\nABSTRACT This management accounting case provides insights into the emergence of global firms
\nfrom emerging economies that have effectively adapted modern management accounting tools in
\nstrategy implementation. It is based on real-life situations and was developed using information
\nfrom interviews and access to the firm?s internal processes, journal articles, and other publicly
\navailable information. It is suitable for use in second level courses in management accounting or
\non MBA programs. It provides insight into the use of the balanced scorecard, in particular the
\nstrategy map and measurement.
\nKEY WORDS: Case study, management accounting, balanced scorecard
\nIntroduction
\nIt was well past mid-night on a crisp January night in 2007. The Tata Head Office in
\nMumbai (Bombay) was alive with restless anticipation as Chairman Ratan Tata, Managing
\nDirector Muthuraman and a handful of key executives monitored the London auction for
\nthe Anglo-Dutch steel firm Corus. CSN Brazil had proved to be a determined player and
\nhad already raised the bid close to 570 pence per share, edging the total purchase price
\nbeyond the $9 billion mark. Tata knew that this was a crucial stage in the life of Tata
\nSteel (TS) given the global changes taking place in the steel industry. Besides, the
\ncompany had prepared for this moment over the past few months, beginning with
\nManaging Director Mr Muthuraman focusing on meeting expansion goals through a
\nprogram of selective mergers and acquisitions.
\nWhile steel prices had leveled in developed countries, recent increased steel consumption
\nin emerging countries such as India and China had rejuvenated the steel industry.
\nHowever, consolidations and mergers were also beginning to re-shape the industry and
\nthe supply chain to increase the competitive strengths of the industry.1 Historically, the
\nAccounting Education: an international journal
\nVol. 18, No. 2, 117 ?130, April 2009
\nCorrespondence Address: George Joseph, Department of Accounting, College of Management, University of
\nMassachusetts Lowell, One University Avenue, Lowell, MA 01854, USA. Email: george_joseph@uml.edu
\n0963-9284 Print\/1468-4489 Online\/09\/020117?14 # 2009 Taylor & Francis
\nDOI: 10.1080\/09639280802436731
\n?commoditization? of steel had made it vulnerable to economic cycles. Additionally, while
\nraw materials? vendors and major customers such as automobile companies were highlyconcentrated,
\nthe steel industry was fragmented. This also made it more vulnerable to raw
\nmaterial price increases combined with steel price fluctuations that often resulted in a
\nprofit squeeze. The cost of freight had also increased, due in large part to Chinese
\ntrade, making it necessary for companies to locate closer to raw materials. In fact, it
\nwas now imperative for TS to adopt a global strategy to survive.
\nThe company had adapted to the environment, while retaining its historical image for
\nhigh moral and ethical standards. The company has incorporated insights about stakeholders?
\nneeds through a ?stakeholder engagement? system in developing and implementing
\nstrategy. Additionally, the Balanced Scorecard (BSC) had become critical in
\nintegrating various components of the strategy, and communicating it throughout the
\norganization. After the initial adoption of the BSC, the company felt the need to strengthen
\nits use. In January 2004, TS invited Ted Jackson, then President of the Balanced Scorecard
\nCollaborative, to conduct management seminars on the use of the scorecard. Mr Sharma2
\nof the Strategy and Planning Division recalled that the workshop was attended by Senior
\nExecutives of Tata Steel and its associate companies. The concept of the strategy map was
\nrefined and developed in some detail. Additionally, Ted Jackson also discussed the BSC
\ncascading process and clarified how Business Support unit scorecards differed from the
\nBusiness unit scorecards. Mr Sharma remarked that the workshop had succeeded in
\nadding needed momentum to the use of the BSC and increasing communication within
\nthe organization.
\nBackground
\nSteel, the basic commodity that forms the basis for several products from the construction
\nof buildings and tankers, to hairpins and clips, has a complex and global supply chain (see
\nFigure 1) and a shifting customer base.
