1. Porter’s Value Chain – Tata SteelThe Tata Steel Group has a balanced global presence in over 50 developed European and fast growing Asian countries, with manufacturing operations in 26 countries and various ongoing projects in different parts of the world. Like any manufacturing industry, steel has its own value chain. For the sake of simplicity, let us divide it into two - primary steel-making and finishing. Tata Steel's strategy is based on breaking up this value chain and putting each part where it is the most cost-effective. Thus, primary steel is produced in India, where there are large deposits of iron ore, while, other Asian markets like Thailand, Vietnam, Shanghai, etc., are now a key focus for Tata Steel and are better addressed by taking the semi-finished steel to these countries for finishing and sales.

Demand in countries like the US, Japan and South Korea has flattened and growth will take place only at 1.5 per cent to 2 per cent - for replenishment of consumption. Developing countries like China and India will show robust growth in the future. Tata Steel believes globalization is a method by which it can put the right part of the value chain in its right place in the world and link it up properly - finishing facilities in places where customers exist, and primary manufacturing facilities in places where manufacturing is competitive.

1.1 Supporting Activities

1.1.1 Firm Infrastructure

Tata Steel is headquartered in Mumbai, Maharashtra, India and has its marketing headquarters at the Tata Centre in Kolkata, West Bengal. It has a presence in around 50 countries with manufacturing operations in 26 countries including: India, Malaysia, Vietnam, Thailand, UAE, Ivory Coast, Mozambique, South Africa, Australia, United Kingdom, The Netherlands, France and Canada.

Primarily steel is produced in India, where there are large deposits of iron ore. Earlier, some portion of their semi-finished steel was sold in the market, but now it is looking at downstream products, as the margins are higher (it is not selling semi finished steel in the markets anymore but using all of semi steel to make finished steel).

The company harnesses its deposits of iron ore in Noamundi, Joda and Katamati in the states of Jharkhand and Odisha and has coal mines at Jharia & West Bokaro.

Tata Steel has implemented established a network of 20 stockyards across India, which serve as service hub in each consumption cluster.

Tata Steel has set a target of achieving an annual production capacity of 100 million tons by 2015; it is planning for capacity expansion to be balanced roughly 50:50 between green-field developments and acquisitions. Overseas acquisitions have already added an addi-tional 21.4 million tonnes of capacity, including Corus (18.2 million tonnes), NatSteel (2 mil-lion tonnes) and Millennium Steel (1.2 million tonnes). Tata plans to add another 29 million tonnes of capacity through acquisitions. Major greenfield steel plant expansion projects

planned by Tata Steel include: a 6 million tonne per annum capacity plant in Kalinganagar, Odisha, India; an expansion of the Jamshedpur plant in Jharkhand, India from 6.8 to 10 mil-lion tonnes per annum; a 5 million tonne per annum capacity plant in Chhattisgarh, India; a 3 million tonne per annum capacity plant in Iran; a 2.4 million tonne per annum capacity plant in Bangladesh; a 10.5 million tonne per annum capacity plant in Vietnam (feasibility studies are underway); and a 6 million tonne per annum capacity plant in Haveri, Karnataka.

1.1.2 Human Resource Management

Tata Steel is equal opportunity, merit-oriented, gender-neutral employer, remuneration and career progression is based entirely on responsibility and performance.

Tata Steel is well-known for its employee-friendly human resource policies. Tata Steel has set up three residential colonies for its employees at Trijanga, Sansailo and Gobarghati. These colonies provide all-weather motorable roads, electricity, and clean running water from taps, a well laid-out drainage system, community halls, and recreation facilities for their children, places for religious ceremonies.

The top management of the company was rudely awakened when, in the early nineties, it went overseas to raise US $ 100 million from international investors. Potential investors acknowledged Tata Steel as a good company but were unhappy that it was grossly overstaffed. Its employee strength was well beyond international norms. This prompted the top management to begin to seriously address the issue of headcount in the company. Based on various initiatives taken, the company set a record for reducing manpower while maintaining the human touch. Its Employee Separation Scheme (ESS) has become a benchmark in terms of its humane approach. The manpower was progressively brought down to below 40,000.

1.1.3 Technology Development / Process Improvement

Tata Steel had to indigenously develop the ‘stamp charging technology’ through painstaking laboratory tests and pilot plant trials over a ten-year period. After successful pilot plant trials, one of the coke ovens was converted to stamp charging. The new technology reduced the use of imported coal for coke to a large extent. This has given the company significant sustainable cost advantage because Indian coal is relatively low-cost and the company has an unlimited supply of medium coking coal.

The company’s own iron ore contained high phosphorous, which is not conducive to producing high quality steels, a process was developed to manufacture low phosphorous steel through in-house technology.

Tata Steel had earlier used large quantities of liquid fuel from one of the petroleum refineries. Significant process changes enabled the company to totally stop the use of liquid fuels. With a focus on saving energy costs, the company set up an integrated system

The management decided to explore the possibility of using the blue dust as raw material for its sinter plant. This change resulted in uniform mining operations.

