Busriness Stategy Assignment - Tata Steel

Business Strategy Assignment - Tata Steel

Busriness Stategy Assignment - Tata Steel

Program

Diploma in Business

Unit Number and Title

Unit 32 Busiess Strstegy 

QFC Level

Level 5

Introduction

Busriness Stategy segment is based on the definitions of vision, mission, core competencies, goals and objectives and the subsequent determination of the same by Tata Steel UK has been effectively highlighted. The second segment effectively carries out an internal audit and an external audit with the help of a SWOT analysis and a PESTEL Analysis. In the final segment, the discussion of strategies has been highlighted. A new business strategy has been formulated by keeping in consideration the four primary elements of Tata Steel which are innovation, customers, sustainability and people. Alternative strategies on retrenchment and significance of strategic alliance also have been effectively analysed.

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 primary objective of a vision is to carve a direction for the future. Vision can be referred to as the entity or situation that an organisation wants to reach by effectively formulating pertinent goals and objectives and devising methods to achieve them in a competitive and dignified way.  The vision of Tata Steel is to eventually become the global leader in the Steel Industry. Their objective is to create value and corporate citizenship and they intend to do so by focusing on their conduct, innovation, offers and through their people. The mission statement can be referred to as the objective setting of several short term goals on route to achieving the primary vision of the company. It helps in determining the central purpose and helps in guiding and assisting the employees and the management at large. Tata Steel provides a lot of significance in going about its operations in a very sustainable way considering mainly the environment and the social well being of mankind.

A core competency can be defined as a set of skills, attributes and specialities that segregates an organisation from another. It helps in the combination of multiple resources together for the attainment of the prescribed goals and objectives.  Tata Steel too has a set of competencies deeply rooted in their system. The more renowned ones include technology, teamwork and leadership of the highest order. According to Tata Steel, one of their biggest competencies can be related to their workforce who is instrumental in making the company what it is today. Objectives and goals mainly aim in answering the question as to what is to be achieved. In magnitude they are smaller than vision and mission. They can be small term and long term in nature. The mission is accomplished by the fulfilment of the short term goals and objectives and vision is fulfilled by the accomplishment of the long term goals and objectives. The primary goals and objectives of Tata Steel are to maximise the generation of value for their customers by making sure that the most credible and reliable products and services are delivered to them. Focusing on their internal development, their main objective is to provide a perfect workplace for their people.

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 helps develop a shared understanding by considering the various implications of the worldly changes and modifications in order to help a company or an organisation in assessing and deciding what to do. Strategic Planning aims in the development of operations with the focus mainly on acquiring competitive advantage over its rivals. (Abraham, 2012)

Three factors that can be associated with Strategic Planning are as follows.

  • Inaccurate Leadership: One of the factors related to strategic planning is the wrongful delegation of leadership responsibilities to people. It has to be understood that leaders should be appointed in the field of his respective excellence. If a person or employee is made leader in a department which is not his specialised area, discrepancies are bound to crop up.
  • Rigidity: Another issue is the rigid nature of the plan. A plan should look to update itself or at least have the potential to do the same along with the ever changing scenario of the market and environment. Plans often turn out to ineffective when it is not flexible enough to accommodate the changing elements.
  • Future adherence to the plan: It should be seen that the plan is followed the same way as it was formulated. Every detail should be paid attention to while going about the achievement of objectives and the mode of operations should always be in compliance with the plan formulated. If this does not happen, an organisation might associate itself with confusion and a lot of hassle.

The weaknesses and strengths generated out of the conduction of a SWOT Analysis depict that due to the struggling steel sector in UK, Tata Steel is considering selling off its plant in Northern England for survival. This is resulting out of a deficiency of their strategic plan as they failed to anticipate this situation and as a result are looking to withdraw. The technological factors determined by the effective conduction of the PESTEL Analysis on Tata Steel provide insight on the internal environment of the Tata Steel. It can be seen that Tata Steel adopts a more traditional approach with regards to technology. This suggests that their strategic plan is not updated with the infusion of the latest modern day technologies.

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

The two strategic planning techniques considered here are the BCG Matrix and Stakeholder Mapping.

Stakeholder mapping is one of the most effective ways of assessment for a strategic plan. It provides a clear idea as to who the beneficial stakeholders are and who should be effectively stayed away from. The steps involved in Stakeholder Mapping include the following:

  • The first step includes accurate and efficient identification of potential stakeholders. Only those stakeholders should be considered who can be beneficial to the organisation. (Kimmich & Sagebiel, 2012)
  • The second step comprises of the prioritisation of the stakeholders. High power, interested people are those stakeholders who should be well satisfied and attended to at all time. High power, Less Interested People is those stakeholders who should be considered but no added effort should be made in order to keep them out of boredom. Low power, interested people should be informed optimally and should always be ensured that no major complexities or problems are arising and finally Low Power, Low Interested People should be remotely monitored and interacted with.
  • The third step deals with assessing how and why the stakeholders will react to the current project at hand by considering a variety of issues like the reason of their motivation , what opinions they hold about the same, etc.

