The Tata Steel Case Study, James Houghton, Wolfe's Living Organization, Measurement & Alignment of Strategy - Management Assignment Help

Assignment Task -                 
 

Write a polished analysis responding to the prompts below.

1. How would you explain the success of James Houghton and the Signature Theater, using the five-question strategy playbook and Wolfe's Living Organization as your frames of reference? Be specific.

2. Using the strategy map illustrated on page 122 of Wapping, Measurement and Alignment of Strategy Using the Balanced Scorecard: The Tata Steel Case" as a guide, create a similar strategy map for Signature Theater (circa 2014).

3. Based on your strategy map and earlier response, what should Houghton do in the future? Why? How? 

ABSTRACT This management accounting case provides insights into the emergence of global firms from emerging economies that have effectively adapted modern management accounting tools in strategy implementation. It is based on real-life situations and was developed using information from interviews and access to the firm’s internal processes, journal articles, and other publicly available information. It is suitable for use in second-level courses in management accounting or on MBA programs. It provides insight into the use of the balanced scorecard, in particular the strategy map and measurement. 

Introduction 
It was well past midnight on a crisp January night in 2007. The Tata Head Office in Mumbai (Bombay) was alive with restless anticipation as Chairman Ratan Tata, Managing Director Muthuraman and a handful of key executives monitored the London auction for the Anglo-Dutch steel firm Corus. CSN Brazil had proved to be a determined player and had already raised the bid close to 570 pence per share, edging the total purchase price beyond the $9 billion marks. Tata knew that this was a crucial stage in the life of Tata Steel (TS) given the global changes taking place in the steel industry. Besides, the company had prepared for this moment over the past few months, beginning with Managing Director Mr. Muthuraman focusing on meeting expansion goals through a program of selective mergers and acquisitions. 
While steel prices had leveled in developed countries, recently increased steel consumption in emerging countries such as India and China had rejuvenated the steel industry. However, consolidations and mergers were also beginning to re-shape the industry and the supply chain to increase the competitive strengths of the industry.1 Historically, the ‘commoditization’ of steel had made it vulnerable to economic cycles. Additionally, while raw materials’ vendors and major customers such as automobile companies were highly concentrated, the steel industry was fragmented. This also made it more vulnerable to raw material price increases combined with steel price fluctuations that often resulted in a profit squeeze. The cost of freight had also increased, due in large part to Chinese trade, making it necessary for companies to locate closer to raw materials. In fact, it was now imperative for TS to adopt a global strategy to survive. 

The company had adapted to the environment while retaining its historical image for high moral and ethical standards. The company has incorporated insights about stakeholders’ needs through a ‘stakeholder engagement’ system in developing and implementing strategy. Additionally, the Balanced Scorecard (BSC) had become critical in integrating various components of the strategy and communicating it throughout the organization. After the initial adoption of the BSC, the company felt the need to strengthen its use. In January 2004, TS invited Ted Jackson, then President of the Balanced Scorecard Collaborative, to conduct management seminars on the use of the scorecard. Mr. Sharma2 of the Strategy and Planning Division recalled that the workshop was attended by Senior Executives of Tata Steel and its associate companies. The concept of the strategy map was refined and developed in some detail. Additionally, Ted Jackson also discussed the BSC cascading process and clarified how Business Support unit scorecards differed from the Business unit scorecards. Mr. Sharma remarked that the workshop had succeeded in adding needed momentum to the use of the BSC and increasing communication within the organization. 

Background 
Steel, the basic commodity that forms the basis for several products from the construction of buildings and tankers, to hairpins and clips, has a complex and global supply chain (see Figure 1) and a shifting customer base. 

The recent resurgence in the industry, fueled by the construction boom and increasing demand for consumer goods in emerging countries, was an opportunity for Tata Steel. Tata Steel (TS) had come a long way since its inception on 26 August 1907 as the Tata Iron and Steel Company. Whilst zealously guarding an enviable reputation for high ethical values inculcated by the founder, Jamshedji Tata,3 TS had developed a placid culture over the years, with a sizeable payroll and a limited steel capacity of less than five million tonnes per annum (mtpa). Liberalization of the Indian economy in the 1990s and a change of management resulted in major changes in the company. The new Chairman, Ratan Tata, set in motion a culture of change in management without compromising the ethical base that defined the essence of the Tata philosophy captured by the Tata Code of Conduct. The company transformed itself from an outdated high-cost operation to a low-cost modern steel producer, named third in management by World Steel Dynamics.4 It was also increasingly becoming the preferred supplier of steel for high-end products such as automobiles. However, the steel sector was changing rapidly and globalization was the next challenge. Fragmentation in the steel industry led to lower margins compared to other players in the supply chain. For example, three iron ore suppliers had over 60% of the total market share, with margins of 35%. Customers such as the automobile industry were also highly- concentrated with the top five firms controlling 65% of the market. In contrast, the top 10 steel firms had only about a quarter of the total global output and a margin close to 10%.5 This had also resulted in re-structuring of the industry, leading to mergers to increase price stability. 

