Tata Steel Europe's Transition Strategy

This assignment applies Lewin's three-step process (unfreezing, change, and refreezing) to Tata Steel Europe's situation. The unfreezing stage involves dropping the light-touch integration system and becoming more involved in decision-making, considering the problems with Port Talbot plant operations. The change stage focuses on pursuing new opportunities, such as taking advantage of Brexit-related market shifts and investing in the profitable Dutch operation. Refreezing ensures a stable and aligned workforce and leadership, maintaining confidence in the chosen strategy to revive Tata's prosperity in Europe.

Ans 1:- The teacher will begin by describing the winner's course principle and the executive
incentive. The following are all definitions.
Winner's Curse: A condition known as a curse for the winner may arise during mergers and
acquisitions of companies, where the bidder could lose, no matter how promising the
circumstances may appear at present. This theory suggests that the winning party appears to
over-value the auctioned items and puts out an unrealistic deal, offering a lot more than the real
value of the asset, as stated by Nikhil Varaiya. While the value of an auctioned asset will be
identical to each bidder, it is impossible to assess the true value of the asset.
Varaiya says that three conditions must be fulfilled for the winner's curse to apply:
 Each bidder 's value calculation is impartial.
 The exactness of each bidder's average value calculation is the same.
 The positioning of each deal generates a positive value estimation function.
In this case, the one with the highest quote is efficient if both parties follow the same bidding
technique. The winning bid, though, would well outweigh the true worth of the item being
auctioned. The victorious party then brands the over-estimated price value as a curse of the
winner.
The winner's curse theory does not reflect a stand-alone factor; it is usually a branch or a product
of a composite composite of the respective offeror that, despite warnings, clouds judgment and
sensitivity of the bidder. Hubris continues to influence the CEO and senior management involved
in a merger or purchase. The opulent perceptions of the future value generated by the transaction
overtake them and misinterpret the true value of the transaction. The effect is too big a premium
charged by the seller that is not covered if the purchased business fails to deliver good results.
The purchase of Corus by Tata reveals both the curse of the winner and the hybris of the top
executives of Tata, which put numerous deals for Corus' overpayment. Tata's original and final
offers were drastically different. The Corus acquisition came at the forefront of the Indian steel
industry's expansionary hysteria. Tata declined to return to the Companhia Siderúrgica National
in the face of a fierce rival.

Executive Officer B. Muthuraman acknowledged that the agreement was costly but he saw both
businesses to benefit. By concentrating on the synergies which two businesses achieved, Tata
tried to justify the high estimation of the valuation of the purchase, which would allow Tata
access to Corus markets and to low-cost stainless steel technology raw materials. The trillions for
the debt to finance the cash trade with Corus, however, sufficed to establish a divergence in the
balance sheet of Tata and proved to be a bane to the firm.
After having established the hubris and the curse of the champion that inhibited Tata's decision-
making skills, during negotiations the trainer should discuss steps for preventing the same issue.
Like Malhotra and Max, Deepak. In its book Negotiating Brilliant, H. Bazerman suggests to take
the following remedial steps:
 Start the talks with a prepared exit strategy: it is important to have an exit strategy before
going into negotiations. As an offeror, payment readiness can be set at a fixed value.
When the price rises above this amount throughout the bidding process, the bidder should
be firm to withdraw.
 Assign the advocate to a devil: personal loyalty is a by-product of the bid process. If the
offeror is advised by someone who may criticize the validation of the transaction without
discrimination, it can help to make a smarter option. The person who acts as an apostle of
the devil should have faith, not investment or participation in the production of the initial
strategy
 Prepare for and foresee the escalators you can meet: A good negotiator should be
watchful enough to see strategic traps. The causes and effects of escalation are defined as
characteristics that allow the claimant to deter unreasonable behavior during the process
and thereby establish a resolve to minimize losses with immediate effect.
Ans 2:- The teacher will facilitate an examination for this question by identifying the political ,
economic , social, environmental and legal system (PESTEL) and how it influences a business
entity 's efficiency.
An company works in an atmosphere that can affect the internal operating dynamics and overall
efficiency. External variables like competitiveness, economy and consumers are beyond any

