Prof. Dr. W. A. Pförtsch - Main

Tata Steel Branding steel based on customer focus

As one of India’s most successful companies, Tata Steel also represents a great example of a strongly branded B2B company. In 2001 and 2005, Tata Steel was ranked the world’s best steel company in studies carried out by World Steel Dynamics Inc., USA (WSD), a leading steel information service provider. The rankings were based on a set of different criteria, ranging from cash operating costs to stock market performance of the respective past three years. In 2005, Tata Steel outpaced 23 other companies that have been identified as world-class steel makers. Among them, businesses like the French Usinor, the American Nucor, the South Korean giant Posco, Nippon Steel, as well as the Russian giant Severstal.

- Company Background

Established in 1907 by J.N. Tata in Jamshedpur, Bihar, in the eastern part of India, the company began production in 1911 with a capacity of 0.1 million tons of mild steel and continued to grow steadily over the years. By 1958, half a century later, its capacity had increased to 2 million tons. The company followed organic as well as inorganic ways of growth, acquiring companies in the process. In 1973, the company acquired some flux mines and collieries. Ten years later Tata bought the Indian Tube Co. Ltd., a manufacturer of seamless and welded tubes and in 1991, it acquired the ferrochrome units of OMC alloys Ltd. Today, it produces a wide range of products. Tata Steel is part of the Tata Group, one of India’s largest and most respected business conglomerates. In the early 80s, the company started a five stage modernization program for its steel plants which ultimately made the company Asia’s first and India’s biggest Integrated Steel Producer (ISP) in the private sector, a decade later. By 2000, eight divisions of Tata Steel were ISO 14001 certified and the company had already completed four phases of the modernization program by investing over 60 Billion INR. By April 2001, Tata steel was the world’s lowest cost producer of steel with operating costs of hot metal (liquid stage) being US$75 per ton.

At this time, company also started the fifth stage of the modernization program, in which focus was laid upon attracting, developing and retaining its human resources, under its Performance Ethic Program (PEP). It consisted of two basic elements, creating a new organizational structure which aimed to create growth, flexible decision making processes and accountability, and the introduction of performance management systems which would focus on reward systems linked to performance and self development opportunities of all the employees equally. The company also initiated a Total Productive Maintenance (TPM) program to reduce breakdown time, readjustments, accidents, errors and product rejections, starting from its bearings division and later implemented to all the plants across the company.

In August 2001, B Muthuraman took over as managing director of the company and he devised a new program known as Vision 2007, which aimed at making the Economic Value Added (EVA) of Tata Steel positive by the year 2007, which the company achieved in the first year of the inception of the program itself! At first this number was negative, and the return from their business was less than the cost of capital. Than in May 2005, Tata Steel declared its annual financial results ended on March 31st, 2005. Tata Steel declared a profit after tax (PAT) of 34.741 Billion INR (€659,7 million) over a turnover of 158.77 Billion INR (€2,995 billion). This was an increase of 99 percent and 33 percent in last years PAT and turnover respectively. The company also reported a rise of 37 percent in the export revenues over previous financial year. It already owns a subsidiary in Sri Lanka and has taken the first significant step to build a global business by investing in Singapore based Nat Steel to acquire 100 percent of its steel business in Singapore and its regional steel subsidiaries and associated companies in China, Malaysia, Vietnam, Thailand, Philippines and Australia at an enterprise value of US$486.4 million.

- Branding Steel

The profitability of the steel industry in India is generally linked to business cycles, reaping profits when economy is going well and eroding them when it is in depression. In the late 1990s, the Indian steel industry was experiencing a glut in the market which strongly affected the profit margin of all related companies. To reduce its dependence on the external environment and business cycles, Tata Steel adopted a strategy which stressed the following two points: branding its products and moving to high value added products.

