The leading steel producers of India, Tata steels has captured the top 10 position in its industry. It produced 26.5 million tons of steel last year. To put that into a perspective, we can build the “Golden Gate Bridge” of San Francisco 295 times with that much amount of steel and still have some left. That production giant was doing their business in a monopolistic manner in India, up until the 90’s when they finally started facing competition. Following are few competitive advantages of TATA steels:
Lean Production System
In order to be competitive, the company has to foresee the future and so did Tata steels. It was then that they realized only production wasn’t going to cut it. They needed to go for leaner and production system that would maximize their profit, with minimum raw material and production process. Managing Director of that time, Dr. J.J. Irani foresaw the benefits of implementing quality management system in the production process.
Customer Driven Strategy
Competition was getting high, customers were needed to be maintained. “If we don’t take care of our customers, somebody else does.” was the notable statement made by the CMD of the time. To give the customers better service, better quality product was needed. To produce better steel, more skilled manpower was needed, utilizing this human resource would need a more efficient and better communication system among the working parts of the company. To achieve all these, a better strategy was needed to be formulated.
Customer Oriented Product Mix
At this point, the company was sailing in unknown waters. It quickly assessed its position and started to form short term strategies which were coherent with their long term goals. Ego needed to be checked, Tata wasn’t the only people who could produce good quality steel. So if the steel quality could not win the hearts of the customers, the best way to win was winning the hearts of the customers directly. That meant a customer oriented product mix. Tata steels quickly assessed the supplier market, gathered an understanding of the demand and supply and formed a strategy for their product.
Effective Personnel Management
Change doesn’t come easily. Tata steels hand-picked personnel who would initiate change in the company. New personnel were added. At the end of it all, the results spoke for themselves. Cost of raw materials decreased by a staggering 57%. Producing steel became even cheaper. Production cost decreased by 15%. Fuel cost decreased by a whopping 80%. All these resulted in cheaper and better produced steel that the customer greatly demanded. At times like these, moral of employees increase as well. The workplace became a safer environment. Labor productivity increased by 95%.
Total Quality Management
This was and still is the number one competitive edge the company has against other industry competitors. Once it used to produce 2 million tons of steel using a combined workforce of 80,000 people. Now, 70,000 employees produce over 25 million tons of steel. The production process is leaner and more efficient. Properly using TQM, Tata has shown how a company can thrive when the competition is at its highest. Tata should maintain its position since Steel industry entry barrier is high (close to US $1billion/mtpa by Steel Manufacturers association’s estimates.)