enterprise 's control. Companies must be watchful to ensure healthy economic development and
sustainability and closely monitor external influences. An review from PESTEL can allow
students to understand the effect of external elements on business results.
The following points are made in the PESTEL external environment study on Tata Steel Europe
 Political: The EU and Britain have been restrained in their reactions to the subject of the
Chinese disproportionate domestic imports of steel. Britain has been careful in its
diplomatic dealings with China with regard to Chinese steel. The British Government has
blocked attempts by the European Union to extend high tariffs to Chinese goods to the
detriment of its own steelmakers. Tatata Steel Europe has suffered, to the level of closure,
in the wake of the UK consensus on its own steel sector.
 Economic: The steel industry was struck harder by the slump because they were
dependent on natural substances like coal and iron ore, which saw a decrease in demand
and supply in market failure. The United Kingdom was a hit country, with the worst
consequences of the recession being borne by Tata Steel Europe.
 Social: the production of steel in the UK has declined in European countries since the
1960s. European countries experienced a sharper fall in production since the financial
crisis of 2008. But Europe managed to recover its steel industry, while the UK was less
successful. With just 0.1 percent in 2014 and wages similarly adversely impacted, the
United Kingdom has added to the overall economic production. There has been a major
downturn in the steel sector. It should have signaled a strong negative impact on
production and employment, but Tata didn't seem to be caring.
 Tech: Tata's United Kingdom. Steel plants use conventional blast furnaces — now an
outdated technology for steel processing — instead of electrical bowling furnace furnace,
which is regarded as a new technology with considerable advantages compared with
traditional blast furnaces. For Tata 's future in the United Kingdom, technological
upgrade was a big problem. plants of stone. Tata 's Port Talbot plant uses expensive
furnaces in space and investment. They are more carbon-emitting than powered arc
furnaces, making them less attractive in a market like the UK that no longer exports iron
ore. In the other hand, electric arc furnaces, instead of using iron ore, are cheaper ,
quicker and effective for processing scrap metal steel.

 Environmental: The Climate Change Act to fix the carbon crisis was introduced by
British policymakers in 2008. It was in accordance with the rules of the European Union
that energy-intensive companies had to pay for each unit of carbon emissions generated a
certain compulsory number, some of which were branded as 'green tax.' As the world
praised the United Kingdom. The government has been facing tremendous opposition
from domestic industrialists, because of the danger to their income as well as to economic
sustainability, to introducing the first legally binding climate change act. The green tax
contributed to the difficulties of the steel sector with energy responsible for 20-40% of
production costs. Europe's Tata Steel U.K. This altruistic influence by the government
bore the brunt of operations.
 Legal: a significant explanation for Kingdom 's misery. The inability of the United
Kingdom was steel producers, like Tata Steel Europe. Government to shield its steel
industry from cheap Chinese imports. If the US has lifted its' cold-rolled steel import
tariffs from China to 522% from 266%, the EU is rising. Chinese steel provisional tariffs
stood at just 16%. Therefore, Tata Steel Europe's UK as an in-house steel maker.
Operations experienced a slightly higher energy and pension production expense catalyst.
In order to restore damages in many of its production facilities around the United Kingdom, tata
should have withdrew in due course. The boom has not taken place overnight in Chinese steel
production. In comparison, the outdated technology at work could have been replaced at the port
Talbot factory, with over-investments in the UK.
Tata was worse off than their European equivalent, which is of strategic importance. The Brexit
phenomena has introduced a degree of confusion that Tata will benefit from and consolidate as a
leading steel producer.
Ans 3:- The instructor will start analyzing this topic by identifying cultural integration principles
and a common vision.
In order to increase competitiveness and performance on a short-term basis, acquisitions consist
of more than two firms. A long-term growth and performance vision must be established. For
their sustainability or growth, businesses seek fusions and acquisitions. They allow businesses to
enhance creativity, grow market share and increase stock prices. Fusions and acquisitions

