TATA STEEL COMPANY

ECONOMIC ANALYSIS

PROF. MANOJ K. SHARMA

Contents
ACKNOWLEDGEMENT
..1
STEEL INDUSTRY
OVERVIEW
.2
TATA STEEL VISION AND
MISSION
..11
INTRODUCTION TATA STEEL

13

ABOUT

..............13
OPERATIONS
.13
HISTORY
...14
BOARD OF DIRECTORS

..16
SHAREHOLDING

.19
COMPETITORS
.19
CHALLENGES
.20
PRODUCTS
..21

DEMAND
ANALYSIS
.24

CATEGORIES
..24
DETERMINANTS
..............25
KEY MARKET
SECTORS
29
FORECASTING
..34
ANALYSIS OF SALES FOR TATA
STEEL..36
TREND ANALYSIS FOR TATA STEEL FOR 25
YEARS.38

COST
ANALYSIS
39

TYPES OF
COST
.40
25 YEAR ANALYSIS OF TATA
STEEL.4
3

PRODUCTION
ANALYSIS
..50

THEORY
50.
PRODUCTION FUNCTION FOR TATA STEEL
CALCULATION.52
REGRESSION ANALYSIS (CAPITAL AND LABOUR PROPENSITY)
57

MARKET
ANALYSIS
.59

MARKET STRUCTURE FOR

STEEL
59

MARKET SHARE OF TATA

STEEL
.60

CONDUCT
ANALYSIS
62
HUMAN RESOURCE
PRACTICES
62

RECRUITMENT

.62
PERFORMANCE
MANAGEMENT
.62
TRAINING
AND
DEVELOPMENT
..63
EMPLOYEE WELFARE &
PERQUISITES..
63
EMPLOYEE
SATISFACTION
...64
CORPORATE
GOVERNANCE
.64
OCCUPATIONAL HEALTH &
SAFETY.6
5
CORPORATE SOCIAL
RESPONSIBILITY
65

PERFORMANCE

69

PROFIT
ANALYSIS
.69

SWOT
ANALYSIS
.71
PESTEL
ANALYSIS
..73
MICHAEL PORTER'S
ANALYSIS
.74

INDUSTRY OVERVIEW
GLOBAL STEEL INDUSTRY

After a period of sustained weakness and uncertainty, the global economy continues along the
road to recovery and may be on the verge of acceleration. At the end of 2013, global industrial
production indicators showed a definite upswing in
sentiment, with 3% month-on-month growth. This growth is
expected to continue into 2014, with forecast growth of
about 4% compared with 1.9% in 2013. The current global
steel industry is in its best position in comparison to last
decades. The price has been rising continuously. The
demand expectations for steel products are rapidly growing
for coming years. The shares of steel industries are also in a
high pace. There are many more mergers and acquisitions
which overall buoyed the industry and showed some good
results

Global supply and demand

Global steel demand increased by an estimated 3.2% in 2013 as compared to 2012, largely due to
increased infrastructure and construction activity, especially in Asia.
China was the clear driver of global steel demand, recording 6% growth in 2013 compared with
2.9% in 2012. In the rest of the world, however, demand for steel in 2013 failed to meet
expectations and was lower than previously forecast. Despite structural issues and volatile
financial markets in emerging markets, the majority of demand (apparent steel use) was still
propelled by these economies (+4.9%), whereas demand in the EU continued to contract (
3.8%). There was, however, a slight increase in apparent steel usage in North America (+0.2%).
Global outlook for steel
In 2014,global demand is forecast to grow faster at about 3.3%. However, more demand is
expected to come from outside of China as the Chinese Government pushes through economic
restructuring with a focus on private consumption.
With the exception of China, global supply and demand for steel will largely follow economic
growth recovery around the world. In China, a national mandates to rationalize capacity will
have an effect on supply and as the Chinese economy moves to a more consumer-driven model,
steel consumption is expected to be moderate.

OVERVIEW OF INDIAN STEEL INDUSTRY

Introduction
India has become the second best in terms of growth amongst the top ten steel producing
countries in the world and a net exporter of steel during 201314. Steel production in India
recorded a growth rate of 4.8 per cent in February 2014 over February 2013. The cumulative
growth during AprilFebruary, 201314 stood at 4.2 per cent over the corresponding period of
the previous year.
Steel contributes to nearly two per cent of the gross domestic product (GDP) and employs over
500,000 people. The total market value of the Indian steel sector stood at US$ 57.8 billion in
2011 and is expected to touch US$ 95.3 billion by 2016. The infrastructure sector is Indias
largest steel consumer, thereby attracting investments from several global players. Owing to this
connection with core infrastructure segments of the economy, the steel industry is of high
priority right now. Also, steel demand is derived from other sectors like automobiles, consumer
durables and infrastructure; therefore, its fortune is dependent on the growth of these user
industries.
The liberalisation of the industrial policy and other government initiatives have given a definite
impetus for entry, participation and growth of the private sector in the steel industry. Allowing
foreign direct investment (FDI) has been a positive step since India is heavily dependent on
foreign technologies. These foreign technologies generally add life to the plant and production
units, which ultimately lead to the countrys economic growth.

Market Size
Indias real consumption of total finished steel grew by 0.6 per cent year-on-year in AprilMarch
2013-14 to 73.93 million tonnes (MT), according to Joint Plant Committee (JPC), Ministry of
Steel. Construction sector accounts for around 60 per cent of the country's total steel demand
while the automobile industry consumes 15 per cent. India became net steel exporter in 201314
and is likely to maintain the momentum in 2014-15 as producers are looking to dock more
overseas shipment to tide over subdued domestic consumption. Total steel exports by India
during 201314 stood at 5.59 MT, as against imports of 5.44 MT. During the period, Steel
Authority of India (SAIL) clocked a 30 per cent growth in exports and aims to more than double
the shipments to 1 MT in 201415. Rashtriya Ispat Nigam Ltd (RINL), which exported 1 lakh
tonne steel last fiscal, aims to treble that in the current fiscal.
Iron ore export from India has showed a 253 per cent increase during the period October
December 2013, at 3.75 MT as against 1.06 MT in the corresponding period of the previous year,
on the back of the opening of new mines in Chhattisgarh, Madhya Pradesh and Rajasthan, as per
the Federation of Indian Mineral Industries (FIMI).

Investments
India needs investment of US$ 210 billion over the next decade to achieve the steel production
capacity of 300 million tonnes per annum (MTPA) by 2025 from the current 90 MT, according to
Mr C S Varma, Chairman and Managing Director, SAIL. Some of the major investments in the
sector are as follows:

India's third-largest steel maker, JSW Steel, plans to purchase Welspun Maxsteel for
about Rs 1,000 crore (US$ 165.32 million). The acquisition will help JSW secure
continuous supply of cheaper raw material as it plans to expand its capacity at Dolvi,
Maharashtra, to 5 MT to supply in the western and northern markets.
Prize Petroleum, a wholly-owned subsidiary of Hindustan Petroleum Corporation Ltd
(HPCL), has acquired stakes in two Australian hydrocarbon fields for A$ 85 million (US$
79.27 million). The company has entered into an agreement with Sydney-based AWE Ltd
to acquire 11.25 per cent stake in T/L1 area and 9.75 per cent interest in T/18P area.
McNally Bharat Engineering Co Ltd has entered Russia for the first time through a
subsidiary, MBE Coal & Minerals Technologies GMBH. It received an order worth 5.95
million (US$ 8.21 million) from Eurochem Group of Russia for an iron ore mining
project.
Canada has invited Coal India Ltd (CIL) to explore mining opportunities in British
Columbia, Canada. Mr Stewart Beck, Canadian High Commissioner met with Mr N
Kumar, Director (Technical) of Coal India Ltd, to seek investments for coal assets in the

Canadian province. CIL currently holds interests in two assets in Mozambique acquired
through a concession agreement between the African and Indian governments.

Government InitiativesThe Government of India has allowed 100 per cent FDI through the automatic route in the Indian
steel sector. It has significantly reduced the duty payable on finished steel products and has
streamlined the associated approval process.
The government is taking steps to increase industrial activity in Uttar Pradesh (UP). Addressing a
Conference on Demand for Steel in India: The End User Perspective, the Union Minister of
Steel, Mr Beni Prasad Verma said, in order to increase supply of steel to rural consumers,
companies like SAIL and RINL have set up 521 and more than 100 rural dealers respectively in
remote parts of UP.
In order to provide thrust on research and development (R&D), the Ministry of Steel is
encouraging R&D activities both in public and private steel sectors, by providing financial
assistance from Steel Development Fund (SDF) and Plan Scheme of the Central Government.
Under the SDF scheme, 82 R&D projects have been approved with total project cost of Rs 677
crore (US$ 111.92 million) wherein SDF assistance is Rs 370 crore (US$ 61.17 million). Under
the Plan Scheme, eight projects were approved with a total cost of Rs 123.27 crore (US$ 20.38
million) wherein Government assistance is Rs 87.28 crore (US$ 14.43 million).
To encourage beneficiation and pelletisation of iron ore fines in the country, basic customs duty
on the plants and equipment required for initial setting up or substantial expansion of iron ore
pellets plants and iron ore beneficiation plants has been reduced from 7.5 per cent to 2.5 per cent.
Import of critical raw materials for steel industry, such as coking coal, non-coking coal and scrap
are subject to zero or very low levels of custom duty.
More than 3500 different varieties of steel are available in the steel industry of India. These can
however be classified into two broad categories:
Flat Products - Flat products include plates and hot rolled sheets such as coils and sheets. Flat
products are derived from slabs. One of the major uses of steel plates is in ship building.
Long Products - Long products include bars, rods, wires, ropes and piers. These are called long
products due to their shapes. Long products are made from billets and blooms. Long products are
mostly used in housing and construction and also in rail tracks.

