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Tata Steel

Tata Steel

Type

 

Public

Traded asBSE: 500470

BSE SENSEX Constituent

Industry Steel

Founded 1907

Founder(s) Dorabji Tata 

 

Headquarters Mumbai, Maharashtra, India[1]

 

Area served Worldwide

Key people

B Muthuraman

(Vice Chairman) 

Hermant M. Nerurkar (MD) 

ProductsSteel, flat steel products, long steel

products, wire products, plates

 

Revenue US$ 26.06 billion (2011)[2]

 

 

Profit US$ 1.97 billion (2011)[2]

 

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Total assets US$ 30.38 billion (2011)[2]

 

 

Total equity

 

US$ 7.97 billion (2011)[2]

 

 

Employees 81,251 (2011)[2]

 

 

Parent Tata Group

 

Subsidiaries Tata Steel Europe

 

Website www.tatasteel.com

 

INTRODUCTION

Tata Steel Limited (BSE: 500470) (formerly TISCO and Tata Iron and Steel Company

Limited) is a multinational steel company headquartered in Mumbai, India and subsidiary of Tata Group. It is the tenth-largest steel producing company in the world, with an annual crudesteel capacity of 23.5 million tonnes, and the largest private-sector steel company in Indiameasured by domestic production.[3] Tata Steel is also India's second largest and second-most

profitable private-sector company, with consolidated revenues of $26 billion and net profit of over $1.9 billion in the year ended March 31, 2011.[4][5] Tata Steel is the eighth most-valuableIndian brand according to an annual survey conducted by Brand Finance and The EconomicTimes in 2010.[6] It is currently ranked 410th in the Fortune Global 500.[7][8] It has also beenlisted as World's most ethical companies by Forbes.[9] 

Tata Steel's largest plant is located in Jamshedpur, Jharkhand, with its recent acquisitions, thecompany has become a multinational with operations in various countries. The registered officeof Tata Steel is in Mumbai. The company was also recognized as the world's best steel producerby World Steel Dynamics in 2005.[10] The company is listed on Bombay Stock Exchange andNational Stock Exchange of India, and employs about 80,000 people.[11][12] In August 2007 Tata

Steel won the bid to acquire the UK-based steel maker Corus in what was, to date, the largestinternational acquisition by an Indian company. It made the Tata Group the world's fifth largeststeel maker, and catapulted them to the global league.[13]

Tata Steel is a Private Sector Organisation that offers services in Iron and Steel with Annual Total

Turnover of 5000+ Crs and with Employee Strength of 5001 & above. 

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History

TISCo was established by Jamsetji Tata in year 1907.[14]In year 1939, it had largest steel plant inthe British empire. A modernization and expansion program was launched in year 1951. Later,the program was upgraded to 2 MTPA project. In 1990, it started expansion plan and establishedits subsidiary Tata Inc. in New York .[15] The company changed its name TISCO to Tata Steel inyear 2005. layoffs.[16] 

[edit] Global Network 

Tata steel has presence in 50 countries with manufacturing operations in 26 countries. It hasmanufacturing operations in these locations:[17] 

[edit] Asia

  India

  malaysia

  Vietnam

  Thailand

  Oman

All through Acquisitions route.

 Africa

  Ivory coast

  Mozambique

  South Africa

 Australia

  Central Queensland

North America

  Canada

Europe

  United Kingdom

  The Netherlands

  France

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 Capacity Expansion 

 Acquisitions 

Corus Main article: Tata Corus acquisition

  On 20 October 2006, TISCO signed a deal with Anglo-Dutch company, Corus

  On 19 November 2006, the Brazilian steel company Companhia Siderúrgica Nacional (CSN)

launched a counter offer for Corus at 475 pence per share, valuing it at £4.5billion.

  On 11 December 2006, Tata preemptively upped the offer to 500 pence, which was within hours

trumped by CSN's offer of 515 pence per share, valuing the deal at £4.9 billion. The Corus board

promptly recommended both the revised offers to its shareholders.

 

Wikinews has related news: Steel Industry: Tata buys Corus 

  On 31 January 2007 Tata Steel won their bid for Corus after offering 608 pence per share,

valuing Corus at £6.7 billion.

Other acquisitions

  In August 2004, Tata Steel entered into definitive agreements with Singapore based NatSteel Ltd

to acquire its steel business for Singapore $486.4 million (approximately Rs 1,313 crore) in an all

cash transaction.

  In 2005, Tata Steel acquired 40% Stake in Millennium Steel in Thailand for $130 million (approx.

Rs 600 crore).

  In 2007 Tata Steel through its wholly owned Singapore subsidiary, NatSteel Asia Pte Ltd acquired

controlling stake in two rolling mills: SSE Steel Ltd, Vinausteel Ltd located in Vietnam.

