HISTORY

India is on an upswing when speaking about the Steel Industry because of the strong global and domestic demand. The rapid economic growth and progressing demand by sectors like infrastructure, real estate and automobiles, at home and abroad, has put Indian steel industry on the Global Map.

The latest report conveys that in International Iron and Steel Institute (IISI), India is the seventh largest steel producer in the world. The modern Indian steel industry's origin was from way back in 1953 when a contract for the construction of an integrated steelworks in Rourkela, Odisha was signed between the Indian government and the German companies Fried Krupp und Damage AG.

The annual capacity of 500,000 tonnes was the initial plan, and then later subsequently rose to 1 million tonnes. Presently the capacity of Rourkela Steel Plant (RSP), which belongs to the SAIL (Steel Authority of India Ltd.) group, is about 2 million tonnes. The former USSR and a British consortium at a very early stage also showed an interest in establishing a modern steel industry in India.

All these initiatives resulted in the Soviet-aided building of a steel mill with a capacity of 1 million tonnes in Bhilai and the British-backed construction in Durgapur of a foundry which also has a million tonne capacity.

BRIEF INTRODUCTION

Indian steel industry organized it self as three categories such as main producers, major producers and secondary producers. The main producers & major producers have integrated steel making facility with plant capacities over 0.5 MT which utilize iron ore and coal/gas for production of steel. The major producers are Tata Steel, SAIL, and RINL, while the other producers are ESSAR, ISPAT and JVSL.

The secondary sector is dispersed and consists of firstly the 12 sponge iron producers of Backward linkage that use iron ore and non-coking coal, providing feedstock for steel producers; and then the next is approximately 650 mini blast furnaces, electric arc furnaces, induction furnaces and energy optimizing furnaces that use iron ore, sponge iron and melting scrap to produce steel and lastly forward linkage with about 1,200 re-rollers that roll out semis into finished steel products for consumer use.Size of the industryIndia Steel Industry has tremendously grown in records for production. In 1992, India was able to produce 14.33 million tonnes of finished carbon steels and 1.59 million tonnes of pig iron. The steel production capacity of the country increased rapidly since 1991 and in 2008, India produced nearly 46.575 million tonnes of finished steels and 4.393 million tonnes of pig iron. In 1992, the total consumption of finished steel was 14.84 million tonnes. In 2008, the total number of domestic steel consumption was 43.925 million tonnes. With the growing demand in the national market, a huge part of the international market is also served by the Indian Steel industry.

In 2005- April-December the production of the finished steel recorded a growth of 4 % and reached 28.3 million tonnes. Indian steel industry ranks 10th in the world's scenario. The industry today represents approximately Rs. 9,000 crore of capital and provides direct employs more than 0.5 million people.

Domestic and Export share

In India about 50% of the steel produced is exported. The industry export of steel during April - December 2008 was 64.4 MT as against 9.7 MT in December 2007. The export of steel in February 2009, increased by 17% to 12.6 MT from 10.8 MT in the same month the previous year.

India exports more than 50% of steel to China. The major boost came to the export of steel when Government took the decision to reduce export duty on iron ore lumps from 15% to 5%.

Top leading steel plants

Salem Steel Plant at Tamil Nadu Bhilai Steel Plant at Chattisgarh Durgapur Steel Plant West Bengal Alloy Steel Plants at West Bengal Visvesvaraya Iron and Steel Plant in Karnataka Rourkela Steel Plant at Odisha Bokaro Steel Plant at Jharkhand