involve a flexible and well-executed holistic integration, on both the basic level of work and
function and the higher level of mutual purpose and identity.
Galphin and Herndon emphasize that alignment and synergy have to be handled in the
transformation process, which highlights the two merger organizations' common view of the new
organisation. Communication and convergence interconnectedness is important. Kussatscher and
Cooper agree that the new entity 's leadership must recognize the need to preserve aligned
decisions for the synergy that is to be accomplished. Leaders can allow for continuous, reliable
and transparent communication. Effective incorporation is unlikely without it. If closely
managed, the process of merger and acquisition will control trends and the resulting success or
loss.
At any point of the convergence or acquisition that generates a collective vision for the newly
developed organization, communication strategy and cultural incorporation are critical. The
following attributes are shared in a view:
 It gives the workers of the organization an interconnected function.
 It encourages a sense of co-ownership
Failure to develop an effective contact plan in the pre-merger state will lead to employee
disengagement after merger, which can have significant implications for merger and acquisition
profitability. The cultural, company or national differences between the two sides can result in an
atmosphere for us versus the others. Employees may isolate themselves physically or leave the
organisation.
To promote the collaboration plan, a post-integration plan must be formulated in advance. An
significant factor is openness and clarity in communication. Integration teams containing
members of the two organisations should be formed with a view to building traction for future
operations and consolidation. When transformation has been completed effectively, workers
continue to embrace their new identity and establish a sense of commitment and involvement.
The company will then emerge in a different way.
Cultural Integration
Cultural convergence can be accomplished by three means:

 The acquiring business will enforce its principles and activities on its staff. But generally,
this strategy is resisted. It is can contribute to a decaying culture not associated with the
corporate plan of the firm. Synergies are also inaccessible.
 To build a modern society, best practices from all business cultures should be embraced.
This strategy can not, though, be entirely matched with the goals of the organization and
also contribute to a disintegrated culture that does not produce synergies.
 Partnership ensures that the structure and personality of the purchase remain distinctive.
In this strategy , the company acquiring trust in current management, and in particular in
the CEO, maintains the same role of authority and autonomy throughout the preliminary
acquisition phase. In order to outline the course of major divisions or to promote know-
how sharing between businesses, the parent company serves as protector of market
importance, assisting providers. What is essential is not acquisition, but partnership. This
method can however, by allowing it too much autonomy, negate the goal of the
acquisition. The organization acquired should step on its own course, forget the
traditional view. The parent corporation has to maintain control over the purchased
company to fulfill a common vision.
The teacher may ask students at this stage to address how Tata did not develop a common vision
and cultural integration. Integration with Corus was still a concern before Tata was acquired. The
integration of Hoogovens and British Steel was considered to save British Steel, which in 1999
incurred losses of up to £ 81 million prior to the merger. Following the acquisition, management
made major investments in the Netherlands activities making the firm a multinational unit,
although British Steel was still being overlooked. Consequently, there was no essential synergy.
In the post-acquisition of Corus, even Tata did not blur the previously existing war lines between
the Netherlands and the British. It was only natural for Tata to spend after acquisition on the
British side of the operations, since the modernisation and improvement enjoyed by the
Netherlands' operations was robbed. Nevertheless, the Netherlands workers were disgusted when
they argued that the investments had been credited unfairly to British Steel, because the
productivity of the Dutch factory was much greater than that of outdated British facilities.
It is clear that the lack of coordination and understanding between the firms' two sides resulted in
an impaired morals, rather than an improvement in productivity, of the Tata-Corus workers.

