Tata Steel and Corus Merger: An International Business Case Study

This report provides a detailed analysis of the Tata Steel and Corus merger within the context of international business. The executive summary highlights the application of PESTLE analysis and the significance of understanding the international business environment for maximizing profitability and formulating effective policies. The report explores international business theories, focusing on the benefits of capturing larger market share and ensuring long-term sustainability. It examines the acquisition of Corus by Tata Steel, a landmark deal in the steel industry, and analyzes the advantages and disadvantages for both companies. The report covers various factors affecting business operations, including political, economic, social, technological, environmental, and legal aspects. It also emphasizes the importance of organizational structure in international business and the use of tools like Porter's Five Forces for market analysis. The objective is to understand how external environmental factors influence business operations and to provide insights into the strategic decisions made by both Tata Steel and Corus during and after the merger.

International
business

EXECUTIVE SUMMARY
This report is based on international business, case study of merger of Tata Steel and Corus
is consider in this report for study. Tool called PESTLE analysis is taken in this report for do
analysis. One of the major finding of this report is that various factors are there that affect the
business operations of an enterprise. Proper analysis should be done by entity in order to operate
well in international environment. In order to get all benefits related with operate on a global
level it is very essential for a business organisation to carry out analysis of international business
environment as this make the manager about the major forces that impact on business activities
and affect the profitability of enterprise. All this provide guidance to manager which help in
formulate and develop effective policies related with operate on a large basis. Porter's five force
analysis is a affective tool that can be utilise by the manager of firm to identify and examine the
conditions of international market. This help firm in identify the which are the elements who
have the power to affect the decisions take by entity to serve its customers and to increase the
number of its profits. With all this profits can be maximised and company can sustain in
international market for long run. Merger provide benefit to both entities as Corus get quality
steel in minimum prices and Tata Steel can utilise the patent of Corus and its research and
development skills. One of the major finding of this report is that various factors are there which
affect the functioning of a business organisation that operate on a global level.

CONTENTS
EXECUTIVE SUMMARY.............................................................................................................2
1.0 INTRODUCTION ....................................................................................................................1
1.1 Objective of the research...........................................................................................................1
2.0 Findings......................................................................................................................................4
3.0 Analysis......................................................................................................................................7
4.0 CONCLUSION..........................................................................................................................8
REFERENCES..............................................................................................................................10

1.0 INTRODUCTION
International business refers to all those business transactions that takes place between
countries and nations and between more than two regions. As all commercial operations occurs
across national boundaries so high risk and complexity is involve in this. All transactions that
take place beyond national boundaries is come under international business. One of the main
benefit of this is that it provides an opportunity to capture larger market share and ensure
sustainability of firm in long run. Before expand its activities on global level various factors are
there that require to be consider by entity (Forsgren and Johanson, (2014). With this entity can
get all benefits related with international business. Acquisition of Corus by Tata Steel was one of
the biggest deal in steel industry. This incident happens at the time when steel sector was in
consolidation process. According to steel association this was a landmark deal in steel sector. At
the moment of takeover Tata Steel ranked 56th position in steel production and Corus stood 5th
position in that. After the acquisition of Corus Tata Steel is positioned 7th largest steel producer.
Tata steel has a long history since 1907. Mainly Tata Steel is a part of Tata Group which is the
biggest corporate. On the opposite of this Corus was formed of merger of two European
companies known as Koninklijke Hoogovens and British Steel and both these firms has was a
legacy of more than 100 years (Birkinshaw, 2016). Tata Steel was limited to India only while on
the opposite of this Corus was an international organisation and have its presence in more than
40 countries. Corus operate in matured market while on the other hand, Tata Steel operate in
developing country. Tata steel has large amount of raw material as firm has its own iron ore
mines and opposite of this, Corus face scarcity of raw material and had less control and
investment over raw material. Case of study take cover of Corus by TATA Steel is consider in
this report for study. Various tools that can be use by business enterprise to analyse international
business environment before expand its operations there is all given in this report. Further
advantage and disadvantage for both the firms TATA Steel and Corus due to merger of their
operations is all given in this report. In addition to this report also highlight the relevant data
related with operate on global level.
International trade theory
There are various international business theories. There is a theory that is absolute
advantage. It says that trade between many countries cannot be restricted by the government
policy. Trade can be done between the two countries through market forces. If one country has
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specialization in a particular area, then it can create efficiency in all the products and thus they
can give this product to another country. Thus as a result they can easily enhance their activities
and operations on a large scale. Through this efficiency people who are living in both countries
can take benefit from the efficiency and can enhance standard of living.
