TATA STEEL

Presented by: group 4

Antriksh Miya

Ipshit Matta

Arjun Khera

Rupesh Jain

Surabhi Chakrabarty

Vaibhav Maheshwari

Tanmay aggarwal

TATA STEEL• Largest private sector steel marketer in India.

• Crude steel production capacity of 6.8 million tonnes per annum.

• The company has been successful in maintaining its dominant position among key segments in the Indian steel market

• It has also es-tablished a significant presence in the international markets through both tie-ups with customers and mergers and acquisitions

• The company is aiming at enhancing its domestic steel capacity to about 30 million tonnes per annum by 2015.

• In May 2002, the company launched the Vision Architecture 2007 (Tisco News, 2002);

Vision architecture 2007

Source: Tisco News, 2002

TATA STEEL: KEY FEATURES• TATA STEEL, the flagship company of the Tata

group, has several awards and recognitions to its credit.

• They are one of the lowest cost producers of steel.

• The world and the global benchmark in corporate social responsibility activities.

• They have a strong distribution network in the Southeast Asia and with the introduc-tion of cold rolled steel, they are now the leading sup- plier to the Indian auto industry.

• On February 27, 2003, ‘TATA STEEL’ launched the world’s first branded cold rolled steel (CRS) called ‘TATA Steelium’

PRIOR TO LAUNCH

• Branding will give rise to a customized product in terms of value

Performance

Pricing

• Help to meet our customers’ needs better.

 Branding will go a long way in meeting the challenge of gaining a sustainable competitive edge.

• It will add value to the product and help in highlighting it in the otherwise fragmented market for cold-rolled steel.

• It will not only help in product identification, but will also boost

the element of brand recall, thereby creating a niche”

 

• Prior to brand launch, TATA STEEL brand management team had to acquire a very clear understanding and a deep insight into what TATA Steelium should repre sent for the retail customers and how to differentiate the brand well from the competitive products.

• The branding exercise has taken into account customers’ behavior and expectations, feedback from potential intermediaries.

Factors that play an important role prior to brand launch are described

below.

Technology selection:

• Firstly identifying the segment that one needs to lay stress upon(high end CRS users.)

• TATA STEEL had the capacity to produce hot rolled coils (HRC) but not the facility to add further value by rolling it in room temperature that produces CRS

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Importance for Retail Market of CRS and Branding

• Volume-wise, the Indian CRS market was almost equally divided between small (say less than 60 tonne a month) and large (say above 60 tonne to 1,500 tonne a month) customers.

• TATA STEEL wanted to become the leader in CRS in domestic market

Customer Opinion

• Prior to the launch of TATA Steelium, customers faced a lot of problems and made a lot of compromises.

• Solving customer’s problems was seen as a golden opportunity to make a strong hold in the market by TATA Steel.

Three Major Problems faced by Customers

1) Customer was not satisfied with the quality of CRS being procured by the competitors.

The CRS could be used for simple applications but was not fit for bending, forming and artistic uses.

Superior quality materials available from import were beyond the reach of small customers.

Interaction with Manufacturers

2) The small customers had limited access to manufacturers of CRS.

They moved from one retailer to another to fulfil their requirement.

These retailers did not entertain quality complaints from customers because of lack of support at the backend.

Accordingly, the need for transacting with a professionalorganization instead of market-based retailers was strongly felt by the small customers.

• Third, identity and quality of CRS purchased from the retailers were often doubtful. Other manufacturers apparently sold identical CRS of different specifications including inferior grades at lucrative price and terms.

• Manufacturer’s name and other details were usually marked only on the packaging materials that could be easily manipulated by a dishonest retailer.

• Customers hated the power of dishonest retailers more than anything else.

Post the Launch of TATA Steel

• “Steelium has changed our life; it has increased our productivity; it has made the life of our workers easy and has taken away many of our agonies.”

• “Our business was not going in the right direction and then we got the opportunity to change it with TATA CR.”

Business Environment:The Chain and the Problems

Manufacturer

Broker

Wholesaler

Retailer

Critical Action Areas• Creation of an environment where the company,

distributors/dealers, and customers had trust on one other.

• People with widely different background (experience, education, age, communication skills, etc.) are involved in selling, it was an enormous task to bring a minimum level of professionalism and consistency among the dealing persons.