A BCG Matrix is a 2 dimensional analysis on the management of strategic business units. It was developed by Bruce Henderson in the 1960 and we come to know it as Boston Consulting Group. It is one of the best known portfolio matrixes till date. It is based on three fundamentals which are the experience curve, four phase lifecycle concept and the use of free cash flow. It comprises of four cells with the horizontal axis depicting the relative market share and the vertical axis depicting market growth rate. The four cells can be classified as: (Kotler & Berger, 2010)

  • Stars: Stars are referred to those that enjoy a high relative market share but in a rapid market. Investments included are high.
  • Cash Cows: Are referred to those that have a high relative market share but in a slow growing marketing mix. It tends to release more cash than it consumes.
  • Question Mark: Refers to those business units that have a low relative market share within a rapid growing industry. In this category, more cash is used up than generated.
  • Dogs: Low relative market share in a slow growing market. The business units here exhibit neutrality as neither much cash is released nor consumed.

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 referred to as anyone who can or is affected by an organisation or a strategy. They are people or small groups having the liberty to respond, negotiate and change an organisation’s strategic future. (Eden & Ackermann, 2015)

The stakeholder analysis can be best described with the help of resorting to the technique of stakeholder mapping. Stakeholder mapping is one of the most effective ways of assessment for a strategic plan. It provides a clear idea as to who the beneficial stakeholders are and who should be effectively stayed away from. The steps involved in Stakeholder Mapping include the following:

  • The first step includes accurate and efficient identification of potential stakeholders. Only those stakeholders should be considered who can be beneficial to the organisation. (Kimmich & Sagebiel, 2012)
  • The second step comprises of the prioritisation of the stakeholders. High power, interested people are those stakeholders who should be well satisfied and attended to at all time. High power, Less Interested People is those stakeholders who should be considered but no added effort should be made in order to keep them out of boredom. Low power, interested people should be informed optimally and should always be ensured that no major complexities or problems are arising and finally Low Power; Low Interested People should be remotely monitored and interacted with.
  • The third step deals with assessing how and why the stakeholders will react to the current project at hand by considering a variety of issues like the reason of their motivation , what opinions they hold about the same, etc.
  • Tata Steel ensures that it communicates with its stakeholders much in advance to the implementation of policies or actions. Their biggest stakeholders include customers, suppliers, vendors, employees, communities, investors, etc. (Tata Steel, 2012)
  • Special Customer meets are arranged to address issues such as cost, delivery, value added products etc. The capability of the vendors and suppliers are enhanced through the help of various training sessions and vendor meets. One of the biggest stakeholders is the employees. Career Planning, Training and development, health and safety, etc everything is considered by Tata Steel. Public hearings and meetings are resorted to in order to communicate with the communities, etc

Thus this is why it is important for Tata Steel to conduct an effective stakeholder analysis.

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.

Taking the current situation of Tata Steel into consideration, two primary things need to be attended to. The continued loss making out of the business in the UK owing to the struggling steel sector and also the recent allegations of the company decision making millions of money by selling an emission permit plan that was acquire from a European Commission for free has caused considerable damage to the reputation and revenue generation of the company.

In order to counter the cheap supplies of steel from China, Tata Steel cannot obviously reduce costs to match the Chinese suppliers but instead it can think of an alternative. In order to stand up against the loss, it can look to sell off one of its mines which are invariably underutilised. They can do this for a substantial amount as many steel companies do not have their own mines. Since cost cutting is not a viable option for them, the positioning Strategy to be implemented should be based on Pricing. High pricing can be synonymous to a high reputation and people might perceive it as credible steel which might hold Tata Steel in good stead. Tata Steel has always catered to four primary elements with regards to their strategy formulation and this strategy will also be formulated keeping in mind these four significant elements.

Consumers

  • Engage in emotional promotion and brand building in order to win back loyalty from the consumers after the allegations of Unethical Carbon Permit selling.
  • Considerably try to provide customised offers to large scale consumers in order to secure the future.
  • Try and upgrade the products in order to meet the growing demands and preferences of the customers.

Innovation

  • Tata Steel is a company driven by innovation. Resorting to traditional technological practices is not a crime. But it is also significant to implement the most updated form of technologies like The Hismelt Process, Finex, etc.
  • Adoption of a differentiation strategy at the correct time is very important.
  • Try and engage in pertinent advertising and promotion especially emphasising on the online medium in order to restore brand value and customer loyalty.

Sustainable Development

  • Adopt eco friendly practices and engage in various CSR activities with initiatives catering towards the well being of the environment, community, human health, etc.
  • Adopt methods to reduce the levels of carbon emission in order to feature within the permissible limits.