\nThe recent resurgence in the industry, fueled by the construction boom and increasing
\ndemand for consumer goods in emerging countries, was an opportunity for Tata Steel. Tata
\nSteel (TS) had come a long way since its inception on 26 August 1907 as the Tata Iron and
\nSteel Company. Whilst zealously guarding an enviable reputation for high ethical values
\ninculcated by the founder, Jamshedji Tata,3 TS had developed a placid culture over the
\nyears, with a sizeable payroll and a limited steel capacity less than five million tonnes
\nper annum (mtpa). Liberalization of the Indian economy in the 1990s and a change of management
\nresulted in major changes in the company. The new Chairman, Ratan Tata, set
\nin motion a culture of change in management without compromising the ethical base
\nthat defined the essence of the Tata philosophy captured by the Tata Code of Conduct.
\nThe company transformed itself from an outdated high cost operation to a low cost
\nFigure 1. Steel industry overview
\n118 G. Joseph
\nmodern steel producer, named third in management by World Steel Dynamics.4 It was also
\nincreasingly becoming the preferred supplier of steel for high-end products such as automobiles.
\nHowever, the steel sector was changing rapidly and globalization was the next
\nchallenge. Fragmentation in the steel industry led to lower margins compared to other
\nplayers in the supply chain. For example, three iron ore suppliers had over 60% of the
\ntotal market share, with margins of 35%. Customers such as the automobile industry
\nwere also highly- concentrated with the top five firms controlling 65% of the market. In
\ncontrast, the top 10 steel firms had only about a quarter of the total global output and a
\nmargin close to 10%.5 This had also resulted in re-structuring of the industry, leading
\nto mergers to increase price stability. Chairman Ratan Tata understood the challenges:
\nIn this changed steel scenario, Tata Steel cannot stand still. It must explore ways of enhancing
\nits capacity domestically while also establishing finishing facilities in strategic locations internationally,
\nleveraging its low cost Indian base and the availability of domestic iron ore. The
\nCompany needs to evaluate and invest in new emerging steel-making technologies, so as to
\nenable it to be a state-of the-art steel-making facility.
\nTata Steel had begun to shop globally, purchasing NatSteel in Singapore6 and
\nFerrochrome Smelter in Richards Bay, KwaZulu-Natal, South Africa. In October 2006,
\nTata Steel made a bid for the Anglo-Dutch steel giant, Corus, which specialized in highend
\nsteel products including aircrafts and automobiles. Ratan Tata felt that this purchase
\nwould integrate well with the company?s global strategy.7 Thus, Tata Steel was poised to
\nreap the benefits of globalization, liberalization and the growing steel demand from Asian
\neconomies, while remaining alert to the threats of hostile takeovers, the pressures on
\nprices and raw materials, and the increasing competition to create value for the customer.
\nRole of the BSC in Tata Steel
\nAfter spending time with management at the head offices in Jamshedpur, Ted Jackson outlined
\na program for the BSC workshops. The key objectives of the workshops were to revitalize
\nTS?s BSC program to make it more effective, to integrate the BSC with the Strategic
\nGovernance process, and to create momentum using the BSC as a dynamic process.
\nSeveral key executives, including Mr Muthuraman, the Managing Director (MD),
\nMr. Mukherjee, the Deputy Managing Director (DMD) of Steel, and Mr Chaturvedi,
\nVice President (VP) of Flat Products, attended different sessions in the workshop (see
\nFigure 2 for the organization structure). There was a variety of sessions, including sessions
\nfor strategy development, strategy maps, and cascading of the scorecard.
\nIn the strategy session, executives reviewed key factors integral to the strategy, the
\nfirm?s vision, values and mission. All reaffirmed the firm?s desire to remain true to
\nthe vision of the founder, Jamshedji Tata, to strengthen India?s industrial base through
\nthe effective utilization of staff and materials by mobilizing high technology and productivity,
\nconsistent with modern management practices. The TS vision recognized that,
\nwhile honesty and integrity were the essential ingredients of a strong and stable enterprise,
\nprofitability provided the main spark for economic activity. The vision also acknowledged
\nthe need for an atmosphere free from fear, and thereby reaffirmed its faith in democratic
\nvalues. The Tata Code of Conduct institutionalized the firm?s value system. The code
\nincluded several articles that highlighted the need for transparency and mutually beneficial
\nrelationships with different stakeholders (Elankumaran et al., 2005).8 The Tata Code of
\nConduct specifically forbids bribery and corruption in various forms.9 The firm?s
\nmission was to mobilize resources to avail itself of opportunities through areas such as
\nemerging technologies, new business models, value creation, customer service, new
\nMapping, Measurement and Alignment of Strategy 119
\nFigure 2. Organization structure
\n120 G. Joseph
\nproducts, services or businesses to make the firm EVA positive.10 Additionally, the firm
\nwould keep in view the vision by improving the quality of life of the employees and
\nthe communities served and upholding the spirit and values of the Tatas in nation building.