Role of steel industry in Indian GDP

Domestic consumption of steel in India has grown by 12.5% better than later years. In the year 2006-07 the domestic steel consumption was 41.14 million tonnes The average growth rate of the Indian Steel Industry is 11.36% All over India the construction projects are major consumers of steel. The per capita consumption of steel in India is 35kgs The largest steelmaker in the world Arcelor Mittal has plans of establishing two Greenfield steel projects with capacity of 12 million tonnes annually, in India. Acerinox SA is setting up a steel plant in India, one of the important stainless steel manufacturers in collaboration with Nisshin Steel, Japan. The Tata Steel has plans of expanding its capacity by the year 2015 & ranks 5th in the world steel production. India's biggest producer of steel SAIL has plans of increasing the production to 24.98 million tonnes annually. China's Sinosteel Corp is planning to invest US$ 4 billion to set up a 5 million tonnes capacity Greenfield steel plant. Tata Steel has acquired Anglo-Dutch steel manufacturer, Corus. The 1.63 billion US$ acquisition of Canada for The Algoma Steel by Essar Global.

PEST Analysis

Political Factors: It includes a lot of policies given by the Indian steel ministry; it includes industrial policies, electricity policies, national mineral policies, foreign trade policies, environmental policies, etc. there are also other factors including government ownership at local and national levels and other legislations and licenses involved.

The Government has approved the National Steel Policy (NSP) in November 2005.The long-term goal of the NSP is for India to have a modern and efficient steel industry of world standards. The focus of the policy is to achieve global competitiveness not only in terms of cost, quality and product-mix but also in terms of global benchmarks of efficiency and productivity.

The policy targets to increase steel production at a compounded annual growth rate of7.3% to 110 mt by 2019-2020. It projects domestic consumption to grow at annual growth rate of6.9% to 90 mt during this period. The policy envisages the share of exports to increase to 25% from present share of 10%100% FDI is allowed under the automatic route for metallurgy and processing of all metals.

Economic Factors:Inflation: the inflation has grown to about 7.25 percent so there is rise in price of all the goods, and also production efficiency has decreased.Currency fluctuation and exchange rates: With increase in the value of dollar, the industry needs to give a large amount in exchange rates. Moreover there is a rise in price of crude oil and has cost transportation charges to increaseEconomic Crisis: due to economic crisis in Europe led to decrease in demand of finished goods in the foreign market and has led to a trade deficit.Consumer expenditure: Due to high inflation rate the prices of product has increased leading to more expenditure of the customer.

Social Factors: shift in value and culture of people, a positive attitude towards work, green environment issue, product safety issue, employment and safety laws

Technological Factors: There is a need for new government investment policies. New patents and products for extracting ores, manufacturing purpose should be implemented where ever necessary to rapid the pace and improve quality of the products. The current level of investment in R&D in the Indian Steel Plants is less than 0.24% of their total turnover. In order to encourage R&D activities in Iron and Steel sector, Ministry of Steel isproviding financial assistance.

COMPETITOR ANALYSIS:The Major competitors to steel industry are plastic industry, alluminium industry and cement industry. Though their cheap prices they cannot replace steel in essential products like automobile, machineries and in construction of bridges and other infrastructure. Although a small sector of steel is affected by plastic industry as steel is replaced by plastic in some kitchenware articles, and furnitures.

SWOT ANALYSIS

StrengthsAvailability of iron ore and coal: India has abundance of iron ore, coal & other raw materials required for iron & steel making. It has 4th largest iron ore reserves (13 bn tons)in the world.Low labor wage rates: India has low unit labor cost, this gets reflected in low cost ofproduction. Abundance of quality manpower: It has 3rd largest pool of technical manpower, next to UnitedStates&erstwhileUSSR,capableofunderstandingandassimilatingnewtechnologies. Matureproductionbase.

Weakness Unscientific mining: Indiais deficient inraw materials required by thesteel industry. Iron ore deposits are finite and there are problems in mining sufficient amounts of it. India's hard coal deposits are of low quality. Low productivity:AccordingtoanestimatecrudesteeloutputatthebiggestIndian steel maker is roughly 150 tonnes per worker per year, whereas in Western Europe the figure is around 600 tonnes. Power shortages: Steel production in India is also hamperedby power shortages. Inadequateinfrastructure: Insufficientfreightcapacityandtransportinfrastructure hamper the growth of Indiansteel industry Low R&D investments: There are inadequateinvestments in infrastructure.Lack of best quality and trained professionals has been a major drawback. High cost of debt: Since huge capital investment is required therefore cost of these debts is very high.