The company soon realized that a strong customer focus is essential if any branding approach was to be successful. It soon began to introduce internal campaigns in order to bring the customer-centric message to its employees. In the late 1990s, the company launched several internal marketing programs to emphasize customer focus and service. The programs had taglines such as, “customer first – her haal mein” (Customer comes first in any case), “customer first – her haal mein, her saal” (customer comes first in every case, every year), “customer ki kasam – hain taiyaar hum” (We pledge to the customer that we are ready for him). These are the mantras behind Tata Steel’s success. This transfer from producer logic to customer logic was seen as the path to influence customer behavior for mutual gain.

Before jumping on to the brand wagon, Tata Steel set up a branding task force in January 2000 to explore the possibilities of branding Tata Steel products. Only three months later, the task force evolved into a brand management department. Within this department they created the distinct sub functions “market development”‘, “order generation” and “order fulfillment”‘ which were computerized, enabling Tata Steel to reduce its customer response time significantly. The company also initiated the concept of “customer account managers” who were authorized and empowered to solve specific customer grievances immediately. The company furthermore sought to increase customer interaction in order to better understand customer needs and to explore new and improved ways to meet these needs and expectations.

Tata’s second area of key focus was to shift into the domain of high value added products. In April 2000, Tata Steel launched its first branded product, along with the commissioning of its CRM plant. Tata Shaktee is their brand for galvanized corrugated sheets. Eight months later the company introduced its second brand, Tata Tiscon (re-bars) for rods used in the construction industry. In February 2003, Tata Steel launched another product brand Tata Steelium. By September 2003, Tata Steel had three products as well as three generic brands in its brand portfolio, as Tata Pipes, Tata Bearings, and Tata Agrico (hand tools and implements) and Tata Wiron (galvanized wire products).

 “To beat the industry trend in a situation of over supply we need to move away from selling commodities into marketing brands. Even as we will continue to leverage and take to greater heights the value of the Tata brand there will be efforts to create new images and associations for our services our product in current as well as new businesses”

The leader of the company had decided that branding the commodity steel would provide them a unique selling proposition in a great way. Branding Steel would help Tata Steel in two big ways: It would help stabilize the flow of revenues even during business downturns, and it would make premium pricing possible. Similar development could be noticed in other steel companies around the world. Usinor Steel, today part of Arcelor Steel conglomerate established in 2000 a clear set of product brands which propelled their sales to new heights. Tata went on a similar road. Because the corporate brand Tata was already associated with various products and attributes the company decided not to put the main focus on it but to create subbrands with separate identities, supported by the corporate brand as co-driver. At that time the Tata group was involved in a wide range of product and service categories ranging from automobiles to software and was one of the biggest industrial houses of the country. They had learned from the European competition that specialty product offerings and strong brand associations had guarded the market against the low cost importers from the Far East. Tata Steel wasn’t the first company to brand its steel in India. Other steel companies are hoping to keep their bottom-line healthy by producing branded steel in their furnaces that customers will ask for by name. But Tata was pushing ahead with its ambitious plans to ensure that larger quantities of its steel are branded in the coming years.

At the beginning, one of the major obstacles Tata Steel had to overcome was its inexperienced marketing personnel. Their knowledge of branding techniques was quite limited and moreover, many of them had doubts about the feasibility of branding steel. As a solution they started several training programs for them and organized seminars and workshops where experienced people from other sectors came and spoke to employees regarding various issues related to branding. It also formed separate marketing teams for its “long” and “flat” products, keeping in view, the different approaches required for both. The positioning reinforces especially the brand’s leadership position, both in the market place and in the minds of the Indian consumer.

