Tata Steel Company

COMMUNICATIONS CAMPAIGN: TATA STEEL COMPANY

Tata Steel Company

2010

Tata Steel Company

Communications Campaign: Tata Steel Company

1. Introduction The scope of steel industry consists of all activities of producing, distributing and marketing many kinds of steel products. The industry evolved since the times of Renaissance, where there was the need to manufacture steel products although at that time the steel production was considered inefficient and obsolete. However, the advanced technologies in the steel production such as Basic Oxygen Steelmaking process and Bessemer process in the mid-19th century have lifted up the efficiency in steel production, which also boost the production several fold. Nowadays, the development of economies in some countries has driven the rising needs for steel production as the building out of several infrastructures requires huge amount of steel such as the ships, automobile, and building. This condition suggests that the continuous supply for iron products are required by the modern society to survive and to create better standards of living. Nevertheless, like any other industry, dynamic changes of the environment generated issues which influence stability of the industry. Concerning the steel industry, this paper will discuss about one producer of steel, TATA Steel Company. The discussion includes several aspects such as market analysis, trends, competitors and company current position, objective to be achieved, elements of marketing communication to be involved along with underlying reasons for selection. In addition, this paper will also elaborate the communication method, strategy and costs for each marketing

Tata Steel Company communication method. Since spending the marketing communications is high, therefore, we also provide the methods for measuring the effectiveness of the marketing communication. 2. Environmental Analysis 2.1. Market analysis The nature of steel industry is its pricing depends on the demand-supply in the market.

Though it suggests that the development of steel industry depends on the economic condition, it highlights that steel company must set competitive pricing in order to cope with the market price or even conduct the simple pricing like Nucor that quote similar price and terms of sales to all customers. By conducting the attractive pricing strategy that maintains the contracts, it would help steel company to speed up the growth. Another important aspect in the competitiveness for a steel company is innovation in designing and assembling the steel manufacturing plant. Under such circumstances, steel company must continue building the manufacturing plants as the fastest time in order to cope with the growing demands. Interestingly, the nature of growth in the steel industry is contributed largely by a country economy development since the steel products mostly used for construction business, automobile, and plantation in which all related to the growth of a countrys economy.

Tata Steel Company Figure 1 Steel Consumption by sector (%)

Source: The Metal Casting, 2009 Figure 1 highlights the contribution of sector to the steel industry, which coin the ideas that this multi-billion industry heavily depends on the global economy. In the case of global recession in 2007-2008, for instances, the steel companies worldwide soon experience a hard time in sales as their clients start canceling their orders, which further impact to the steel companys production and also layoff. This happens as top three of customers group in the steel industry -construction, automobiles and industrial equipment- also experience huge lose due to cancellation of orders. In North America, the origin of global recession, the demand for steel products also declines rapidly. The construction industry that consume about 40% of steel products, automobile (20%), and industrial equipments (20%) are all badly hit by the economic recession (The Metal Casting, 2009). Table 1 show that China and India are two countries that continue experience the rise of steel demand despite other countries like U.S., Japan, and E.U. experience the plummeting demands.

Table 1

Steel Demand by country (in million ton)

Tata Steel Company

According to Organization for economic co-operation and development (OECD) (2009), the slowing demands in several developed countries do not happen in China, to be precise as the country is still running the mega project in the public infrastructure.

2.2.

Trends Amidst the slowing demands during the 2008-2009 periods, some producers believe that

the demand would up in 2010. This situation soon will provide another challenge as producers are racing towards the sales, which may give pressure to bring down the commodity price. Another trend is each country will try to absorb the local production before importing steel from other countries as the transportation costs surge (Daltorio, 2010; Alter, 2008). This situation makes favorable impact to U.S as their steel products are now competitive compared to China counterparts. This happen as the transportation costs for raw materials to be exported into China and steel products that exported to U.S, for example, also increase due to the rising oil price. This situation brings down the China steel export to the U.S by 20% while U.S. steel production increase by 10%. Figure 2 shows the competitiveness of China and U.S steel industry that also influence the world steel production as the rise of oil price may cause the local steel products to be as competitive as imported ones (Daltorio, 2010; Alter, 2008).

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(a) cost advantage over China steel producers Figure 2

(b) China steel exports to U.S fall

China and U.S. Steel Competitiveness

Source: Alter, 2008 2.3. Competitors In the Steel industry, the domination of Arcelor-Mittal remains strong with annual production reach 109.7 million tones. This domination also become one factor to determine whether the outlook of steel industry is better or worse by analyzing the way Arcelor-Mittal accelerates. Despite this situation, still the steel industry does not change so much in terms of top 10 producers except the latest merger and acquisition over Corus by Tata Steel Company for 4.3billion ($8.1billion), representing the largest acquisition in terms of value by India company at that time. That acquisition puts the new combined company to be the fifth largest steel company after Arcelor-Mittal, Nippon Steel, Posco, and JFE (Business Line, 2006). Table 2 shows the competition in steel industry where the position of Arcelor-Mittal remains unbeatable as its capacity is more three fold than its closest competitors, Nippon Steel (Japan). Table 2 Top 10 Steel Producers (in million tones)

Tata Steel Company

2.4.