• Improvement of service (level and quality) was long overdue in the retail sales of CRS.

• Service improvement had to continue and service excellence over competition had to be persistent. This is because it was understood that similar technology can be installed by other firms later and differentiation in the physical product may not be a determinant of the purchase decisions in the future.

Brand Engineering• Product

The company introduced choice of grade and size in a manner that best influenced the customers’ perception of value.

• Packaging

Technology specially selected for packaging. TATA STEEL tags and unique blue seals on the packaging which help identify the source of the material and other information.

• Pricing

Tata Steel decided to charge premium price over competition. To ensure the perceived value , the brand management team regularly monitors competitors’ prices, market dynamics, and components like quality premium, service premium etc.

• Communication

Being the world’s first branded cold rolled steel, it could draw sufficient media attention for quite some time. The brand features and brand achievements appear in the news time and again.

B2B brand was not through brand preference or brand image advertising, but by communicating its product and service strategy to a large number of small customers of cold rolled steel.

Relationship management through distributors as well as account managers.

• Salespersons

It ensures that all Steelium distributors have a minimum number of salespersons according to their business volume and they are knowledgeable about the product, systems, procedures, and customers.

• Channel Design

Based on the consumption pattern and strategic business volume, the company decided to go for selective distribution in each major location.

Web enabled distributers for better information exchange and service response

Distributor Selection

• TATA Steel distributors and dealers had high market reputation, premium business location, and superior capabilities to serve the customers

• Distributor selection was done through a three-step process.

• screening was done based on the combination of criterias like investment capabilities, interest in exclusive dealership, registration with statutory authorities, and market reputation

• In next step screening was again done and the compensatory decision rules were usually applied. The criteria considered in this phase are business experience, turnover, knowledge, and quantum of sales

• Finally, in level-3, nominated senior officers of the company took decision about distributor selection based on their ratings and scores in level-1 and level-2.

Distributor’s Capability Improvement• TATA STEEL had taken multi-pronged actions for improving their channel

members’ ability to serve customers better while improving the profitability of the entire channel, these action were as follows

Improvement of supply chain efficiency and effectiveness through the theory of constraints (TOC)

According to the proposed scheme, the decision making authority for determining shipments of Steelium from TATA STEEL to a distributor would transfer from the distributor to TATA STEEL

TATA STEEL would monitor the flow of its product through the distributors’ warehouses, and decide what to ship to the distributor, and when to ship it.

Human resource development initiatives for employees working with channel partners

TATA STEEL organized training on sales management for all employees of distributors through reputed business schools or other corporate training organizations.

The company’s HRD department provides full support for problem solving (if any) and consultancy to distributors free of cost

Implementation of key account management (KAM) process among

distributors:Each distributor was required to identify its key customers according to profitability/ relationship criteria and submit a valid account development plan

each distributor was also required to establish a customer-friendly procedure for handling quality complaints and order management

an initiative was also taken to recognize the key employees of distributor’s customer through a special programme called ‘Vijeta’

Based on the purchase quantum and cooperation during a given period, some of these identified employees got recognition and reward from distributors/TATA STEEL.

Evaluation of Distributors• TATA STEEL measures the performance of Steelium distributors

periodically, using scorecards prepared on performance and capability parameters.

• The dimensions of performance scorecard include:

1. Sales compliance

2. Quality of feedback

3. Inventory management

4. Market receivable management

5. Customer visits

6. Margin monitor

The dimensions of capability scorecard include:

1.Market understanding

2.Quality of service centre

3.Service capability

4.Quality of HRM practices

5. Implementation of quality management systems

6.Work on special projects

.

Value proposition

• Excellent functional quality:

Steelium slogan ‘Help Shape your Dreams’ indicating superior shaping and forming application properties, formed the core of a highly-differentiated value proposition.

• Dream customer service through highly capable distribution:

It was ensured that the distributors and their dealers in each location provided adequate services and satisfactory buying experiences to every customer.

• Customer intimacy:

The goal of the company is to give each customer a sense of dealing with a professional organization indicative of ‘Tata’ brand by having competent and concerned intermediary employees and installing effective systems of dealing with customers.

