied steel suppliers.

Mission Statement

In its quest statement Tata Metallic expresses that while credibility and integrity will be the essential component of a solid and stable business, profitability provides the main spark for monetary activity. Founded way back in 1907, Tata Metal stress on the primary ideology in its vision statement by making focus on their people, distributor of choice, ground breaking approach and their conduct. Tata Steel's vision statement is currently became a tangible asset, which provide right route to their managers and employees. Tata Steel has highly skilled employee asset of 81, 000 pass on over five continents. Tata Material stress on creating differential value for their customer with help of ongoing improvement in their business process and product technology.

Value Chain Analysis

The value string is an economical tool used to look for the strategic resources available to an organization. Basic process of the worthiness Chain Analysis is the fact the foundation for a competitive benefit of a firm lays primarily in the application of the pack of valuable resources at the firm's disposal. To convert a short-run competitive gain into a sustained competitive gain requires that these resources are heterogeneous in nature and not correctly mobile (Barney, 1991, p105-106; Peteraf, 1993, p180). Effectively, this translates into valuable resources that are neither correctly imitable nor substitutable without great effort (Barney, 1991, p117). Tata Metal has few major proper capabilities that happen to be valuable, unique and non-substitutable.

Tata Steel's Proper Capabilities

Tata Steel's tactical capabilities are offered in Desk 3, below.

Table 3

 

Resources

Competences

Threshold Capabilities

Threshold Resources

Threshold Competences

Steel production plant life at various geographical locations.

Production and Sales management.

Offices and structures at various physical locations.

All other standard management skills.

Sufficient supply of recycleables for steel making.

Sophisticated IT skills.

Sufficient cashflow.

Safety management.

Pool of skilled employees.

Excellent customer service.

IT System in place.

Efficient management framework.

Logistic, freight and shipment facilities.

Effective employee welfare system.

Capabilities for Competitive Advantage

Unique Resources

Unique Competences

Varieties of products which caters to market sectors like Infrastructures, Cars, Aviation, Energy etc.

Very competent sales team with high negotiation skills which create market for his or her products.

Tata and Corus brands.

Excellent use from it systems for extremely effective used in sales process.

Highly ready management team.

Continuous growing and upgrading services to provide different industry levels.

Online portal Material junction for customers.

Highly skilled professionals and directors who improve and support the company success.

A century experience in metallic making.

Integrated dealer and buyer management.

Strong financial backing from group.

Lowest cost metal company in world.

Very strong existence in India which is a huge market because of their products.

Enterprise Risk Management (ERM) to remove risk associated with various operations.

First mover gain through ground breaking products & operations.

Continuous Improvement Process (CIP).

Excellent R&D for leading edge technology and products.

Operational efficiency and excellent quality control.

Many proprietary products such as Tata Tiscon etc.

Long-term romance with customers and suppliers.

Porters Five Forces Analysis

Tata Metallic has registered two times digit growth in past couple of years except their European business. Through the use of Porters' Five Causes analysis primary, we can evaluate the Tata Steel's market competitiveness and its current and future strategy towards intense competition encountered at various fronts.

Threat of New Entrants: Low

Threat to new entrants in any industry sector is a major challenge. Yet, in steel industry access hurdle is high hence threat of new entrants are relatively low predicated on factors such as huge capital investment, economies of level, government policies and product differentiations.

Steel industry requires huge capital investment to create an integrated steel production facility plant which is currently near US$ one billion/mtpa according to Metal Manufacturers Association's recent estimate. This deters any new entrants getting into in this field. By increasing their creation capacity to 50mtpa and wide variety of products they can lower their cost, hence more profit, sustainability and these conditions are unfavourable to any new entrants.

Raw materials is a significant issue with problem related to mining allocation and land acquisition, it makes difficult to new entrants to come in this field. Various regulatory clearance and environmental issues also create big barriers to new entrants. Access barriers in terms of product differentiation are very low in steel industry.

Competitive Rivalry: High

The material industry is truly global in terms of competition with large metal producing countries like China significantly influencing global prices through their intense exports. In metal industry, branding is not very common hence little differentiation is out there between their fighting products. Tata Steel faces stiff competition with their rivals such as Arcelor Mittal, POSCO etc.