Fig. 1 Tata Steel print advertising, source: www.tatasteel.com

The communication tools used for the brand launches were primarily print ads and outdoor advertising. Yet, they also created TV commercials that portrayed signs of happy customers and employees reveling in the concern the company had for them. “We also make Steel” was the punch line that signaled the triumphant finale of that TV ad. They also began to engage in community welfare programs. They were instrumental in controlling AIDS in the state of Jharkhand, by their AIDS awareness initiatives. Many such programs for community and employee welfare put Tata Steel well ahead in terms of Corporate Social Responsibility practices in the industry. Around 60 per cent of Tata Steel’s products are sold through contracts – quarterly, half-yearly or annually – and so these products are naturally protected from price fluctuations. It is, therefore, the remaining 40 per cent that are subject to price fluctuations. This is where branding becomes important. Tata Steel is spending between 1 per cent and 1.3 per cent of brand-related turnover to establish the brands, and it pays off. The company claims that as a product example, Tata Agrico currently commands a premium of 15 per cent over competing brands. Company sources say there are plans to increase Agrico’s market share even further than 25 per cent. Keeping customers is only one side of the picture. At another level steel companies have come to believe that branding can create a greater level of awareness and interest at the shop floor level. The theory is that if workers know where their products are headed and what they will be used for, it creates a higher level of commitment. Value Management Tata recognized earl on that their employees were essential assets in the course of becoming more customer-focused. Therefore it adopted a program of Retail Value Management, under which the company provided training to sales people recruited by the retailers to help increase sales. In a region in northern India, for instance, sales teams trained by the company approached local architects and convinced them of the advantages of using more steel, resulting in a doubling of the market share of Tata Tiscon in that region. One of the most important things in branding is to know who you are actually messaging to. One of the major implications that Tata undertook in the course of their branding efforts was a concise target group check and distribution revamp. The company was actively involved in both B2B and B2C ? areas. The B2B customers were mainly automakers Maruti, Telco and Ford, who with their knowledge of steel helped the company to focus on product quality on a holistic way, negotiating for specifications and discussing the advantages of using different grades of steel. When Tata Steel scrutinized its customer base, it revealed the quite common Pareto effect in the allocation of total sales related to customers. Only 200 large industrial customers were providing the big chunk of its total sales – 80 percent – while the remaining 20 percent were contributed to by around 5,000-6,000 smaller customers. The logical consequence was to adopt different sales strategies for B2B and B2C ?. For the 200 key accounts that made up for 80 percent of the sales, the company started an extensive Customer Value Management program. Under this program they allocated a whole team consisting of people from various departments of the company to one customer.

Future Prospects From the beginning, the branding initiative of Tata Steel showed impressive results. Tata Steel’s corporate sustainability report for 2003-04 states that the sale of branded products increased by 84 per cent. This resulted in a share of branded products as a percentage of total turnover of 22 percent in that fiscal year. The future expectations and prospects of the company are also very positive. Today, Tata Steel is already one of the best branded names in steel industry and has already started initiatives in the co-branding arena with high end customers like Ashok Leyland and Telco. Looking to the future, Tata Steel has announced that the company would be focusing on co-branding initiatives with its high-end customers such as Telco, Ashok Leyland. Company sources say that initially Tata Steel would be focusing on the automobile sector; later the co-branding initiative will be expanded to the consumer durables sector also. Just recently, in November 2005, Tata Steel and BlueScope ? Steel announced that they have agreed to enter into a partnership and form a new Joint Venture company in India. The 50/50 Joint Venture Company will build a new business across India and South Asia that will manufacture zinc/aluminum metallic coated steel, painted steel and rolls formed steel products, and deliver pre-engineered buildings (PEBs ?) and other building solutions. The new company will offer a comprehensive range of branded steel products for building and construction applications.

The steel industry has been racing along at a surprisingly high speed during recent years, largely due to the huge buying from China. Tata Steel has also done extraordinarily well as the industry moved upwards, but the next big challenges are already seen on the horizon: global reach with global branding. The world number two Mittal Steel has successfully reched out to orchestrate a hostile takeover of Arcelor. The newly created European giant is the largest and most global steel producer and brand.

l Table 1. Tata Steel logos

Further readings in: Philip Kotler, Waldemar Pförtsch Business-to-Business Brand Management, Springer Heidelberg, New York 2006 http://www.amazon.de/exec/obidos/ASIN/3540253602/wwwpfoertscco-21/

