TATA Steel’s Case Study Report
Business Assignment
Student number: 100045940
Word count:
Date: 05/12/2013
TATA Steel is an Indian international steel manufacturing company which established in 1907 (Tatasteeleurope, 2013). It is belonged to Tata Group, a conglomerate, giant company that encompasses seven business sectors, which are engineering, materials, energy, communications and information technology, consumer products, services and chemicals, and Tata Steel is one of the major companies of the group. It was the top 12th largest steel producing company in the world in 2012 (World Steel Association, 2012), with an annual crude steel production of 23.8 million tones. It has a giant international network that operates over 26 countries and has over 81,000 employees. In August, the company has a new record on iron production, an average of 84,500 tonnes of iron per week (BBC News, 2013). In order to analyze the success of Tata Steel, a framework of analysis, Porter’s Five Forces, is used to identify the key environmental drivers on the organization. Porter’s Five Forces consists of five elements, which are threat of new entrants, threat of substitute products, bargaining power of buyer, bargaining power of suppliers and intensity of competitive rivalry. This framework of analysis evaluates the impact of the drivers on the organization and the pros and cons of those drivers that bring to the organization. Managerial recommendations are also offered on their responses to the market based on this analysis.
As one of the largest steel producing company among the world, one of the key drivers of TATA Steel is its giant and stable fundamental structure. TATA Steel has an overall revenue of US$26.13 billion in financial year 2011-12 (Tata Steel Europe, 2013). This allows TATA Steel has sufficient money as reserve, giving them strong financial benefits than other rivals. And they can invest large amount of money on research and development so as to improve their quality of product and service. In Porter’s Five Forces, this key driver allows Tata steel outstand from others in this market, and makes new entrants hard to compete with it. For instance, Tata Steel has set up an Advanced Armour Technology Centre in UK this year while the UK government was also participated in the plan. It is the largest in Europe and the first in UK. This plan not only helps the company to expand its business in UK, but also enhance its popularity. Richard Brooks, a ministry officer and the programme delivery director of the Defence Science & Technology Laboratory (DSTL), has mentioned "This company got the right potential, they're willing to invest, they're willing to try risky things, they're willing to innovate - they're a small, agile organization" (BBC, 2013). On the other hand, Tata steel is considered to be the lowest operating cost of manufacturing steel company in the world. As they have their own iron ore resources in India, they can supply raw materials to the factories by themselves. This reduces the costs on collecting resources and relieves the pressure suffered from the increasing iron prices. Steel industry not only requires high investment, large scale of operation and specialization, but also the ability to afford huge debts. Tata Steel Group acquired 1.16 billion of net debt in the financial year 2011-2012. High revenue business often brings high risks, new entrants need to conquer difficulties come from both the external and internal environment. Therefore, it is not easy for company to start its business in this market and Tata Steel faces small threats from new entrants. Managers need to find ways to maintain their vantage in the future. For instance, they need to keep their internal system regulated so that resources can allocate efficiently and cost of sales can be reduced. This can lead to reduce in debts and increase in profits.
Steel is assuredly one of the most important materials in the world and hard to be
