Tata Steel
Tata Group
101st Annual Report 2007 - 2008

Integration

• A compelling vision in steel

The idea of collaborative growth is one which is particularly relevant in today’s context. With a growing global market, countries, corporations, communities and people collaborating with each other to mutual benefit is a route of growth that is perhaps the most effective.

The Tata Steel Group has long believed in this concept, and in the last year, has successfully entered a phase of integration with its partners in growth. Tata Steel and Corus, two companies with long proud histories, share a common business culture and a global vision for the future. And this shared vision has resulted in the emergence of strong synergies that have catapulted the Tata Steel Group to the position of the world’s fifth largest manufacturer of steel, with 82,700 employees across four continents.

 

• Synergies

Manufacturing
Greater productivity leading to increased output and market size.
 
Procurement
Economies of scale leading to cost reduction through combined buying.

Research and Development
Cross fertilisation of Research and Development capabilities and operational best practices, leading to greater innovation and operational efficiencies.

Finance and Corporate
Restructuring of organisation and refinancing.

Synergies of USD 450 million are expected to be achieved by 2010, driven by a joint management.

 

 

A New Phase of Growth

The key objective of a focussed integration initiative is to ensure that collective strengths are leveraged towards achieving a common shared vision. The Tata Steel Group has initiated an integration process at two levels: one, at a strategic level; and the other, with a view to maximising the synergies amongst the various functions of the business. The overall philosophy of the integration process has been “One Enterprise – Two Entities” .

Strategy and Integration Committee
A Strategy and Integration Committee has been constituted that is chaired by the Group Chairman. This committee meets on a regular basis to review progress on the strategy and integration road map, to ensure that key milestones are being met.

Operational Synergies
With the intention of ensuring that different business units bring to the table the focus of individual areas, in April 2007, joint integration teams were constituted. These teams, with defined synergy targets to be achieved as milestones, included the areas of Manufacturing, Research and Development, Information Technology, Finance, and Capital Projects. The joint teams have together identified synergies worth USD 450 million. With detailed action plans that have been formulated and presented, the joint operational teams have a target to deliver these synergies by Q4 of FY2010. This first phase has been termed as ‘Wave One’ synergies. Having made a headstart in this initiative, during the last year, the Tata Steel Group has already realised USD 76 million of the USD 450 million target.

Strategic Initiatives
With the view of taking into account long-term, strategic issues, joint teams have been set up who have a mandate to focus only on strategic issues. For example, areas like Raw Material Procurement, the Flat Product and Long Product businesses, etc. are specific strategic areas where there will be a separate focus.

The Operating Model
Recognising the need for organisational re-structuring in order to achieve seamless integration, the senior management at Tata Steel has identified three types of processes.

  1. Common processes – where both entities need to work together
  2. Aligned processes – where both entities need to work in co-ordination and consultation
  3. Separate processes – where both entities should continue to manage processes independently.

The key considerations in the development of the Operating Model were the strategic content of the processes, the impact that they have on enterprise competitiveness and health; and the need for the enterprise to focus on a particular process because of existing gaps in performance. A ‘Governance Structure’ was formed to oversee the successful implementation of the integration process in January 2008.

> The Governance Structure

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