\nThe firm placed a high priority on ?stakeholder engagement? and used feedback from
\nstakeholders to identify key areas of strategy and as a means to integrate economic,
\nsocial and environmental issues (part of the Code of Ethics) into its strategy.11 The
\nengagement process (Figure 3) helped identify key stakeholders within stakeholder
\ngroups, assess and prioritize their concerns and address them in corporate strategy.
\nThe executives were familiar with the variety of forums to receive feedback and communicate
\nwith stakeholders including investor satisfaction surveys, customer conferences
\nand satisfaction surveys, vendor dialogues, meetings with key suppliers, employee dialogues,
\nsenior citizens? forums, and joint community meetings. Information from stakeholder
\nengagement, integrated with values, mission, and the competitive environment, formed
\nthe basis for strategy development. Using this information, the executives were assigned
\nthe task of drawing up the ?strategy map,? which Ted described as the ?roadmap? of the
\nstrategy linking key components of the strategy in the four BSC perspectives. After
\nseveral hours of debate and heated discussions, the executives finally agreed to a map
\nover which there was reasonable consensus (see Figure 4). Mr Sharma recalled some of
\nthe discussions with executives from different functional areas highlighting their contributions
\nto overall strategy. The Chief (Strategy and Planning) coordinated the efforts,
\nguiding discussions along the areas linked to the BSC perspectives.
\nWhile the strategy map proved to be invaluable in articulating overall strategy, Ted
\nJackson emphasized the critical importance of cascading strategy to different levels in
\nthe organization by developing scorecards at the corporate level, as well as for each
\nbusiness unit and support unit. Scorecards formed an integral part of communication
\nand alignment of strategy. The cascading process began at the corporate level with the
\nManaging Director?s (MD) scorecard.
\nThe team next worked on the outline for the MD?s scorecard (also called the corporate
\nscorecard) that emphasized areas where the corporate office provided the synergies to
\nenable achievement of organizational strategy. Muthuraman had set the financial goal
\nof becoming EVA positive, a target he recognized as difficult in the steel industry. He
\nrecognized the need to emphasize quality through branding, and meeting the manufacturing
\ndemands of sophisticated customers such as automobile and aircraft manufacturers to
\nincrease margins. The global aspects of the Revenue strategy, to achieve revenue growth
\nand diversification into related end products through mergers, were also evident in the
\nscorecard (Table 1).
\nThe BSC now needed to be cascaded to different levels in the organization. The task
\nwould continue long after the workshop, but the sessions had set the stage for a
\nrenewed and revived implementation of the BSC. As Mr Sharma thoughtfully summarized
\nthe impact of the BSC, he expressed his appreciation of the overall usefulness of the
\nFigure 3. Stakeholder engagement process
\nMapping, Measurement and Alignment of Strategy 121
\nFigure 4. Strategy map
\n122 G. Joseph
\nTable 1. Corporate balanced scorecard
\nBSC perspective Corporate objectives
\nStrategic measures
\n(unit) Actual Target Benchmark Strategic initiatives
\nFinancial
\noutcomes
\nCreate incremental EVA year
\non year on existing
\nbusiness
\nEconomic value
\nadded (EVA)
\n(Rs. Crores)
\n507 10% incremental
\nEVA year on year
\nPosco China Steel (5.4%) Grow organically & through M&A (in India & overseas) to 15 mtpa by 2010
\nExecute overseas Fe-Cr facility
\nEstablish global presence in steel manufacturing
\nSustainable & aggressive growth
\nInvest in attractive new business
\nDivest, merge, acquire
\nIncrease in top line
\ngrowth (%)
\n21 20% year on year 43% Gerdau SA Establish a low cost coastal plant to link domestic & global operations
\nInternal Capacity expansion
\nExecute Titanium Projects plans
\nDevelop well-defined M&A framework for domestic & overseas acquisition
\nMarket
\noutcomes
\nMove from commodities to
\nbrand
\nRetail sales through
\nbrands (%)
\n100% Improve brand promotion & brand positioning
\nImplement retail value management (RVM)
\nCustomer
\nperspective
\nValue creating partnerships with
\ncustomers
\nCustomer
\nsatisfaction
\nindex (CSI) ?
