James Rix & Ricky Bennett

Set up in 1907 as Tata Iron and Steel Company

Under ownership of Tata Group employs 300,000 of which 83,000 are involved in Tata Steel. (28%)

Indian Government liberealised the economy in the1990’s and prompted a rethink of Strategic Management for Tata.

Tata in 1991

Strategic Management: The management of an organisations purpose to ensure the enablers of the present are balanced with those of the future.

Tata Steel’s Purpose:

1. To add economic value Tata steel’s product

2. Improve the quality of life for it’s employees and communities the company serves

1. Narrowing down the business units◦ Merged, acquired business units.

2.Identified that there is too much risk in certain business areas,

3. Expanding into industries which are relevant to Tata Steel to add value to the product.

4. Tata Business Excellence Model (TBEM)

Porter’s Value Chain

Logical incrementalism

Georgiou (2002):

“A system is not mentally synthesized gradually.

Consciousness conceives instant universal compositions and hence an emergent system

adapts to suit the consequences.”

Tata Steel Tata Steel StrategyStrategy

•EUROPEAN STRATEGY•Worst hit - restructuring

• SOUTH-EAST ASIAN STRATEGY•Badly hit – but with strong growth signs

• INDIA STRATEGY•Small Growth

Different local variations amounting to one strategic

goal.

•In the past Tata Steel had employee benefits that consisted of

•This has led to their furnaces never being disrupted due to employee unrest.

•Techniques to improve operational effectiveness used by Tata Steel: Kanban, Kaizen, TQM, Quality Circles

1912 - 8 hour work days, when at the time 12 was the legal limit

1920 Retirement funds, 40 years before they became mandatory in India

1920 Pay with leave, 20 years before it became mandatory in Indian law

“Such differences in operational effectiveness are an important source of differences in profitability among competitors as they relate to cost positions and levels of differentiation.” (Porter 1996)

“Competition based on operational effectiveness alone is mutually destructive...”(Porter 1996)

“Managers have a misconception that focusing entirely on Operational Effectiveness will eliminate tradeoffs. However if there are no tradeoffs, there is no sustainable advantage, with companies sprinting to stay top constantly” Porter (1996)

Trade offsTrade offs

A strategic position is not sustainable unless there are tradeoffs with other positions. They occur when activities are incompatible.

Combining activitiesCombining activities

“Strategic fit among many activities is fundamental not only to competitive advantage but also to the sustainability of that advantage. The collective is much more sustainable than the individual.” (Porter 1996)

Porter’s Strategic Porter’s Strategic ContinuityContinuity

“A company must continually improve its operational effectiveness and actively try to shift the productivity frontier; at the same time,

there needs to be ongoing effort to extend its uniqueness while strengthening the fit among its activities. Strategic continuity, in fact should make an organisation’s continual improvement more

effective.” (Porter 1996)

Tata Steel’s Purpose:

1. To add economic value Tata steel’s product

2. Improve the quality of life for it’s employees and communities the company serves

Books◦ Strategic management

Journals

◦ Georgiou, I (2003), The idea of emergent property, The Journal of Operational Research Society, Vol 54. No. 3, p239-247

◦ Porter, M (1996), What is strategy, Harvard Business Review [Available online] www.harvard.edu

◦ Winter, S (2000), The Satisficing Principle in Capability Learning, Strategic Management Journal, Vol 21, No. 10/11, p981-996