Tata Motors Risk Assessment - Case Study Example

TATA MOTORS RISK ASSESSMENT CASE STUDY WORK Table of Contents Introduction…………………………………………………………………………………..……3 Aims and objectives……………………………………………………………………………….3 Problems encountered by Tata Motors in the past………………………………………………...5 Similar Problems Facing Players in the Automobiles Industry.......................................................6 Regulations of the sector, planned changes and the environment...................................................7 Are there any potential opportunities that could enhance company performance...........................8 Identified risks and opportunities.....................................................................................................8 Define the acceptable risk threshold..............................................................................................10 Identify mitigation actions for risks that are above the stated threshold.......................................10 Conclusions....................................................................................................................................11 Appendix.......................................................................................................................................12 Reference list.................................................................................................................................13 Tata Motors Risk Assessment Case Study Coursework a) Introduction Tata is the largest automobiles company in India with its establishment in 1946. Tata has made a production of more than 4 million cars since its establishment. Tata specializes in automobiles of all classes including personal cars, vans, pickup trucks, construction trucks and heavy commercial lorries. Tata Company has its operations in several countries with many of its brand vehicles plying their roads every day. An estimate that about 8 million Tata vehicles ply on Indian roads and with operations in several countries including Saudi Arabia, Bangladesh, South Africa, Italy, Ghana and Nigeria. Tata Company provides employment opportunities to many people across the world and its operations are mainly in spare parts and automobile engineering works with highest technology at affordable rates. For instance, Tata has made productions of environment friendly cars with less emission like the electric cars, hybrid cars and public transport vehicles. This company faces stiffer competition from companies like Mahindra and Toyota but it has also made steps in cubing the challenge through acquiring brands like jaguar Land rover and Daewoo, which are world’s most renowned companies for luxurious vehicles (Alexander. 2008). b) Aims and Objectives As a company, Tata has its mission visions and quality policy statements. These are the keynote points that direct the company towards its winning end and meeting its company goals and objectives. A company should set its aims in business considerably in manageable units to measure its progress with the already achieved aims and objectives. Objectives are what the company intends to achieve through its course of work and objectives are either in long term or short term. Long-term objectives are those that focus on achievements that the company aims at in the end. These ones are gradual and take a longer time to fulfil. Short-term objectives are what the company needs to achieve within the short run. They are always short and precise and they are rapid and take a short time to realize. Tata’s aim is to be a leading producer in the best vehicles and experiences to customers’ worldwide and as such aims to be passionate in anticipation to lead in quality services and to be the most admirable with partners, customers and workers. The aim of Tata motors of being the number one producer of automobiles in India is on the basis that it is the second largest vehicle company in India even though it lost the position of public vehicles to Mahindra last year and therefore it has the potential to top. The company has put several strategies to reach their main aim. They focus on providing something audacious for their customers, something of quality, and something real. For instance, the company has made partnerships with Fiat Company and this has made its operations wide and worldwide. The company has also acquired brands like jaguar land rover and Daewoo motors which are worldwide and big producers hence increasing its capacity. Tata released the NANO and the INDICA, which are India people’s vehicle. These vehicles are affordable to all classes of people and this has shown a good image in the vehicle industry (Allaoua, 1996) Since the company is in business, its main objective to make money and more profits while at the same time give good services and fulfil the customer’s satisfaction. This objective is the main driver towards Tata’s excellent performance and coming up with innovations to suite the growing technologies and the demands. This objective is included in the main mission of the company together with the policy statements and they are the main control points of the company c) Problems encountered by Tata Motors in the Past In the recent past and throughout the growth journey of Tata automobile company, it has had some problems, which were challenges to its service delivery. In the past, Tata Automobiles Company was majorly operating within India and with few operations in other countries. This was due to the small scale of operation. This problem made the company not to generate more profits and compete well in the motor world. Tata could only provide few vehicles o run within India with some of the models that were of lower quality than its competitors were in 1954. This has later led to improvement as now the company operates in large scale, in many countries, and with several sleek car models. Another problem that Tata motor company had in the past years was that its competitors have been in the motor business for over 40 to 50 years while it was starting and therefore they had a good market share and had an advantage over Tata. The company had to struggle and catch up with production of lean products to catch up with its competitors, which brought the issue of sustainability and environmentalism of the company. The company is a low cost producer and so catching up with its competitors in terms of quality and lean products means extra costs. This had impacts by underpinning its competitive advantage but with the recent acquisition of some world-renowned brands and collaborating with others, the company has at last overcome the issue (Dagwell, Lambert & Wines, 2007) Acquisition of raw materials including steel for the low cost producing company was a big challenge in the past. Steel and aluminium are expensive to get and sometimes are imported under high costs and therefore producing cheaper affordable vehicles as it was its aim became a very big challenge. This saw some of its first brands become as expensive as those of its competitors before the company came to terms with the issue and gave out the Nano. d) Similar Problems Facing Players in the Automobiles Industry In the past, the major problem that the companies in the automobiles sector did experience was stiff competition. There were companies that had an already established root market around the world in earlier years and this gave stiff competition to the new entrants. New companies in the business had to undergo some serious internal audits to come to terms with the competition and give out quality products at the same time. This led to increase in their operating cost and some losses as they made trials in the low cost vehicle sector. However, there is still stiff competition with each player trying to secure the top position but now all the players have the capacity to satisfy their market demand. Another problem that other organisations within the sector have encountered in the past is trying to come to terms with the rapidly changing technology. Technology changes daily with