Unit 32 Business Strategy Assignment - Tata Steel

Introduction

This Unit 32 Business Strategy Assignment Tata Steel provides effective insight on the process of strategic planning and evaluation. The company taken in consideration here is ‘Tata Steel UK’. The first segment comprises of the definition of the terms like vision, mission, value, core competencies, goals and objectives. This is also discussed with regards to Tata Steel as an organisation. The key problems associated with the process of strategic planning has been analysed and the different types of planning techniques has been discussed. The second segment deals with the internal and external analysis of the environment of Tata Steel UK. The concept of stakeholder analysis is defined and analysed in brief and the importance of the same with relation to the chosen company has been discussed. It also includes the compilation of a new strategy for Tata Steel UK.

Task 1

1.1 In your report, briefly define the following terms; visions, missions, objectives, goals, core competencies.  Assess how these notions inform strategic planning for a business

The concept of vision aims to paint a picture of the organisations and behaviour’ direction and the future. A well formulated vision statement helps in the succinct communication of an uplifting philosophy that helps in energizing the stakeholders of the organisation to face challenges by embracing it in order to accomplish the various goals and objectives. (Virtue Ventures, 2016). Tata Steel believes that diversity helps in enriching any large organisations and does enhance its overall collective capabilities. The primary vision of Tata Steel is to become the top global steel industry benchmark for the purpose of creating value and corporate citizenship and they aim to achieve it through their people, their offers, their innovation and their conduct. (Tata Steel, 2016)

The mission statement can be referred to as the heart of the enterprise. It helps in determining the central purpose and the basic principles of the organisation that helps in guiding the actions of the employees and the management. A mission statement also aims at the embodiment of the organisational values of the enterprise. Tata Steel’s primary mission is to attain sustainable development through all its operations by laying equal emphasis on economic, environment and social considerations. A core competency can be defined as a concept within the management theory that aims at the combination of multiple resources in the most harmonious way possible and also comprises of the skills and attributes that distinguishes a firm from others.

The core competencies of Tata Steel include that of persistent teamwork, enhanced leadership, development of leading edge solutions in Technology and various processes. One of the biggest competencies of Tata Steel is its employees that work consistently in achieving the pre determined vision and mission by acting with pride, passion and pace. Objectives and goals can be interchangeable. They can be defined as the particular end towards which actions and efforts can either be coordinated or directed. Objectives and goals aim in determining the ‘what’ and not the ‘how’ and in nature are smaller than the mission. The goals and objectives of Tata Steel is to become the obvious supplier of choice by ensuring that premium and commendable products and services are delivered and value is effectively created for all the customers. One of their main objectives is to provide an efficient workplace for the various employees to work in and also by caring for communities by maintaining high ethical standards.             

1.2. Analyse factors that Tata Steel UK and yourself, as the strategic manager would need to consider planning and formulating strategic plans. In this part of your report, consider some of the key issues and problems there are with respect to strategic planning. Include at least three factors associated with Strategic Planning.

Strategic Planning takes into consideration all internally and externally focused information during the implementation or enforcement of a decision aiming to maximise certainty, minimise risk and look to optimise results and outcomes. Strategic Planning allows one to determine what is significant in the organisation and facilitates the understanding of every organisational element starting from business systems to human resources and achieves the contribution towards every individual’s, teams’ and organisation’s success. (Simerson, 2011). Three factors associated with Strategic Planning include:

• Leadership: The Marketing management has to ensure that the right people are appointed to be leaders handling the pertinent job roles. For ex- intuitive perceptive thinkers are the most efficient in problems that are elusive or difficult to define like specifying company mission, etc. Systematic receptive thinkers are most efficient in handling problems related to quantitative problems such as inventory control. The roles must not be mismatched and one of the problems in strategic planning occurs when the roles are not clearly defined and the intuitive and systematic thinkers are seen with role reversal. (Steiner, 2010)
• Flexibility: A strategic plan determined should be flexible in nature. This means that it should adapt to the environment by adapting to the changing marketing conditions. A rigid strategic plan always ends up short as it hardly can incorporate the elements related to the changing market scenario.
• Execution: It is one thing to have a plan and other to execute it properly. The decisions incorporated within the plan should be firm and the management should learn to stand by it. Having a plan just for the sake of it never helps. Thus a plan formulated should be executed properly as organisations sometimes fail to execute even a well formulated plan. (Forbes, 2011)            