\n(flat products,
\nlong products,
\ntubes) (index)
\n1.06 (FP)
\n1.10 (LP)
\n1.14 1.12
\nBaoshan Steel
\nCustomer value management (CVM) program with 100% OEM customers
\n(enterprise Accounts) by 2007
\nDevelop customer relationship index
\nInternal business
\nperspective
\nValue creating partnerships with
\nsuppliers
\nContinue to be the lowest cost
\nproducer of steel
\nOutsource strategically
\nEncourage innovation and allow
\nthe freedom to fail
\nEnsure safety and environment
\nsustainability
\nImprove quality of life of the
\ncommunities we serve
\nCorporate image
\nindex (out of
\n100)
\nSupplier satisfaction
\nindex
\nEmployee cost
\n(% of turnover)
\nCorporate
\ncitizenship index
\n(out-locations)
\n7.7
\n7.7
\n11.87
\n10
\n92
\n8.0
\nContain at
\n02? 03 levels
\n10
\nIndividual and parameters for
\neach stakeholder group
\nseparately benchmarked
\nTata Steel is the benchmark
\nImprove operational excellence & sustain cost competitiveness
\nImprove perception? potential employees, school students, government,
\nfinancial community
\nImprove corporate governance practices
\nImplement social accountability (SA 8000)
\nImplement OHSAS
\nCollaborate with DuPont for institutionalizing safety
\nLearning
\nperspective
\nManage knowledge
\nEnthused and happy
\nemployees
\nImprove the quality of life
\nof the employees
\nOrganization
\nlearning index
\nEmployee
\nsatisfaction
\nindex
\n441
\n3.8
\n650
\n3.9
\nUnique measure
\n3.89; Infosys
\nBring unionized cadre in knowledge management fold
\nImprove knowledge sharing & knowledge Manthan
\nImprove workplace ambience, safety & ergonomics
\nIncrease time spent on developing people to create leaders at all levels
\nCreate leadership pipeline and develop global managers
\nUnleash people?s potential and
\ncreate leaders who will build
\nthe future
\nLeadership
\nbehavioral
\nindex (%)
\n74.7 85 Unique
\nSource: Adapted from Tata Business Excellence Model Report.
\nMapping, Measurement and Alignment of Strategy 123
\nworkshop, particularly in the strategy map development. Business units and support units
\nwould now need to develop their own scorecards using appropriate themes from the strategy
\nmap to ensure strategic alignment. Using the stakeholder approach, the firm set about
\ndetermining areas of customer and stakeholder concerns and requirements, the focus for
\nfurther development of business unit scorecards.
\nBusiness Units: Measurements and Outcomes
\nCustomer Outcomes
\nMr Mukherjee of the Mumbai (Bombay) sales office, explained that the Sales (Flat
\nProducts) Division used its ?listening and learning? activities (customer visits, satisfaction
\nsurveys, and other ?listening posts? such as call centers and e-linking) to gather information
\nand develop measures by customer segment and product category. An example
\nof customer value creation was evident in the Bombay sales office where, in the midst
\nof hectic activity, Mr Mukherjee negotiated the next month?s supply of auto grade steel
\nwith representatives from Mahindra & Mahindra, a major auto customer. The Bombay
\noffice had a direct video conferencing with the production facilities at Jamshedpur and
\nthe customer production facilities. The agreement included details of ?technical? and
\n?delivery? conditions, key components of the customer value proposition.
\nA key feature of the marketing strategy has been the development of strong relationships
\nwith large customers and retailers. In line with the strategy, TS developed measures
\nby customer type and product segment to identify areas to strengthen relationships with
\ncustomers. Important measures in the Enterprise category included share of business, satisfaction
\nindex, and awards and certificates;12 for distributors, measures included monthly
\nsales analysis, complaint analysis, number of products, Brand Equity Index, and new
\nproducts introduced. Additionally, measures by product segment and product mix, as indicated
\nin Table 2, enabled the firm to develop processes to meet customers? expectations.