Size of the Indian Steel Industry

India's steel production is estimated to be around 100 million tonnes (MT) in 2013 and the
production is expected to reach 275 MT by 2020. The per capita steel consumption increased
from 34 kilograms (kg) in 2004-05 to 59 kg in 2011-12. The World Steel Association has
estimated steel consumption in India to grow at five per cent in 2013. Steel producers may see a
spurt in demand in the medium term if the Indian Government implements its US$ 1 trillion
infrastructure investment plan. India's steel-making capacity is slated to cross 100 MT in 2013
which will require about 160-170 MT of iron ore.
The steel industry is expected to add 12.8 MT of capacity in the second half of 2012-13, with the
major contributors identified as SAIL, RINL Tata Steel, Bhushan Steel and Jindal Steel. Indian
crude steel production is estimated to grow at a compound annual growth rate (CAGR) of around
10 per cent during 2010-2013, whereas the finished steel consumption is estimated to grow at a
CAGR of around 12 per cent during FY 2012-14, as per a RNCOS research report.
Some of the major reasons that have led to the growth in the size of India's steel industry
a. Abundant availability of iron-ore in India.
b. Good facilities for steel production.
c. Increased consumption of steel in the sectors like construction, automobile and
infrastructure.
FOREIGN DIRECT INVESTMENT
The foreign direct investment in India being made in the steel industry of India has been picking
up in the recent years as a result of the immense growth potential of the country's steel industry.
In the Asian continent India is second only to China in terms of growth potential. The gross
domestic product of India has increased in the recent times.
This has sparked off the demand for production of steel in the country and the production has
increased as well. In the recent times India has been among the top producers of crude steel of
the world. All these factors are supposed to be important for attracting foreign direct investment
in the Indian steel industry. The Indian national government also has been pretty liberal with
their approach to the foreign direct investment being made in the country. The Indian

government

has

also

foreign investment laws. This has led to more international steel giants coming to India to tap the
abundant resources present in the country.
Steel projects. These projects have been funded by the Indian national government, as well as, a
number of companies that are forces to reckon with in the context of the Indian .The increased
interest shown by such companies has led to a growth in the steel industry of India.
Research and studies have shown that Orissa and Jharkhand would be the steel junctions of
India. In the recent times these two states, which are located in the eastern part of India, have
been experiencing a number of steel industry. Since, the government has also been taking steps
to make sure that the production and demand for Indian steel remains high in the international
market; it may be assumed that an increasing number of companies from around the world would
be interested in the Indian steel industry

STEEL INDUSTRY TRENDS

Steel Industry trends are not at all static but are rather very dynamic. The country that is
producing the maximum amount of steel may not be in the first position in the coming years.
Analysis of the Steel Industry trends show that from the period starting from 1910 till the year
1960, the first position in terms of producing the largest amount of steel in the whole world was
captured by United States of America. During this period it was observed that almost half of the
total steel production around the globe was produced in USA. But the scenario started to change
after the countries like Japan and China came to the fore. Again, in the recent years,
India as well as Brazil has shown tremendous performance in the steel production side.
According to the recent Steel Industry trends, China is the largest steel producing nation. But it
has also been seen that the production of quality steel in China is very low. Thus, they have to
import large quantities of the same from the foreign countries, especially Brazil. Very recently,
the Indian Steel company called TATA Steel has acquired the fifth largest steel company of the
world called Corus and consequently came up from 6th to 5th position.
Merger and acquisition is becoming a Steel Industry trend in the recent times. The biggest M&A
venture that took place recently was the one where the Rotterdam (Netherlands) based steel
company called Mittal Steel bought the erstwhile steel giant Arcelor. This acquisition has led to
the formation of the largest steel company of the recent times called Arcelor-Mittal Steel
Company.
Steel Industry trends also show that a downsizing in the steel industry is a common phenomenon
all round the globe. This phenomenon has arisen due to the fact that this industry has shifted

from its earlier stance of being a labor intensive one to a capital intensive one. The recent trend
of M&A has enhanced its pace.
Steel Industry trends in the case of prices have also shown high rate of growth and the main
factor acting behind it is excess demand for steel generated by the construction, automobile and
infrastructure industries.

TATA STEEL LIMITED

Vision
Aspire to be the global steel industry benchmark for Value
Creation and Corporate Citizenship.

We make the difference through:

Our People
By fostering teamwork, nurturing talent, enhancing leadership capability and acting with pace,
pride and passion.
Our Offer
By becoming the supplier of choice, delivering premium products and services and creating
value for our customers.
Our Innovative Approach
By developing leading edge solutions in technology, processes and products.
Our Conduct
By providing a safe workplace, respecting the environment, caring for our communities and
demonstrating high ethical standards.

Mission
Consistent with the vision and values of the founder Jamsetji Tata, Tata Steel strives to
strengthen Indias industrial base through the effective utilization of staff and materials. The
means envisaged to achieve this are high technology and productivity, consistent with modern
management practices.
Tata Steel recognizes that while honesty and integrity are the essential ingredients of a strong
and stable enterprise, profitability provides the main spark for economic activity.
Overall, the Company seeks to scale the heights of excellence in all that it does in an atmosphere
free from fear, and thereby reaffirms its faith in democratic values.

INTRODUCTION:

Company Profile
Tata Steel has in its lineage some of the worlds most pioneering and respected entities the Tata
Group itself, British Steel, Koninklijke Hoogovens and Natsteel. What binds together every
member of the global Tata Steel family is a shared corporate culture, shaped by value-based
guiding principles that underpin every business decision.

About Tata Steel

Tata Steel, the flagship company of the Tata group, has a crude steel production capacity of
nearly 30 million tonnes per annum (MnTPA). A Fortune 500 Company, the Tata Steel Group is
the worlds second-most geographically diversified steel producer, employing over 80,000
people in nearly 50 countries. The Tata Steel Group recorded a turnover of US$ 24.81 bn in the
year ended March 31, 2014.
The ascent of Tata Steel over more than a century owes its origin to the efforts of its illustrious
Founder, Jamsetji Nusserwanji Tata, and the remarkable leaders who have, thereafter, provided
stewardship to the Company.
From the very beginning, the Company has pioneered several employee welfare policies long
before they were mandated by law. Tata Steels journey of industrial harmony of over 85 years
owes a lot to its unique concept of workers participation in management.

Indian Operations
Tata Steel founded Indias first industrial city, now Jamshedpur, where it established Indias first
integrated steel plant in 1907. The Jamshedpur Works currently comprises of a 9.7 mtpa crude
steel production facility and a variety of finishing mills.
Three new Greenfield steel projects in the states of Odisha, Jharkhand and Chhattisgarh are
underway to augment production capacity further by 23 mtpa.
Mines and collieries in India give the Company a distinct advantage in raw material sourcing.
Iron Ore mines are located at Noamundi (Jharkhand) and Joda (Odisha) both located within a
distance of 150 km from Jamshedpur. The Companys captive coal mines are located at Jharia
and West Bokaro (Jharkhand).

European Operations
Tata Steel Europe (erstwhile Corus) has a crude steel production capacity of 18 mtpa. Tata Steel
Europe has manufacturing operations in Western Europe, plants in UK, Netherlands, Germany,
France and Belgium, backed by a sophisticated global network of sales offices and service
centres.

South East Asian Operations

Tata Steel started its operations in SEA in 2004 with investments in NatSteel Singapore (Tata
Steel Singapore) and Millennium Steel (Tata Steel Thailand).
With over 40 years of Steel making experience, Tata Steel Singapore is one of the most
prominent steel producers in the Asia Pacific region. It caters to the growing construction
industry through its manufacturing presence in Singapore, Thailand, China, Malaysia, The
Philippines, Vietnam and Australia.
Tata Steel Thailand is the largest producer of long steel products in Thailand.

A Century of Trust
The origins and ascent of Tata Steel, which has culminated into the century long history of an
industrial empire, emerge from the illustrious efforts of India's original iron man and the
remarkable people who thereafter, have kept the fire burning.

The story of Tata Steel is a century old. And so is the story of steel in India. Etched with the
visions and hardships of a single man, the story has flowed through ages to re-define steel in
every way. The saga, which started in 1907, completed a century of trust in 2007 and carries on.
Over the years this one company has discovered different avenues of effective steel utilisation
and its story defines and re-defines conventional wisdom in more ways than one.
As India was left slightly dazzled and overwhelmed in the wake of the Industrial Revolution in
England the leading Indian intellectuals of the 19th century believed that if India were to keep
pace with the world it would have to master the modern scientific methods of the West.

Tata Iron & Steel company was established by DORABJI TATA on 25 August,1907,as Asias
first integrated private sector steel company.
By 1939 it operated the largest steel plant in the British Empire .Launched a major mobilization
and expansion program in 1951.
Tata Steel Group is among the top ten global steel companies with an annual crude steel capacity
of over 29 million tones per annum.
Now the worlds second most diversified steel producer ,with operations in 26 countries.

BOARD OF DIRECTORS

Mr. Cyrus P. Mistry

CHAIRMAN,
independent,
Executive Director,

NotNon

TATA SONS

Mr. B. Muthuraman

VICE- CHAIRMAN, Notindependent, Non-Executive

Director, TATA SONS

Mr. Nusli N. Wadia

Independent,
NonExecutive Director, TATA
STEEL LTD

Mr. Jacobus Schraven

Independent,
NonExecutive Director, TATA
STEEL LTD

Mr. Andrew Robb

Independent,
NonExecutive Director, TATA
STEEL LTD

Mr. O. P. Bhatt

Independent,
NonExecutive Director, TATA
STEEL LTD

Mr. T.V.NARENDRAN

Managing Director, TATA

STEEL INDIA and SOUTH
EAST ASIA

Mr. Ishaat Hussain

Not-Independent,
NonExecutive Director, TATA
STEEL LTD

Mr. Subodh Bhargava

Independent, Non-Executive
Director, TATA STEEL LTD

Mrs. Mallika Srinivasan

Independent, Non-Executive
Director, TATA STEEL LTD

Mr. D. K. Mehrotra

Independent, Non-Executive
Director, TATA STEEL LTD

Dr. Karl-Ulrich Koehler

Managing Director
Chief Executive
Officer,
TATA
EUROPE

Mr. Koushik Chatterjee

and

STEEL

Executive Director
Group Chief

and

Financial and Corporate,

TATA STEEL LTD

SHAREHOLDING

As on 31 March 2013, Tata Group held 31.35% shares in Tata Steel. Over 1 million individual
shareholders hold approx. 21% of its shares. Life Insurance Corporation of India is the largest
non-promoter shareholder in the company with 14.88% shareholding.