The Internal Analysis of Tata Steel can be affected by conducting a SWOT Analysis on the Organisation. The resultant strengths and weaknesses give an indication of the internal environment. The weaknesses of Tata Steel basically deal with the operational efficiency and slightly backward on the technological front. This means that Tata Steel during the compilation of the strategic plans is not implementing or determining techniques and tactics with the consideration of modern day technology. A well crafted competitor analysis will help in understanding the updated technology that needs to be incorporated in the operational activities in order to transform the weaknesses into strengths. (Mbaskool, 2016)

The External Analysis of Tata Steel can be determined by the conduction of Porter’s 5 Forces. This reveals that Tata Steel has to take into account the strategies and trends of other competitors in the market. Competition is stiff and hence accumulating all the data of the operations of all the competitors can be tough. The main competitors include BHP Billiton, CVRD and Rio Tinto.

1.3. Define and evaluate the appropriateness of the effectiveness of any two strategic planning techniques used in strategic planning

Two Strategic Planning Techniques used in Strategic Planning include:

BCG Matrix: is basically a (2*2 matrix) that has been developed by the Boston Consulting Growth, USA. It is basically a two dimensional analysis on the effective management of Strategic Business Units. The Matrix denotes that businesses can be categorised as high or low based on their growth rate and market share. BCG Matrix comprises of four cells. The Horizontal Axis denotes market share (relative) and the vertical axis denotes market growth rate. Resources allocated to the business units are in accordance with their position and situation on the grid. The four cells are called stars, cash cows, question marks and dogs. (MSG, 2016)

• Stars: Stars represents those strategic business units that have a substantial or large market share with a fast growing industry. Due to the rapid growth of the market, stars are associated with huge investments in order to maintain the lead. The net cash flow in this category is usually modest.
• Cash Cows: This represents the category of those business units that do have a large market share but in a matured or a slow growing industry. The investment required here is little and cash is generated for the utilisation for the purpose of investment in other business units. These SBU’s are core of the business as they are the corporation’s key source of cash.
• Question Marks: This category represents those SBUs that have a considerably low market share but feature in a high growing industry. They generally require huge amounts of cash in order in order to enjoy increasing market share. Question marks generally are associated with new goods and services in the market which are prospective in nature. 
• Dogs: This category represent those businesses that exhibit low market shares in low growth markets. Neither do they require huge amounts of cash nor is much cash generated. Low market share ensures that these units face cost disadvantages. These firms can only gain market share at the expense of a rival firm.

Stakeholder Mapping: Stakeholder Management is a planning technique that all successful organisations implement in order to derive favours and support from others. Various steps are involved in the process of stakeholder mapping. (Freeman, 2010)

• Step 1: The first step deals with effectively analysing who the stakeholders are and clearly identifying them. Stakeholders may include shareholders, customers, prospects, suppliers, alliance partners, etc.
• Step 2: The second step deals with prioritising the stakeholders. Prioritisation happens on the following four categories.

1. High Power, Interested people: These are the stakeholders that one must always engage with and aim at satisfying completely by incorporating high efforts.
2. High Power, Less Interested People: Enough work must be put in order to satisfy these people but not too much that it bores them or makes them monotonous.
3. Low Power, Interested people: These people should be kept adequately informed and must be interacted with on a frequent basis to let them know that no major issues are rising, etc.
4. Low Power, Less Interested People: These people should be periodically monitored but not loaded with extra interaction.

• Step 3: The third step deals with understanding the key stakeholders and how they are likely to engage or react to the project. There are several questions that help in understanding who the key stakeholders are. A few questions include “What motivates them most of all? What is their current opinion of your work? , What information do they want from you?” etc.

The best way of answering these questions is by talking to the stakeholders as they are likely to be quite open about their views and opinions. The understanding should be incorporated on the stakeholder map so that one can understand which stakeholders are going to be blockers and which ones are going to be supporters. Colour Coding enhances this phenomenon by showing the supporters in green, blockers in red, etc.

Task 2

2.1 /2.2 In your document, analyse the strategic positioning of Tata Steel UK by carrying out an internal audit using SWOT.  As a development of your analysis, carry out an external audit using PESTEL as this will support your proposal.