Bargaining Ability of Suppliers: High

Tata Steel looks forward to increased autonomy in recycleables supply as they own mines for natural material supply. Tata Steel's fully included supply string system keeps considerable supply of raw material for his or her plant life. However, other metallic producers, who don't possess their own mines, have to rely on raw materials suppliers. On global level natural materials market is dominated by the three mining giants BHP Billiton, CVRD and Rio Tinto. They make nutrient market as oligopolistic and supply two-thirds of the refined flat iron ore to material producers hence demand very high bargaining electric power. Other steel producers, who don't possess their own mining procedures, must buy natural material at market prevailing price and move that hike to consumers making them less competitive.

Threat of Swap Products: Low

New materials may create threat to viability of steel. Aluminium, plastics and other amalgamated materials are being considered as substitute in industries like vehicle, aviation etc. Concrete is another replacement material which may pose threat to make use of of material in infrastructure and energy areas. Some of the replacement materials such as aluminium itself are very costly, hence doesn't create very big hazard against steel providers. However the development led by infrastructure sector, vehicle sector, aviation sector and consumable goods could keep demand up for metallic hence more expansion for Tata Metallic.

Bargaining Electricity of Clients: Average

Bargaining electricity of potential buyers is not a lot of due to their fragmentation. Big players of the major metal consumers in industries such as automobile, aviation, energy etc may squeeze greater amount of great buy. On the other hand these bulk consumers may offer long-term procurement offer to the company hence more earnings made. However, small and retail individuals are scattered, though they ingest significant amount of metallic production, don't have the same bargaining capabilities as in case there is big players.

Tata Steel Group SWOT Analysis

SWOT research of any firm provides understanding of the problems and opportunities encountered by Tata Steel group in future. They can be complete below.

(S)trengths

  • Tata Metallic has acquired great mineral reserves which is a key to their operations. These reserves can serve their raw material demand for next three decades. Tata Steel's nutrient reserves are located at various proper physical locations such as India, Australia, Canada, Mozambique, Oman, Ivory Seacoast etc.
  • Tata Metal has very suitable, credible and reliable top management. Their successful global extension plan in previous five years proved this. Tata Steel has successfully received and integrated Corus Europe, NatSteel Indonesia and Millennium Metal Thailand.
  • Tata Metal uses tailor made state of fine art integrated information management system because of their routine operation. Their advanced R&D potential has improved further by acquiring Corus which is globally renowned for its product innovation.
  • Tata Steel uses Tata Group's strong distribution and retail network. Its Group's demand for steel is very high due to their presence in most of the sectors.
  • Currently Tata Metallic produces 32 mpta of material and by completion of DPCL project its total capacity will reach to 50mpta which will make it second biggest material producer in world.
  • Tata Material has structured risk management process set up in their procedure known as Business Risk Management (ERM). ERM's key function is to recognize risk at every level and mitigate the same.
  • Tata Metal mitigates very well the cyclicality situation which occurs in metal industry occasionally by its broad spectrum of its product portfolio.
  • Tata Steel extension plan has consolidated its position worldwide and by diversifying its profile and market is in process to become pioneer in metal industry.
  • Tata Metallic has very strong brand value for its products. It has strengthened further by acquiring Corus which itself is a large brand. Their successful integration with Corus was a benchmark in corporate record.

(W)eaknesses

  • Tata Steel's considerable debt obligations of US$9. 8 billion is a significant weakness. Their personal debt equity ratio is currently 1. 77, which reflects company money are found by debt credited to Corus acquisition.
  • Its Western european business (Corus) has a high exposure to place price and a high functional gearing thus creating very high risk of price volatility.
  • Tata Steel depends for some fresh material on international suppliers, which expose their success in case of steep go up in their prices.
  • Tata Steel's Indian procedure is very much indeed hampered by insufficient infrastructure, lack in power supply, lesser output, bureaucratic hurdle in export etc.
  • Additional levies and tax imposed by municipality put them in less revenue making situation. The subsidies provided by some countries (China etc) can make their product less competitive in cost hence reduce their demand.

(O)pportunities

  • Currently the appearing economies are considering huge infrastructural trends, which require significant amount of metallic in all areas. In India the opportunity for growth of its metallic products are substantial in every sector, which Tata Metal can exploit very well with its increased production capacity. According to World Steel Connection estimate, the consumption of steel will be doubled in next 2 decades.
  • By Acquiring Corus and improving its R&D activities, Tata Metal moved towards a much better product differentiation and improved product stock portfolio which provide them new opportunities over its rivals.
  • Their geographical locations with involved operations and online marketing strategy are a key factor in capturing market share and increasing their financial performance. They can implement Corus's advanced automation technology in their own crops to improve productivity, economies of scale, cost reduction, increased outcome and functional efficiency to attain better performance.
  • Following recent tough economy, various resources (minerals, vegetation facilities etc. ) can be found at an extremely low price because of the financial difficulty. Tata Metal, with strong support from its mother or father group can secure future products of raw materials for metallic making.
  • With increased material creation capacity of 50 mpta, they'll be the second most significant steel maker after Arcelor Mittal & most geographically varied company with wide variety of product combination.