Greenfield and Brownfield Projects

Tata Steel has set an ambitious target to achieve a capacity of 100 million tons by 2015.Managing Director B. Muthuraman stated that of the 100 million tonne, Tata Steel is planning a50-50 balance between Greenfield facilities and acquisitions.[18][19] 

  Overseas acquisitions have already added up to 21.4 million tonne, which includes Corus

production at 18.2 million tonne, Natsteel production at two million tonne and Millennium Steel

production at 1.2 million tonne. Tata is looking to add another 29 million tonnes through the

acquisition route.[18][19] 

  Tata Steel has lined up a series of greenfield projects in India and outside which includes[18] 

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1.  6 million tonne plant in Orissa, India: Tata steel is setting up 6 million tonne per annum capacity

plant at Kalinganagar.[20] 

2.  10 million tonne in Jharkhand, India: The capacity of Jamshedpur steel plant has already been

increased to 6.8 MTPA. It is expected that its capacity will increase by 10 MPTA in near future.[21] 

3.  5 million tonne in Chhattisgarh, India:Tata steel signed MOU with Chhattisgarh government in

2005 for setting up 5 MTPA plant. But, it is facing strong protest from tribal people.[22] 

4.  3-million tonne plant in Iran

5.  2.4-million tonne plant in Bangladesh

6.  10.5 million tonne plant in Vietnam (feasibility studies underway)

Key Market Sectors

Tata steel serves customers in these market sectors globally:[23] 

  Automotive

  Construction

  Consumer goods  Engineering

  Packaging

  Lifting and Excavation

  Energy and Power

  Aerospace

  Shipbuilding

  Rail

  Defence and Security

Competitors

Competitors of Tata Steel are ArcelorMittal, Essar steel, JSW steel, SAIL, VISA steel etc.[24] 

Controversies

The company is facing increasing criticism that the drive for growth and profits is completelyovershadowing its once famed philanthropy, and causing lasting social and environmentaldamage at various locations.[25] In response, Tata cites its programs for environment and resourceconservation, including reduction in greenhouse emission, raw materials and water consumption.The company has increased waste re-use and re-cycling, and reclaims land at its captive minesand collieries through forestation. Tata Steel's chief, environment and occupational health, says,

"Our capital investment in pollution-abatement solutions was in the vicinity of 4 billion in2003-04."[26] 

Dhamra Port 

The Dhamra Port, a Joint Venture between Larsen & Toubro and Tata Steel, has come in forcriticism from groups such as Greenpeace, Wildlife Protection Society of India and the OrissaTraditional Fish workers' Union. The port is being built within five kilometres of the

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Bhitarkanika National Park, a Ramsar wetland of international importance, home to animpressive diversity of mangrove species, saltwater crocodiles and an array of avian species. Theport will also be approximately 15 km. from the turtle nesting of Gahirmatha Beach, and turtlesare also found immediately adjoining the port site. Aside from potential impacts on nesting andfeeding grounds of the turtles, the mudflats of the port site itself are breeding grounds for

horseshoe crabs as well as rare species of reptiles and amphibians. One such species, theamphibian Fejervarya cancrivora, is the first record for the Indian mainland.[27][28] 

SWOTAnalysis of Tata Steel 

Earlier known as Tata Iron & Steel Company upto 2005

Strengths of TATA STEEL:

1.Mineral Reserves – Tata Steel has two collieries in West Bokaro and Jharia, in the state of Jharkhand. The iron ore units are locatedin Noamundi, Joda and Katamandi in the states of Jharkhand and Orissa. Tata SteelLimited also has a manganese mines and dolomite quarries in Orissa. These minesare located at an approximate distance of 150 kms from Jamshedpur, home to thesteel company's manufacturing facility. The Steel Company's iron ore unitsproduce 9 million tons per annum of various grades of high quality iron oreincluding rich blue dust ore. The company in India is having mines of 281 million

tones reserves in its mines in Jharkhand and thus having minerals to cater its needsfor more than 20 years. The company has also been acquiring stake overseas inCanada, Mozambique, Australia etc. to boast its reserves for clean coking coalwhich is rarely available in India.

2.Management Team- Tata Steel has a highly credible management team who has displayed their skillsin expanding the company through inorganic route. The company has successfullyacquired Nat Steel of Indonesia, Millennium Steel of Thailand and more

importantly Corus. The company‟s virtuosos of finance have been able to findinnovative ways to tackle the company‟s bulgeoning debt and keep the bottom linein the green zone despite lowering demand and huge debts accumulated.

3.Information Technology- The entire mining operation of the Company is safeguarded against accidentoccurrence. Proactive measures are undertaken to ensure the employee's health and

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productivity through ergonomically designed work stations and by protecting themfrom occupational hazards. All its mines are ISO-14001 -EnvironmentalManagement System Certified. Tata Steel's collieries use 'Surpac', a state-of-the-artmine planning software that estimates the volume of coal in every seam. This

software is coupled with qualitative detailing that focuses on output consistency.To maximize productivity and utilization, a voice and data equipped GlobalPositioning System is used, which helps to supervise mining activity for machinemovement and engine status.

4. Innovativeness of TATA Steel with respect to its competitors- Tata Steel has the lowest operating cost for steel manufacture in the world. Further it has displayed effective means in adopting an eco-friendly and

sustainable approach towards the manufacture of steel thus proactive measures are

undertaken to ensure the employee's health and productivity through ergonomically

designed work stations and by protecting them from occupational hazards.

5. Adaptability of the company in the fast change of the environment- Tata Steel has displayed immense agility in the recent past during the globalfinancial tsunami. Its virtuosos of various fields have adopted various methods likelowering of production and even shutting down of steel plants owing to the lack of demand, managing the balance sheet efficiently etc. The company has 70% of itsprocurement of raw materials for its operations in Asia through long term contractsand so its margins can be shielded from the nuances of the volatility of the

financial markets.6. Brand value- The TATA brand owing to its highly ethical and a socialistic approach tobusiness have made its name synonymous to trust. After the acquisition of Corusanother powerful brand, the brand value of the company has enhanced further.7. Corporate governance- Tata Steel has had an impeccable record for corporate governance. It has set thebenchmark in global corporate governance principles of transparency,accountability and equity for others to follow. Tata Steel has been consistentlyreceiving prestigious awards at both the national and the international arena.Recently it bagged the Best Governed Company Award for corporate practicespresented by Asian Centre for Corporate Governance.8. Excellent integration with Corus

 – Corus has a great reserve of around2000 metallurgists and technology whichcould be exploited by Tata Steel on several fronts.9. Excellent procurement philosophy

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- Tata Steel has around 70% of its supplies through long term contracts. Thus it can beshielded from the volatility of the financial markets.