Opportunities Unexplored rural market: The Indian rural market remains fairly unexposed to the multi-faceted use of steel. Growing domestic demand: There is enormous scope for increasing consumption ofsteel in almost all sectors in India. Export Market Penetration: It is estimated that world steel consumption will double in next 25yrs. Quality improvement of Indian steel combined with low cost advantages will definitely help in substantial gain in export market Consolidation: As global companies have realized the threat of excess supply, they are looking at M&A (mergers and acquisitions) option to retain market share and improve margins.

Threats Technological change: Technological changes force the industry structure to change. In India where capital itself is costly, technological obsolescence is amajor threat. Price sensitivity &Demand volatility: The demand for steel is derived demand and thepurchase quantity depends on end-use requirements. The traders are price sensitive andbuy when there are discounts. Dumpingofsteelbydevelopedcountries: Highqualityproductsfordeveloped countries available for imports at competitive prices. Slow Industry Growth

LATEST DEVELOPMENT:

In 2009 according to The Press Information Bureau, the government took a number of fiscal and administrative steps to contain steel prices. Central value added tax (CENVAT) on steel items was reduced from 14 per cent to 10 per cent with effect from February 2009. India's per capita consumption of steel is only 27kg per capita, which is far below the level of other developed and developing countries - 472.4kg, 428.6kg and 128kg in USA, EU and China respectively.

The government for the Union Budget of 2010-11, has also allocated US$ 37.4 billion for infrastructure sector and has increased the allocation for road transport by 13% to US$ 4.3 billion which would promote the steel industry.

The Indian steel industry has had humble beginnings. The acquisition of the British steel giant Corus steel by Tata Steel and the acquisition of Arcelor by Mittal Steel herald a new beginning for the Indian steel industry.

All these are the evidences that the Indian steel industry has acquired a global identity and is today extremely competitive globally. Today some of the prominent steel producers are Tata Steel, Posco, Essar, Ispat, Sail and Rinl.

Indian steel industry contributes about 2% of gross domestic product, or about USD 20 billion to the country's USD 1 trillion economy. India is known as the 5th largest producer of steel in the world, behind China, Japan, Russia and the United States. It produced 55.1 million tonnes of the alloy in 2009, but is still only a tenth the size of China, the No.1 steel producing country. The largest producer of steel in India is State-run Steel Authority of India, with capacity of 13.8 million tonnes. Tata Steel, the world's No. 8 steelmaker, has capacity in India of 7 million tonnes, while JSW Steel is third with annual capacity of about 6.9 million tonnes.

A report of research in India reveals that steel consumption in India is expected to grow significantly in coming years as per capita finished steel consumption is far less from its regional counterparts. During the year 2008, per capita finished steel consumption was estimated to have a volume of around 44 Kg, which represents tremendous growth potential for coming years.

"Indian Steel Industry Outlook to 2012" is an outcome of an extensive research and conceptual analysis of the steel industry in India. The detailed information is provided by the forces which have led to the industry towards remarkable developments in the past few years. The report emphasizes an insight into the future outlook of various vertical industry segments, including automotive, aerospace, marine, consumer durables, power, railways, telecom and housing. This report has classified the finished steel product market into two categories - alloy and non-alloy. It covers the information on overall steel consumption industry-wise steel demand, production and trading market.