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News Portfolio Information Research Dialogue Only for students Only for research TriadSkin powered by PmWiki	Main Tata Steel Tata Steel Branding steel based on customer focus As one of India’s most successful companies, Tata Steel also represents a great example of a strongly branded B2B company. In 2001 and 2005, Tata Steel was ranked the world’s best steel company in studies carried out by World Steel Dynamics Inc., USA (WSD), a leading steel information service provider. The rankings were based on a set of different criteria, ranging from cash operating costs to stock market performance of the respective past three years. In 2005, Tata Steel outpaced 23 other companies that have been identified as world-class steel makers. Among them, businesses like the French Usinor, the American Nucor, the South Korean giant Posco, Nippon Steel, as well as the Russian giant Severstal. - Company Background Established in 1907 by J.N. Tata in Jamshedpur, Bihar, in the eastern part of India, the company began production in 1911 with a capacity of 0.1 million tons of mild steel and continued to grow steadily over the years. By 1958, half a century later, its capacity had increased to 2 million tons. The company followed organic as well as inorganic ways of growth, acquiring companies in the process. In 1973, the company acquired some flux mines and collieries. Ten years later Tata bought the Indian Tube Co. Ltd., a manufacturer of seamless and welded tubes and in 1991, it acquired the ferrochrome units of OMC alloys Ltd. Today, it produces a wide range of products. Tata Steel is part of the Tata Group, one of India’s largest and most respected business conglomerates. In the early 80s, the company started a five stage modernization program for its steel plants which ultimately made the company Asia’s first and India’s biggest Integrated Steel Producer (ISP) in the private sector, a decade later. By 2000, eight divisions of Tata Steel were ISO 14001 certified and the company had already completed four phases of the modernization program by investing over 60 Billion INR. By April 2001, Tata steel was the world’s lowest cost producer of steel with operating costs of hot metal (liquid stage) being US$75 per ton. At this time, company also started the fifth stage of the modernization program, in which focus was laid upon attracting, developing and retaining its human resources, under its Performance Ethic Program (PEP). It consisted of two basic elements, creating a new organizational structure which aimed to create growth, flexible decision making processes and accountability, and the introduction of performance management systems which would focus on reward systems linked to performance and self development opportunities of all the employees equally. The company also initiated a Total Productive Maintenance (TPM) program to reduce breakdown time, readjustments, accidents, errors and product rejections, starting from its bearings division and later implemented to all the plants across the company. In August 2001, B Muthuraman took over as managing director of the company and he devised a new program known as Vision 2007, which aimed at making the Economic Value Added (EVA) of Tata Steel positive by the year 2007, which the company achieved in the first year of the inception of the program itself! At first this number was negative, and the return from their business was less than the cost of capital. Than in May 2005, Tata Steel declared its annual financial results ended on March 31st, 2005. Tata Steel declared a profit after tax (PAT) of 34.741 Billion INR (€659,7 million) over a turnover of 158.77 Billion INR (€2,995 billion). This was an increase of 99 percent and 33 percent in last years PAT and turnover respectively. The company also reported a rise of 37 percent in the export revenues over previous financial year. It already owns a subsidiary in Sri Lanka and has taken the first significant step to build a global business by investing in Singapore based Nat Steel to acquire 100 percent of its steel business in Singapore and its regional steel subsidiaries and associated companies in China, Malaysia, Vietnam, Thailand, Philippines and Australia at an enterprise value of US$486.4 million. - Branding Steel The profitability of the steel industry in India is generally linked to business cycles, reaping profits when economy is going well and eroding them when it is in depression. In the late 1990s, the Indian steel industry was experiencing a glut in the market which strongly affected the profit margin of all related companies. To reduce its dependence on the external environment and business cycles, Tata Steel adopted a strategy which stressed the following two points: branding its products and moving to high value added products. The company soon realized that a strong customer focus is essential if any branding approach was to be successful. It soon began to introduce internal campaigns in order to bring the customer-centric message to its employees. In the late 1990s, the company launched several internal marketing programs to emphasize customer focus and service. The programs had