10. Spawning upon opportunities

- Tata Steel has been amongst the earliest to spot the escalation in the demand forsteel in the forthcoming years. It has hence invested heavily in the expansion of itsexisting facility at Jamshedpur and is setting up other green field projects at Orissa,Jharkhand etc.

Weaknesses of TATA Steel- 

1.Huge debt burden- Tata Steel is having a total debt of 10.2 billion USD in its books. It has a debtequity ratio 0f 1.6 which means that the assets of the company is largely financed

through debt. With the inflation on a rise the central banks of most all the countriesare intending to tighten in the liquidity in the money markets. As a result of whichthe interest rates are on a rise. In India the banks are mulling the option of a ratehike and most analysts feel that the RBI is going to increase the repo rate by almost100 bps further after a CRR hike of 75 bps in late February this year. Thus it wouldadd to the interest burden of the company which would further increase theliabilities of the company and thus degrade the quality of its balance sheet further.

2. High attrition rate

- Tata Steel has traditionally faced the brunt of high attrition rate. In its Jamshedpurplant many engineers constantly change their jobs to SAIL in Bokaro and vice-versa. Thus the formation of a core team of capable individuals across alldepartments is very difficult as the size of the team is ever changing.

3.Products in the portfolio lacking demand-The company has certain products in its portfolio like aerospace steel which

lacked demand in the recent past. Primarily due to the slow down of the aviationsector which led to delay in the delivery of aircrafts as a result of cutting of capacity by airlines. The company also had certain Cast products largely marketing

in the UK which has been witnessing slowdown in demand since 2001. Hence thecompany had to close down its Tee Side plant.

4.Degradation in brand value owing to job losses-TATA group has made its name synonymous to job security of it employees. But

the shutdown of its plants in the UK and The Netherlands will dent its image to a

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certain extent. As a result of which around 1600 employees would lose their dailylivelihood.

5.Low cost recovery

 – There are specific products like the aerospace steel and cast products which hasreceived feeble response in the past. The company has failed to recover costs inthis business front.

6.Laggard in technological front- Companies like SAIL has efficiently introduced the XRF (X-Ray Fluorescence)in its plants at Durgapur and Bokaro over 12 months back which the Tata Steel hasfailed to do.

7.Bad raw material procurement philosophy of its subsidiaries-

The largest subsidiary of Tata Steel,Corus has high exposure to spot prices and a higher operational gearing among thelarger European steel companies. Hence it has the risk of volatility associated withpricing, one of the key elements in determining profitability of a commoditycompany.

Opportunities

1. Competitive position of the company-

Tata Steel is the second largest producer of steel in India and the sixth largestproducer in the world.

2. Newer technologies –  i) The Corex processcombines an iron melter/coal gasifier vessel with a pre-reduction shaft to produce aliquid product that is very similar toblast furnace hot metal. Coal, oxygen, and pre-reduced iron are fed into the melter/gasifier to melt the iron and produce a highlyreducing off-gas.

ii) The HIsmelt processIron reduction and coal gasification take place in a liquid metal bath. Thefundamental processes of HIsmelt began with early experiments in Germany withbottom-blown oxygen steelmaking converters (LD, LD-AC, KMS, among others)to allow for coal, lime, and/or iron ore injection through the bottom nozzles.iii) Direct Iron Ore Smelting

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(DIOS) process in Japan and the AISI direct steelmaking process in North Americaproduced two similar routes to hot metal production. Both processes utilize asmelting reactor where the primary reactions occur in a deep slag bath as opposedto in the metal phase.

3. Opportunities in the field-India has geared up for rapid expansion in the field of infrastructure. TheGovernment of India (GoI) has earmarked Rs.1, 70,000 crore for infrastructuralspending for the fiscal year 2010- 2011 and the trend is set to escalate up to thefiscal year 2025 when India is slated to become the third largest economy in theworld. Further many private players either independently or by undergoing publicprivate partnerships (PPP) has also come into the fray. The consumption of steelhas been steadily increasing with the rapid investment in the infrastructure and realestate projects. The annual steel production of India has touched 200MT and

according to governments steel policy is expected to touch around 250 MT by2013-2014. The demand for Indian made steel is escalating overseas out of the 200MT of steel currently produced in India around 50% of it is exported. In the firstsix months of the fiscal year 2009-2010 the Indian steel export almost doubled to9.3MT from 4.4MT in the same period the previous fiscal year. The country‟s ironore exports during April-October 2009 period grew 20 per cent over the year agoperiod to 53 million tons.

4.Acquisition opportunities -

In the aftermath of the financial tsunami various mineral assets are availableglobally at a price which is just a shade of their prime valuations. The government

of various countries has been putting up coal blocks under the hammer. Tata Steel

has been very active in the asset acquisition space and has bagged various coal

blocks in Asia, Africa etc. which is essential for its security of raw materials.