Workforce

  • Adopt well documented and feasible health and insurance policies for the employees
  • Frequent training and development programmes for the employees focusing on future growth and well being.
  • High Profile Incentive programmes fostering conditions for employees to strive for achieving more.
  • Based on the analysis in 2.1, 2.2 and 2.3, this is the strategy that i would devise for Tata Steel UK keeping in mind the recent scenarios.

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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 two alternative strategies taken into consideration here is strategic alliances and retrenchment strategies.

Tata Steel has to understand that it is barely possible to compete with the upmarket Chinese suppliers at this point of time. The other main competitor other than CSN and the Russian Supplier is China. Since Tata Steel has incurred a lot of loss and hence complete acquirement of subordinate steel companies may not be easily possible neither viable right now. But Tata Steel has to realise that it is one of the most renowned and reputed steel companies in the world. So what it can do is it can form major alliances with top steel producers in the world and come up with some new market entry strategy in Europe and look to counter China. Tata Steel should look to target the top 5 Steel companies in the world for forming an alliance with. One thing that might work in Tata Steel’s favour is that the number one Steel Company in the world right now is ArcelorMittal owned by fellow Indian countryman of the Tata owner, Mr. Mittal. So based on this aspect of law, ArcelorMittal might want to join forces with the other major steel company from the same homeland and Tata Steel then can come up with something substantial. (Worldsteel, 2016)

The other alternative that i would choose is the retrenchment strategy. This is will be the ultimate option in a scenario where absolutely nothing else is working. However I would look to implement the divestment strategy over the liquidation strategy first. Tata Steel has a lot of accumulated assets globally. I would look to ensure some revenue by divesting assets that are fairly underutilised consistently. As mentioned earlier, Tata Steel can look to sell off a personal mine of theirs as various companies around the world would bid to achieve. This was one way Tata Steel UK could have come to some financial stability. Even if this would not be enough, then I would assess ideas of adopting the complete liquidation strategy by selling off the entire UK establishment.  

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 strategy considered in 2.4 is Pricing based Positioning Strategy. This is because of a number of reasons. Firstly, the Steel Sector of UK is going through huge complexities at the moment with the demand for local steel diminishing by the day. This is causing huge loss to Tata Steel and affecting their financial stability in a massive way. It has to be understood that Tata Steel cannot be compared to China at this point of time as they cannot offer their steel at the prices that China is at this point of time. Hence it is viable to adopt the Pricing Positioning Method here. This might enhance the reputation of Tata Steel and besides people may perceive expensive steel as credible steel as after all the company in reckoning is Tata. This is why the Pricing Positioning Strategy has been selected. The rest of this strategy is basically targeted towards the all time four primary elements of Tata Steel and their development.

Conclusion 

In this study, we come to learn the long term vision of Tata Steel UK to establish itself as the leading player in Steel globally. The strengths, weaknesses, opportunities and threats are analysed as a result of the SWOT analysis and the external analysis is also carried out properly. Two current scenarios have been highlighted in this assignment. First the diminishing state of UK Steel Industry along with successive impact of China providing cheap steel and also the scandal of Tata Steel where it decided to sell of carbon emission permits and make millions of pounds out of that which they apparently received for free from a European Commission.

References

Abraham, S. (2012). Strategic Planning: A Practical Guide for Competitive Success. Emerald Group Publishing.
BBC. (2016). Tata Steel plans to sell loss-making UK plants. [Online], Available at: http://www.bbc.com/news/business-35922046, Accessed on: 22nd June, 2016.
BBC. (2016). Tata Steel to launch sale of UK plants. [Online], Available at: http://www.bbc.com/news/business-36009437, Accessed on: 22nd June, 2016.
BBC. (2016). How Tata Steel made millions from EU pollution permits. [Online], Available at: http://www.bbc.com/news/business-35995651, Accessed on: 22nd June, 2016.
Eden & Ackermann. (2015). Stakeholder definition. [Online], Available at: http://www.stakeholdermap.com/stakeholder-definition.html, Accessed on: 22nd June, 2016.
Kimmich, C & Sagebiel, J. (2012). Methods for Stakeholder Analysis. BoD – Books on Demand.
Kotler, P & Berger, R. (2010). The Quintessence of Strategic Management: What You Really Need to Know to Survive in Business. Springer Science & Business Media.
Tata Steel. (2012). Measuring the impact of sustainable policies. [Online], Available at: 
Tata Steel. (2016). The World of steel. [Online], Available at: http://www.tatasteel.com/media/pdf/group-brochure.pdf, Accessed on: 22nd June, 2016.
Worldsteel. (2016). Top steel-producing companies. [Online], Available at: https://www.worldsteel.org/statistics/top-producers.html, Accessed on: 22nd June, 2016.
Youremployment. (2016). what are core competencies?  . [Online], Available at: http://youremployment.biz/competency/what-are-core-competencies/,  Accessed on: 22nd June, 2016.