Shareholders

Shareholding

Promoters: Tata Group companies

31.35%

Insurance Companies

21.81%

Individual shareholders

22.03%

Foreign Institutional Investors

15.35%

GDRs

02.41%

Others

07.05%

Total

100.0%

COMPETITORS
The major competitors of TATA STEEL are :

CHALLENGES BEFORE INDIAN STEEL INDUSTRY

a. The experts are also of the opinion that not enough policies or measures have been adopted to
amend the situation in of the infrastructural facilities available in the steel sector. Even though
India is capable of producing steel at a good rate and also increase the volume of production there
is not enough land available to support such activities. One of the major reasons for such
problems is the consistently increasing population of India.

b. The design institutions in India have not been successful at recruiting the best of engineers and
metallurgists in India. This has affected the technological aspect of the Indian steel industry. The
experts are of the opinion that this issue has to be countered in order to reduce the dependence on
the overseas technological assistance. The steps taken by Tata Steel are instructive in such a
context. The company has been increasing public awareness about the steel industry through
books and educational sessions at the Indian Institute of Technology at Kharagpur.

c. The experts are also of the opinion that not enough policies or measures have been adopted to
amend the situation in of the infrastructural facilities available in the steel sector. Even though
India is capable of producing steel at a good rate and also increase the volume of production there
is not enough land available to support such activities. One of the major reasons for such
problems is the consistently increasing population of India.

d. The design institutions in India have not been successful at recruiting the best of engineers and
metallurgists in India. This has affected the technological aspect of the Indian steel industry. The
experts are of the opinion that this issue has to be countered in order to reduce the dependence on
the overseas technological assistance. The steps taken by Tata Steel are instructive in such a
context. The company has been increasing public awareness about the steel industry through
books and educational sessions at the Indian Institute of Technology at Kharagpur.

TATA STEEL PRODUCTS

TYPES OF PRODUCT

AGRICULTURAL IMPLEMENTS-TATA STEEL manufactures superior quality agricultural

implements through its Agrico division from TATA high carbon Steel, after using a single piece
by forging. The high quality of the product makes them the 1 st choice in agricultural equipment
procurement both in public and in private sector.

Agricultural implements (Source: Internet)

BEARING-A wide variety of bearing and auto assemblies are manufactured at TATA STEEL at
its bearing division with a production capacity of 30 million bearing division with a production
capacity of 30 million bearing numbers per annum. TATA bearing and auto components happen to
be the preferred choice of the key players in the targeted industry segment.

Bearing (Source: Internet)

LAT PRODUCT-Galvanized corrugated sheets under brand name TATA Shaktee has been
consistently delivering on its promises of longevity and strength TATA STEELUM, another
product of the plant product division happens to be the worlds branded cold rolled steel and has
a strong presence in the retail segment through exclusive shops called Selenium zones.

LONG PRODUCT-Thermo Mechanically Treated (TMT). Rebar from the long Product Division
are produced under the brand name Tiscon and are the 1st of its kind to have been introduced in
India Tiscon has been the 1st rebarin the country to be awarded the super brand status in the
constant rebar category.

Long Products (Source: Internet)

PLANT AND EQUIPMENT-Multidisciplinary engineering approach for design manufacture

and supply of high precision equipment is offered to various industry sector by TATA STEELs
growth shop division services include erection and commissioning of all types of equipment in
plants and industrial building in addition to a wide variety of jobs in matching and assembly.

Plant (Source: Internet)

RAW MATERIALS-With a century of experience in sourcing raw material through scientific

research and development and sustainable mining, TATA STEELs three main areas of raw
material, operation are iron- ore, chromites and coal. The companys long term strategy has been
designed to have greater control over raw material.

Raw Material (Source: Internet)

TURBO-Pipes manufactured by the companys strategy business unit TATA TUBES, is the most
prominent brand in the industry today which is retailed through a wide distribution network. A
deeply thought out branding exercise was under taken in order to unleash the power of the TATA
PIPES brand in the welded steel.

Turbo (Source: Internet)

WIRES- Steel wires under the brand name TATA Wiron compromise 30% of market share of the
organized wire market in India. A wide range of wires manufactured by TATA STEELs wire
division cater to the needs of the various industry segments such as automobiles, infrastructure,
power and general engineering.

Tata wires

DEMAND ANALYSIS:
Demand is defined as that want,need,or desire which is backed by willingness and ability to buy
a particular commodity ,in a given period of time.Categories of demand:
i) Direct and Derived Demands
Direct demand refers to demand for goods meant for final consumption; it is the demand for
consumers goods like food items, readymade garments and houses. By contrast, derived demand
refers to demand for goods which are needed for further production; it is the demand for
producers goods like industrial raw materials, machine tools and equipments.
ii) Domestic and Industrial Demands
The example of the refrigerator can be restated to distinguish between the demand for domestic
consumption and the demand for industrial use. In case of certain industrial raw materials which
are also used for domestic purpose, this distinction is very meaningful.

iii) Autonomous and Induced Demand

When the demand for a product is tied to the purchase of some parent product, its demand is
called induced or derived.
For example, the demand for cement is induced by (derived from) the demand for housing.
Autonomous demand is not derived or induced. Unless a product is totally independent of the use
of other products, it is difficult to talk about autonomous demand. In the present world of
dependence, there is hardly any autonomous demand. Nobody today consumers just a single
commodity; everybody consumes a bundle of commodities. Even then, all direct demand may be
loosely called autonomous.

iv) Perishable and Durable Goods Demands

Both consumers goods and producers goods are further classified into perishable/nondurable/single-use goods and durable/non-perishable/repeated-use goods.

v) New and Replacement Demands

If the purchase or acquisition of an item is meant as an addition to stock, it is a new demand. If
the purchase of an item is meant for maintaining the old stock of capital/asset, it is replacement
demand. Such replacement expenditure is to overcome depreciation in the existing stock.

vi) Final and Intermediate Demands

This distinction is again based on the type of goods- final or intermediate. The demand for semifinished products, industrial raw materials and similar intermediate goods are all derived
demands.

vii) Individual and Market Demands

This distinction is often employed by the economist to study the size of the buyers demand,
individual as well as collective. A market is visited by different consumers, consumer differences
depending on factors

viii) Total Market and Segmented Market Demands

This distinction is made mostly on the same lines as above. Different individual buyers together
may represent a given market segment; and several market segments together may represent the
total market.

x) Company and Industry Demands

An industry is the aggregate of firms (companies). Thus the Companys demand is similar to an
individual demand, whereas the industrys demand is similar to aggregated total demand. You
may examine this distinction from the standpoint of both output and input.

DETERMINANTS OF DEMAND
Price of the product

As the price of the cement product goes up, the demand goes down as
people postpone their house or building constructions.

Price of Competitor Products

As there are many no. of buyers and sellers consumers shift to other
brands as price of one rises.

Price of other construction goods

As cement is used as a raw material for construction, as the prices of

other materials go up the demand of cement goes down as the
construction is postponed due to non-profitability.

 Housing and corporate lending policy

If government provides easy housing finance and corporate finance at

affordable prices, people are able to buy more real estate and this
indirectly increasing the demand for cement.

Infrastructure development policies

As the govt. spends more on basic infrastructure such as roads,
schools housing, healthcare etc. the demand for cement also goes up
as it is required in building them.

Distribution of national income

More rational distribution of national income among people promotes
more spending on housing etc. thus increasing demand for cement
products indirectly.

Availability of land

All infrastructure development requires land acquisition. If land is

easily available it increases development and investment on
infrastructure thus increasing demand for cement.

Cement demand - High correlation with GDP

Cement demand is directly linked to economic activity. Since
infrastructure investments and construction activity, which are the
main drivers of cement demand, are key components of GDP, cement
demand growth has high correlation to GDP growth. Further, housing
(both rural and urban), also a determinant of cement demand, depends
on agricultural productivity and income levels, which are again a key
components of GDP.

Shift in population profile

Continued growth in population and change in population profile also

effect on the demand of cement. Based on decline in average age of
home purchasers coupled with higher income levels, we believe that
the population within the 25-44yr age group is critical to the growth in
housing demand as well as the cement demand will also increase.

Income Level
Strong economic growth helps boost disposable income. This coupled
with easy availability of finance enables households to migrate from
nonpucca houses to urban pucca housing and results in increase in
demand for larger houses, thereby raising average size of dwelling

units. Thus it will also increase the demand of cement as it is the main
component of building houses.

Infrastructure development
The demand of cement industry depends on infrastructure facilities in
the field of coal & power supply and rail transportation for its
sustainable development. Good number of large infrastructure
construction projects like Bridge, Flyovers, and highways are on the
pipeline. So there is a huge demand of cement for this type of
infrastructural development.

Access of loan/finance
The expansion of mortgage lending and construction reflects a greater
demand for infrastructure building, to be beneficial for the cement
industry. Now-a-days many financial institutes are providing home
loans and commercial loans, which may help to boost up the demand
of cement.

Price level
Cement is almost a price inelastic product as it does not have any
close substitute in the short run. So if it is required to build something,
then the demand of cement is must, no matter whatever the price is.
Moreover, the pricing of cement of various players in the industry are
very close to one another. The model of industry competition has led to
a remarkable stability in cement prices in recent years, encouraging
greater demand.

Fiscal incentives and development plans

Fiscal incentives and development plans helps to continue boosting
cement demand. Fiscal incentives granted by the Government have
provided boost to housing demand. Additionally, emphasizing on ADP
(Annual Development Plan) which includes developing the roads and
contractions, schools, hospitals etc, which will increase the demand for
cement.

Business opportunities

Providing incentives for the foreign investors (EPZ). While construction

activity and housing market have attractive returns on investment,
encourage the entry of investors and construction companies. This can
be a positive determinant of the demand of cement.

Seasonality

Cement demand declines during the monsoons due to a slowdown in

construction activities. On the other hand, though the yearly capacity
of the industry is saturated with overcapacity, market demand gets
matched or cross the effective capacity during the first 5 to 6 months
of the year.

Competition

In cement industry there is an intense competition among players

regarding price due to homogeneous product. So, if the price of the
imported cement decreases, then the demands of local cement will
decreases and vice-versa.

Price of related goods

There is no "Substitute" for Cement. Steel can be used in construction
but in limited extent due to its high cost. On the other hand, in rural
areas of the country that may use "quincha" (a mixture of straw and
mud), but it cannot be matched with the quality of cement.