(T)hreats

  • Steel Industry is major source of greenhouse gas emission, which makes them very prone against many litigation and legislation in future.
  • The raw materials used in steel development are non-renewable and their source is depleting extremely fast.
  • Due to rising cost of metallic products, the finish users want for substitutes of steel; which may be a major risk to Tata Steel's business.
  • Intense competition among international metallic player and cheap metal available from China are another major danger to Tata Steel's performance.
  • Tata Steel's huge credit debt is one of major risks against them. The rising interest increase their debt burden.

Future Outlook

Following two years of most severe global monetary downturn, the world appears to be regaining some economical stability. There exists moderate expansion from developed world; however rising economies are registering very strong and sustainable development with robust domestic market.

Before downturn, the material demand was very strong with over 6% development during last ten years; this is mainly driven by solid growth in BRICS nations (Brazil, Russia, India, China and South Africa), South East Asia and Middle East. By 2025, according to forecast BRICS countries will have 46% of global human population and will consume 65% of the global development and can have three one fourth of the global GDP.

The raw materials for metallic making are going at record due to high demand, higher freight rates and monopoly of three big natural resources companies. The effects of the above mentioned factors are shown in higher metal price and decrease in profit percentage of metal companies. However Tata Steel's strategy used over previous five years for securing long-term contract for raw materials source or acquiring new fresh materials mines at various physical location has helped them to keep their prices competitive and making complete operation as viable. Tata Steel's integration with Corus has completed successfully and producing better consequence than expected. Tata Steel's tactical effort of capacity development and work to secure recycleables source at various physical locations yielding positive results.

Tata Steel's upstream integration process ambition will lead them to achieve 100% self-sufficiency in India and around 50% self-sufficiency in European countries in next 5 years. Tata Metal is investing closely in R&D to get breakthrough systems and develop services and services that decrease the development cost and environmental impact over the product lifecycle. To improve its processes, top priority is directed at energy conservation techniques; in technology break-through such as Ultra Low Carbon Steel making and in other progressive projects where in fact the Group has proprietary technology.

Conclusions

"It had been the best of times, it was the most severe of times. . . ", this famous offer meant too much to Tata Steel. Five year back, just after starting with their ambitious global enlargement plan, they were struck by worldwide financial tsunami which analyzed their resilience. Their well created and turned out business strategy has shown resilience and potential to stand up to the unprecedented highs and lows of another that often comes unheralded. They took proactive effort across all geographies to minimise aftermath distress of tough economy. Their strategy commenced to pay off towards the last quarter of time 2009, when they rebounded to revenue following the turmoil of recession. Undeterred by the economical turbulence, the business continued to put focus on working methods in health, safeness and commercial citizenship, with specific initiatives used each one of these areas.

In addition, a continuing focus on engineering solutions for customers is helping it maintain its position of a product pioneer. Tata Material believes in staying aware of future opportunities while never letting go of its center values. This is the school of thought that has underpinned its progress over the years and one which remains its key driving a vehicle force.

The strategy used by Tata Metal during last five years to become a global player paid. They increased their income and development by six collapse by capacity expansion or acquisition. They achieved uncooked material self-sufficiency of 50% by season 2010 and by season 2012 they try to increase it to 60% by more investment in mines acquisition. In previous five years Tata Metallic became a global player from an area steel designer with presently global existence in 50 marketplaces and manufacturing businesses in 26 countries.

Appendix A: Guide List

Tata Material Group - Annual Report 2009-10

G Johnson, K Scholes & R Whittington (2008), Exploring Corporate Strategy, 8th Release Text & Conditions, Harlow: Financial Times Prentice Hall

http://www. tatasteel. com

Barney, J. 1991. Firm Resources and sustained competitive benefit, Journal of Management, 17 (1): pp99-120.

Barney, J. 1995. Looking inside for competitive advantage, Academy of Management Professional. 9(4). Pp49-61.

Peteraf, M. A. (1993). The cornerstones of competitive benefit: A resource-based view, Strategic Management Journal, 14 (3), 179-191

Porter, M. E. (2008). The five competitive pushes that condition strategy, Harvard Business Review, January, 78-93.

Porter, M. E. (1996). What is Strategy? Harvard Business Review, Nov-Dec, 61-78.

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