taglines such as, “customer first – her haal mein” (Customer comes first in any case), “customer first – her haal mein, her saal” (customer comes first in every case, every year), “customer ki kasam – hain taiyaar hum” (We pledge to the customer that we are ready for him). These are the mantras behind Tata Steel’s success. This transfer from producer logic to customer logic was seen as the path to influence customer behavior for mutual gain. Before jumping on to the brand wagon, Tata Steel set up a branding task force in January 2000 to explore the possibilities of branding Tata Steel products. Only three months later, the task force evolved into a brand management department. Within this department they created the distinct sub functions “market development”‘, “order generation” and “order fulfillment”‘ which were computerized, enabling Tata Steel to reduce its customer response time significantly. The company also initiated the concept of “customer account managers” who were authorized and empowered to solve specific customer grievances immediately. The company furthermore sought to increase customer interaction in order to better understand customer needs and to explore new and improved ways to meet these needs and expectations. Tata’s second area of key focus was to shift into the domain of high value added products. In April 2000, Tata Steel launched its first branded product, along with the commissioning of its CRM plant. Tata Shaktee is their brand for galvanized corrugated sheets. Eight months later the company introduced its second brand, Tata Tiscon (re-bars) for rods used in the construction industry. In February 2003, Tata Steel launched another product brand Tata Steelium. By September 2003, Tata Steel had three products as well as three generic brands in its brand portfolio, as Tata Pipes, Tata Bearings, and Tata Agrico (hand tools and implements) and Tata Wiron (galvanized wire products). “To beat the industry trend in a situation of over supply we need to move away from selling commodities into marketing brands. Even as we will continue to leverage and take to greater heights the value of the Tata brand there will be efforts to create new images and associations for our services our product in current as well as new businesses” The leader of the company had decided that branding the commodity steel would provide them a unique selling proposition in a great way. Branding Steel would help Tata Steel in two big ways: It would help stabilize the flow of revenues even during business downturns, and it would make premium pricing possible. Similar development could be noticed in other steel companies around the world. Usinor Steel, today part of Arcelor Steel conglomerate established in 2000 a clear set of product brands which propelled their sales to new heights. Tata went on a similar road. Because the corporate brand Tata was already associated with various products and attributes the company decided not to put the main focus on it but to create subbrands with separate identities, supported by the corporate brand as co-driver. At that time the Tata group was involved in a wide range of product and service categories ranging from automobiles to software and was one of the biggest industrial houses of the country. They had learned from the European competition that specialty product offerings and strong brand associations had guarded the market against the low cost importers from the Far East. Tata Steel wasn’t the first company to brand its steel in India. Other steel companies are hoping to keep their bottom-line healthy by producing branded steel in their furnaces that customers will ask for by name. But Tata was pushing ahead with its ambitious plans to ensure that larger quantities of its steel are branded in the coming years. At the beginning, one of the major obstacles Tata Steel had to overcome was its inexperienced marketing personnel. Their knowledge of branding techniques was quite limited and moreover, many of them had doubts about the feasibility of branding steel. As a solution they started several training programs for them and organized seminars and workshops where experienced people from other sectors came and spoke to employees regarding various issues related to branding. It also formed separate marketing teams for its “long” and “flat” products, keeping in view, the different approaches required for both. The positioning reinforces especially the brand’s leadership position, both in the market place and in the minds of the Indian consumer. Fig. 1 Tata Steel print advertising, source: www.tatasteel.com The communication tools used for the brand launches were primarily print ads and outdoor advertising. Yet, they also created TV commercials that portrayed signs of happy customers and employees reveling in the concern the company had for them. “We also make Steel” was the punch line that signaled the triumphant finale of that TV ad. They also began to engage in community welfare programs. They were instrumental in controlling AIDS in the state of Jharkhand, by their AIDS awareness initiatives. Many such programs for community and employee welfare put Tata Steel well ahead in terms of Corporate