Theories of international business: It is important and essential theory for the company
to expand their business operations and activities easily. International trade theories are mainly
different model in order to inform international trade. It is the idea of transferring services and
products between two people as well as entities. It is an effective concept of this transaction
between people as well entities in two various countries. Both People or entities commercialism
because they accept that they welfare from the transaction. They may necessity or want the
products or services. While at the overhead, this many dependable very simplex, there is a large
deal of concept, policy, and concern scheme that represent international trade. The International
Business Model Rivalry is the basic and big lean beginning rivalry in the global. The
competition's primary motives are to improve and animate smarter businessperson who establish
such kind of ventures that are more successful. The competition needs active designation and
proof of important business model hypotheses on the other hand the penning of a static business
plan, talking to clients outside the structure rather than assemblage secondary information inside
the construction, applying client development rather than trusting on product improvement, and
“pivoting” or ever-changing course rather than execution on the plan.
1.1 Objective of the research
Tata Steel is a part of Tata Group companies that was popular as TISCO or Tata Iron and
Steel Company Limited. Tata Steel is the largest steel company in terms of its domestic
production (Cavusgil and et. al., 2014). Firm has a target to achieve a capacity to achieve a
capacity of 100 million tonne. Overseas acquisitions added 21.4 million tonne and the firm is
looking to add another 29 million tonnes with help of acquisition route. The main objective
behind select these firm is that Tata and Corus both conduct their business at international level
and deal with many different countries.
External environment is one of the important factors as it has a great influence on business
operations (Chidlow, 2014).Basically, it includes those elements that are outside of organization
and provides company with many opportunities in order to enhance business in an effective
manner. Therefore, if a firm wants to gain overall success than they must consider environmental
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factor that are present in market area. Furthermore, it includes a combination of factors like
economical, legal, governmental, social and culture and so on.
Political: Mainly, this includes all the laws and regulations that are formulated by
regulatory bodies of a country. It may differ from place to place for example: legislation of
Africa, Middle East, Australia or other countries will be different from one another. Other than
this, government play important role in implementing taxes on different commodities
(Deshpande and Srinivasan, 2012). In context with Tata Steel they are concentrated on actions
taken by regional or national bodies. As a result, it is helping them in running their business in an
effective manner. Although company is expanded in entire globe but they face some kind of
difficulties while establishing their business in other new place as they have to face rules and
regulations imposed by local or national government (Driffield). Tata Steel provides raw
material to different companies but because of the taxes imposed by regulatory bodies as this
increase the price due to a decrease in sales and profitability can be seen. But United Kingdom is
very good in these term and they are giving impressive taxes benefits to companies so that they
can attract new investors from different countries. Political stability and good will of customers
are helping Tata Steel in enhancing their business effectively.
Economical: Tata Steel is operating its business throughout the world and their prime
focus is on individual market by determining all the standpoints of economy on global level. For
expanding their business they are collaborating and making joint ventures with firms established
in various countries (Dunning, 2013). Tata Steel has a greater experience of improving their sales
by incorporating all the resources that are available in market area. For example: in terms of raw
material company are getting best raw material from South Africa which they are optimizing for
making final products. Other important element that firm must consider is of currency rates in
different countries if organization is operating its business globally (Killing, 2013). Therefore,
profit and loss can get hampered if investment is higher and return company is getting is
comparatively low.
Social: Opinions, ideas and attitude of customers largely affects the entire business of a
company. Along with this, it includes factors such as stakeholders, investors, customers and
many more. Therefore, future operations of business totally depends upon the attitude and nature
of shareholders whether they are interested in their proposal or not (Ferreira and et. al., 2014).
Along with this, demographic factors give an overview about targeted places form where firm
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can get standardized income. Tata Steel is not facing such kind of problem as they have higher
per capita income (Chidlow, 2014). Henceforth, social factor is determined as an important
element that company must consider for shaving effective result.
Technological: Tata Steel as per current market situation they are using latest tools and
technologies for making effective products that can be delivered to its end customers. Thus,
company is growing in a rapid speed because of the knowledge and proper understanding of
economical stimuli (Ferreira and et. al., 2014). This will help them in sustaining a position at
market area as company is manufacturing their products which other firms are using for making
their final products. Now days there are various tools and technologies that are present at market
area and through which company can produce goods in an effective manner . Therefore, for
marinating their growth speed Tata Steel are focusing all the factors through which they can get
maximum benefits and technology is one of them.
Environmental: This factor also has some or the other affects in business operations thus,
company must consider this for having better conduction of business (Forsgren and ohanson,
2014). For example: if a place where Tata Steel has established its business and its climatic
condition is not good definitely employees will find difficulty in performing their task in a better
way.