5.Opportunities for demand of higher prices

- The demand for steel is on arise both domestically and internationally as a resultof the enhanced focus upon infrastructural development. Secondly with other steel

projects of international giants POSCO, ARCELOR MITTAL stalled due to landacquisition problems the prices of steel are slated to soar. In the month of April2010 the steel prices were increased by Rs.2500/ton and this is just the brink of theU-Shaped economic recovery and the prices are slated to rise further in the nearfuture.

6. The movement of Tata Steel in the value chain front-

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India is the only country in the world where steel can be made cheaper and there isconsumption. Then there are other countries like Ukraine, Iran, Brazil, Australiaand Bangladesh where steel can be made cheap because of the availability of ironore and coal. Tata Steel has been to Iran, Ukraine, Bangladesh - all in the last year

and is looking at China for finishing capabilities Ukraine is like India, where thefactors of production are competitive. The sustainable level of demand in Ukraineis 12 million tons (MT),but one can make much more steel because of theavailability of ore. Secondly, the labor is cheap in India and so is the cost of energy.Hence, Tata Steel's strategy is based on breaking up this value chain and puttingeach part where it's the most cost-effective. So primary steel will be produced inIndia, where there are large deposits of iron ore. But the Asian markets, now a keyfocus for Tata Steel, will be better addressed by taking the semi-finished steel tothese countries for finishing and then selling there. For now, Jamshedpur will

provide the semi-finished steel for the NatSteel bases. Tomorrow, it could wellcome from Iran or Ukraine; these countries have abundant iron ore and aretherefore ideal for primary steel making.

7 . I m p r o v e m e n t i n t h e q u a l i t y o f o p e r a t i o n s , p r o d u c t s ,i n v e n t o r y management –  

7.1 Strategic Sourcing ApproachTata Steel‟s approach is based on the principle that strategic procurement is an

exercise beyond cost reduction. Commodities used for steel-making processes andtheir allied services are being selected and prioritized for study using strategicsourcing tools, before their annual procurement, depending upon their annual purchasevalue and criticality of application. After the selection of the commodities, aCommodity Competence Team(CCT) is formed which is a cross-functional teamwherein people from different departments such as User/Operation, Research andDevelopment, Quality Control, MRO, Supply Management and Finance cometogether to formulate sourcing strategies for a commodity purely on a techno-commercial basis. After the formation of the CCT, the commodity studies arecarried out based on different technical and commercial parameters as

7.2 Strategic Sourcing Levers

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Strategic sourcing requires the application and interpretation of sophisticatedstrategic sourcing tools and techniques. Tata Steel follows a variety of sourcingstrategies, as shown in Figure 5, with multifarious objectives which are mentioned

 below:• Decrease specific consumption and specific cost of commodities on life-

cycle costing basis.• Source consistent quality products.• Ensure continuous supplyof materials.• To increase the productivity of blast furnaces or steel-Melting shopsby decreasing the down time through the use of improved quality, cost-effectivematerials, wherever applicable.

7.3 Total Refractory Management ConceptTo ensure the quality of refractory, proper service and the life of cast house

runners which are directly related to the hot metal production and also to decreasethe total cost of ownership on a life-cycle costing basis, a strategic decision wastaken to go for „total refractory management‟. In the total refractory management

of cast house troughs for high-capacity blast furnaces, the supplier is responsiblefor the supply of the entire refractory material for all the locations of cast housetroughs, initial installation, regular supervision, maintenance of troughs throughcasting till guaranteed throughput hot metal is achieved and the supply of all kindsof equipments required for installation and maintenance of cast houses.

7.3.1 Vendor Selection through comparative assessmentA comparative analysis of the suppliers was carried out based on parameters,which includes total throughput commitment of hot metal, throughput of hot metalcommitted in between two repairs, total down time of trough runners, a referencelist of a supplier‟s customers, quality of refractory to be used and life-cycle cost of refractory in terms of Rs/ ton of hot metal (Rs/thm).

7.3.2 Reduction of Life-cycle cost

A reduction of the total life-cycle cost. Of refractory, in terms of Rs/thm, hasbeendone by proper selection of material, optimization of its amount toachieve theguaranteed throughput and finally by knowledge-basednegotiation.

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7.3.3 Benefit to Tata Steel• Reduced down time of the trough runners leading to higher rate of production.• Reduced specific consumption of refractory in terms of kg/thm.• Reduced overall cost of ownership due to higher campaign life of refractories andalso due to higher rate of production, as the productivity of the blast furnace

largely depends on the quality of refractories used at the cast house. DifferentSourcing Levers Applied for Procurement of High Value and Critical Commodities

8. Time for diversification-With the demand for various products of steel soaring presents us with the right time forupstream diversification.

Threats faced by Tata Steel- 1. Resources to cushion the from business environmental change-

Tata Steel is a company floated by Tata Sons whose assets are valued at

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 Fig 5

around 108 billion USD and thus the company has enough reserves to cushion itself from market fluctuations.

2. International competition-Companies like the Indian Steel magnate Lakshmi Mittal‟s Arcelor Mittal, Posco has landed in the shores of India and have proposed to set up 8 MT and 12 MT

respectively. These are amongst the largest steel producers in the world and have ahigh chance of eating into the market share of Tata Steel. Indian market is alsoplagued with cheaper Chinese made steel which is ubiquitously available and issignificantly munching through the pie of all Indian steel makers including TataSteel.