Result

A large number of customers today ask for TATA Steelium despite the premium it commands over generic CRS available from competition.

Distributors Characteristics

• Satisfying the distributor’s needs, providing them with immediate solution and there maximum satisfaction has been a key objective for Tata Steelium.

• The distributors see the brand as a means for increased profitability and growth.

Building relationship with distributors• The distributors are willing to invest more in infrastructure to

grow with TATA Steelium.

• TATA has also come up with setting atleast one service centre at every location.

• The distributors are also willing to spend Rs. 70-10 per tonne of steel sold on brand promotion activities.

• Distributors have improved their quality management systems and are going for ISO certifications

• The distributors have shifted to planned sales approach, and have developed micro plans for key customers.

Dealer Characterstics

• Tata recognizes that dealers capabilities are yet to be developed completely.

• Dealers have to ensure wide distribution to small furniture manufacturers.

• Dealers often have to finance the customer and sell the goods on revolving credit.

• Many of the outlets are though multibrand, but now exclusive steelium dealers have been established.

• Applications for being exclusive dealers increases day by day.

Challenges ahead• It’s a highly competitive segment, with players like SAIL,

Essar Steel, Bhushan Steels etc.

• Maintaining sales growth has become a challenge.

• Increased supply means inability to charge premium .

• The two elements: superior steel quality and extraordinary customer services.

• Quality attributes : Surface finish , packaging, labelling and distributors capability

• Focus has shifted to organized customers and higher growth segments

Customers• Tata Steelium takes care that service quality to customers is

unmatched and provides single point solution to all the customer needs and problems.

• Customers consider several factors like yield, availability, cost, product etc. while buying the product.

• Customers are now expecting :

• Service centre facility in terms of customized blanks and sizes

• Better technical support

• Demand for new and better quality products by small customers.

• Fixed price and long term contracts.

Porter Five Forces Model

Intensity of rivalry - Increasing

• The number of firms willing to serve retail customers are increasing

• Difficulty in entering into agreements with manufacturers in terns of prices due to increased competition

• Fear that economic woes would lead to shrinkage in demand

• Decrease in international price levels will force them to focus more on domestic markets

• Demand for customized products in terms of shape, sizes and quality.

Threat of new entrants

• Global and experienced players like POSCO and Mittal Steel have already announced their entry into the domestic market.

• Customers may shift more reputed brands such as Essar steels and Jindal steels.

• These new and big entrants have large funds to setup wide distribution network in a short period of time.

THREAT FOR SUBSTITUTES: MIXED

Thinner hot rolled steel tends to replace CRS.

Fibre glass, aluminium, plastics, etc., are becoming suitable substitutes.

Steelium serves the complex use decreasing threat of substitutes.

12 % of total sales coming from unorganised sector.

Threat from Buyers: Medium to High

Small unorganised retail buyers.

Small customers often do not have much knowledge about market dynamics.

Some small customers are now able to import CRS.

Threat from Suppliers: Weak

TATA STEEL is having its own hot rolled coil

Production.

Vertical integration in SCM weakens this threat.

There are three strong forces:Increasing competitionThreat of new entrants.Increasing exports from

buyers.

SWOT ANALYSISSTRENGTH

High QualityHigh awareness and

preferenceGood Channel partners

Good pre-sales, and after-sales

Association with TATA

WEAKNESSLimited availability leads

to customer switching.Logistical disadvantages.

Brand logo vanishes in further processing.

OPPURTUNITIESContract production can

increase sales volume.Considerable room for

expansion.Scope of Innovative

marketing.

THREATSHigh competition from

players like Essar and Jindal.In case CRS imports, Steelium

will have to compete solely on the

strength of intangibles

• TATA Steel has the best customers in its portfolio.

• Had a perception of reliable and collaborative.

• Economical prices.

• Increasing demand-supply gap is hampering prospective.

SWOT ANALYSIS

WAY FORWARD

Concerns• Price-sensitive customers are not

going for a repeat purchase. Should the brand premium be reduced?

• protect the distributors’ and dealers from competitors.

• Threat of the MNCs entering Indian market.

Strategy• Brand premium should not be

reduced.

• Look for new dealers and functional innovations.

• Continuous improvement for competitive advantage.

THANK YOU