CASE STUDY:Introduction to TATA STEEL:Backed by 100 glorious years of experience in steel making, Tata Steel is among the top ten steel producers in the world with an existing annual crude steel production capacity of 30 Million Tonnes Per Annum (MTPA). Established in 1907, it is the first integrated steel plant in Asia and is now the world`s second most geographically diversified steel producer and a Fortune 500 Company. Tata Steel has a balanced global presence in over 50 developed European and fast growing Asian markets, with manufacturing units in 26 countries.It was the vision of the founder; Jamsetji Nusserwanji Tata., that on 27th February, 1908, the first stake was driven into the soil of Sakchi. His vision helped Tata Steel overcome several periods of adversity and strive to improve against all odds. Tata Steel`s Jamshedpur (India) Works has a crude steel production capacity of 6.8 MTPA which is slated to increase to 10 MTPA by 2010. The Company also has proposed three Greenfield steel projects in the states of Jharkhand, Orissa and Chhattisgarh in India with additional capacity of 23 MTPA and a Greenfield project in Vietnam.

Through investments in Corus, Millennium Steel (renamed Tata Steel Thailand) and NatSteel Holdings, Singapore, Tata Steel has created a manufacturing and marketing network in Europe, South East Asia and the pacific-rim countries. Corus, which manufactured over 20 MTPA of steel in 2008, has operations in the UK, the Netherlands, Germany, France, Norway and Belgium. Tata Steel Thailand is the largest producer of long steel products in Thailand, with a manufacturing capacity of 1.7 MTPA. Tata Steel has proposed a 0.5 MTPA mini blast furnace project in Thailand. NatSteel Holdings produces about 2 MTPA of steel products across its regional operations in seven countries.Tata Steel, through its joint venture with Tata BlueScope Steel Limited, has also entered the steel building and construction applications market. The iron ore mines and collieries in India give the Company a distinct advantage in raw material sourcing. Tata Steel is also striving towards raw materials security through joint ventures in Thailand, Australia, Mozambique, Ivory Coast (West Africa) and Oman. Tata Steel has signed an agreement with Steel Authority of India Limited to establish a 50:50 joint venture company for coal mining in India. Also, Tata Steel has bought 19.9% stake in New Millennium Capital Corporation, Canada for iron ore mining. Exploration of opportunities in titanium dioxide business in Tamil Nadu, ferro-chrome plant in South Africa and setting up of a deep-sea port in coastal Orissa are integral to the Growth and Globalisation objective of Tata Steel. Tata Steels vision is to be the global steel industry benchmark for Value Creation and Corporate Citizenship.Tata Steel India is the first integrated steel company in the world, outside Japan, to be awarded the Deming Application Prize 2008 for excellence in Total Quality Management.

THE TATA GROUP

Before we discuss at the length of the company, we would like to throw some light on the Tata Group of companies in present day India. Tata Steel is one of the ventures of the Tat Group but it has many successful companies under one umbrella. Some of the other notable Tata concerns and their lines of businesses are shown below.

VISION OF THE COMPANYSWOT Analysis

Strength1. Raises over 14 million tonnes of ores from its captive collieries, iron ore mines and quarries2. Adaptability of company in the fast changing environment3. Excellent integration with Corus which has more than 2000 metallurgists4. Control over raw materials5. Economies of scale6. Strong backing of Tata brand name7. Operations in 26 countries and a commercial presence in over 50 countries

Weakness1. Operational efficiency are not as good as international leaders2. Slightly lagging in technological front

Opportunity1. Newer technologies- The Corex process, The Hismelt process, Direct iron ore smelting2. Public private partnership3. Acquisition of coal blocks in Asia, Africa etc.

Threats1. Rising coking coal prices2. India is plagued with violent agitation against land acquisition3. Government & regulatory norms4. International competition

Competition

Competitors1. SAIL2. JSW Steel Ltd3. Essar Steel Ltd4. ArcelorMittal5. POSCO

4 PS OF MARKETING:1. PRODUCT:

Tata Steel Products The Companys products consist of TSL products, produced by the Companys Indian operations and its NatSteel and Tata Steel Thailand operations, and Corus products, and produced in the United Kingdom and The Netherlands. TSLs products can be divided into three main categories: 1. Finished and semi-finished steel products; 2. Ferro alloys products; and 3. Other products and services, including tube products, bearing products, refractory products, pigments, municipal services and investment activities.