\nClassified broadly by production into Long and Flat Products, the mix indicates the
\nproduct development strategy move from commodities to high-quality brands. The firm
\nalso used brand names such as Tata Shaktee and Tata Steelium to differentiate their
\nproducts and to emphasize quality. Branded products, contributing about 14% to the
\ncompany?s sales, commanded a premium over non-branded products in the market,
\nwith a higher turnover.
\nThe customer requirements reflected the close interaction and led to innovations. As
\nMr Mukherjee explained, ?We convey the customer requirements to production in
\nJamshedpur. While we try to ensure that all customer complaints are addressed and
\norders are complied with in a timely manner, each customer has unique needs that we
\nalso try to fulfill. Sometimes, we have seen major innovations from production and R&D,
\nas a result. Take the case of the innovation of ?galvanized bake hardening steel? for dent
\nresistant automotive use, a breakthrough in developing steel for automobile chassis.?
\nInternal Business Processes
\nTS identified several processes key to implementing strategy. ?Operations and Fulfillment?
\nwas one critical process that included several support processes (Table 3).13 The concerned
\ndepartments used information from surveys and business plans to determine key
\nprocess requirements. These process requirements were translated into in-process and
\nkey performance measures. Key performance measures (KPM) measured the effectiveness
\nof the process (outcomes) and they were linked to the BSC. However, the process owners
\nwere particularly concerned with the in-process measures, which guided their activities.
\n124 G. Joseph
\nImprovements in these areas also generally translated into improvements in KPMs. The
\ncontrol methods ensured internal and external audits of the efficiency of the processes.
\nThe departments\/business units controlling the processes usually developed their own
\nscorecards tied to the MD?s scorecard and the strategy map. For example, the objective of
\nthe R&D was to make Tata Steel an EVA-positive company. As MD Muthuraman put it,
\n?It is the strategy that drives the research objective. R&D has a BSC that is tied to the
\nMD?s BSC. It contains various strategic measures in the perspectives of finance, customer,
\ninternal business processes, people and special projects. Its performance is measured
\nagainst the metric set in the BSC.?
\nLearning and Growth
\nThe support departments, particularly the HR, had also streamlined their activities to
\nconform to the strategic goals spelled out in the BSC. New employee orientation included
\nTable 2. Market segments and expectation
\nProducts Segment Customer requirements
\nFlat products?
\nHR, CR, galvanized
\nAuto segment Surface quality
\nOrder compliance
\nComplaint redressal
\nAppliances Shape and hardness
\nOrder compliance
\nComplaint redressal
\nGeneral Engineering Mechanical properties
\nOrder compliance
\nComplaint redressal
\nHot rolled products Consistency in chemical properties
\nConsistency in mechanical properties
\nOrder compliance
\nComplaint redressal
\nTata Shaktee Zinc yield ratio
\nComplaint redressal
\nLong products, TISCON: projects Weight\/meter
\nTiscon-wire rods Yield strength
\nWeldability (carbon equivalent)
\nCompliance to technical delivery
\nconditions
\nComplaint redressal
\nTISCON: retail Compliance to technical delivery
\nconditions
\nYield strength
\nComplaint redressal
\nHigh carbon wire rods Compliance to technical delivery
\nconditions
\nSegregation level
\nComplaint redressal
\nLow carbon wire rods Compliance to technical delivery
\nconditions
\nComplaint redressal
\nSource: Adapted from Tata Business Excellence Model Report.
\nMapping, Measurement and Alignment of Strategy 125
\nTable 3. Key support processes, requirements, KPMs and in-process measures (operations and fulfillment value creation process)
\nKey support
\nprocesses Key process requirements In-process measures
\nKey performance
\nmeasures (KPMs) Control methods Process owner
\nProcurement Timely availability of
\nproducts and services at
\ncompetitive prices;
\nPartnership with suppliers
\nAverage lead time for placing
\norder; GRN cycle time;
\nFeedback from vendors on
\ntimely payment; Spend
\nbase covered by strategic
\nsourcing; Trends in
\nimprovement in response
\ntime (IT);
\nSavings through strategic
\nsourcing; Supplier
\nsatisfaction index
\nMonthly reviews;
\nsegment steering
\ncommittee
\nreviews
\nChief
\nProcurement
\nSocial
\nresponsibility
\nand corporate
\ncitizenship,
\nsafety and
\nenvironment
\nInvolvement in community
\ndevelopment and ensuring
\na safe and clean
\nenvironment. Congenial
\nwork environment.
