Global Challenges for Business, Management and Leadership: Tata and Globalization - Term Paper Example

GLOBAL CHALLENGES FOR BUSINESS, MANAGEMENT AND LEADERSHIP TATA and Globalization Table of contents Introduction Page 3 2. TATA and Globalization : Page 4 3. SWOT Analysis of TATA : Page 5 a. Strengths : Page 5 b. Weakness : Page 5 c. Opportunities : Page 6 d. Threats : Page 6 4. PEST analysis : Page 7 a. Political : Page 7 b. Economic : Page 7 c. Social : Page 8 d. Technological : Page 8 5. Analysis of TATA using Porter’s Five Forces : Page 8 a. Rivalries : Page 9 b. Threats of substitutes : Page 9 c. Buyer power : Page 9 d. Supplier power : Page 9 e. Barriers to entry : Page 10 6. Management at TATA : Page 10 7. The Challenges for TATA : Page 11 8. Recommendations : Page 11 9. Conclusions : Page 12 10. References : Page 13 11. Appendix : Page 14 Introduction Boddy (2007) described management as a universal human activity occur whenever people take responsibility for an activity and consciously try to shape its progress and outcome(Boddy 2007, p.9). Many people have the false belief that the management occurs only at the professional life of a person. In fact management is a broad subject. It occurs not only in one’s professional life but also in his social and family life as well. In Boddy’s opinion the purpose of management is to add value and to create wealth. In his opinion, people may produce goods and services inefficiently using more resources than the customers willing to pay which will result in creating pollution and waste (Boddy 2007, p.8). Effective management helps the judicious utilization of resources for making products or services with minimum pollution and waste production. There are lot of management theories like the Total Quality Management, Six Sigma, Kaizen, Change management, Human resource management etc. But these management theories will remain on paper alone if the managers are incompetent in implementing it. The effective management theories will be a blend of the traditional management theories and the modern management theories. Taylor’s four principles of management describes management as the development of science for every job, selection of workers who fit for the job, offering incentives to workers in order to motivate them to perform based on the principles of science and supporting workers by carefully planning their works and smoothing the way as they do their jobs (Quinn & Faerman, 2006, p.3) Even though many different management approaches are prevailing in the business world, fortunately they all come together in Quinn’s (1996) Competing Values Frameworks (CVF) (see appendix 1). CVF allows us to identify and compare different management models such as Human relations, Internal process, Open systems Rational goal models etc. These models provide effective internal and external management controls in a flexible manner. “Researchers and consultants have used the competing values frameworks to structure management education and development and training programs for first, middle and upper level managers” (Quinn & Faerman, 2006, p.19) Competing Values Framework is an effective tool in analysing organisations and their possible strategies for the future. TATA group is one of the prominent business groups in India in the automobile manufacturing sector. Apart from automobile business they have business portfolios in telecommunication sector and in investment sector as well. TATA has recently unveiled world’s cheapest car NANO priced only around $ 2000. TATA Indicom is India’s leading wireless internet service provider whereas TATA SIP is an active business entity in the mutual fund investment sector. Globalization has provided many opportunities and challenges to the TATA group. This paper briefly analyses TATA’s business prospects and their strategies for the future focussing on globalization. TATA and Globalization Began in 1945, TATA group of companies is one of the rapidly growing Indian business groups which have operations not only in India, but in China, Europe, Africa, Asia Pacific, Middle East, North America, South America and United Kingdom. Apart from automobile manufacturing TATA business group have operations in steel industry, investment industry, telecommunication industry etc. Globalization and the recent crisis in the global economics sector have brought both challenges and opportunities for the TATA group. Even though TATA has many business portfolios, for convenience, this paper analyses only the automotive sector. SWOT Analysis of TATA Strengths The major strength of TATA is its immense financial capabilities and diversified business portfolios. Even the current global financial crisis has not affected the TATA group much. Even though, automotive industry globally faced stiff challenges, TATA was able to overcome such challenges using their other business portfolios. Internationalization of business helped TATA to overcome the current challenges. Challenging business strategies are another major strength of TATA. TATA was able to read the minds of consumers and they released new products at the appropriate times. The recently released new product, NANO car (World’s cheapest car priced around $ 2000 only) has produced one million booking even in the initial year after its release in India. In order to compete with the middle segment of car industry TATA has recently released another sedan c called MANZA which also moving well in Indian market. TATA has recently signed an alliance with the Italian car manufacturer Fiat for selling and servicing Fiat in India. Moreover, these two automobile giants agreed to spread their cooperation to international markets like America and Europe. The