Taxes and Tariffs

The multinational cement companies are at an advantage because

they import their own clinker. They just need to pay the import duty
and taxes. They also have an advantage as the government allows
them to import at a very low cost if the work is done for the
government. But the local companies have to pay the import duty and
also the price of the clinker. For this reason, the price of local cement is
higher than the imported cement. Thus the demand for local cement
falls.

KEY MARKET SECTORS OF TATA STEEL:

Construction
Tata Steel provides a comprehensive range of products and techniques to create value for the
construction industry and support sustainable development.
The consumption of steel, a key ingredient in industries such as construction and infrastructure is
linked closely to the economic prospects of a country or region. From helping to build the
worlds most impressive buildings to providing the metal and expertise for infrastructure
projects, Tata Steel has the products and services to meet the needs and standards of the global
construction sector.
Tata Steel offers a range of products and systems that can be segmented according to their
primary function the structural frame (sections, tubes), infrastructure, building solutions (roof
and wall products) and internal fit out applications (HVAC).

Automotive
Automotive applications is one of the focus areas of Tata Steels Research & Development,
aimed at giving the Group a competitive edge in the automotive market.

Committed to progress of the automotive industry, Tata Steel offers multiple automotive steel
products ranging from strip to bar, tube, and welded blanks to advanced automotive steels. The
Group's global reach ensures that it can supply and support customers wherever they are.
Steel makes up more than half the weight of a car and is used not only for the body and chassis
but also the powertrain, gear box, wheels and tyres. Automotive high strength steel grades
maintain the safety standards of vehicles whilst improving fuel efficiency.

Consumer Goods
Tata Steel manufactures specialised steel for a wide variety of products in the consumer goods
industry, including domestic appliances, electronics and furniture.
In a rapidly growing economy when customers are getting more quality conscious and
demanding every day, Tata Steel makes sure that it keeps renewing its product range with
customised developments and innovations to suit specific requirements. The Company
manufactures and processes steel for a wide range of customers across the Consumer Goods
sector worldwide. These include domestic appliances, manufactured goods, packaging and many
other applications.

Energy and Power

The Tata Steel Group supplies a broad portfolio of products and services to the energy and power
sector leveraging its long-standing technical expertise.
High performance steels, backed by dedicated support and expert advice, fulfill a whole range of
applications in the energy market. Tata Steels product portfolio for this sector includes wide
ranging energy applications as well as quality base steel products like high quality pipeline
systems, structural products, light fabricated systems and steel components for drilling and
power generation. Additional processing options are also available including coating, profiling
and welding.

Agriculture

Tata Steel manufactures a range of high quality agricultural implements making it the first choice
in Indias rural markets.
In the agriculture and forestry equipment sectors, equipment and machinery need to cater to
specific requirements in reliability, durability and efficiency. Tata Steel recognises the critical
role played by wear-resistant steel in these specific steel applications and manufactures a wide
array of purpose-built machinery for these segments.

Engineering
Tata Steel manufactures a range of steel products, encompassing hot rolled and cold rolled
sheets, wire rod and wire, sections, plate, bearings and tubes, which serve a multitude of small
engineering companies.
Tata Steel manufactures a wide range of steel products, encompassing hot rolled and cold rolled
sheets, wire rod and wire, sections, plate, bearings and tubes, which serve many small and
medium-sized engineering companies in India, Europe and South East Asia. Gears, engines,
motors, hydraulic systems, power generation are some of the areas that demand many
engineering applications for steel.

Packaging

Tata Steel is one of Europes leading suppliers of high quality packaging steels, offering
innovative new materials, applications and processing technologies.

Aerospace
For more than 60 years Tata Steel has been a leading manufacturer of Aerospace steels with its
high integrity specialist steels being used in major commercial and military aerospace projects
around the world.

Shipbuilding
Tata Steel is a major supplier of products to the shipbuilding industry worldwide, with one of the
widest product ranges available.

Rail
Tata Steel provides a wide range of high performance rail products and railway infrastructure
services to the international rail industry.

Defence and Security

INELASTIC DEMAND CURVE :

(For steel)

Demand forecasting :
Is an essential activity in sales and marketing. The demand forecasting has to be done so that the
company does not store huge inventories and at the same time, does not under utilise its
operation setup. By taking into considerations the various types of demand in the market, the
firm can thereby have a proper forecast and can plan its inventories accordingly, meeting the
objectives of the firm.
There are mainly 8 types of demands in Marketing which have to be taken into consideration by
the marketing manager during demand forecasting. The various types of demands, and how to
tackle the challenges for marketers in these various demands, is discussed below.
Negative Demand Negative demand is a type of demand which is created if the product is
disliked in general. The product might be beneficial but the customer does not want it. For
example Dental work where people dont want problems with their teeth and use preventive
measures to avoid the same. Insurance, which people should have but they delay buying an
insurance policy. Similarly, people would like to avoid heart attacks and hence may pay for a full
body check up where the results might be negative, but still the customer has to pay. The
marketer has to solve the issue of no demand by analyzing why the market dislikes the product
and then counter acting with the right marketing tactics.
Unwholesome demand Unwholesome demand is the other side of Negative demand. In
negative type of demands, customer does not want the product even though product might be
necessary for the customer. But in unwholesome demand, the customer should not desire the
product, yet the customer wants the product badly. Best example of unwholesome demand are
cigarettes, alcohol, pirated movies, guns etc.
No demands Certain products face the challenge of no demand. The best example for the same
can be education courses where there is very low demand or no demand at all. Such cases are
very hard to counter.
Latent Demand Latent demand is, as the name suggests, a demand which the customer
realizes later. Thus, while buying the product, he might not desire some features. But later on, he
might think about those features and buy the product. The best example of latent demand are
normal phones vs smart phones. People nowadays want more and more features in the
smartphone. They might settle for a normal phone, but then later on they get the itch to buy a
smart phone. Similarly, people might buy a petrol car. But most likely their second car will be a
diesel car. A marketing managers job is to find out the features which people might be looking
for later and market them to the customer in such a manner that he immediately wants them.
Declining demand Declining demand is when demand for a product is declining. For example,
when CD players were introduced and IPOD came in the market, the demand for walkman went
down. Although there was still a demand for the product, the demand was a declining demand. A

marketers job in such a case to think ways to revive the product so that the demand is not
declining.
Irregular demand Irregular demand can be demand which is not consistent. The best example
of irregular demand is seasonal products like umbrellas, air conditioners or resorts. These
products sell irregularly and sell more during peak season whereas their demand is very low
during non seasons. The best way to counter irregular demand is to introduce incentives for the
customer to buy the product.
Full demand In an ideal environment, a company should always have full demand. Full
demand means that the demand is meeting the supply potential of the company. It also means
that the markets are happy with the products of the company and that people want to buy from
the same company. The marketing challenge in this type of demand is to maintain the same level
of interest in the product and the company.
Overfull demands Overfull demands happen when the companies manufacturing capacity is
limited but the demand is more than the supply. This can be observed in the cement industry
occasionally. Generally, most cement industries have limited manufacturing capacity. And hence,
brand switching in cement industry is high. Many companies use de marketing techniques to
counter act overfull demands. This is because if the company keeps marketing, but it is not able
to supply the material, then the company might suffer badly in brand equity.

YEAR

SALES

Dec 87
Dec 88
Dec 89
Dec 90
Dec 91
Dec 92
Dec 93
Dec 94
Dec 95
Dec 96
Dec 97
Dec 98
Dec 99
Dec 00
Dec 01
Dec 02
Dec 03
Dec 04
Dec 05
Dec 06
Dec 07
Dec 08
Dec 09
Dec 10
Dec 11
Dec 12

8198.6
8198.6
9637.8
11406.9
14090
15057.9
16181.3
20427
23294.6
24510.5
23731.1
25858.3
26792.2
29361.2
32260
33718.8
39003.7
45498
37235.1
64680.6
78666.2
82746.1
88031.7
86092.9
104919.3
113566

INCOME AFTER
FINANCIAL
SERVICES
29
29
26.5
43.1
147.1
288.6
360.4
367.9
499.2
249.9
270.3
359.2
287.5
193.1
242.3
849.5
1112.2
227.6
1363.9
771.3
1223.4
1367.9
803.8
1011.2
1919.1
2061.8

PROFIT
TAX

AFTER

3.2
3.2
168.4
1104.2
1104.7
655.7
607.7
1561.1
2267.8
749.9
134.4
568.4
-588.5
571.7
1304.3
1038.9
2002.4
3783.9
5441.8
12318.4
14385.9
12127.9
16067.3
11209.4
13267.5
14346.7

DEMAND FORECASTING
(USING REGRESSION ANALYSIS)

Annual Data for TATA STEEL (for 25 years)

YEAR

SALES(y)
x2
(
Rs.