Legal: Political and legal factors have some or the other link as they both are important
for running their business effectively (Chidlow, 2014). This provides a proper guidance about
norms that are to be followed by all companies who wants to establish its business in different
areas as well
All these are the macro factors that affect the functioning of Tata Steel. In order to work
well and to generate more number of profits, it is very important for manager to examine all
these elements as this help formulate better policies. It is very important for organisation to
follow a right organisational structure while operate on international level. This help in complete
all business operations in proper manner and at the same time contribute in success and growth
of company. In this way company can perform well at global level and can satisfy the needs of
its customers. Different tools and method are there which can be use by a business enterprise in
order to examine the situations exist in a country in which entity wants to expand its activities.
Large number of forces are there which affect the action and decision of firms operating on
global level. Economic factor is one of the element that largely affect the activities of an
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international organisation. This consists purchasing power of individuals living in that country,
fluctuation arise in exchange rate, deflation and inflation rate exist in that nation. International
practices are largely affect by this factor so analyse this element is very important for business
firms to enter into global market. In this way company can generate more number of profits and
at the same sustain in international market for a long time period.
2.0 Findings
On October 2006, Tata steel signed a business deal with Anglo-Dutch company, Corus
(Birkinshaw, 2016). On 19 November 2006, the Brazilian sell firm launched a offer for Corus at
475 pence which is value at £4.5. After that on 11 December 2006, Tata Steel upped offer to 500
pence. Corus board recommend both these offer to its stakeholders and on 31 January 2007 Tata
Steel won the bid for Corus offering 608 pence per share, valuing Corus at £6.7 billion and as a
result and joining of these two will create the fifth largest steel in the world. For nearly 170
years steel and iron have made on Tesside from the time when ironstone was discovered
(Cavusgil and et. al., 2014).
SWOT analysis of Tata steel
Strengths:
 Lower cost producer in the globe.
 Huge experience in acquisitions.
 Low debt as compare to equity ratio
 Stable balance sheet.
Weakness:
 Corus is triple size of Tata as compare
to in terms of production.
 Tata steel was not big that payment
through means of share swapping.
Opportunities
 To get explore to the global steel
market.
 Consolidation trend in steel sector.
Threats:
 Brazilian players CNS
 No financial supports for the project.
 Russian player Severstal
History of Corus:
British steel: This was a large British steel producer, consists the assets of private companies that
had been nationalised in year 1967.
Koninklijke Hoogovens: This firm was a steel producer in founded in 1918. A founding
committee was formed in order to raise the funds for establishment of the entity. Company was
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merged with British Steel in 1999 to become the part of Anglo Dutch Corus group Steel
company.
Merger and formation of Corus
British Steel merged with the Dutch Steel producer Koninklijke Hoogovens to from the
Corus Group in year 1999.
SWOT analysis of Corus
Strengths:
Changes that take place in management
structure due to privatization in 1999 has
strengthen the manufacturing company which
prior the merger, suffered from huge losses
between the year 1975 and 1984. Increased
investment reduce overhead, increase
effectiveness of decision making process and
also revolutionised work related practices
become the main foundation that make the
Corus one of the biggest manufacturing firm.
Exports on continuous basis add more value
into the products which make the global
presence of hotel more effective.
Weakness:
Firm does not have a long term vision as this
mainly concentrate on small steel ventures
while all its rivals are making significant
moves and through which they are making
their position more stronger (Hovhannisyan
and Keller, 2015). Firm is not financially
strong to expand its activities in new areas
which is very important for achieve success
Opportunities:
By expand its business operations entity can
increase the number of its profits. There is an
opportunity for firm to increase its production
capacity with adoption of new technology
(Neelankavil). Steel prices are likely to
increase in coming years so with this company
can increase the number of its profits and can
sustain in market for long run.
Threats:
Opening of new power generation market is
one of the biggest threat for firm.
Reasons for mergers of the firms
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Main reason of merger for Corus and Tata Steel can be understood by the following points:
For Corus:
 Corus require raw material at lower prices in order to maintain competition.
 Corus was 1.6 billion GBP total debt.
 Employee cost of entity was 15% while employee cost of Tata is 9%. Due of lack supply of raw material and high purchase price of raw material the total
profit of Corus was $ 18.00 billion.
For Tata:
 Diversify range of products reduce the risk of entity related with earn profits.
 Corus has research and development facility in various places and has large number of
patents.
 Tata Steel will move from 55th position to the 5th position in manufacture steel on
international level.
 Tata is well known for handling workers and increase their productivity wt workplace
with available resources and funds.
Benefits from merger
To Tata Steel
 Firm directly get fifth position form the fifth sixth producer in the globe.
 Entity will have a better geographical mix and have a access to more than 40
countries across the world (Killing, 2013). This transform the organisation a
international player from the domestic player.
 Company will get access to high developed markets.
To Corus:
 Link up with a low cost producer help firm to compete on international level.
Porter five force model
In last several years Tata Steel register a growth in both domestic and intentional market.