The integration process was undertaken by Tata, but the integration strategy wasn't successful.
This was discussed as a step towards economic development and strategic extension. The
relationship style strategy, where the acquired company automatically signed the values of Tata
and followed them, was occasionally forced upon the parent company management. More
specifically, Tata had to be formed in the Integration Committee almost a year after it had been
acquired. The vision of the CEO of Tata Group for the Light-Touch convergence approach was
why Tata and Corus worked separately. The autonomy given to Corus, however, was not
successful. A new vision disappointed Tata and the current gap widened between the
Netherlands and the British. The shared vision for the Netherlands operations and British
operations needs to be improved by Tata.
Ans 4:- The teacher will start answering this topic by telling students what possible series of
events during combinations and acquisitions companies will take. The teacher will
chronologically organize them based on the Sudi Sudarsanam model of five-stage fusions and
acquisitions after giving students a variety of ideas.
Model of fusions and acquisitions of five levels
The model of Sudi Sudarsanam is not a transaction, but a mechanism. It is a continual step-by -
step initiative. The model separates the sequence of fusions and acquisitions into five phases:
 Creation of Organizational Strategies
 Organization of transactions
 Structure of deals and compromises
 Integration after purchase
 Audit and operational learning after purchase
This failure enables the detection of mergers and acquisitions failure. The 5 steps are intertwined
in sequential and developmental order to match one another and to complete the previous
process, otherwise it would be annulled.
Creation of corporate strategies: A corporate strategy finds ways to leverage the portfolio of
companies which a company may have. Fusions and transactions are made for profit generation,

be it in terms of growth of the market, or economies of size and distance. The following
programs achieve benefit for businesses:
 Reduction of expenses and consistent sales
 Improved sales, though consistent costs
 Build new opportunities to accomplish one of the above objectives
This is the first step in strategic growth. Decisions, including the selection of forms by merger
and acquisition, the rationale of the value formation, and the choice of target company to meet
strategic goals, depend on this process.
Organization for acqusition: a decision is essential, because it affects not only the development
of value theory, but also the process of incorporation after acquisition. The judgment on
acquisitions is based mainly on two aspects: logical or process-related.
A fair choice of viewpoint is based on the acquisition 's actual economic , financial and future
benefit later. The merger is believed to be a decision that unites all of the company's
administrators.
Owing to the presence of the human factor, operation prospects are a gentle complement to the
hard-rational approach. This method complicates decision-making – one which requires diligent
monitoring to achieve the dedication of managers.
Structuring and negotiation: it is also not straightforward to structure an agreement and to
compromise. It entails various intertwined actions, such as identifying target businesses and
extracting the greatest possible details, involving the best kind of consultants for the contract,
discussing the post-merging senior management of the group, and taking decisions about the
appropriate offer and strategies to seal the transaction. This stage of the fusion and acquisition
process is very dangerous because of those complexities. Any minute amount of incompatibility
between the information acquired by the buyer firm and the information of the target firm can
create trouble later on.
Integration after acquisition: When acquiring, integration is the next critical step that requires
careful implementation. This process would decide how the acquired business will meet the
strategic priorities and evaluations initiated by the takeover first. Integration involves more than

just replacing structures of the hierarchy. It needs frameworks, techniques and other
requirements to be integrated. More specifically, the incorporation between persons and their
societies, everywhere they are interested. Fusion may cause a shift in the thought and cultural
actions of individuals. Culture then becomes an essential factor in the process of combinations.
Others will ultimately hinder the integration process because of people's loyalties and prejudices.
Audit and executive preparation since acquisition: building a longer strategic edge and value for
stockholders is an accomplishment only for businesses who have built fusions and acquisitions
into main competences. This is a strategic power that uses the best investment approach and the
operational expertise necessary for the successful operation of the investment.
But how is an organization skilled in the operations of fusions and acquisitions? Robust
corporate learning capabilities which form part of the acquiring company's competitive strategy.
These capability can be build on previous experience, merger examples from other organizations
or the mistakes of the business or those of other organizations. These capacity growth can be
focused on. It is important to disseminate this information or learning in all aspects of the
business. This is the best way to pursue excellence successfully in the field of mergers and
acquisitions.
The teacher will at this level split the class into separate minor groupings from two sides — Tata
and Corus depending on the size of the class. The students from both sides should be motivated
to follow and incorporate a scenario of fusion and acquisition. The exercise will include a
summary of the five steps of merger and sales transactions.
The business approach in the first phase was consistent with Tata's sector and size growth goals.
Before the purchase, Tata expected to expand production locally and internationally by 50
million tons a year to 30 million tons a year by 2010. Tata 's investment in the infrastructure,
time , and energy needed to develop steel mills will have taken five or six year to achieve this
aim. Corus has become the best fit to accomplish the function of Tata.
CEO of Corus Philippe Varin reported that in 2005, a year before the bid, the company had been
in touch with Tata. Corus indicated an intention to integrate or take over as the next step of its
strategic assessment of 2005. The aim was to find a solution to its issue of low-cost raw materials