Xy

REGRESSIO
N ANALYSIS

Dec 88
Dec 89
Dec 90
Dec 91
Dec 92
Dec 93
Dec 94
Dec 95
Dec 96
Dec 97
Dec 98
Dec 99
Dec 00
Dec 01
Dec 02
Dec 03
Dec 04
Dec 05
Dec 06
Dec 07
Dec 08
Dec 09
Dec 10
Dec 11
Dec 12
Dec 13

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
x=325

Millions)
8198.6
9637.8
11406.9
14090
15057.9
16181.3
20427
23294.6
24510.5
23731.1
25858.3
26792.2
29361.2
32260
33718.8
39003.7
45498
37235.1
64680.6
78666.2
82746.1
88031.7
86092.9
104919.3
113566
y=1054965.
8

1
4
9
16
25
36
49
64
81
100
121
144
169
196
225
256
289
324
361
400
441
484
529
576
625

8198.6
19275.6
34220.7
56360
75289.5
97087.8
142989
186356.8
220594.5
237311
284441.3
321506.4
381695.6
451640
505782
624059.2
773466
670231.8
1228931.4
1573324
1737668.1
1936697.4
1980136.7
2518063.2
2839150

x2=5525

xy=18904476.
6

Analysis for Sales

Substituting the above values in following equations:

-5708.24
-1716
2276.24
6268.48
10260.72
14252.96
18245.2
22237.44
26229.68
30221.92
34214.16
38206.4
42198.64
46190.88
50183.12
54175.36
58167.6
62159.84
66152.08
70144.32
74136.56
78128.8
82121.04
86113.28
90105.52
94097.76

y =n a + bx
xy = ax + bx2

1054965.8 = 25a + 325b

18904476.6 = 325a + 5525b

On solving these equations, we get a = -9700.48 and b = 3992.24

So, y = -9700.48 + 3992.24x

Trend for Sales

COST ANALYSIS

Cost Analysis or Costvolumeprofit (CVP), in managerial economics, is a form of cost

accounting. It is a simplified model, useful for elementary instruction and for short-run decisions.
CVP analysis expands the use of information provided by breakeven analysis. A critical part of
CVP analysis is the point where total revenues equal total costs (both fixed and variable costs).
At this break-even point, a company will experience no income or loss. This break-even point
can be an initial examination that precedes more detailed CVP analysis.
CVP analysis employs the same basic assumptions as in breakeven analysis. The assumptions
underlying CVP analysis are:

The behaviour of both costs and revenues is linear throughout the relevant range of
activity. (This assumption precludes the concept of volume discounts on either purchased
materials or sales.)
Costs can be classified accurately as either fixed or variable.
Changes in activity are the only factors that affect costs.
All units produced are sold (there is no ending finished goods inventory).
When a company sells more than one type of product, the sales mix (the ratio of each
product to total sales) will remain constant.

The components of CVP analysis are:

Level or volume of activity

Unit selling prices
Variable cost per unit
Total fixed costs

APPLICATIONS
Cost Analysis simplifies the computation of breakeven in break-even analysis, and more
generally allows simple computation of target income sales. It simplifies analysis of short run
trade-offs in operational decisions.

LIMITATIONS
It is a short run, marginal analysis: it assumes that unit variable costs and unit revenues are
constant, which is appropriate for small deviations from current production and sales, and
assumes a neat division between fixed costs and variable costs, though in the long run all costs
are variable. For longer-term analysis that considers the entire life-cycle of a product, one
therefore often prefers activity-based costing or throughput accounting

Different Types of Costs:

(A) Actual Cost
Actual cost is defined as the cost or expenditure which a firm incurs for producing or acquiring a good or
service. The actual costs or expenditures are recorded in the books of accounts of a business unit. Actual
costs are also called as "Outlay Costs" or "Absolute Costs" or "Acquisition Costs".
Examples: Cost of raw materials, Wage Bill etc.
(B) Opportunity Cost
Opportunity cost is concerned with the cost of forgone opportunities/alternatives. In other words, it is the
return from the second best use of the firms resources which the firms forgoes in order to avail of the
return from the best use of the resources. It can also be said as the comparison between the policy that
was chosen and the policy that was rejected. The concept of opportunity cost focuses on the net revenue
that could be generated in the next best use of a scare input. Opportunity cost is also called as
"Alternative Cost".
If a firm owns a land, there is no cost of using the land (ie., the rent) in the firms account. But the firm
has an opportunity cost of using the land, which is equal to the rent forgone by not letting the land out on
rent.
(C) Sunk Cost
Sunk costs are those do not alter by varying the nature or level of business activity. Sunk costs are
generally not taken into consideration in decision - making as they do not vary with the changes in the
future. Sunk costs are a part of the outlay/actual costs. Sunk costs are also called as "Non-Avoidable
costs" or "Inescapable costs".
Examples: All the past costs are considered as sunk costs. The best example is amortization of past
expenses, like depreciation.
(D) Incremental Cost
Incremental costs are addition to costs resulting from a change in the nature of level of business activity.
As the costs can be avoided by not bringing any variation in the activity in the activity, they are also
called as "Avoidable Costs" or "Escapable Costs". More ever incremental costs resulting from a
contemplated change is the Future, they are also called as "Differential Costs"
Example: Change in distribution channels adding or deleting a product in the product line.

(E) Explicit Cost

Explicit costs are those expenses/expenditures that are actually paid by the firm. These costs are recorded
in the books of accounts. Explicit costs are important for calculating the profit and loss accounts and
guide in economic decision-making. Explicit costs are also called as "Paid out costs"
Example: Interest payment on borrowed funds, rent payment, wages, utility expenses etc.
(F) Implicit Cost
Implicit costs are a part of opportunity cost. They are the theoretical costs ie., they are not recognised by
the accounting system and are not recorded in the books of accounts but are very important in certain
decisions. They are also called as the earnings of those employed resources which belong to the owner
himself. Implicit costs are also called as "Imputed costs".
Examples: Rent on idle land, depreciation on dully depreciated property still in use, interest on equity
capital etc.
(G) Book Cost
Book costs are those business costs which don't involve any cash payments but a provision is made in the
books of accounts in order to include them in the profit and loss account and take tax advantages, like
provision for depreciation and for unpaid amount of the interest on the owners capital.
(H) Out Of Pocket Costs
Out of pocket costs are those costs are expenses which are current payments to the outsiders of the firm.
All the explicit costs fall into the category of out of pocket costs.
Examples: Rent Payed, wages, salaries, interest etc
(I) Accounting Costs
Accounting costs are the actual or outlay costs that point out the amount of expenditure that has already
been incurred on a particular process or on production as such accounting costs facilitate for managing
the taxation need and profitability of the firm.
Examples: All Sunk costs are accounting costs
(J) Economic Costs
Economic costs are related to future. They play a vital role in business decisions as the costs considered
in decision - making are usually future costs. They have the nature similar to that of incremental, imputed
explicit and opportunity costs.

(K) Direct Cost

Direct costs are those which have direct relationship with a unit of operation like manufacturing a
product, organizing a process or an activity etc. In other words, direct costs are those which are directly
and definitely identifiable. The nature of the direct costs are related with a particular product/process,
they vary with variations in them. Therefore all direct costs are variable in nature. It is also called as
"Traceable Costs"
Examples: In operating railway services, the costs of wagons, coaches and engines are direct costs.
(L) Indirect Costs
Indirect costs are those which cannot be easily and definitely identifiable in relation to a plant, a product,
a process or a department. Like the direct costs indirect costs, do not vary ie., they may or may not be
variable in nature. However, the nature of indirect costs depend upon the costing under consideration.
Indirect costs are both the fixed and the variable type as they may or may not vary as a result of the
proposed changes in the production process etc. Indirect costs are also called as Non-traceable costs.
Example: The cost of factory building, the track of a railway system etc., are fixed indirect costs and the
costs of machinery, labour etc.

25 Years Cost Analysis for TATA STEEL

The following data analyses the cost structure of company starting with Sales of Goods, Income
and the Total Expenses incurred (also termed as the Total Cost)
Year

Total Sales

Total Income

Total Expenses

1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012

11406.9
14090
15057.9
16181.3
20427
23294.6
24510.5
23731.1
25858.3
26792.2
29361.2
32260
33718.8
39003.7
45498
37235.1
64680.6
78666.2
82746.1
88031.7
86092.9
104919.3
113566
123766

2143.7
2876.6
3126.87
3421.78
3312.76
4013.65
3452.89
2134.78
3241.89
4412.29
4562.98
3321.78
4567.98
5547.35
4481.45
4,252.93
3,661.70
6,022.65
7,309.20
7,864.52
8,453.28
8,639.14
10,285.87
11,265.97

898.67
923.89
998.78
1234.89
1634.89
1789.89
1887.98
1997.89
2087.98
2113.89
2346.89
2576.98
2978.89
3786.89
3886.98
3,996.12
4,087.78
5,019.78
5,998.78
6,015.78
6,543.89
7,620.89
9,276.52
10,141.78

From the above data we can see that Sales, Income and Expenses have
been almost growing consistently since year 1989 but there is a slight dip in all
three in the year 2003,2007,2009 and 2011, further the sales and income have
shown a slightly down turn in year 2003 and 2009 (sales) & 2005 (income).
The slight dips can be accounted for the global slowdown or recession.

Here is the break-up of the costs incurred by the company during last 20 years. Variable
Costs including Raw material expenses, Power & fuel, Compensation to the Employees,
Advertising expenses, Marketing expenses, Distribution expenses and Research &
Development expenses are shown in the table below (Figures in `Cr)
Year

Raw
Material
expenses

Power
Adv.
and fuel expenses
expenses

Compensat Marketing
ion
to expenses
employees

Distributi
on
expenses

R&D
expenses

1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012

45.11
68.18
72.48
95.47
99.63
115.75
136.31
202.73
204.27
245.3
240.72
373.46
391.91
420.29
401.97
486.13
502.7
677.39
767.73
799.12
891.51
1113.89
1243.89
1154.78

151.18
218.14
242.77
285.47
321.16
340.37
401.44
484.73
557.28
531.18
546.06
629.31
580.12
616.38
706.07
755.24
669.86
972.66
1243.63
1598.96
1539.65
1598.67
1654.90
1775.67

53.95
85.67
84.38
85.39
106.81
115.06
124.07
146.3
161.93
172.21
188.01
199.83
196.08
211.57
212.25
234.38
202.05
33.44
357.9
422.26
391.68
462.26
501.9
544.87

56.5
124.56
142.86
156.9
181.67
222.04
271.31
303.71
367.51
402.36
396.22
348.68
367.28
411.51
490.88
538.06
614.9
956.46
1108.13
1178.56
1224.1
1256.51
1456.68
1449.8

0
0
0
0
0
0
7.31
6.7
13.89
12.81
6.76
010.11
10.16
6.44
7.86
7.79
10.57
4.69
5.09
5.09
3.62
5.21
7.95
9.31

0.68
0.99
0.87
1.55
2.77
2.02
5.86
7.26
12.23
6.19
14.47
13.22
17.26
18.43
25.98
33.48
33.6
44.23
41.77
47.56
53.16
68.85
74.89
89.8

4.79
9.12
9.35
16.26
26.93
33.57
45.12
37.21
52.43
55.04
74.56
32.54
39.12
43.08
54.75
66.4
77.72
120.41
129.58
125.44
116.61
111.87
123.90
132.87

From the above table we can see that the major portion of variable costs consists of Raw
Material and Power and Fuel expenses. Although as the cost of transportation is increasing
year-on-year due to rising fuel prices, an effective rise in distribution cost can be seen over
the years which has also become a major constituent now.