3. Financial Crises -Tata Steel is having a huge debt of 10.2 billion USD in its books and hence a huge

interest burden. With the volatility of the financial markets and the tightening of 

the liquidity by the central banks this rate is slated to go up and hence wouldfurther increase the interest burden of the company.

4. Adoptability of the company to technological changes –  Tata Steel has shown immense integration abilities in the past. With the

acquisition of it has been able to imbibe the high end technological knowledge to

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its production facilities and hence has been able to produce high quality steel atleast prices and significantly bettered its operating margins.

5. Regulatory norms-

The government of India has chalked a strict norm for the clearance of a plantthrough environmental impact assessment(EIA). To get clearance from theconcerned authority demands more than eight months thus leads to delay and

 project cost escalation. Albeit the governments‟ steel policy has been pro industry

in order to increase the steel capacity at a brisk pace.

6. Adverse effects of land acquisition picketing-India is plagued with violent agitation against land acquisition. The landacquisition process of the company‟s plant in Orissa has been stalled primarily dueto the uprising of the land losers in the concerned area. Albeit the company is

providing with attractive compensation packages, the uprising is primarily due tothe cheap politics of the local leaders to come into the limelight. This will severelydent the company‟s expansion plans of the future. 

7. Decrement in the sales volumes-Some of the Tata Steel products(like aerospace steel) have witnessed a severereduction in sales and as a result of which the production facilities of the companyin the UK and The Netherlands is facing the brunt of shut down.

8. Brand equity of the products-Tata Steel brand is a very powerful one, can only take a product very far. Beyondthat it will be necessary for the product to strike ahead with its own brand. He says,"A villager who goes to buy steel in the marketplace does not know what TataSteel is bringing to this steel. All he knows is that it is a Tata product." Thatvillager needs to be told about the superiority of Tata Steel‟s product over others.

This is the work of the brand. Branding has begun to yield rich dividends. Lastyear Tata Steel sold about 345,000 tons of branded steel, which represented about12 per cent of its total steel sales, as against 265,000tons, representing 9 per cent of total steel sales, the previous year. This year the company plans to more than

double its volume of branded steel. Although the resultant increase in turnover of branded products will be enormous, there are miles to go before Tata Steel can reston its laurels.

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SWOT Analysis of Tata Steel 

Four quadrants of SWOT analysis are strengths, weaknesses, opportunities and threats.

 SWOT analysis is an examination of the strength, weakness, opportunities and threats faced by a companyduring its phase of operation. A SWOT analysis is important for Tata Steel to evaluate its current positionand formulate strategies to tackle its competitors.

1. Strengths of Tata Steel

o  Tata Steel is the pioneer of steel business in India and thus enjoys brand equity.Tata Steel has a multiple companies under the same banner, which gives it anadvantage of value-chain efficiency, whereby the company can utilize productsmade in its sister companies to process raw materials and increase efficiency.

Weaknesses of Tata Steel

o  The biggest weakness of Tata Steel is its increasing debt-to-equity ratio. Most ofits assets are financed by debt, which can be dangerous in the long-run. TataSteel largely depends on domestic and a few international markets for generatingbusiness. This over-dependence can prove to be fatal in times of economic

crisis.

Opportunities for Tata Steel

o  Tata Steel is branching out to overseas market. The company has recentlysigned a deal with Corus group, which provides access to European markets.Tata Steel will now be in a position to utilize the R&D facility and the patentsowned by the Corus group. Exposure to new technologies and markets is a bigadvantage for the company.

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Threats to Tata Steel

o  In the current scenario, the biggest threat for Tata Steel is to maintain the Co2emission standards when it starts its operations in Europe. The sudden overseasexposure along with a possible economic slowdown is the biggest challengefaced by Tata Steel in the present circumstances.

Strategy of SWOT Analysis  

 Successful businesses are a result of strategic planning, extensive analysis and carefully planned decisions. Businesses that consider every detail and attempt to foresee unexpected circumstances take the upper hand inlong term survival and overall growth. Once of the most important considerations for a business is its SWOT analysis. SWOT is an acronym for the analysis of Strengths, Weaknesses, Opportunities and Threats.

1. Strengths

o  Understanding the power and effectiveness of your businesses is the first step toSWOT analysis. You must understand not only what your company's strengths

are, but how or where the company gets the strength. If analysis shows that yourcompany excels in selling purple cloth, for instance, but is poor at selling yellowcloth, you must consider the strength of the purple cloth and understand why youexcel in that product. Consider the area of customer concentration for eachproduct and the staff that produces the cloth. If the purple department is separatefrom the yellow department, what does the purple department do differently thatmakes their product better? Make a SWOT checklist as your research yourinformation. List your strengths and sub list the reasons for the strengths.

Weaknesses

o  To truly excel in business, regardless of the industry, you must have a clear

understanding of your company's weaknesses. Start internally, reviewingstruggling areas of business. Why are these areas producing or selling less thanother departments in your business? What limitations or restrictions does thecompany encounter when attempting to produce? These areas are importantconsiderations, and resolutions and alternate options should be considered toresolve or improve the weakness. For instance, at one point, Dell's SWOTanalysis pointed out that many customers sought out additional PC accessories,software and televisions to complement their Dell system purchases. This meant

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that their customers left their store or site and purchased accessories fromcompetitors. SWOT must always be considered from the customer's standpointin order to effective for the company. Dell's analysis showed that their customerswere annoyed by the inconvenience of searching out these additional items withother companies. In turn, Dell lost the business of these potential purchases. The

declared resolution to this weakness was to introduce a line of accessories,printers, televisions and software to meet the customer's needs in oneconvenient location.