and benefit in rising economies. Were Tata to act earlier, it would possibly have been much
easier to buy.
Due diligence in the discussions to complement the competitive goals which can be
accomplished by acquisition is the key distinguishing characteristic of the third level. Tata gave
up due diligence in Corus' search. The corporation took the bidding game by incorrectly judging
Corus 's worth, paying a steep premium on the stock price of Corus before the initial offer. The
goal of increasing shareholder capital was clearly in dispute, a primary explanation for the
takeover.
Tata can not take complete ownership of its acquisition until the next phase in the integration
process. The CEO of Tata Group found that a smooth integration approach was adequate to
mitige any cultural problems, considering cultural disparities between the two firms. However,
owing to the lack of cultural convergence the deep disparity between the two societies has left
workers frustrated and split loyalties. Malay Mukherjee, a former ArcelorMittal member, pointed
out how the company's soft acquisition strategy contributed to high financial costs for Tata. After
the purchase, Tata wanted Corus to continue to run profitably, as it was before. The desired
outcome was however not produced and consequently forced Tata to opt-out. Activities.
In relation to the last step of post-acquisition audit, it will be fair to analyze Tata Steel Europe in
successive years as a threat to the parent group. The steel company is one of the most expensive
steel companies worldwide, as the flagship of Tata Group for US $108 billion. Corus 's
assessment of 2003 to 2006 without Varin would not have seen a phenomenal reversal in
generating sales before debt, taxes and depreciation of $680 million. However, there were
periods when demand for steel and price fluctuations rose. The fact that the deals between Tata
and Corus were based on these figures, making the agreement suitable in 2006–07, was the
negative impact. The debt acquisition has created more issues than the slowdown for Tata, when
there was insufficient hope in the aftermath of celebrations of business growth and the first year
of profitability that followed the acquisition. When management controlled the purchased
business from the beginning, the company was bound to struggle on a longer-term basis with the
use of leverage and soft care. There could be no end to the harm if rigid guidelines or judgments
on costs and layoffs were implemented some years after purchase.

At the management level, the situation has often left employees and employees scared. Former
CEO Karl Kohler simply reduced employment and was removed for unnecessary expenditures as
battle steps to the company's defeat. Kohler was not expected to be the impending CEO option.
Clearly, Tata Steel Europe did not turn its methods around, and in February 2016, after Kohler
was ousted, the Board of Directors eventually acknowledged it.
Ans 5:- The teacher should launch the conversation with Lewin's change management model:
unfreeze, change and re-freeze.
Lewin's Three-Steps Change Management Approach – In the 1940s, Kurt Lewin created the
model known as the change management model to explain internal change. The model was made
up of three steps: freezing, modification and refreezing. Lewin demonstrated as a physicist the
idea of organizational transition by means of an example of modifying the form of an ice cube.
According to this analogy, when an entity may release its current systems, traditions or values
into a new world that encourages organizational requirements, a effective transition happens. In
order to anchor a new corporate ethos, the systems need to renew themselves. According to
Lewin, three phases are thus included in the effective transition project: freezing, modifying and
recasting.
Deep-freezing: Lewin claimed that the consistency or equilibrium on which human behavior
depends must be "destabilized (unfrozen) before old comportament can be abandoned
(unlearned) and new comportability effectively embraced."
In addition, Schein subdivided the freezing stage by three mechanisms that had become
important in order to reach freezing: the legitimacy disconfirmation of the status quo, the
development of shame or fear over survival and the development of psychological protection.
Schein concluded that people had a sense of protection over any failure or embarrassment that
they could face in embracing new expectations. This is the best way to dismiss old traditions and
embrace modern practices.
Motivation induces organizational shifts, according to Lewin. People should then be given ample
justification for reexamining the corporate heart and for incentive to pursue a new balance.