Internal Audit: SWOT ANALYSIS

Strengths Tata Steel is one of the lowest cost producers of Steel in the world. The TATA Group is highly experienced in doing global acquisitions Indication of a very stable balance sheet which indicates a low debt to equity ratio. (Dash, 2010) They have an excellent integration with Corus	Weaknesses Corus continues to outmatch Tata Steel on the basis of volume of production Tata Steel’s inclination of selling of the plant in Northern England in order to survive. Technologically equipped but not always up to date. Operational efficiency not at the standards of international leaders
Opportunities Struggle of the UK Steel Industry with a flood of cheap steel being pumped from China. The tarnished image of CSN after the failure of 2002 negotiations Chance to transform and reform UK’s current status in the steel industry Adoption of newer technologies like The Corex Process, The Hismelt process, etc.	Threats Possibility of the loss of 12,000 jobs if Tata Steel decides to sell its UK business. (Farrell, 2016) Rising prevalence of the Brazilian competitor CSN Considerable threat posed by the Russian competitor Severstal High Prices associated with the process of coking coal.

External Audit: (PEST ANALYSIS)

• Political: Political factors indicate the degree to which the Government intervenes in the UK Economy. They include areas like tax policies, labour laws, trade restrictions, tariffs, etc. Tata Steel has to resort within principles laid down by the Government Policies of the UK.  State aid clearance was secured for the payment of further compensation to energy intensive industries (EII) that includes steel for renewable policy costs. The anti dumping policy has to be resorted to by Tata Steel. One of Tata Steel’s projects that have used UK Steel is that of the Network rail. (Gov.uk, 2016)
• Economical: The marketers of Tata Steel need to consider the state of the UK Economy in both short and long term perspectives. The various factors that need to be looked into include that of interest rates, analysis of the level of inflation employment level per capita, Gross Domestic Profit (GDP) per capita including the long term prospects of the economy, etc.
• Social Factors: This category will include factors like health and social care issues of the people, employment, etc. Tata Steel should ensure that their operational procedure, especially with regards to their own mines should not create any health hazards for the people residing in the locality or in UK at large. The anti dumping regulations should be adhered to and resorted within. An example can be taken of Tata Steel planning to sell its UK Plant. This will result in around 12,000 employees losing their job. Thus Tata Steel should ensure suitable replacement for them as this would constitute the social ethics. (Kitco, 2016)
• Technological Factors: This involves the functioning of the operations of the company by using the most updated form of processes and technologies. Traditional technologies include that of basic arc, induction furnace, and electric furnace. These are outdated in nature. These include Acirc, Finex, Corex Process, Hismelt Process.

2.3. Define the term stakeholder in your proposal and then assess the importance of stakeholder analysis with respect to Tata Steel UK and its formulation of a new strategy.

A stakeholder can be defined as a person, group or organisation that has an interest or concern in an organisation. They can affect or be affected by the objectives and policies of the organisation. Examples of stakeholders can be customers, suppliers, creditors, directors, etc. (Businessdictionary, 2016). Stakeholder Analysis is a planning technique that all successful organisations implement in order to derive favours and support from others. Various steps are involved in the process of stakeholder mapping. (Freeman, 2010)

• Step 1: The first step deals with effectively analysing who the stakeholders are and clearly identifying them. Stakeholders may include shareholders, customers, prospects, suppliers, alliance partners, etc.
• Step 2: The second step deals with prioritising the stakeholders. Prioritisation happens on the following four categories.

1. High Power, Interested people: These are the stakeholders that one must always engage with and aim at satisfying completely by incorporating high efforts.
2. High Power, Less Interested People: Enough work must be put in order to satisfy these people but not too much that it bores them or makes them monotonous.
3. Low Power, Interested people: These people should be kept adequately informed and must be interacted with on a frequent basis to let them know that no major issues are rising, etc.
4. Low Power, Less Interested People: These people should be periodically monitored but not loaded with extra interaction.

Step 3: The third step deals with understanding the key stakeholders and how they are likely to engage or react to the project. There are several questions that help in understanding who the key stakeholders are. A few questions include “What motivates them most of all? What is their current opinion of your work? , What information do they want from you?” etc.

The best way of answering these questions is by talking to the stakeholders as they are likely to be quite open about their views and opinions. The understanding should be incorporated on the stakeholder map so that one can understand which stakeholders are going to be blockers and which ones are going to be supporters. Colour Coding enhances this phenomenon by showing the supporters in green, blockers in red, etc. The importance of stakeholder analysis with regards to Tata Steel includes:

• Health & Safety: The objective of Tata Steel is to be the Global Steel industry leader by making sure that the health and well being of the employees and onsite contractors are always maintained.
• Responding to needs of the consumers: Tata Steel realises the importance and value of the creation of mutually beneficial and cordial relationship with their customers present throughout their supply chain.
• Involvement in the community: Tata Steel has always been actively involved with local communities around the world. Conducting an effective stakeholder analysis will help them take the form of financial support, sponsorship, provision of materials, etc.

