Generating value by selling Steel: TATA TISCON traverses the liberalization discontinuity (Part A)

Abstract

The case opens at the turn of 20th century, with Tata Steel’s commercial department facing fundamental issues in its steel rebar business. Almost a decade after steel prices were deregulated as part of liberalization of the Indian economy, Tata Steel faced a declining graph of profit-less growth. Traditionally, Tata Steel had sold its material in the trade markets at government-determined fixed prices through its trusted traders. The traders specialized in securing access to the scarce supplies of steel and maintaining credit relations in the trade network. The managers of Tata Steel of the pre-liberalization era, drawn from privileged backgrounds, commanded social presence and influence, which was of use in dealing effectively with bureaucrats or traders and navigating through the maze of legal complexities of a heavily regulated industry. With the liberalization of the Indian economy, the company could now sell steel at ‘market price’ but the traders, no more constrained by scarcity of material, were also able to play the market and arm-twist the company into unfavorable price and credit terms. The company had no exposure to the consumption centers and could not counter the trader’s moves. Although the company had started recruiting professionally qualified management graduates from business schools, the new class of managers, trained on various management concepts and analytical tools, could hardly afford to apply their skills.