Tata Steel Company current position The acquisition on Corus by Tata has put the company to be the fifth or sixth largest steel

company in the world as the gap between Tata and Baosteel is considerably close that make them to overlap one another in a given period. In the Stock Markets Review (2009), Tata-Corus is places as sixth place with total capacity reaches 30 million tones. Table 3 exhibits the Tata Steel performance during third quarter in 2009 where the impact of slowing down of global economy still influences the companys performance that is forced to cut their production, which result in the rising employee costs. Table 3 Tata Steel Company 3Q - 2009 Performances

Source: Stock Markets Review, 2009

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Compared to the market leader, Arcelor-Mittal (MT), the both companies also experience significant pressure due to the economic turmoil where in the fourth quarter of 2009, they both cut production, which cause the company to slash their revenue by 50% (Stock Markets Review, 2009). Table 4 Tata Steel (TSL) and Arcelor-Mittal (MT) performances

Source: Stock Markets Review, 2009 2.5. Objectives Considering that in 2010, the demand for steel products starts rising, which may encourage steel producers to cut price in order to absorb their production, therefore the objectives of marketing communication for Tata Steel Company would be: To communicate the quality improvement of Tatas products with the reasonable value for money

3. Marketing Communication 3.1. Elements of Marketing Communications to be involved along with underlying reasons for selection Marketing communication convey the plan and execution on how to promote or create responsiveness of the product in the marketplace. A promotion plan explains the tools or tactics

Tata Steel Company used to accomplish the marketing objectives. Promotion decisions are those related to communicating and selling to potential consumers. In order to deliver a message effectively in advertising, there should be budgets to estimate the expense. The budget should include separate accounting for internal hours (staff

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time) and external costs (out-of-pocket expenses). Table 5 shows the resume of budget for Tata Steel company. Table 5 No. 1 2 Marketing Communication Budget Items Revenue of Tata Steel Company Marketing Communications Budget for Tata Steel Company Budget X 0.001X

The budget of promotion for Tata Steel is assumed to account for 0.1 percent of the company revenue. As the companys customers are not individuals but construction companies, manufacturers, and industrial equipments, to name a few; the marketing communication approach will likely to use direct selling approach with few advertising in traditional media not for promoting the product but it campaign the corporate social responsibility, which also strengthen the company image. Another approach within the direct selling method is to participate in any metal or steel industry exhibition. This is the best method for B2B (business-to-business) industry like steel industry since it bridges the meeting between steel producers and potential buyers.

3.2.

Communication method, strategy and costs for each marketing communication method.

Tata Steel Company Intentionally, customers often buy a product based on its attractive and catching advertising campaign. One way to send a good image in the advertising is to use appropriate models or representations. Moreover, assuming the annual revenue of Tata Steel reach $25

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billion, therefore, the budget for marketing communications is $25 million. This number will be divided into several programs as listed in the table 6.

Table 6

Communication/promotion activities, budgets and time scheme, and measures for evaluation

No 1

Communication

Budgets

Time Schedule

Measure for

Activities ($) Evaluation Public Relations and Corporate Social Responsibility (CSR) programs In-house 1 millions Every Responses to exhibition/press months/product 4 millions launching annual the launching of products Dedicated to education in the countries where 12 millions Tata Steel exists Metal and Steel exhibitions conferences Corporate Social Responsibility programs

3 3

Industrial exhibitions Print Advertising Booklets

500,000

Distributed at exhibitions, press conferences etc Every month

Trade Magazines

4 millions

Advertisement at steel and trade magazines in the target market and some leading international

Tata Steel Company magazines 5 Online Advertising Website Updates 500,000 Any time Web sites updated every time Tata Steel make news 7 Outdoor Advertising Billboard TOTAL 3 millions 25 millions A whole year Giant billboard at industrial estate

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The above elaboration of advertising budget is just one example of how Tata Steel should be detailed about their expense in order to enable the management of Tata Steel to estimate the expense and therefore generate projected revenue to cover the advertising expense and other expenses include costs of employees. The traditional marketing strategy uses various types of media. The easiest and most popular media is paper or in-print media. In marketing theory, marketing using in-print media comes in many forms such as advertising in magazines or sending direct mail. The direct mail method has the advantage of cheaper and more effective form of advertisement. However, according to 50 simple things you can do to save the earth (1989), the direct mail method is not effective anymore due to average Americans receive almost 4 million tons of junk mails annually, which means that customers are less likely to read direct mail.