Opportunities

o  With good analysis, a company's opportunities can be presented while reviewingyour SWOT weaknesses. Understand the weaknesses and present resolutions.The opportunities represent the favorable conditions that could produce positiveaspects for the company. They are situations that exist but must be acted upon inorder for the company to see a benefit. In our example, we find Dell's weaknessor its lack of product offerings turning into an opportunity to introduce newproducts and services. The weakness' resolution to introduce new products onlybecame an opportunity because Dell acted upon the favorable conditions.

Threats

o  Threats in SWOT analysis are barriers that prevent the company from reachingits goals. Unlike opportunities, threats must be acted upon in order to prevent thecompany from limiting it capabilities. Threats can be environmental forces,industry competition or economy changes, just to name a few. One of Dell's

threats is its competition with other competitive and equally qualified server andtechnology companies. As the Dell Company grows, it continues to strive tomaintain its position as one of the best companies with the most advancedtechnology. One effort many technology companies currently strive for is toprovide green technology that uses reduced power and recyclable parts. Dellcontinues to develop and introduce their green items to maintain itscompetitiveness amongst its competitors.

Analysis Review

o  Once you have considered and mapped your company's strengths, weaknesses,

 

opportunities and threats, you will begin to determine what steps you can take to

improve its overall standings. If you have more strengths than weaknesses andmore opportunities than threats, your company is well on its way to success. Ifyou find that your company's SWOT leans more to the weakness and threataspects, you have many considerations to undertake. Either way, you musttackle your weaknesses first. Try to turn your weaknesses into opportunities.Gather your opportunities and take action on them. Introduce new products orservices or tweak existing ones. Always consider your analysis from a customerstandpoint. This will help you to increase your potential of success and customer

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demand. Attempt to eliminate your threats by understanding why they arethreats. If, for instance, your biggest threats are industry competition, take stepsto understand what the competition does better or differently than your companyand make the appropriate adjustments. Customer surveys and feedback helpgreatly in SWOT analysis. Speak with customers to understand their opinions.

LABOR MARKET:- The market in whichworkers compete for jobs and employerscompete for workers. Itacts as the externalsource from which organizations attractemployees. These marketsoccur becausedifferent conditions characterize differentgeographical areas,industries, occupations,and professions at any given time.

Labor Market Related Terms

1- Labor Market:A labor market is defined as a pool of all potential workers whocompete for jobs. It also

includes the employers who competefor workers. Labor markets are based on the supplyanddemand of labor in a country or a specific location that are ableand willing towork.

2- Labor Force:Labor force includes all persons classified either as employed orunemployed

during a specified period of time, usually a day ora week. Labor force can becategorized as self-employed, wageand salary earners, casual workers and unemployed.

3- Casual Workers:Casual workers are those workers who are generally employed bysmall

entrepreneurs on daily or weekly basis on a low wage rate.They are not entitled toany paid holiday leave or paid sick leaves.

4- Unemployed persons:

The persons in the labor market who are without work, that is, without paidemployment or self-employment and are currently either available for work or areseeking any work are considered to beunemployed.

5- Employment rate:It is ratio of employed persons to the total labor force. It is the percentage of 

working age people who have jobs or are employed.

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6- Labor force participation rate:It is the number of persons in the labor force as a percentage of the working-age population. The working-age population is the population above a certainreferenceage like 15 years old and over or 15 – 64, etc

7- Unemployment rate:It is the ratio of unemployed people to the total labor force

8- Underemployed persons:who are employed, but not in the desired capacity, whether in terms of compensation,hours, or level of skill and experience. The skills of such persons areunderutilized,for example paying low wages to a highly skilled employee.Underemploymentalso refers to a situation where a major portion of labor force isunemployed.

9- Underemployment rate:It is the ratio of underemployed to either total labor force or total employment.

Labor Market in IndiaThe Indian labor market can be categorized into three sectors:

Rural workers, who constitute about 60% of the workforce

Organized of the formal sector, that constitutes about 8% of the workforce.

Urban unorganized or informal structure which represents the32% of the workforce.

Categories of Labor force

Self Employed Workers

Wage And Salary Earners

Casual Workers

Unemployed Workers

Estimated Increase In Labor Force

The chart below describes the estimated increase in the number of laborsfrom1977-78 to 2004-05. The labor force has grown from 276.3 million to385.5million between 1977-78 and1993-94 showing an annual growth rate of 2.1%.During the year 1999-2000, the workforce was estimated to be 407 million.In2004-05 the labor market consisted of 430 million workers and has grown upto500 million in 2006.

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The Labor Force In Year 2006

It has grown up to 509.3 million out of which 60% are inagriculture, 12% areemployed in industries and theresidual 28% are in services.

LABOUR TURNOVER :

Turnover means “change”. A change in the financialstatus of an organization is called “the

financialturnover”. A change in the number of employees of  an organization is called “The

labor turnover” REASONFOR LABOUR TURNOVER:

Avoidable Reasons

(low job satisfaction, low pay, risky or repetitive worketc.).Unavoidable reasons

(death, retirement, accident, poor health etc.).