In the table below, the various costs are shown as a percentage of total costs
and total sales.

All figures in `Cr except percentages

TVC = Total Variable Cost
TC = Total Cost
TFC = Total Fixed Cost
Year

T.V.C.

TFC=
TVC

1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012

552.71
641.04
738.97
828.81
991.42
1188.64
1369.54
1425.09
1466.8
1607.15
1601.93
1727.7
1899.76
2121.48
2111.4
2809.28
3653.83
4176.99
4220.33
4617.26
5064.11
5157.1
6543.98
6722.9

345.96
282.85
259.81
406.08
643.47
601.25
518.44
572.80
621.18
506.74
744.96
849.28
1,079.13
1,665.41
1,775.58
1,186.84
433.95
842.79
1,778.45
1,398.52
1,479.78
2,463.79
2,732.54
3,418.88

TC- TVC/TC
(%)

TFC/TC
(%)

TVC/Sales
(%)

61.50311
69.38488
73.98726
67.1161
60.64139
66.40855
72.53996
71.32975
70.24972
76.02808
68.25757
67.04359
63.77409
56.0217
54.31981
70.30019
89.38421
83.21062
70.35314
76.75247
77.38684
67.67057
70.54348
66.28915

38.49689
30.61512
26.01274
32.8839
39.35861
33.59145
27.46004
28.67025
29.75028
23.97192
31.74243
32.95641
36.22591
43.9783
45.68019
29.69981
10.61579
16.78938
29.64686
23.24753
22.61316
32.32943
29.45652
33.71085

4.845401
4.54961
4.907524
5.122024
4.853478
5.102642
5.587565
6.005158
5.672453
5.998574
5.455942
5.355549
5.634127
5.439176
4.640644
7.544709
5.649035
5.309765
5.100337
5.244997
5.882146
4.915302
5.76227
5.431944

In the above table we can see that the share of fixed cost in the Total cost has decreased
over the years whereas that of the variable costs has increased very much. This shows that
in the long run the actual Total cost becomes more dependent on Variable costs. The
Variable cost and Sales ratio shows an irregular trend which is almost stable around 65%

Graph showing Total Variable Cost

Graph showing Total Variable Cost as a percentage of Total Cost

(TVC/TC %)

Graph showing Total Fixed Cost as a percentage of Total Cost

(TFC/TC %)

PRODUCTION ANALYSIS

Production function measures the elasticity of output with respect to employee expenses which
shows the change in output (income or sales) with respect to one unit change in employee input.
This elasticity is measured by function . Similarly function measures the elasticity of output
with respect to total capital of the company which will tell us the change in output with respect to
one unit change in capital. Further this analysis i.e. calculation of production function will
exhibit either one of three returns to scale scenarios for the company. Returns to scale refer to the
degree by which level of output changes in response to given change in all the inputs in a
production system.
I.

II.

III.

The production function can exhibit constant returns to scale which will indicate that
proportional increase in all inputs (capital and employee) will yield an equal
proportional increase in output. If employee and capital both are doubled, then output
will be doubled. For this + will be equal to 1.
The production function can exhibit decreasing returns to scale which will indicate
that proportional increase in all inputs (capital and employee) will yield a less than
proportional increase in output. If employee and capital both are doubled, then output
will be less than doubled. For this + will be less than 1.
The production function can exhibit increasing returns to scale which will indicate
that proportional increase in all inputs (capital and employee) will yield a more than
proportional increase in output. If employee and capital both are doubled, then output
will be more than doubled. For this + will be greater than 1.

Cobb-Douglas Production Function

Cobb-Douglas production function considers two variable factor inputs. Thus:

Q = f (L, K, F)

Where,
L = Labour
K = Capital
F = refers to fixed factor component of input.
For empirical measurement, the Cobb- Douglas production function is presented with
power terms as:

Q = a Lb K c
Where,
Q = Total output
L = Labour units input
K = Capital units input
Stated in double log form, it is transformed into linear function:
Log Q = log a + b log L + c log K

It is widely used in empirical research on production. In estimating regression of a Cobb

-Douglas production, it showed transformed into a linear form by using double log terms.
Data to estimate production function can be obtained from relevant sources such as company
records and accounts on employment, purchases, output etc. For using regression methods, time
series or cross- sectional data may be collected.

Calculation of production function for Tata Steel has taken following

parameters in consideration:

Output: The output for the company has been shown by the Income of the company.
Employee Cost: The total employee cost has been shown by the total compensation that
is paid to the workers of the company.

Capital: The total capital cost has been taken as net worth of the company which has
been calculated as the sum of total share capital plus reserves. Total share capital includes
equity share capital + preference share capital + share application money.
The data is taken for the last 12 years (Rs. Millions)
Year

Land

Sales
(in millions)

Employee
millions)

2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012

1
1
1
1
1
1
1
1
1
1
1
1
1

2679.22
2936.12
3226
3371.88
3900.37
3723.51
5468.06
6866.86
7432.22
7896.67
8543.98
8878.98
8976.34

1851.7
1876.98
1896.87
1972.54
2032.2
2147.6
1848.4
3180.2
3527.3
4130.4
1851.7
4056.7
4231.8

For Share Capital

Cost(in Share
millions)
1,151.74
1,019.87
1,076.74
1,353.73
1,597.68
2,136.75
3,142.92
4,152.71
4,927.73
6,016.22
6,469.49
7,192.27
7,382.80

Capital(in

Year

Land

Sales(in
millions)

2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012

1
1
1
1
1
1
1
1
1
1
1
1
1

2679.22
2936.12
3226
3371.88
3900.37
3723.51
5468.06
6866.86
7432.22
7896.67
8543.98
8878.98
8976.34

Share Capital(in A.P.

millions)
(Average
Product)
1,151.74
2.33
1,019.87
2.88
1,076.74
3.00
1,353.73
2.49
1,597.68
2.44
2,136.75
1.74
3,142.92
1.74
4,152.71
1.65
4,927.73
1.51
6,016.22
1.31
6,469.49
1.32
7,192.27
1.23
7,382.80
1.22

M.P.
(Marginal
Product)
2.33
-1.94813
5.097239
0.526662
2.166387
-0.32808
1.733852
1.385239
0.729478
0.426692
1.428089
0.463488
0.510996

For Employee Cost

Year

2000
2001
2002
2003
Year
2004
2005
2006
2000
2007
2001
2008
2002
2009
2003
2010
2004
2011
2005
2012
2006
2007
2008
2009
2010
2011
2012

Land

1
1
1
1
1 Land
1
1
11
11
11
11
11
11
1
1
1
1
1
1
1

Sales(In
millions)

Employee
Cost(in
millions)
2679.22
1851.7
2936.12
1876.98
3226
1896.87
3371.88
1972.54
Sales(in 2032.2
Employee
3900.37
millions)
Cost(in
3723.51
2147.6
millions)
5468.06
1848.4
2679.22 3180.2
1851.7
6866.86
2936.12
1876.98
7432.22
3527.3
3226
1896.87
7896.67
4130.4
3371.88 1851.7
1972.54
8543.98
3900.37 4056.7
2032.2
8878.98
3723.51
2147.6
8976.34
4231.8
5468.06
1848.4
6866.86
3180.2
7432.22
3527.3
7896.67
4130.4
8543.98
1851.7
8878.98
4056.7
8976.34
4231.8

Share
Employee
Share
Capital(in Cost/Sales
Capital/Sales
millions)
1,151.74
69.11339868
42.98788453
1,019.87
63.92722368
34.73529692
1,076.74
58.79944203
33.37693738
1,353.73
58.49970936
40.14763277
A.P
M.P.
1,597.68
52.10274923
40.96226768
(Average
(Marginal
2,136.75
57.67676198
57.38537026
Product)
Product)
3,142.92
33.80357933
57.4777892
1.446897446
1.4468
4,152.71
46.31228829
60.47465654
1.564278788
10.16218354
4,927.73
47.45957466
66.30226231
1.70069641
14.57415787
6,016.22
52.3055921
76.18679773
1.709410202
1.927844588
6,469.49
21.67256946
75.71986358
1.919284519
8.85836406381.00333597
7,192.27
45.6888066
1.733800522
1.53258232282.2473302
7,382.80
47.14393617
2.958266609
5.830715241
2.159254135
1.050307854
2.107056389
1.628810141
1.911841468
0.77010446
4.614127558
0.284069864
2.188719895
0.151927438
2.121163571
0.556025128

Employee cost/ sales (%)

Share Capital/Sales (%)

Production function can be defined as

Output = f(L,K), where L is the employee cost and K is the capital cost.

O = A.KL
Where,
, are the constants. A is the technological parameter, is the elasticity of output with respect
to capital and is the elasticity of output with respect to employee.
To obtain the values of , we will use regression analysis. Taking log on both the sides

Log O =Log A + Log K + Log L

The various logarithmic values for sales, employee and capital are calculated. Then we use
regression analysis to calculate the values of , .

Year

Log O(Sales)

Log K(Share Capital)

Log

L(Employee

Cost)
2000
2001

3.428008376
3.467773801

3.06135445
3.008544817

3.267571
3.27346

2002

3.508664363

3.032110847

3.278038

2003

3.52787211

3.131532053

3.295026

2004

3.591105807

3.203489799

3.307966

2005

3.570952525

3.329753713

3.331953

2006

3.737833271

3.497333327

3.266796

2007

3.836758193

3.618331604

3.502454

2008

3.871118557

3.692646904

3.547442

2009

3.897443989

3.779323709

3.615992

2010

3.931660223

3.810870046

3.267571

2011

3.948363078

3.856865983

3.608173

2012

3.953099294

3.868221104

3.626525

Using SPSS software we get the values of , alpha and beta.

Calculation of alpha (Labor Propensity):

Model Summary
ANOVAb
Model
Model

R
Sum of

Regres

on
Residu

Square
F
Sig.

Square
.954df

Mean .952

Std. Error of the

Estimateb
ANOVA
F 25711.19088
Sig.