knowledge exchange between these two will definitely beneficial to both the companies. Weakness TATA companys passenger car products are based upon 3rd and 4th generation platforms, which put Tata Motors Limited at a disadvantage with competing car manufacturers. Moreover, TATA don’t have a suitable car in the luxury sector to exploit the interests of the wealthy people of India. The more emphasise given to the ordinary people interests isolated TATA from the lucrative sector. The name TATA is another weakness for the TATA group in the international arena since tat means rubbish in English (Marketing teacher, 2010). Another major weakness of TATA is the lack of service quality compared to their main competitor MARUTI in India. MARUTI is the number one car in India as far as service quality is concerned having service centres across India irrespective of rural or urban areas whereas TATA has service centres only at the major cities. Opportunities Marketing teacher (2010) has reported that in 2008 Tata Motors successfully purchased the Land Rover and Jaguar brands from Ford Motors for UK £2.3 million whereas in 2004, it acquired Daewoo Motors Commercial vehicle business for around USD $16 million (Marketing teacher, 2010). These two acquisitions have opened immense opportunities for TATA group in overseas countries. The developing world is looking for environment friendly, fuel efficient passenger cars and TATA’s latest release NANO has brought lot of opportunities for TATA even in developed countries. Apart from cars TATA is producing trucks and buses which also have opportunities in overseas countries. Threats The major threat for TATA automobiles in India is coming from Maruti. In fact TATA, so far not succeeded in achieving the number one spot in India either in the ordinary or in the luxury car manufacturing segments. The changing rules related to environmental protection and the exhausting oil resources is a major threat for TATA for their future operations. They need to spend millions for developing technologies suitable for the future. “ICICI bank and DaimlerChrysler have invested in a new Pune-based plant which will build 5000 new Mercedes-Benz per annum. Other players, developing luxury cars targeted at the Indian market include; Ford, Honda and Toyota” (Marketing teacher, 2010). The presence of these overseas players in Indian market, will definitely a threat for the TATA group. PEST Analysis of TATA Political TATA group has a strong influence on Indian politics which helped them to establish their manufacturing plants in any of the Indian locations. Recently, the left led West Bengal government forced to ask the TATA group to shift their NANO plant from West Bengal due to people agitation over the acquisition of lands. On the other hand, many other Indian states offered TATA the luxury of land and other infrastructure facilities for establishing NANO plant in their territories. Gujarat has won this race. Because of the political influence TATA was able to derive tax incentives for their investors. They have a strong motivation for globalization and their reputation and trust among political circles in India are immense. Economic As mentioned earlier, the backing of diversified business portfolios and international exposure to business made the TATA group one of the most stable economic entity in India. They are bringing lot of revenues to the Indian economy through the export of domestically made vehicles to the overseas market. Their workforce and investments in the development of the Indian infrastructure has brought dividends to the Indian economy. Social TATA encourages researches in educational and IT sectors. TCS (Tata Consultancy Services) provides world class IT services to the customers. “TCS offers a wide range of IT services, outsourcing and business solutions. It applies specific industry experience to create tailored business solutions” (Tata Consultancy Services, 2010). India Business Directory, (2010) has mentioned that TCS is spread across 42 countries with more than 130,000 IT consultants. Moreover, they had registered consolidated revenue of USD 5.7 billion for the FY 2007-08.(India Business Directory, 2010). Apart from activities in the educational and IT sectors, TATA has developed and implemented a strong management culture in the Indian business world. TATA employees are one of the most satisfying employees in the Indian subcontinent. Technological Research and developmental activities have lot of importance in TATA’s business strategies. TATA has lot of collaboration with other big companies for the exchange of technologies. TATA is a technology savvy company. It encourages and incorporates most modern technologies in most of their manufacturing activities. Analysis of TATA using Porter’s Five Forces Rivalries, threat of substitutes, buyer power, supplier power and barriers to entry are the five forces suitable for industry analysis as per Porter (Quick MBA, 2007) Rivalries Maruti is the number one competitor for TATA group as far as the Indian automobile sector is concerned. Maruti has left TATA yards behind as far as selling and servicing of passenger cars in the sedan and hatchback sector. Maruti 800 and Alto (both from Maruti) were two major cars which have raised stiff challenges to TATA’s Indica and Indigo which forced TATA to develop world’s cheapest car NANO. Threat of substitutes Since the making of vehicles need a large amount of steel, the prices of steel often affect the prices of the cars also. The steel prices are growing rapidly which forced TATA like car manufacturers to raise the prices of their vehicles recently even though the demand for vehicles was less due to global recession. Buyer