Chairman Ratan Tata understood the challenges: 
In this changed steel scenario, Tata Steel cannot standstill. It must explore ways of enhancing its capacity domestically while also establishing finishing facilities in strategic locations internationally, leveraging its low-cost Indian base and the availability of domestic iron ore. The Company needs to evaluate and invest in new emerging steel-making technologies, so as to enable it to be a state-of-the-art steel-making facility. 

Tata Steel had begun to shop globally, purchasing NatSteel in Singapore6 and Ferrochrome Smelter in Richards Bay, KwaZulu-Natal, South Africa. In October 2006, Tata Steel made a bid for the Anglo-Dutch steel giant, Corus, which specialized in high-end steel products including aircraft and automobiles. Ratan Tata felt that this purchase would integrate well with the company’s global strategy.7 Thus, Tata Steel was poised to reap the benefits of globalization, liberalization, and the growing steel demand from Asian economies, while remaining alert to the threats of hostile takeovers, the pressures on prices and raw materials, and the increasing competition to create value for the customer. 

After spending time with management at the head offices in Jamshedpur, Ted Jackson outlined a program for the BSC workshops. The key objectives of the workshops were to revitalize TS’s BSC program to make it more effective, to integrate the BSC with the Strategic Governance process, and to create momentum using the BSC as a dynamic process. Several key executives, including Mr. Muthuraman, the Managing Director (MD), Mr. Mukherjee, the Deputy Managing Director (DMD) of Steel, and Mr. Chaturvedi, Vice President (VP) of Flat Products, attended different sessions in the workshop (see Figure 2 for the organization structure). There was a variety of sessions, including sessions for strategy development, strategy maps, and cascading of the scorecard.
 
In the strategy session, executives reviewed key factors integral to the strategy, the firm’s vision, values, and mission. All reaffirmed the firm’s desire to remain true to the vision of the founder, Jamshedji Tata, to strengthen India’s industrial base through the effective utilization of staff and materials by mobilizing high technology and productivity, consistent with modern management practices. The TS vision recognized that, while honesty and integrity were the essential ingredients of a strong and stable enterprise, profitability provided the main spark for economic activity. The vision also acknowledged the need for an atmosphere free from fear and thereby reaffirmed its faith in democratic values. The Tata Code of Conduct institutionalized the firm’s value system. The code included several articles that highlighted the need for transparency and mutually beneficial relationships with different stakeholders (Elankumaran et al., 2005).8 The Tata Code of Conduct specifically forbids bribery and corruption in various forms.9 The firm’s mission was to mobilize resources to avail itself of opportunities through areas such as emerging technologies, new business models, value creation, customer service, new products, services, or businesses to make the firm EVA positive.10 Additionally, the firm would keep in view the vision by improving the quality of life of the employees and the communities served and upholding the spirit and values of the Tatas in nation-building. 

The firm placed a high priority on ‘stakeholder engagement’ and used feedback from stakeholders to identify key areas of strategy and as a means to integrate economic, social and environmental issues (part of the Code of Ethics) into its strategy.11 The engagement process (Figure 3) helped identify key stakeholders within stakeholder groups, assess and prioritize their concerns and address them in corporate strategy. 

The executives were familiar with the variety of forums to receive feedback and communicate with stakeholders including investor satisfaction surveys, customer conferences and satisfaction surveys, vendor dialogues, meetings with key suppliers, employee dialogues, senior citizens’ forums, and joint community meetings. Information from stakeholder engagement, integrated with values, mission, and the competitive environment, formed the basis for strategy development. Using this information, the executives were assigned the task of drawing up the ‘strategy map,’ which Ted described as the ‘roadmap’ of the strategy linking key components of the strategy in the four BSC perspectives. After several hours of debate and heated discussions, the executives finally agreed to a map over which there was reasonable consensus (see Figure 4). Mr. Sharma recalled some of the discussions with executives from different functional areas highlighting their contributions to the overall strategy. The Chief (Strategy and Planning) coordinated the efforts, guiding discussions along the areas linked to the BSC perspectives. 

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