\nWaste utilization; capital
\ninvestment on pollution
\nequipment; safety training;
\nexpenditure on society
\nCCI; family planning;
\nwater pollution, quality;
\nimmunization; mandays
\nlost due to
\naccidents; ambient air
\nquality; reportable
\naccidents
\nSocial audits;
\ncompliance to
\nISO 14001 and
\nOHSAS norms;
\nISA 14001 and
\nOHSAS internal
\nand external
\naudits
\nMD; DMD
\n(customer
\nservice) and
\nDMD (safety)
\nInformation
\nmanagement
\nTimely availability of data
\nand information at all
\nlevels for decision-making
\nTrends in improvement in
\nresponse time (IT); IT
\nuptime
\nOverall CSI with ITS Internal CSI; Help
\ndesk monitoring
\nCIO
\n126 G. Joseph
\nResearch and
\ndevelopment
\nDevelop new customized
\nproducts for customers;
\nefficiency in operations
\nthrough better processes
\nR&D expenditure No. of innovations; no. of
\npatents; no. of new
\nproducts developed;
\nnew product
\ndevelopment cycle time
\nR&D reviews at
\napex level and
\nsecond level
\nChief (R&D and
\nshared
\nservices)
\nShared services
\nmgmt
\nAvailability of plant and
\nequipments; energy
\nconsumption; availability
\nof electrical power
\nCompliance to performance
\nrequirement of level 2
\nsystems; power generation
\nstage-wise energy
\nconsumption
\nAverage uptime of
\nautomation products;
\nspecific energy
\nconsumption; power
\nrate; works power cost
\nInternal CSI
\nservices)
\nVP (shared
\nservices)
\nFinance and
\naccounts
\nTimeliness; accuracy; speed
\nof processing
\nInternal CSI Cycle time for cost
\nreports; accuracy of
\ncost reports; invoice
\nprocessing within due
\ndate; monthly accounts
\nsubmission; remittance
\nof salary to banks
\nInternal, external
\naudits
\nCFC (corporate)
\nSource: Adapted from Tata Business Excellence Model Report.
\nCCI ? Corporate Citizenship Index; CFC ? Chief Financial Controller; CIO ? Chief Information Officer; CSI ? customer satisfaction index;
\nDMD ? Deputy Managing Director; GRN ? goods receipt note; ITS ? Information Technology Services; MD ? Managing Director; VP ? Vice President.
\nMapping, Measurement and Alignment of Strategy 127
\nthe Code of Conduct, team building exercises, company policies, strategic objectives,
\nacculturation, and management systems and processes. Management development
\ntraining focused on a key ?basket of competencies? vital to the short-term\/long-term
\ngrowth of the firm. Training programs were developed by employee category, (e.g.
\nworkers, supervisors, and officers) and employee life cycle, (e.g. new employee plant
\nvisits, on the job training, special projects, and advanced training).
\nTo cultivate a culture of innovation and knowledge management, TS employed ?learning
\nfrom failure? sessions that led to new insights into processes and innovations.
\nMr Maheshwari, Chief of Scientific Services pointed out that: ?learning from failure
\nand developing an innovation evaluation method is extensively used to improve and
\ndifferentiate products.? TS also captured knowledge at different levels from ?tacit shop
\nfloor? knowledge to ?global expert? knowledge and communicated it across the organization
\nthrough its knowledge management (KM) portal. In line with Tata values, training
\nincluded that of disadvantaged groups, (e.g. tribal groups) and diversity training in such
\nareas as cultural (religious, language and social) and gender (professional and social
\nempowerment of women).
\nThe firm recognized the importance of feedback and incentives to ensure the effectiveness
\nof training and knowledge management programs. There was systematic data collection
\nintegrated with information technology that enabled timely collection, retrieval, and
\nanalysis of performance measurement (Table 4).