Social Responsibility practices in the industry. Around 60 per cent of Tata Steel’s products are sold through contracts – quarterly, half-yearly or annually – and so these products are naturally protected from price fluctuations. It is, therefore, the remaining 40 per cent that are subject to price fluctuations. This is where branding becomes important. Tata Steel is spending between 1 per cent and 1.3 per cent of brand-related turnover to establish the brands, and it pays off. The company claims that as a product example, Tata Agrico currently commands a premium of 15 per cent over competing brands. Company sources say there are plans to increase Agrico’s market share even further than 25 per cent. Keeping customers is only one side of the picture. At another level steel companies have come to believe that branding can create a greater level of awareness and interest at the shop floor level. The theory is that if workers know where their products are headed and what they will be used for, it creates a higher level of commitment. Value Management Tata recognized earl on that their employees were essential assets in the course of becoming more customer-focused. Therefore it adopted a program of Retail Value Management, under which the company provided training to sales people recruited by the retailers to help increase sales. In a region in northern India, for instance, sales teams trained by the company approached local architects and convinced them of the advantages of using more steel, resulting in a doubling of the market share of Tata Tiscon in that region. One of the most important things in branding is to know who you are actually messaging to. One of the major implications that Tata undertook in the course of their branding efforts was a concise target group check and distribution revamp. The company was actively involved in both B2B and B2C ? areas. The B2B customers were mainly automakers Maruti, Telco and Ford, who with their knowledge of steel helped the company to focus on product quality on a holistic way, negotiating for specifications and discussing the advantages of using different grades of steel. When Tata Steel scrutinized its customer base, it revealed the quite common Pareto effect in the allocation of total sales related to customers. Only 200 large industrial customers were providing the big chunk of its total sales – 80 percent – while the remaining 20 percent were contributed to by around 5,000-6,000 smaller customers. The logical consequence was to adopt different sales strategies for B2B and B2C ?. For the 200 key accounts that made up for 80 percent of the sales, the company started an extensive Customer Value Management program. Under this program they allocated a whole team consisting of people from various departments of the company to one customer. Future Prospects From the beginning, the branding initiative of Tata Steel showed impressive results. Tata Steel’s corporate sustainability report for 2003-04 states that the sale of branded products increased by 84 per cent. This resulted in a share of branded products as a percentage of total turnover of 22 percent in that fiscal year. The future expectations and prospects of the company are also very positive. Today, Tata Steel is already one of the best branded names in steel industry and has already started initiatives in the co-branding arena with high end customers like Ashok Leyland and Telco. Looking to the future, Tata Steel has announced that the company would be focusing on co-branding initiatives with its high-end customers such as Telco, Ashok Leyland. Company sources say that initially Tata Steel would be focusing on the automobile sector; later the co-branding initiative will be expanded to the consumer durables sector also. Just recently, in November 2005, Tata Steel and BlueScope ? Steel announced that they have agreed to enter into a partnership and form a new Joint Venture company in India. The 50/50 Joint Venture Company will build a new business across India and South Asia that will manufacture zinc/aluminum metallic coated steel, painted steel and rolls formed steel products, and deliver pre-engineered buildings (PEBs ?) and other building solutions. The new company will offer a comprehensive range of branded steel products for building and construction applications. The steel industry has been racing along at a surprisingly high speed during recent years, largely due to the huge buying from China. Tata Steel has also done extraordinarily well as the industry moved upwards, but the next big challenges are already seen on the horizon: global reach with global branding. The world number two Mittal Steel has successfully reched out to orchestrate a hostile takeover of Arcelor. The newly created European giant is the largest and most global steel producer and brand. l Table 1. Tata Steel logos Further readings in: Philip Kotler, Waldemar Pförtsch Business-to-Business Brand Management, Springer Heidelberg, New York 2006 http://www.amazon.de/exec/obidos/ASIN/3540253602/wwwpfoertscco-21/ Edit Page History List Group Page last modified on March 05, 2007, at 03:56 AM	Order here
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