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Methods Used To Estimate Turnover:

Every good organization prepares a report of labor turnover to refer and rectifytheavoidable causes of turnover. Below are methods used to estimate

turnover:Average No. = (No. of employees at start + No. of employees at end) / 21- Separation Method/Rate:(Number of employees separated in a period / Average number of employees in the period )* 1002- Replacement Method/Rate:(Number of employees replaced in a period / Average number of employees inthe period) * 1003- Flux Method/ Rate:(No. of employees separated + No. of employees replaced) / Average numberof employees in the period } * 100

Factors could be the cause of a high level of LabourTurnover :

a) Dissatisfaction on account of insufficient wages leading toemployees moving tocompetitorsb) Low level of motivation from employers‟ side and poormorale within the workforce in a

specific industry.c) Recruiting and misplacement of employees resulting intheir mobility in search of suitableemployment.

d) A floating local labour market offering better andmore attractive opportunities toemployees.

HOW TO REDUCE LABOUR TURNOVER

Following action may be taken to reduce labour turnover:Pay Problem – increasing pay scale & improving pay structure toremove inequities

Employees Learning to further their Career – providing better careeropportunities&

ensuring the job, opportunities for training &development program, implementpromotion

Employees Leaving due to Conflict – more effective procedure forhandling

grievances & improving communication, using resolution &teambuildingtechniques, reorganisation of work.

The Induction Crisis – improving recruitment & selection process,ensure job

requirement, developing better induction & initial trainingprogram

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Shortage of Labour  – improving recruitment , selection & training, intoducing better

method of planning & scheduling work smooth out peak loads.

PRESENTEEISM

Presenteeism is a term used by human resource professionals to describecircumstances in which employees come to work even though they are ill, posingpotential problems of infection and lower productivity. When employees go to work sick they risk infecting their co-workers and will most likely not be as effective or productivein their work Stress Shift work.

ABSENTEEISM :In every organisation an employee / worker has some definite working hours withcertain responsibility (work assigned)and if the worker is not present in theirworking hours that called absenteeism in the organisation. FACTORS IN

ABSENTEEISM :Moral

Work schedule flexibility

1- Alternative Work Arrangements2. Compressed Work Week 3. Job Sharing, and4. Telecommuting

CAUSES OF ABSENTEEISM :

  Personal Factors -age, marital status, health, education, hobbies, extracurricular actitvites.

  Work Environment – working conditions, relation with coworkers & seniorsand their attitude

  Home Conditions – distance from residence, mode of conveyance, familysize, family problems & responsibilities

  Economic Issues – subsidiary economic interests

  Regional Aspects – legislations, politics, geographical situations

  Organisational Features – type & size of company, work load, nature of work,shift arrangements, management attitude, personnel policies, leave facilitiesand medical benefits

  Social Reasons – religion, community obligations, customs festivals,marriage and death.

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Absenteeism and Labor Turnover— Presentation Transcript

  1. HUMAN RESOURCE MANAGEMENT IICHAPTER 5: ABSENTEEISM AND LABOUR TURNOVER

  2. CHAPTER 5

  MEANING OF ABSENTEEISM

  Each employer/any organization expectsemployees to be present in work place as pertimings or schedule f ixed for the purposeAny deviation from

the fixed time reportingentails loss to the organization. When an employee fails to report for duty ontime without prior intimation or approval,

thenthe employee is marked as “absent”.

  3. CHAPTER 5 TYPES OF ABSENTEEISM

  Absenteeism is of four types:

  Authorised Absenteeism

  Unauthorised Absenteeism

  Wilful Absenteeism

   Absenteeism caused by circumstances beyond one’s control

  4. CHAPTER 5 FEATURES OF ABSENTEEISM

  The rate of absenteeism is the lowest on pay day and increases considerably on the days following the payment of wages and bonus

Absenteeism is generally high among the workers below25 years of age and those above 40 years of age

  The rate of absenteeism varies from department to department within an organization. Generally it is high in the production department

Absenteeism in traditional industries is seasonal in character

  5. CHAPTER 5 CALCULATION OF ABSENTEEISM RATE

  Absenteeism can be calculated with the help of the following formula:

  Absenteeism Rate

  Frequency Rate

  Severity Rate

  Absenteeism Rate=(Number of mandays lost)/(Number of mandays scheduled to work) * 100

  Frequency Rate=(Total number of times in which the leave was availed)/(Total number of mandays scheduled to work) * 100

  Severity Rate (Total number of days absent during a period)/(Total number of times absent during the period ) * 100

  7. CHAPTER 5 CAUSES OF ABSENTEEISM

  Maladjustment with the Working Conditions

  Social and religious Ceremonies

  Unsatisfactory Housing (conditions at the workplace)

  Industrial Fatigue

  Unhealthy Working Conditions

  Poor Welfare Facilities

  Maladjustment with the Job demands

  Alcoholism

  Indebtness

  Unsound Personnel Policies

  Inadequate Leave Facilities

  Low level of Wages

  9. CHAPTER 5 CATEGORIES OF ABSENTEEISM

  Entrepreneurs

  The Status seekers

  The Epicureans Family-oriented

  The Sick and the Old

  10. CHAPTER 5 SOME MEASURES TO MINIMISE ABSENTEEISM  Selecting the employees by testing them thoroughly regarding their aspirations, value systems, responsibility and sensitiveness

  Adopting a humanistic approach in dealing with the personal problems of employees

  Following a proactive approach in identifying and redressing employee grievances

  Providing hygiene working conditions, welfare measures, fair and competitive remunerations, training and development

  11. CHAPTER 5 LABOUR TURNOVER: MEANING

  External mobility means shifting of employees into and out of an organization.