Employer of Choice: Tata Steel’s employment philosophy is based on the realisation or recognition of the fact that people are the primary source of their competitiveness and they forever strive to provide a workplace fostering equal opportunities and team work. (Tata Steel, 2010)

2.4 Create and present a new strategy for Tata Steel UK. Look at any positioning that we think is the most suitable for Tata Steel taking into consideration, taking into consideration the answers in: 2.1, 2.2, and 2.3.

The new strategy will be based on the outlook of fostering the business management opportunities of Tata Steel in the UK.  Tata Steel is currently looking to sell of its establishment in the UK owing to the import of cheap steel from China. The current situation of Tata Steel can be defined by analysing the internal and external analysis of the company. The main aim is to convert the weaknesses of the SWOT into strengths and the threats into opportunities. The new strategy will involve the focus on production. This is because Corus out-produces Tata Steel by quite a big margin when it comes to production. Even if producing more than Corus is not possible, emphasis should be laid on narrowing the margin of difference. The en strategy will also focus on the adoption of new technologies like the Corus Process and the Hismelt Process. The new strategy will focus on various aspects in the following ways.

The Positioning Strategy should be based on pricing. The main competitors for Tata Steel in the UK market right now are the suppliers of steel into the UK from China. It is not easily probable for Tata Steel to provide steel to UK at the low price as China is offering, hence one of the positioning strategies can be price. People and businesses might perceive the comparatively higher price of Tata Steel and relate it to better quality as the steel from China is coming in at massively diminished price per tonne.

Customer Focus

• Focus the sales and marketing approach on the more demanding clients of UK.
• Focus on the investing done on different type of projects in order to improve the product mix and service offering
• Transformation of the internal supply chain in order to improve the levels of customer service.

Innovation

• Adopt a strategy of differentiation by aiming at the maximisation of differentiated products.
• Adoption of modern day technologies like The Corus Process, The Hismelt Process, Acirc, Finex, etc.
• Conduct repeated market research to better understand the needs and demands of the customers.

Sustainability

• Aim to act responsibly towards the environment by the virtue of sustainable use of raw materials, enhanced conservation of water and energy, reduction of emission levels, etc.
• Focus on the development of breakthrough technologies for dealing with the complexities of carbon emission.
• Promote sport and support economic and environmental education through financial support.

People:

• Ensure safety of the employees by providing them the most safe and efficient workplace for them. A lot of workers work in plants who might be subjected to accidents every now and then.
• Develop the employees with the help of employee engagement and training & development programmes.
• Always look to foster team work.

Tata Steel is looking to sell its plant off in the UK. The new strategy will counter such a thought or decision. It has to be understood that the steel industry of UK is struggling at this point of time. Cheap Steel is being infused from China. Tata Steel should look to capitalise on this situation and look to achieve competitive advantage. One of the primary strategies is to infuse faith among the UK people that the Steel Industry is there to last. Tata Steel should look to merge up with or completely acquire comparatively smaller steel organisations which tend to be struggling in the UK market now. This will mean that they now have access to a wider amount of customer base also backed up with pertinent number of workers as a result of the acquisition.

Task 3

3.1 Suggest two alternatives strategies and analyse the appropriateness of these strategies.  In this section of your proposal, analyses two of the following; market entry, organic growth, growth by merger, acquisition, strategic alliances,  substantive growth, limited growth and retrenchment strategies.   

The first strategy that should be adopted by Tata Steel is through strategic acquisition of smaller steel companies in UK. The UK Steel Industry is struggling and has been for quite some time now. Tata had earlier acquired Corus in 2007. There are chances of Tata Steel facing loss in UK if it continues to exist independently as steel imports into Europe from third world countries and cheap import of steel per tonne from China might result in Tata Steel’s demise. That is why it should look to acquire or merge with companies like Celsa Steel UK, Bourne Steel, etc. This will help them concentrate on different sectors and will also give them access to a larger customer base and higher market demand opportunities.