\nSometimes training was not as structured, nevertheless linked to strategy. Mr. Chaturvedi
\nrecalled how MD Muthuraman had sent him to Northwestern University?s Kellogg School
\nof Management (located in Evanston, Illinois, USA) for a week long program on mergers,
\nacquisitions and alliances. He did not realize that, in just a few months, his time there would
\nbe put to good use during the acquisition of NatSteel in Singapore. Sending Chaturvedi to
\nTable 4. Key data and Information gathered for daily operations and organizational performance
\n(sample, not exhaustive)
\nKey data and information How collected
\nDaily operations Sales, dispatch compliance, productivity,
\ncost, quality
\nSAP
\nCustomer complaints Lotus notes\/manual
\nEmployee grievances Manual
\nOrganizational
\nperformance
\nSafety performance Safety incident reporting system
\nCustomer satisfaction index, supplier
\nsatisfaction index, market share
\nThird-party survey
\nEmployee satisfaction index, corporate
\ncitizenship index
\nInternal survey
\nEconomic value added (EVA), profit after
\ntax (PAT), operating profit,
\nSAP
\nasset utilization, return on equity (ROE),
\ngrowth, revenue from branded
\nproducts, premium from branded
\nproducts
\nTata business excellence model (TBEM)
\nscore
\nExternal assessment
\nSource: Adapted from Tata Business Excellence Model Report.
\n128 G. Joseph
\nKellogg was part of Muthuraman?s plan of transforming TS into a global player, something
\nthat was increasingly taking shape.
\nMerger and Continuing Challenges
\nLooking back over the years since the initial BSC implementation and the revival after the
\nworkshops in 2004, Mr. Sharma concluded that BSC had helped improve focus and flexibility,
\nincreasing the ability of the firm to initiate new ventures and adjust to changes.
\nRecent financial results were also impressive. Despite price fluctuations and raw materials
\nincreases, Tata Steel leveraged its low cost, high productivity and revenue strategy to
\ninfluence its bottom line considerably. Recent quarterly earnings indicated that Tata
\nSteel?s EBITDA was considerably higher than that of competitors such as Nippon
\nSteel, Arcelor, POSCO, JFE, and Mittal Steel.14 However, challenges for the future
\nremain. The external environment in the steel industry has many uncertainties and strategy
\nneeds constant evaluation. While the demand side appeared to have gained momentum,
\nthere was always the concern about cyclicality of demand. Additionally, overcapacity
\nin the Chinese supply side could also destabilize prices.
\nNevertheless, TS was now better equipped to meet these challenges. The results of the takeover
\nbattle were in. Overnight, Tata Steel had changed from the 55th to the 5th largest steel
\nfirm in the world with a capacity of 25 mtpa and a global reach. At $11.3 billion, the cost was
\nhigh, but according to Ratan Tata, ?we hadn?t reached the limit we had set ourselves.? The
\nimmediate challenge was to integrate a much larger firm, a process that could include
\nmany possible hurdles. However, there was now an air of confidence. As Ratan Tata
\nsummed it, ?the human chemistry was good. There is more going for us than against us.
\nWhen the hurdles come, we will deal with them. What we have done now is create an integration
\ncommittee that will operate towards integration of both companies seamlessly.?
\nSuggested Questions
\n1. How does Tata Steel develop strategy?
\n2. Using the strategy map (Figure 4), organization chart (Figure 2), and other relevant
\ninformation, present scenarios where different functional area managers use the
\nstrategy map to interact and discuss a unified strategy.
\n3. Strategy map and strategy implementation:
\n(a) How does the strategy map result in measures and initiatives in the BSC?
\n(b) Comment on how different perspectives contribute to the final goal of becoming
\nEVA positive.
\n4. Measurement and incentives:
\n(a) Briefly describe the steps in measurement that enable TS to use measures to
\nimprove performance and increase transparency (use Tables 1 to 3, with
\nemphasis on Table 2).
\n(b) Does the nature (or type) of the measures influence the BSC implementation?
\nIdentify the different types of measures in the TS case and indicate their
\nusefulness.
\n(c) What are potential problems\/ pitfalls that may affect strategy implementation?
\nDiscuss how they may (or may not) apply to the Tata Steel case.
\n5. Considering the future of the merger with Corus, discuss possible ways that Tata Steel
\ncould benefit from using the Balanced Scorecard approach.
\nMapping, Measurement and Alignment of Strategy 129
\nNotes
\n1
\nMost recently, the Arcelor and Mittal Steel merger created the world?s largest steel company with 110
\nmillion tonnes capacity, setting the stage for more mergers.
\n2
\nSome names have been changed to protect the identity of individuals concerned.
\n3
\nA Parsi philanthropist and pioneer, Jamshedji Tata was involved in the nationalist movement during British
\ncolonial rule in the 1800s. He was one of the first to see the need for self-sufficiency through a thriving
\nmanufacturing sector.