  It is defined as the rate of change in the employees of an organization during a definite period .

  It measures the extent to which old employees leave and new employees enter into an organization .

  12. CHAPTER 5 TYPES OF LABOUR TURNOVER

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  External mobility is of two types:

  Accessions: Additions of new candidates to the existing employees.

  Separations: Termination of employment or Employee turnover which includes  – 

  Voluntary quitting or resignations by employees

  Layoff or Lack of Work

  Disciplinary Lay-off or Discharge

  Retirement and  Deaths

  13. CHAPTER 5 COMPUTATION OF EXTERNAL MOBILITY

  Rate of external mobility is generally computed in terms of accession rate, separation rate and compose rate

  Accession Rate=(Total Accessions per year)/(Average number of employees for the year) * 100

  Separation Rate=(Total Separations per year)/(Average number of employees for the year) * 100

  Composite Rate = [(Total accessions per year + Total Separations per year)/2] / (Average number of employees for the year ) * 100.

  These formulae are useful to compute and compare the rates with those of other organizations for the same period and of the same organization

for the past years.

  This comparison shows the trends in mobility rates and the place of the organization in the community in respect of turnover.

  It also shows the magnitude of the problem and indicates the effects of external mobility

  15. CHAPTER 5EFFECTS AND CONTROLLING OF EXTERNAL MOBILITY

  Certain degree of external mobility is inevitable and also desirable to enable flow of efficient human resources into the organization

  Though external mobility is for the betterment of the employees in some cases, it causes problems to employees in many cases.

  Personnel managers have to analyze the causes for mobility and find means to control it in view of its adverse effects on the organization and

employees.

  Personnel managers have to analyze the causes of mobility before suggesting measures to reduce it .

  The management has to forecast the vulnerable areas of external mobilit y and apply appropriate measures.

  Reduction of excessive employee mobility by identifying the areas and applying measures is the responsibility of the executives at all levels inthe

organization .

QUESTIONNAIRE 

(1)Name :

(2)Age : (a) Below 35 (b)Above 35

(3)Gender : (a) Male (b)Female

(4)DESIGNATION :

(5)Are the person employed in your organisation are best qualified?(a)YES (b)NO

(6)Do you take necessary steps to retain the deserving employees?(a)YES (b)NO

(7)What type of facilities and oppurturnities provided for thepersonal growth of an employee?(a)Insurance (b)Leave with salary (c)Family benefits

(8)What is the main source of recruitment in your organization?(a)Internal recruitment (b)External recruitment

(9)which of the following preferred the most?(a)Qualification (b)Experience

(10)Is the sufficient job securities provided for the employees?

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(a)YES (b)NO

(11)What will be the main part of absenteeism in your company?(a)Nature of work (b)Lack of interest (c)Poor management system

(12)Women tend to be more absent in you organisation?(a)YES (b)NO

(13)Is the rate of absenteeism is likely to be high in days before and afterholidays

(a)YES (b)NO

(14)Do the employees take extra holidays in addition to the holidaysgiven/permitted by the organization?(a)YES (b)NO

(15)Do the employees come to the office on regular basis?(a)YES (b)NO

(16)Is the work environment satisfactory for the employees?

(a)YES (b)NO

(17)Is the working pattern in your organization satisfactory?

(a)YES (b)NO

Employee Turnover Definition

Employee Turnover is the number of permanent employees leaving the company within thereported period versus the number of actual Active Permanent employees on the last day of the

previous reported period (physical headcount).

The number of leavers, that are included in Employee Turnover, only includes natural turnover(resignations, termination, retirement etc); it does not reflect any redundancies. Plannedredundancies are reported and explained separately if relevant for Employee Turnover.

Formula for Employee Turnover rate: 

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Regretted Employee Turnover Definition 

Regretted Employee Turnover is the number of permanent high potential employees leaving thecompany within the reported period, versus the number of actual Active Permanent high

potential employees on the last day of the previous reported period (physical headcount).

The number of leavers, that are included in Regretted Employee Turnover, only includes naturalemployee turnover (resignations, termination, retirement etc); it does not reflect anyredundancies.

High potential is an employee rated as Meets and Exceeds job requirements and employee who'sreadiness for the job is Ready for Promotion or Fully owns the job with high performance rating.

Formula for Regretted Employee Turnover rate:

Reasons of Employee Turnover

There can be one or more reasons for employee leaving the company. Those reasons are relatedto different factors like job description, salary, organizational culture, local economy, workload,duration on current position, personality etc. One of the predominant reasons for leaving of position is the local economy and ratio of demand for employees and number of employees thatare looking for a job. If there are more jobs available, than the employee turnover rate is higher,since employees are trying to get the better offer.

The Maslow's Hierarchy of Needs explains the structure of human needs. If they are not fulfilled,

 

the employee will look for the environment that will satisfy his/her needs. 

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Healthy Employee Turnover 

 

The Exit Interview shows the reasons of the employee turnover. The

 

employee turnover should be managed by the company in order to keep it at acceptable level.

 

The certain employee turnover is desirable, since the new employees are more motivated and

 

open to demands of their job.

 

Old employees gives experience, but at same time they tend to be more resistant to change and

 

new requirement. The healthy employee turnover depends from the company organisation and

 

business objectives, but anything up to 5% on annual level is acceptable. Too high employee

 

turnover may cause organizational problems, while to low or no turnover is causing lack of idea

 

generation and resistance to changes.