Another alternative strategy can be the decision to initiate strategic alliances with the different Chinese exporters who are contributing to present scenario of the steel industry of UK by providing steel at a very cheap rate. Steel imports into the UK from the rest of EU on an estimated average cost 897 Euros a tonne while China exported steel into the UK at 583 Euros a tonne. Moreover, in 2013, UK imported around 303,000 tonnes of steel which went up to 687,000 tonnes in 2014. Thus the UK Steel sector is massively under the control of these Chinese Suppliers. (Bowler, 2016). Thus Tata Steel, based on its reputation should look to make strategic alliance with some of these suppliers. They should seek allegiance to companies like Hebei Iron & Steel, Baosteel Group, Jiangsu Shagang, Shandong Iron and Steel Group, etc. This is the analysis of two alternative strategies that Tata Steel should adopt.

3.2 In your proposal, inform the board of your selection in 2.4 and provide justification for this selection. Please note, “do nothing” is not an option at this stage.

The Positioning Strategy selected is based on pricing. As mentioned earlier, UK is highly dependent on China for its steel consumption as China suppliers are offering steel to the UK at the rate of 583 Euros per tonne in comparison to the rest of EU supplying UK at the rate of 897 Euros per tonne. (Bowler, 2016) It might not be possible for Tata Steel to stoop down to such low prices. Hence, they positioning should be based on the pricing aspect because the difference in rate of the steel from China is massive, therefore organisations and people may question the quality that is being provided. For such organisations and people, they might perceive the comparatively higher cost of Tata Steel as more reliable and high in quality firstly because of its realistic and expected cost and secondly because of its existing reputation.

The rest of the strategy is based on the core values that Tata Steel always aims to incorporate. They are customer satisfaction focus, innovation, sustainability and people. (Tata Steel, 2016). Customer satisfaction is what Tata Steel focuses on to yield profits. They recognise the value of serving customers efficiently in order to enjoy competitive advantage. Hence in this strategy as well, a lot of emphasis will be laid on focusing on customers. They also aim to be the global leaders in Steel sector through leading innovation. This is why the second segment of this strategy is based on the adoption of the latest and modern day technologies. One of the aspects that this strategy is focused on is sustainable development. This is in order to keep a clean environment. Tata Steel has engaged in a lot of CSR activities making their contributions to the society and environment. So this strategy will also look to provide to achieve development but in a sustainable way. Emphasis will be laid on adhering to the anti dumping policy of UK and reduction in carbon emission levels.

Finally Tata Steel realises the significance of their workforce. It is the workers and employees that have taken this company to unparallel heights. Thus the formulation of the strategy does include the development and satisfaction of their employees. This includes providing an efficient workplace for the employees, frequent training and development programmes, employee engagement schemes, etc

Conclusion

This Unit 32 Business Strategy Assignment Tata Steel depicts the strategic objectives and intentions of the globally renowned Steel Company Tata Steel. The vision of the company is to become the global leader in Steel. The various problems that arise in the planning procedure include that of flexibility of the plan, wrongful leadership and the ill execution of a well formulated plan.  The two strategic planning techniques taken into consideration here is the BCG Matrix and Stakeholder Mapping. The second segment depicts the internal and external analysis of environment of Tata Steel UK. The internal analysis has been carried out by considering the strengths and weaknesses of a SWOT Analysis and the external analysis has been carried out by the conduction of a PEST Analysis.

References

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Farrell, S. (2016). Tata Steel UK: David Cameron urges caution on jobs deal. [Online], Available at: https://www.theguardian.com/business/2016/may/25/tata-steel-uk-david-cameron-urges-caution-on-jobs-deal, Accessed on: 20^th June, 2016.
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Freeman, R. (2010). Strategic Management: A Stakeholder Approach. Cambridge University Press.
Gov.uk. (2016). Government action to support the steel industry. [Online], Available at: https://www.gov.uk/government/news/government-action-to-support-the-steel-industry, Accessed on: 20^th June, 2016.
Kitco. (2016). Tata Steel UK: David Cameron urges caution on jobs deal. [Online], Available at: http://www.kitco.com/news/2016-05-25/Tata-Steel-UK-David-Cameron-urges-caution-on-jobs-deal.html, Accessed on: 20^th June, 2016.
Mbaskool. (2016). Tata Steel SWOT Analysis, USP & Competitors. [Online], Available at: http://www.mbaskool.com/brandguide/industrial-products-and-chemicals/4303-tata-steel.html, Accessed on: 20^th June, 2016

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