\n4
\nThe firm was third in management after S. Korea?s Posco and China?s Bao Steel, based on such criteria as
\nmanagement, technology and cost of production. Some details of the transformations during this phase are
\noutlined in Seshadri and Tripathy (2006), which includes projects such as revamping the blast furnace and
\nturning around the rolling mills. See also, Meredith (2005).
\n5
\nRecent world capacity was about 1113 million tonnes, with production of 962 million tonnes. China contributed
\nabout 31% of the total, followed by the EU and the USA. India totaled about 40 million tonnes, with
\nTata Steel production capacity equaling about 5 million tonnes; currently, the top 10 producers produce
\nabout 30% of the total world production. Information on the steel industry can be accessed from a
\nvariety of sources listed in the references, including speeches by Mr Mittal of Mittal Arcelor available
\nat http:\/\/www.mittalsteel.com\/News?and?Press\/Speeches?and?Presentations.htm (accessed 31
\nMarch 2007) and presentations by TS?s MD Mr Muthuraman available at http:\/\/www.tatasteel.com\/
\ninvestorrelations\/investorevents.asp (accessed 31 March 2007). 6
\nDhawan and Roy (2004).
\n7
\nCorus was about five times the size of Tata Steel. However, Tata Steel had the backing of the vast resources
\nand access of the Tata Business House, which included a stable of companies such as Tata Motors and Tata
\nConsultancy Services (the largest information systems firm in India).
\n8
\nSee Elankumaran, Seal, and Hashmi. (2005).
\n9
\nBribes are often commonly accepted as a means of accessing licenses and circumventing a circuitous
\nsystem, but the firm?s reputation helped to overcome many of the problems that plagued the system. 10Economic value added (EVA) an extension of Residual Income, was trademarked by Stern Stewart and Co.
\nTS used the measure to target returns (RONA) that was greater than the cost of the capital invested.
\nEVA ? (RONA ? WACC) times invested capital, where: EVA is economic value added, RONA is
\nreturn on net assets (?net operating profit after tax\/net assets), and WACC is weighted average cost of
\ncapital.
\n11While the firm identifies shareholders, financial community, customers, media, employees, regulators,
\nsuppliers and partners as stakeholders, the key stakeholders are customers, employees, shareholders and
\nsuppliers.
\n12Recent awards included ?Best Localization Award? from Hyundai and ?Approval for Global Supplies? from
\nCaterpillar, demonstrating ?customer delight?.
\n13Specifically, Tata Steel identified 12 key enterprise processes (KEP) through a framework detailed by
\nAPQC. APQC (initially called American Productivity and Quality Center) became internationallyrenowned
\nafter the creation of the Baldridge Awards and later work in setting up the International Benchmarking
\nClearinghouse and the Open Market Benchmarking Collaborative that helps identify current
\nbenchmarking measures and best practices (see http:\/\/www.apqc.org\/portal\/apqc\/site for more details). 14EBITDA stands for earnings before tax, interest, depreciation, and amortization and is useful to analyze and
\ncompare profitability between companies and industries because it eliminates the effects of financing and
\naccounting decisions. April 2005 to March 2006 comparisons of steel companies from news briefs on
\nTata Steel website showed: Tata Steel: 40%, Nippon: 19%; Arcelor: 16%; POSCO: 30%; JFE: 22% and
\nMittal: 16%.
\nReferences
\nDhawan, R. and Roy P. (2004) The new world of Tata Steel, Business World, 13 September. Available at www.
\nbusinessworld.in\/index.php\/The-New-World-of-Tata-Steel.html (accessed 31 March 2007).
\nElankumaran, S., Seal, R. and Hashmi, A. (2005) Transcending transformation: enlightening endeavors at Tata
\nSteel, Journal of Business Ethics, 59(1?2), pp. 109? 119.
\nMeredith, Robyn. (2005) Tempest in a teapot, Forbes, 14 Fe<\/p>\n
<\/p>\n","protected":false},"excerpt":{"rendered":"
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 Read More …<\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-1944","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts\/1944","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/comments?post=1944"}],"version-history":[{"count":0,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts\/1944\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/media?parent=1944"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/categories?post=1944"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/tags?post=1944"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}