Corus has four main product segments: (1) strip products; (2) long products; (3) distribution and building systems; and (4) aluminum.

2.PRICE:Pricing is one of the most crucial elements behind a successful product. It is more pragmatic and fact oriented in industrial marketing as compared to pricing for consumer products. Pricing in industrial marketing is closely related to the firms product, distribution and communication strategies. Factors Influencing Pricing Strategy in Steel IndustryThe most important factors which affect pricing strategies in steel industry are:1. Production Costs2. Market demand (derived in nature)3. Competition4. Government regulationsProduction CostsTata Steel is the lowest cost manufacturer of steel and keeping production costs low have played a major role in achieving that. The following measures have helped Tata Steel in maintaining cost leadership:

Market Demand:Demand for steel is derived in nature since it is majorly used as an input. The following facts and figures suggest that there exist healthy demand in market for Tata Steel to serve. World consumption of steel is expected to be 1.23 billion tonnes in 2010 registering a growth of 10% over 2009. The exports during 2010 are expected to be higher by around 4% as compared to 2009.

Competition:Existing and potential competition inevitably affects pricing strategy by setting an upper limit. The amount of latitude a firm has in its pricing decision largely depends on the degree to which it can differentiate its products in the minds of buyers

Pricing Strategy:A pricing strategy must be conceived in relation to overall business objectives and marketing strategy. The success of any business depends upon a blend of long run profit, growth and survival objectives. Price, because of its influence on unit sales volume and profit margins, affects long run profit objectives. And maintaining profitability through sound pricing practices is necessary to ensure the firms survival over time.

Competitors AnalysisThe various competitors of Tata Steel are: SAIL JSW Essar Steel Ispat IndustriesRecently in India the prices of steel have increased. Steel manufacturers like JSW believe that increase in the raw materials i.e. the iron ore from the mines have led to this price rise. Many of these manufacturers are now concentrating on backward integration just like Tata Steel wherein the iron ore mines are also owned by the company which helps in achieving lower manufacturing costs.

JSW: They are moving ahead with a two prong strategy wherein on one side the focus is on the domestic market catering mainly to OEM segment by servicing them with all value added products customized to their requirement and on the other hand a special drive in the retail segment will continue by opening of state-of-the-art branded steel retail is the largest players in the private outlets with brand name JSW Shoppe.

SAIL: Following are the strategies adopted by SAIL for effective pricing:a) Cost reduction and increased productivity through advanced technology and improved processes.b) Production of value added and customized products to create niche marketsc) Avoid inventory build-up and make production strictly market driven

Essar: Essar Steel is currently expanding its capacity at Hazira from 4.6 MTPA to 8.5 MTPA and then to 10 MTPA. We can see that this is an attempt to cater the large market demand and achieve economies of scale. Essar Steel has pioneered the concept of steel retailing in the country through branded retail outlets Essar Hypermart. This is primarily catering to SME segment.

3. PLACE:Place represents the location where a product can be purchased. But in industrial marketing place is often referred to as the distribution channel.

Distribution channels at Tata Steel:

Tata Steel Limited delivers steel products to Indian customers through: Direct supply channels, 21 stockyards, 25 consignment agents, 15 external processing agents and

4. PROMOTION:

In B2B marketing advertising, promotions and publicity plays an important role in the communication strategies. Hence, to contribute to the overall effectiveness of the promotional strategies utmost care must be taken by the companies.