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Figure 3

Examples of Print Advertising of Tata Steel

Therefore, in terms of in-print advertising, the appropriate method is to advertise in trade magazines or industrial magazines that will target directly those working or doing business in constructions industry. One example of print advertising is shown in the Figure 3, which intends to communicate that Tatas new products Aspire T3- is the industrial breakthrough that can support any mega projects in construction. In addition, to communicate that Tata also provide affordable price due to the concerns that after the economic crisis, construction industry scare of the bubbling price of steel, Tata add the tagline below its logo Strong, Reliable, Affordable.

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Figure 4

Billboard of Tata at Exhibition Hall

In addition, Figure 4 displays the example of Tata billboard that can be placed in the industrial estate, in the exhibition gates or in the office parks where decision makers of targeted industries commute. Meanwhile, for exhibition method, Tata will participate in any exhibitions both large and medium scale. The lists of upcoming exhibitions in the metal industry (http://www.steelonthenet.com/events.php) should be the basis for upcoming Tata Steel participation.

3.3.

Methods for measuring the effectiveness of the marketing communication

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There is a saying that Its worth spending ten per cent of your ad budget on research if it makes the other 90 per cent more effective (B2B International, 2006). Therefore, in practical terms, marketer can ensure that his advertising is as effective as possible. The first step is to provide measurable and quantitative objectives. For instances, Tata Steel might set a target of a certain number of enquiries from a campaign. Based on the objective, therefore, the measurement is quite easy since the marketer simply measures variations between journals and between responses at different times of the year in which the target for the response set in advance of the campaign is the criterion for measuring it Second step is to measure image, attitudes, and awareness right before and after the campaign is launched in order to measure the effectiveness of the campaign. Based on these two simple steps in measuring the effectiveness of an advertising campaign, I can conclude that assessing market size and market shares, for instances, are not sufficient in measuring advertising effectiveness. In other literature, I found that there are also two steps in creating the most influential advertising campaign. It results in the number of favoring findings to make the advertising gets more effective in as following: Step 1 Setting up The Key Message In this first step, a company might conduct press conference in order to figure out perceptions and expectations of target markets/customers about the quality and diversity of Tata Steels products Step 2 Testing The Advertisings The market researchers might test these amongst the audiences of Tata Steel in a location, says in exhibition spots in Moscow, Chicago, Milan, and also Bangkok where the steel

Tata Steel Company exhibitions will take place. Afterwards, researcher sends out copies to 100 respondents who are interviewed to comment on each of the ads in terms of: a. Stopability b. Interest c. Relevance d. Clarity e. Likelihood of taking action The above steps when appropriately developed will provide a company with suitable information that ensure the effectiveness of advertising campaign for a product that favor the

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company to gain not only increased market share but also to reach as much as potential buyers.

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Bibliography

Alter, Lloyd. 2008, High Oil Prices Help Revive US Steel Industry, Create American Jobs, [Online] Available at: http://www.treehugger.com/files/2008/08/high-oil-prices-createsjobs.php B2B International. 2006, Advertising Research, [Online] Available at: http://www.b2binternational.com/case5.html Business Line. 2006, Tatas to buy Corus for $8 b, [Online] Available at: http://www.blonnet.com/2006/10/21/stories/2006102104240100.htm Daltorio, Tony. The Pros and Cons of Dealing with Steel, [Online] Available at: http://www.investmentu.com/IUEL/2010/February/steel-industry-pros-and-cons.html M E Porter. .1980, Competitive Strategy: Techniques for Analyzing Industries and Competitors, The Free Press, New York, 1980, pp 129-130. Organization for economic co-operation and development (OECD). 2009, Trends in the global steel market, 66th Steel Committee Meeting, Paris Porter, Michael. 1998, Competitive Strategy: Techniques for Analyzing Industries and Competitors, Free Press RD Marketing. 2006, Creating an Integrated Marketing Communications Plan. R R Simmons. 1998, How Companies Survive, Iron and Steel Engineer, vol. 65, no 1, January 1998, pp 36-39 Stock Markets Review. 2009, Tata Steel Ltd. consolidated 3QFY09 result analysis by Keynote Capitals, [Online] Available at:

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http://www.stockmarketsreview.com/news/tata_steel_ltd_consolidated_3qfy09_result_an alysis_20090305/ The Metal Casting. 2009, Top Story, [Online] Available at: http://www.themetalcasting.com/news.html Wall Street Pit. 2009, Global Steel Demand Suggest Recovery Stronger than Predicted, [Online] Available at: http://wallstreetpit.com/11232-global-steel-demand-suggestrecovery-stronger-than-predicted