Without the incentive, the buy-in and engagement required to effect any substantial progress is
impossible to obtain.
Shift: Unfreezing then leads to change that can not be carried out without taking into account the
complexities of the powers involved regarding the expected change.
Shift can not be achieved without the awareness of the effect or profit of the changes brought in
by the individuals within the organisation. "The two keys to progress to the transition are time
and coordination." People have to be given ample time to consider the changes to be part of the
process. This will activate them and improve the reforms that need to be introduced.
Refreezing: Refreezing is the third and final step in this model. "To ensure new patterns are
reasonably secure from regression, Refrosting helps to restore the group with a new quasi-
stationary equilibrium. The most critical issue with refrigeration is that new behaviour, to some
level, must be compatible with the rest of the learner 's actions, personality and climate,
otherwise it simply contributes to a new round of trust. This is the process in which the
organisation may internalize or institutionalize improvements in the second level. A new
stabilization system is given to workers to explain the full demolition project and then create a
new order of conduct.
The teacher may order the students to apply the model, after describing it, to the situation facing
Tata Steel Europe. There has been tremendous strain from confusion both at Brexit and by the
withdrawal of Cyrus Mistry from the leadership position of the conglomerate as President of the
Tata Group. But it offers a clean start environment. An successful shift in leadership strategies
will lead Tata Steel Europe, in particular, to new opportunities following Lewin's three-step
process.
Unfreezing: Tata wants to drop the light-touch integration system and be more involved in Tata
Steel Europe decision making. Tata must extract broken pieces of its corporate unit, considering
the serious problems prevised in Port Talbot plant operations. For the sake of the public
wellbeing of the organisation Tata's leadership requires to use absolute justification and
utilitariat.

Change: New chances must be pursued and extended according to concrete steps after hard
choices are reached. Two factors should be considered in relation to openings on the European
market: Brexit and Ijmuiden (Netherlands).
Brexit gave Tata an aspect of vulnerability. Tata 's main segment is the European Union, which
constitutes about a third of its overall production. Therefore, thousands of jobs could be seriously
disrupted by this market. But Koushik Chatterjee, Chief Financial Officer of Tata, had a different
opinion. He thought it was too early to make an appeal. He wanted a knee response to the
referendum to be stopped. She claimed that the Port Talbot steel mill might take advantage of the
sterling downturn following Brexit, as the Chinese importation in the UK is becoming more
costly, which, in turn, could provide more possibilities for the domestic market, was backed by a
limited number of analysts. Brexit may also be viewed by management at Tata as an incentive,
since event volatility prescribes a chance for the British Tata steel plants to take advantage of the
situation if cheap imports of Chinese steel are prohibited.
Tata's Dutch operation, which is still profitable, was the other good chance to look at. Tata is still
working on this, so it can give the company the right chance to turn its losses into profits. The
Dutch plant is the biggest single steel plant with a capacity of seven million tons for crude steel
production. Known for high quality steel production. More investment on the Netherlands side
can be a more profitable option for Tata because the plant has managed to churn on its
sustainable profit line over the years, while steel demand has declined worldwide.
In addition, the transition required and sought by Tata will contribute to the move from light-
touch approach to more involved engagement of the parenting firm.
Refreezing: Once the organization decides the approach of improving management , it is
important to maintain a strong confidence in the strategy. There will be more problems as
demand for steel declines around the world. A clear foothold and trust in the path chosen would
ensure that the workforce and leadership is aligned with a shared aim — reviving Tata 's
prosperity in Europe and thereby aiming to become a world steel superpower.
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