B2B promotion is used to create awareness of the company, to increase the sales of the product and to increase the overall effectiveness of the selling efforts. The promotional programme begins with carefully developed advertising objectives that must be formulated from corporate and marketing objectives in such a manner as to set the direction for creating, co-coordinating, and evaluating entire promotional programme. Promotional activities undertaken by TATA Steel:

Branding Steel Based on Customer Focus

As one of Indias most successful companies, Tata Steel represents a great example of a strongly branded B2B company. In 2001and 2005, Tata Steel was ranked the worlds best steel company in studies carried out by World Steel Dynamics Inc., USA (WSD), a leading steel information service provider.

Branding Steel

The profitability of the steel industry in India is generally linked to business cycles, reaping profits when economy is going well and eroding them when it is in depression. In the late 1990s, the Indian steel industry was experiencing a glut in the market which strongly affected the profit margin of all related companies.

Benefits reaped from Promotional activities:

From the beginning, the branding and promotional initiative of Tata Steel showed impressive results. It was found that the sale of branded products increased by 84 per cent.The future expectations and prospects of the company are also very positive. Today, Tata Steel is already one of the best branded names in steel industry and has already started initiatives in the co-branding arena with high end customers like Ashok Leyland and Telco.

Looking to the future, Tata Steel has announced that the company would be focusing on co-branding initiatives with its high-end customers such as Telco, Ashok Leyland. Company sources say that initially Tata Steel would be focusing on the automobile sector; later the co-branding initiative will be expanded to the consumer durables sector also.

COMPETITIVE ADVANTAGES OF TATA STEEL:

After understanding the 4Ps of marketing pertaining to Tata Steel it was found out that Tata Steel has implemented the marketing mix better as compared to its competitors which has given them an edge and thus it is one of the leading steel manufacturer in India. Apart from that there are several advantages that Tata Steel has which gives it competitive advantage.

Harnessing New and Better Sources of Raw Materials One of the biggest strengths of Tata Steel was that it had captive sources for all key raw materials: coal, iron ore, and limestone. The company began to harness its unutilized deposits of iron ore at Joda in Orissa

New Coke Making Technology Until the late eighties, Tata Steel, like all other steel manufacturers in India, was importing large quantities of coking coal as Indian coal has high ash content compared to imported coal and cannot be used as coking coal

Reducing Energy Costs The company embarked on several steps to become self-sufficient in its fuel needs. Earlier, it 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.

Modernization of Facilities Many of the initiatives discussed above resulted in improving the performance of the existing assets. Simultaneously, the modernization of the facilities became an important focus area.

Quality and Cost at the Centre-stage The top management of Tata Steel was part of a delegation organized by the Confederation of Indian Industry (CII) in the early nineties to study how the Japanese implemented quality. They found vast differences between the quality practices in Japan and India.

STEEL AUTHORITY OF INDIA

Steel Authority of India Limited (SAIL) is one of the largest state-owned steel making company based in New Delhi, India and one of the top steel makers in world. With an annual turnover of 49350 crore (US$8.2billion) (FY 2012-13). It is a public sector undertaking which trades publicly in the market is largely owned by Government of India and acts like an operating company. Incorporated on 24 January 1973, SAIL has 101,878 employees (as on 31-Mar-2013).[2] With an annual production of 13.5 million metric tons, SAIL is the 24th largest steel producer in the world. The company's current chairman is C.S. Verma.SAIL operates and owns 5 integrated steel plants at Rourkela, Bhilai, Durgapur, Bokaro and Burnpur and 3 special steel plants at Salem, Durgapur and Bhadravathi. It also owns a Ferro Alloy plant at Chandrapur.As part of its global ambition the company is implementing a massive expansion plan involving project work of building new facilites with emphasis on state of the art green technology. SAIL is a public sector company, owned and operated by the Government of India. According to a recent survey, SAIL is one of India's fastest growing Public Sector Units.Besides, it has R&D centre for Iron & Steel (RDCIS), Centre for Engineering and Technology (CET), Management Training Institute (MTI) and SAIL Safety Organization (SSO) located at Ranchi capital of Jharkhand.