Squares
Square
3.171E1
1 3.171E1 479.6 .000a

1sion Regressi

al

R Square
df
Mean

a
Squares
.977Sum
of

1
Model

Adjusted R

11.858E11

1.520E1

23

24

Total Total 3.323E14.121E11

24

25

Calculation of Beta
(Capital Propensity):
The Regression Analysis of

9.430E9

1
a. Predictors: (Constant), Capital

SPSS Output:

b. Dependent Variable: Sales

Therefore, the value of Beta (Capital

Propensity) = 0. 671

Conclusion:

(Labor Propensity) = 0.977

.000a

6.611E8

02.263E11

Residual

26
1.858E11
19.702

Therefore, the value of alpha

Capital and Sales Using SPSS.

Sum of alpha and beta is = 1.64 (0.977 + 0.671)

Since sum of value of labor and capital propensity is greater than, hence return to scale

of TATA MOTORS is increasing.

MARKET ANALYSIS

CONDUCT ANALYSIS
Human Resources Practices
ACC has a large workforce of about 80,000 people, comprising experts in various disciplines
assisted by a dedicated workforce of skilled persons. Tata Steel employees, referred to as the
TATA Parivar, come from all parts of the country and belonging to a variety of ethnic, cultural
and religious backgrounds. These employees display a strong sense of loyalty to the Company
and their special stellar qualities as value-adding human capital are well known in the industry.
Tata Steel has clearly stated guidelines concerning recruitment, termination, career advancement,
performance appraisal, professional and employee ethics and code of conduct. The Companys
personnel policies and processes enshrine equal opportunities to all and non-discrimination with
regard to gender, caste, creed, ideology or other opinion, whether social, political or religious.
Also ensured is a due process for employee consultation and participation in organizational
development and policy formulation.

RECRUITMENT
Recruitment in Tata Steel is a very fair and transparent process with adequate
opportunities to look for suitable candidates internally as well as from outside. Applicants
are generally invited on the basis of specific advertisements in newspapers and websites.
A Committee of officers called the Central Recruitment Committee handles the entire
recruitment process comprising screening of applications, preliminary short-listing,
interviews and final selection. Every attempt is made to make the selection process as
objective as possible by incorporating tests of competence. In some cases, outside
consultants are retained. All decisions of the recruitment committee are recorded in
respect of each candidate. Candidates are informed of their short-listing and selection
immediately after the interview or at the earliest thereafter.

PERFORMANCE MANAGEMENT
The Companys performance management system is in itself a benchmark that provides
ample opportunities and motivational incentives to employees so as to reward and retain
good talent within the Company. These incentives include Performance Linked
Incentives, Good Work Awards, Letters of Appreciation, Special Increments and
Promotions, Nomination to external training programmes in India and abroad, public
felicitation and appreciation. Some plants have Best Employee and Employee of the
Month Awards and recognition.
Competent employees and those who display aptitude are invited to become Trainers
themselves and receive Train the Trainer facilitation.

 TRAINING & DEVELOPMENT

Tata Steels new Performance Management System incorporates a process called
Competency Assessment and Training and Developmental Needs wherein appraisers are
specifically called upon to identify and assess training needs of employees at specific
intervals that do not coincide with Performance Appraisals. This is so that training needs
can be assessed objectively. Training is imparted to take care of an individuals career
development as well as functional and skill enhancement. Competency and Development
training inputs include Skill and general performance enhancement, communication skills
and Career development. Functional training needs are identified and conducted by
functional departments while Corporate HR organizes competency and developmental
inputs.

EMPLOYEE WELFARE & PERQUISITES

Employee welfare receives prime attention at Tata Steel. Tata Steel has several schemes
for general welfare of employees and their families. These cover education, healthcare,
retirement benefits, loans and financial assistance and recreation facilities. Tata Steel
townships have excellent schools that are often the best in the district. Education at these
schools is subsidized for employees wards. Tata Steel offers attractive scholarship
allowances for children studying at places away from their parents, merit scholarships for
outstanding children and financial assistance for employees children to pursue higher
professional education. Liberal medical benefits are made available to employees and
their family members by way of reimbursements towards normal medical treatment,
domiciliary treatments and special sanctions for serious illness. Each of Tata Steel
townships has well-equipped health care centres with qualified medical staff and
facilities, ambulance, referrals and tie-ups with reputed hospitals for specialised
treatment. In addition, there are regular health checkups, camps and programmes.
Employees are eligible to apply for loans and financial assistance for various purposes
such as purchase of assets, residential premises as well as a scheme that provides for
supply of cement at subsidized rates to those building their own houses. At Tata Steels
steel plants and factories, employees are provided furnished and unfurnished
accommodation based on their entitlements. At many locations, the employees are given
free electricity, free water supply and free bus facility for nearby places and schools.
These houses are well-maintained and periodically upgraded.

EMPLOYEE SATISFACTION
In addition to periodic internal Employee Satisfaction Surveys, Tata Steel participates in
Employee Satisfaction and Work Places Surveys conducted by reputed external agencies
and organisations like Hewitt Associates Grow Talent. And from time to time, Tata Steel

has also retained reputed firms to study Tata Steels internal work environment and
employee policies and suggest areas of improvement.
Tata Steel shares below salient points of the latest survey of employees:
People are treated fairly regardless of religion and gender
ACC is a safe place to work
Management is competent in running business
Employees feel good about what Tata Steel does for society
Proud to tell others I work here
Management thinks positively the overall findings show significant job
satisfaction at all levels as also deep respect for the company, its performance
management system and its overall business performance.

CORPORATE GOVERNANCE
The importance of Corporate Governance has always been recognised in Tata Steel.
Much before Corporate Governance guidelines became applicable and mandatory for
listed companies, Tata Steel had systems in place for effective strategic planning and
processes, risk management, human resources development and succession planning. The
Audit Committee in Tata Steel was constituted as far back as in 1986. The ShareholdersInvestors Grievance Committee was formed way back in 1962 and the Compensation
Committee was convened since 1993. The Companys core values are based on integrity,
respect for the law and strict compliance thereof, emphasis on product quality and a
caring spirit. Corporate Governance therefore in Tata Steel is a way of life.
Tata Steel is a professionally managed Company with a majority of its Directors being
Independent Directors. The Board of Directors has always consisted of persons who are
professionals in their respective fields and with unquestionable integrity and reputation.
The role, responsibility and accountability of the Board of Directors is clearly defined.
Members of the Board have full freedom to express their views on matters placed before
them for deliberation and consideration.It is the continuous endeavour of the Board of
Directors to achieve the highest standards of Corporate Governance through the adoption
of a strategic planning process, succession planning for attracting, motivating and
energizing human resources, identification of major risks and the way and means to
manage such risks, an effective communication policy and integrity of Companys
internal control systems.
The Board of Directors are also constantly looking at ways and means to ensure that the
most effective use is made of the scarce resources at its disposal and that the management
and employees have the freedom to take the Company forward within the framework of
effective accountability.

The Annual Reports, press releases and other communication have always made full
disclosures on various facets of importance to the stakeholders, particularly with regard
to information relating to financial matters, companys operations/performance, stock
movements etc.

OCCUPATIONAL HEALTH & SAFETY

Occupational Health & Safety (OHS) is a vital part of Tata Steels journey towards
Sustainable development. Safety Audits are being carried out in ACC since 1995 by
National Safety Council based on the 5 Star Auditing System of British Safety Council.
There is a continuous effort to measure and improve Safety Management Systems to
avoid accidents.
Tata Steel has an Apex OH & S Committee headed by the Managing Director. This
committee oversees implementation of Tata Steel OH & S policy Each of Tata Steels
plants and manufacturing units have Professional Doctors and medical facilities for
continuous monitoring and observation of workplace hygiene and occupational health.
The following are some OH & S initiatives at Tata Steels plants:

OH & S brochures, signages, posters and mailers used extensively

Monthly Safety Gate Meetings held at all Tata Steels plants.
Safety Audit and TPM Audits carried out annually
Safety Professionals meets twice a year to discuss and share knowledge on Safety
Statistics and implementation of safety measures at each unit.
Safety Observation Tours (SOT) conducted weekly by all line managers
Behavioral Safety Training programmes for workers at all plants
Incident investigations for all incidents including near misses (with potential for
injuries). The findings and recommendation are shared across the company

CORPORATE SOCIAL RESPONSIBILITY

The Tata Steel Vision aspires to make it the global steel industry benchmark in Value Creation
and Corporate Citizenship. As its operations have expanded to new geographies, the Tata Steel
Group has retained a collective focus on the various areas of corporate sustainability that impact
the people, the environment and the society at large.
The Tata Steel Approach

Tata Steel has always remained steadfast on the ethos of value creation for all stakeholders,
which for the Company has timeless relevance.
The Company supports and propagates the principles of the United Nations Global Compact as
a Founder Member, is a signatory to the Worldsteel Sustainability Charter and supports the
Affirmative Action programme of the Confederation of Indian Industry.
Tata Steels Vision strikes a balance between economic value as well as ecological and societal
value by aspiring to be "a Global Benchmark in Value Creation and Corporate Citizenship". It
guides the Company in its race to excel in all areas of sustainability.
In the initial years, Tata Steel's CSR interventions were more as a 'provider' to society where the
community was given support for its overall needs, both for sustenance and development.
Gradually, the shift in approach led to Tata Steel being an 'enabler' focusing on building
community capacity through training programmes; focusing on providing technical support
rather than giving aid. At present, CSR interventions of Tata Steel focus on 'sustainable
development' to enhance the quality of life of people.
Tata Steels approach to business has evolved from the concept that the wealth created must be
continuously returned to society. The responsibility of combining the three elements of society social, environmental, and economic - is of utmost importance to the way of life at Tata Steel.
Today, Tata Steels CSR activities in India encompass the Companys Steel Works, Iron ore
mines and collieries, reaching out to the city of Jamshedpur, its peri-urban areas and over 800
villages in the states of Jharkhand, Odisha and Chhattisgarh. Community involvement is a
characteristic of all Tata Steel Group companies around the world. It can take the form of
FINANCIAL support, provision of materials and the involvement of time, skills and enthusiasm
of employees. The Group contributes to a very wide range of social, cultural, educational,
sporting, charitable and emergency assistance programmes.
The Company works in partnership with the Government, national and international
development organisations, local NGOs and the community to ensure sustainable development.
The Corporate Services Division delivers these responsibilities through several institutionalised
bodies:
Corporate Social Responsibility