power The buyer power is strong in Indian market because of the availability of lot of varieties of cars at present. Buyers usually go for a comparison of different vehicles before they take their purchasing decisions and Indian car market is blessed with lot of options for the buyers. In other words, buyer power is so strong in Indian market. Supplier power The making of cars requires lot of raw material suppliers. Unlike many other car manufacturers TATA has the immense advantage of the backing of the TATA steel industries India, for their automobile manufacturing. TATA is steels is one of the renowned steel manufacturers in the world and the support of TATA steels helped the TATA automobile manufacturing sector to purchase the most critical component of the car manufacturing, the steel at a lower price compared to their competitors. Barriers to entry          Barriers to entry for the new manufacturers to Indian market is less as the Indian government has liberalised many of the rules to attract foreign Direct Investment (FDI). Many of the world’s renowned car manufacturers have already established their car manufacturing units in India which is a major challenge for TATA. In fact, the Korean car manufacturer, Hyundai is currently manufacturing vehicles in India not only for the Indian market, but even for the overseas markets as well. Management at TATA TATA seems to be following the rational goal model in their management approach. It give more emphasize to control and external focus as evident in the chart given (See Appendix 1). The SWOT analysis and the PEST analysis has clearly established TATA’s abilities and weaknesses and given more evidences for the rational goal model adopted by TATA. TATA is expanding their businesses to overseas countries which is a clear indication that TATA has set their goals for the overseas market after a careful planning. Moreover the acquisition of some of the overseas companies clearly shows that TATA has done their homework well for exploiting the opportunities opened by the globalization. The Challenges for TATA The major challenges for TATA are already mentioned in the SWOT, PEST and Porters five force analysis sections. Apart from the mentioned challenges, TATA is facing challenges because of the global financial crisis also. Even though India was a country which escaped from the crisis without many damages, many of the overseas countries have faced severe challenges which affected TATA’s overseas business. Moreover, the demand for reducing greenhouse gas emissions in order to control the global warming problems is another challenge for TATA to develop new environment friendly technologies. Recommendations TATA can exploit the globalization immensely for their advantages. Because of the diversified portfolios, TATA can easily reach any of the overseas countries without any introduction. The stable and growing Indian economy and the liberalized rules are definitely provide heavy numerous opportunities for TATA both in India and across the world. In order to exploit the global opportunities, TATA needs to make certain changes in their existing management models and business strategies. The rational goal model alone may not be suitable for TATA in achieving their business objectives. TATA needs to incorporate the goods of other models also. For example, Human Relations Model stresses the importance of human relationships for effective management. TATA needs to give more importance to human relations also in their management approach. Relationship building is currently accepted as the core of any business activity and TATA cannot sustain their growth, neglecting the trends in the current business world. Conclusions Management theories are not universal ones or stable ones. The management theory suited for a country/market may not be suited to another country/market because of the differences in these countries/markets with respect to economy, politics, culture, education etc. Life styles and business concepts are changing because of the rapid developments in science and technology. It is impossible for a firm to survive in the changing market with the help of traditional management style. Competing Values Frameworks (CVF) allows us to identify and compare different management models. It also help business people to realize the changes happening in the management sector and to adapt themselves to the changing needs of the business world. TATA group is one of the business tycoons from India who have many diversified business portfolios across the world. They seem to be adopted the rational goal model in their management approach. But the requirements of the current world are more than that and they need to incorporate the goods of the other models also in their management approach in order to excel in the global market. References 1. Boddy David (2007), Management: An Introduction, Publisher: Financial Times/ Prentice Hall; 4 edition (December 10, 2007) 2. India Business Directory (2010), Tata Consultancy Services, Retrieved on 25 January 2010 from http://business.mapsofindia.com/software-companies-india/tata-consultancy-services.html 3. Marketing teacher (2010), SWOT Analysis - Tata Motors Limited, Retrieved on 25 January 2010 from http://www.marketingteacher.com/SWOT/tata_motors_swot.htm 4. Tata Consultancy Services, (2010), Retrieved on 25 January 2010 from http://www.tcs.com/homepage/Pages/default.aspx 5. Quinn Robert E. & Faerman Sue R. (2006), Becoming a Master Manager: A Competing Values Approach, Publisher: Wiley; 4 edition (August 28, 2006) 6. Quick MBA, (2007), Strategic management, Retrieved on 25 January 2010 from http://www.quickmba.com/strategy/porter.shtml Appendix 1 Read More