Various efforts are done by entity to deal with the five threats as given in the following points:
 Threat of new entrant: Various barriers are there related with entry such as product
differentiation, government policies and economies of scale.
 Competition: China largely affect the global prices by exporting all over the world to
steel sector being face threat on global level.
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Business can create strategies and policies so that it can convert weakness into strengths
and it can also create various policies so that it can survive in market. It has also monitored the
porter's five forces model so that TATA Steel can easily beat the competitors by monitoring
various elements. Analysis of business environment is carry out by TATA in order to identify
and examine the factors that affect business decision and accordingly firm formulate policies to
carry out its business activities as per the changes take place in business environment. Porter's
five force model support firm in collect and analyse the market conditions which help in develop
and implement effective policies.
3.0 Analysis
Why did Tata go for overseas acquisition
In early times, Indian economy was expected for high demand for steel was much higher
than the potential of producers of Indian steel. India starts growing at a rate of 8% and all
producers of steel with the hope to have a bright future in coming year (Meyer and Peng, 2016).
Indian plan of Tata Steel was to get a milestone of produce seven million tonnes in year 2007
and thirty million tonnes in year 2015. In year ending 2006 firm produced about five million
tonnes of steel but with changing opportunities entity choose to expand and start evaluating
various options. There were very less chances of mergers and acquisitions between two steel
producers in the country and that’s why entity plan to expand its operations outside the India.
After that Tata Steel started scouting for global presence with help of Greenfield and
Brownfield projects. After some years Tata Steel announce its interest in global acquisition
mainly in USA and Europe. During that time officials of Corus express that they are interested in
China, India and Brazil for get Steel in cheaper rates. This encourage firm to utilise the
opportunity and decided to offer a bid for the same (Neelankavil, 2016). As Corus was also
interested in setting up a distribution of modern steel in India, Tata Steel want to leave no get an
effective presence in European presence. All this help in finalising the deal between Corus and
Tata that increased the capacity of entity to around 24 million tonnes and this make it the fifth
largest steel producer in the globe.
For Tata Steel (Advantages and disadvantages)
 The deal support entity in achieve 5th position in global world from 56th position. This
provide large number of advantages to company in terms of price power in ghloba steel
sector.
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 Acquisition was well align with expansion plan of entity.
 Corus provide huge technological skills and knowledge to the workers and this was large
benefit for the organisation.
For Corus (Advantages and disadvantages)’
 Access to quality and cheap iron ore.
 Corus had looking for a buyer form last two years.
 Access to developed markets with established sales network of Tata steel in developing
markets.
Through a great deal with the Corus, company can easily enhance the position in the
market and can maintain strong position in the market. Through this it can easily easily expand
operations and activities in many countries. Thus as a result they can easily enhance their
reputation in many countries. From the above report, it has been founded that if Tata company
will conduct business with Coral, then in this case Tata firm can increase its competitive position
in international markets. It has a great opportunity to provide better quality of goods according to
demands of confusers of another country at reasonable cost.
4.0 CONCLUSION
From the given project report, it can be summarised that international business is known as
the business activities that take outside the national boundaries. One of the main benefit of
international business is that it provides an opportunity to entity to increase the number of its
profits and this is the one which ensure optimum utilisation of business resources. Tata Steel take
over the Corus in order to expand its business operations outside the nation. It is very important
for manager to identify and examine the factors exist in business environment as this help in
formulate better policies and at the same time support firm in get all benefits related with
expansion of business operations. There is a tool called PESTLE analysis that can be utilise by
manager of business enterprise in order to take better decision related with expansion of business
operations. Proper analysis is very essential for entity before take a final decision to expand
business activities. Various forces and factors are there which affect the functioning and decision
of firms that operate on global level. So in order to get all benefits related with international
business and to sustain in market for long run it is very important for a business enterprise to
identify and analyse all elements. This help in develop effective policies and provide direction to
managers so they can take right decision and at the same can sustain in market for long run.
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When entity operate on a global level then large number of factors are there which affect its
functions and decision as in order to examine those PESTEL is a tool that can be use by firm.
One of the main benefit of this is that it help in formulate better policies which ensure success of
entity. In this way, company can get all benefits related with operate on global level.
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Trademark Office.
Driffield, J. a. (n.d.). International business research and risky investments, an analysis of FDI in
conflict zones. International business review. . 22(1). 140-155.
Dunning. (2013). nternational Production and the Multinational Enterprise (RLE International
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Ferreira and et. al. (2014). Journal of Business Research. 67(12). 2550-2558. Mergers &
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Forsgren and ohanson. (2014).
Hovhannisyan and Keller. (2015). International business travel: an engine of innovation?. .
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Meyer and Peng. (2016). International business. Cengage Learning.
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