Tata Steel Rural Development Society (TSRDS)

Tribal Cultural Society (TCS)
Tata Steel Family Initiatives Foundation (TSFIF)
Tata Steel Skill Development Society (TSSDS)
Education
Medical Services
Urban Services

Sports Department
Tata Steel Adventure Foundation
JUSCO
Other societies like Ardeshir Dalal Memorial Hospital, Blood Banks, Kanti Lal Gandhi
Memorial Hospital etc.)
Tata Relief Committee

To assess the effectiveness of its social initiatives Tata Steel has innovatively devised a Human
Development Index (HDI). In 2012-13, HDI assessment was completed for 230 villages. The
Corporate Social Responsibility Advisory Council was also created with the objective that this
apex body along with the results of the measurement of HDI will enable the Group to direct its
social initiatives better and allocate resources more efficiently.
Affirmative Action
To break the cycle of poverty plaguing indigenous communities, Tata Steel pursues the 5-Es
approach through its Affirmative Action programme:

Employment
Entrepreneurship
Education
Employability
Ethnicity
Prominent initiatives under Affirmative Action include:

The Managing Director holds one-on-one dialogues with community leaders and their
representatives of indigenous communities to capture their social and material aspirations. Tata
Steel also undertakes strategic alliances with governmental and non-governmental organisations
to fulfill these aspirations.
Tata Steel is focusing on enabling indigenous communities safeguard their rights which include
intellectual property, land rights, language and traditional knowledge.
Tata Steels Strategic Outsourcing partnerships with global suppliers such as IBM for IT
infrastructure requires them to align their staffing with Tata Steels Affirmative Action
programme.
The Company has leveraged its growth projects to diversify its workforce through positive
discrimination in favour of local, marginalised communities and women. In 2012-13, a total of
5864 SC/ST employees were on the rolls of the Company. A conscious effort was also made to
have a higher percentage of members of the SC/ST community in the TRADE Apprenticeship
category.

In accordance with its Affirmative Action Policy, Tata Steel encourages business entrepreneurs
from socially disadvantaged communities and includes them in its supply chain on the basis of
equal merit. The Company has leveraged its growth projects to diversify its workforce through
positive discrimination in favour of local, marginalised communities and women. Also, Tata
Steel chooses organisations aligned to its Affirmative Action Policy as its Strategic Sourcing
partners.
In addition to promoting SHGs with members from the SC/ST communities, under its
Affirmative Action programme Tata Steel actively promotes the proportion of business awarded
to vendors/ suppliers from these communities.
Nearly 10,000 youth learned tribal scripts for Santhali, Ho and Oraon languages. Traditional
tribal sports - Kati, Sekkor, Chhur, Bahu-Chor and Ramdel - were revived by organising
tournaments at the grassroots level. To revive and sustain traditional musical instruments like
Banam, Tuhila and Mandar, classes were run to enable youth to learn these instruments.
Sustainability Awards
Since 2012, Tata Steel is a part of the composite Dow Jones Sustainability Index (DJSI Emerging
MARKETS). DJSI comprises leaders in sustainability (the top 10% in terms of performance),
selected on the basis of long-term economic, environmental and social criteria, from the largest
2500 companies in the world. In addition to this prestigious status, some of the other key CSR
awards received by Tata Steel in recent years include

Tata Affirmative Action Programme (TAAP) Jury's Award, 2014

CII-ITC Sustainability Award 2013
Recognised among world's most ethical companies by Ethisphere Institute
First PRIZE at prestigious FICCI Water Awards 2013 for Noamundi Iron Mine
Mining Innovation Award 2012 won by the Joda East Iron Mine
Best Company Promoting Sports at the FICCI India Sports Awards
Think Odisha Leadership Award 2013 for best promotion of inclusive
Golden Peacock Award 2013 won by Tata Steel's Mines Division
Asian Leadership Awards 2013 won by Tata Steels OMQ Division
ASSOCHAM CSR Excellence Award 2012-13 for exemplary contribution to CSR

PERFORMANCE
Profit Analysis
YEAR

PROFIT(y)

x2

xy

REGRESSIO

Dec 88
Dec 89
Dec 90
Dec 91
Dec 92
Dec 93
Dec 94
Dec 95
Dec 96
Dec 97
Dec 98
Dec 99
Dec 00
Dec 01
Dec 02
Dec 03
Dec 04
Dec 05
Dec 06
Dec 07
Dec 08
Dec 09
Dec 10
Dec 11
Dec 12
Dec 13

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25

(Rs.
Millions)
3.2
168.4
1104.2
1104.7
655.7
607.7
1561.1
2267.8
749.9
134.4
568.4
-588.5
571.7
1304.3
1038.9
2002.4
3783.9
5441.8
12318.4
14385.9
12127.9
16067.3
11209.4
13267.5
14346.7

N ANALYSIS
1
4
9
16
25
36
49
64
81
100
121
144
169
196
225
256
289
324
361
400
441
484
529
576
625

3.2
336.8
3312.6
4418.8
3728.5
3646.2
10927.7
18142.4
6749.1
1344
6252.4
-7062
7432.1
18260.2
15583.5
32038.4
64326.3
97952.4
234049.6
287718
254685.9
353480.6
257816.2
318420
358667.5

x=325

y=116203.1

x2=5525

xy=2352230.
4

-3120.32
-2472.95
-1825.57
-1178.19
-530.815
116.562
763.939
1411.316
2058.693
2706.07
3353.447
4000.824
4648.201
5295.578
5942.955
6590.332
7237.709
7885.086
8532.463
9179.84
9827.217
10474.59
11121.97
11769.35
12416.73

13063.92

Substituting the above values in following equations:

y = Na + bx
xy = ax + bx2

116203.1 = 25a + 325b

2352230.4 = 325a + 5525b

On solving these equations, we get a = -3767.7 and b = 647.37

So, y = -3767.7 + 647.377x

Trend for Profits

SWOT ANALYSIS OF TATA STEEL

STREN GTS

S
W
O
T
A
N
A
L
Y
S
I
S

W EAKNESSES

O P P U RT U N IT IE S

T H R E AT S

STRENGTHS

Strong brand name of TSL and TATA group.

India operations capable of meeting its own iron ore requirements.
Raw materials security building through global operations.
Leading sales and distribution capability.
Expanding market share in sector.
Strong position in Europe through Corus.
Value chain efficiencies.
Low ware labour availability.

WEAKNESS

High reliance on coking coal Imports.

Overdependence on few markets.
Low R&D investment.
Unscientific mining.

OPPURTUNITIES

Unexplored rural market.

Growing domestic markets.
Growing global markets.
Developing countries not restrained under the KYOTO protocol.
Carbon credit trading on the rise.
High invent in infrastructure development.

 Proactive production cuts.

Emerging technology to change the metal and mining.
Strategic Acquisitions.

THREATS

Environmental regulations.
Operational Risks.
Slump in Steel demand.
Declining growth in automobile market.
Worlds big producer of steel.
China set to becoming a net exporter.
High duties relations to pollution control and high energy cost.

PESTEL ANALYSIS

1) Political aspect
The Government get several roles influencing the steel industry as follows:
Competitor with the public sector steel companies;
Resource allocator by leading the policies; and
Regulator of the market industry.
Tata has made huge investments in politically unstable countries like Iran or Thailand. The company
contributes to the nation by being a model in terms of corporate social responsibility and citizen. Indeed,
it is a way to face the political environment risks.

2) Economical aspect
The business environment was deteriorated because of the subprime crisis in the U.S. and the liquidity
crisis. By acquiring Corus, Tata had gained the fifth place in the world steel production.The fluctuations
of the currency rates had been a risk for the Corus acquisition, which had thus been financed by the
amount of debt. Consequently, it broke TATA in its predicted investments and capacity expansion plans. It
was facing the fear for recession on negative economical growth. Then, the steel industry is really linked
with the economical context.
It means the steel industry production depends on energy prices; demand in the automotive market or in
the construction market. An increase in these industries would also affect TATAs bottom line.

3) Social aspect
In 2009, Tata Steel Ltd. has been awarded the Golden Peacock Global
Award for Corporate Social
Responsibility. It proves the good ethical behaviour of the company and that CSR has a huge place in the
business strategy. TATA takes part in social development programs. For instance, the company helped
gave medical treatment in rural areas and slums. Furthermore, it participated in the deployment of a
companys mobile medical unit.

4) Technological aspect
Indians are becoming one of the most technology production in the world today in terms of their advance
in research and development. Advances in technology. India have really skilled specialists in different
fields, especially in IT applications. It means that it helps corporations to make savings on operating costs
and to develop more efficient and effective ways of harvesting and processing the natural reserve

MICHAEL PORTER ANALYSIS

Michael Porter had identified five competitive forces that shape every single industry and the market.
These forces help in analyzing the industry from the intensity of competition to the probability and
attractiveness of an industry.

Threat of new Entrants

The easier it is for new companies to enter the industry, the more cut-throat competition there will be.
Steel industry is highly capital intensive and is estimated that to set up 1 MTPA capacity of integrated
steel plant, it requires around Rs. 30 billion of investment depending upon the location of the plant and
technology used. The government follows a favorable policy for steel manufacturers but certain
discrepancies involved in allocation of iron ore mines and land acquisition in India.

Bargaining power of suppliers

If one supplier has large impact on the companys margin and volume then it holds substantial power. In
the steel industry the bargaining power of supplier is very low because the big players in the industry have
their own mines for major raw materials. However, still a few companies have to depend up on suppliers
for the raw materials.

Bargaining power of buyers

In the steel industry unlike the household goods market the buyers have a very low bargaining power. The
only effort which can be done towards ensuring that the buyers are saved in the curb or ceiling laid by the
government on the prices which can be charged by the companies on its product. However, most of the
sale of steel is to the other industries or to through the distribution network and very less to the common
man.

Competitive Rivalry
In India the steel industry is dominated by a major few players only and the degree of competitive rivalry
is very low as the demand is always more than the supply or the production of the companies.

Threats of substitutes
The presence of substitute products increases the propensity of customers to switch to alternatives. The
usage of aluminum has been constantly growing in the automobile sector which used to be the major
customer of the steel industry. However, because of the durability and other features of the steel,
aluminum does not stand as a threat in the market.