By benchmarking with the best plants in the world such as Nippon Steel (Japan), CST (Brazil), and Posco (South Korea), the production of the sinter plant was increased by 60 per cent which was as good as having one sinter plant free.

Tata Steel uses extensive balance card methodology to benchmark its processes. The Managing Director looks after the balance scorecard. Through this process, the Managing Director puts himself through the credibility test by including himself in the accountability process. The top management’s checklist for driving company change included the following:

Lead the change process and take personal ownership; the responsibility cannot be delegated.

Be the role model and the first to change; personal involvement and investment of time is key to success.

Create endless opportunities for two-way communication within the company.

Create a sense of urgency (not panic); embrace change even when it does not appear necessary.

Set up a small hand-picked group to drive change in the organization; train and empower them.

Set key result areas (KRAs) carefully; include the top management in it.

In 1996, the company systematically embarked on the quest for excellence for the organization as a whole through the JRD Tata Quality Value (JRDQV) process which leads to JRDQV Total Quality Award. Managed by the Tata Quality Management Services (TQMS), Pune, for Tata Group companies, the process of qualifying for the JRDQV Award requires the company to successfully pass through exhaustive tests conducted by trained external assessors over a three-month period. Adapted from the stringent Malcolm Baldrige criteria for business excellence, the Tata Business Excellence Model (TBEM) covers almost every aspect of a corporation including visionary leadership, focus on the future, focus on results, organizational agility, customer-driven excellence, valuing employees and partners, management by fact, managing innovation, systems perspective, and public responsibility.

1.1.4 Procurement

Tata Steel has coal mines at Jharia & West Bokaro, in the state of Jharkhand, located within 200km from Jamshedpur. This coal is used for coking processes. Tata Steel's iron ore units are located in Noamundi, Joda and Katamati in the states of Jharkhand and Odisha. The Steel Company's iron ore units produce various grades of high quality iron ore including rich blue dust ore. It has other raw material units in Canada, Mozambique, Ivory Coast and South Africa.

1.2 Primary Activities

Inbound logistics

Iron ore and coal is sourced from its own mines; uses Indian coal and does not rely much on imported coal for coking purposes; eliminated its dependency on liquid petroleum products, rather used gases produced from blast furnace, coke ovens was used as fuel.

Operations

Tata Steel’s Indian operations draw its greatest strength as one of the lowest cost producers of steel in the world. Tata Steel has a strong retail and distribution network in India and SE Asia. Tata is a major supplier to the Indian auto industry and the demand for value added steel products is growing in this market and thus, it has shifted its focus down the value chain by changing semi finished steel products to finished steel products. JIT approach used to fulfil customer orders.

In the past, lowest price was the basis for obtaining an order. This was further reinforced by the customer’s aggressive approach of treating steel as a commodity product. Thus, supplier-customer relationships, far from being cooperative, were largely transactional. In mid-2001, the company was restructured along the profit centre concept with a view to making it more responsive from its old Customer account manager concept. Two distinct profit centres, viz., flat products and long products were created, each headed by a Vice President (VP), who was responsible for both manufacturing and sales.

The company made some headway in setting up service centres across the country to deliver products to its customers using the principles of JIT (just-in-time) manufacturing. It was not uncommon for the customers to squeeze Tata Steel on price frequently demanding a 3 to 5 per cent drop in price each year. With the resulting suspicion on the part of both, it was clear that neither was gaining from the relationship. Customers clearly began to have many options. Tata Steel launched launched customer value management (CVM) initiative for business markets and retail value management (RVM) for its retail markets.

CVM enables the company to craft competitive value chains. These customers were selected using a variety of criteria. This has enabled it to successfully come out of the commodity trap that it earlier found itself in.

Tata Steel went for a home-grown process to implement RVM by adopting the TOP methodology (that the company earlier perfected to achieve drastic improvement of its plant operations). Through RVM, it ‘cleaned up’ the working of the retail channels.

Outbound logistics

Tata Steel has implemented various strategies, including established a network of 20 stockyards across India, which serves as a hub in the respective consumption cluster. Consumption clusters accounting for 80 per cent of the demand and at an average lead distance of 1700 km are served by outbound logistics.

In SE Asian operations, Tata Steel had implemented Vehicle Tracking system (VTS) way back in 2002. In line with the Company’s endeavour to improve customer service, approx 1600 Global Positioning System (GPS) mounted vehicles were been deployed by transport partners of material movement across India. This is the largest implementation of GPS enabled fleet in the steel industry.

Marketing & Sales

Tata Steel operates in B2B, B2SME and B2C markets, thus, different vehicles to capture the needs of customers have been deployed. IT and SAP platforms are extensively used and extended sales force of channel partners acting as learning posts that help in creating differentiated value propositions. Tata Steel has made inroads on branding of steel and thus has products and services offerings for its customers, distributed through its channel network. It has developed product and market strategies to have a leadership edge on the Automotive and Construction sectors.

Service

Tata Steel has worldwide network of service centres which help in fulfilling customer requirements.