novelties everywhere and some of these innovations have to be put in consideration while making the vehicles. This issue makes a vehicle without “some new devices” to be obsolete. This means that the manufacturers have to restructure and accommodate the new ideas in their vehicles. This is always expensive and increases operational cost of the organisations. Global crisis and increasing prices of materials was a big problem to the organisations in this sector in the past. Prices of aluminium and steel kept on shifting and making the overall market price for vehicles unstable. The other problem was specialization. Other organizations had specialized in passenger and heavy commercial vehicles forgetting the luxurious personal cars market. This led them to lose a lot in the markets until when they did diversify to tap from all the market (Chary, 2009). e) Regulations of the sector, planned changes and the environment There are some regulations to the motor producing organisations that govern and regulate their operations and bring sanity to the market. Without these regulations then the sector could be wild and with no regard for other players. One of the regulations is production of environment friendly vehicles in an environment friendly way and to compete fairly in the markets. Due to rising concerns about climate change and global warming, car manufacturers now face the task of producing vehicles that conserve the environment. This means that the companies have to invest heavily in new technologies in order to meet the regulation. For instance, Tata motors deals with hybrid cars, electric powered cars and engines that undergo complete combustion. The sector has a regulation in competition meaning that the competition should be open and fair. This means that the company’s brand, customer taste and the affordability and technology involved in manufacturing the vehicle are what will favour it in the market. For instance, a Chinese company made a vehicle that was exactly a replica of land rover’s Range Rover sport called the Land Wind and at a price more cheap. This did raise eyebrows and conflict between the two companies because the Land Wind did not follow some regulations of competition (Kesavapany, Mani & Ramasamy, 2008) Sometimes these regulations depend on the environment and the market. For instance, Tata can produce any number of vehicles within the Indian markets and few other markets but it cannot exceed a certain number of units in some otherworld markets. This gives space for other players to compete. There are the countries within which a vehicle cannot operate without certain technologies and modifications and this means that not any vehicle from the company can operate there. f) Are there any potential opportunities that could enhance company performance? The Tata Company has some potential opportunities to increase its scale of operation and increase profits. The company has been majoring in the sector of passenger transport and heavy commercial vehicles. With the successful purchase of jaguar land rover brand in 2008, the company has now diversified to luxurious cars. This great opportunity may see the company compete fairly and fully in all segments. As the world moves towards greener vehicles and shun away gas-guzzlers, Tata has their answer, the Nano. This vehicle is the cheapest in the world at a price a little more than that of a motorbike and it is environmentally friendly. The car is acceptable worldwide and this is a big opportunity to the company. With the acquisition of the Korean Daewoo company, Tata has the potential to manufacture environment friendly commercial vehicles because the world is moving towards environmentally friendly vehicles. This is an opportunity for Tata to tap. With the global increase in demand of the commercial vehicles with less gas consumption and high mileage, the range of super milo fuel-efficient buses powered by super-efficient ecofriendly engines rises. Tata can tap into this opportunity by manufacturing a commercial vehicle with an optional organic clutch with booster assist and better air intakes that reduces fuel consumption up to 10%. This opportunity is still open and can see the company prosper to unbeatable levels worldwide if it is fully put into actualization. The company has the potential to collaborate with world brands like Toyota to be able to run in many countries with potentials. This will see the company operating in many more nations and increase its business and profits. g) Identified risk and opportunities The above information presents competition as the biggest risk factor for Tata Motors. The automobiles industry is currently thriving across the globe, and as such, every player is keen on securing a significant market control, as well as consolidating its traditional markets in order to maximise sales and increase their profitability. In fact, the threat or risk of competition is alive and present even in Tata Motors’ own home market of India, whereby international players such as Toyota, Daimler and BMW are jostling for a piece of the piece of the growing India’s car market. However, the company also enjoys domestic support from the government, as well as ordinary Indian citizens and organizations that prefer to buy and promote their local brand of cars and trucks as opposed to purchasing vehicles from international firms (Homifar, 2008) However, the risk of competition to some extent surpasses the acceptable threshold in such a sense that it may equally jeopardize the operational efficiency and profitability of the company. According to the COSO framework, a company should have an optimal risk when undertaking its operations, a case in which if the risk is above the ideal levels, the company may suffer negative consequences. As such, the framework provides an outline for the risk assessment process. The first step is to identify the risk or risks. The second step is to assess the level of risk, which involves developing an assessment criterion, assessing the risk, assessing the risks interactions, and prioritizing the risks. The third step is to respond to the risks depending on the impact of each risk on the operations of the company (Sornarajah, 2010) In responding to risks within the internal environment, the company adheres to the following procedures. It first sets expected objectives, and then identifies the event to mitigate risk. What follow is a risk assessment process, and a risk response process with effective control of all activities involved. It is advisable for managers to collect information during the process, as well as communicate effectively to learn from the challenges raised from the processes, and lastly monitor to deduce the expected outcomes. The major risk identified is competition, which has a scale rating of five, which means it may lead to significant company loses in case it does not get the necessary attention from the management to mitigate it. This is an extreme risk facing the company, and as such, needs advent measures to combat it amicably. On the other hand, the emerging opportunity is the growing domestic market, which assures the company of a consolidated domestic market control h) Define the acceptable risk threshold The acceptable risk threshold for Tata motors as relates to competition is level three, which is a moderate risk threshold. Even though this level of risk leads to some extent of loss for the company, it is within acceptable levels as the losses are not so extreme that they hamper the financial stability and performance of the company. In addition, a healthy competition is always very good for businesses as this enables industry players to improve their products and services, as well as promote creativity and innovation in an effort to outdo each other in the race to control the existing market spheres. As fir this case, a healthy competition enables Tata motors to improve continuously its products in order to remain relevant and trendy within the market. i) Identify mitigation actions for risks that are above the stated threshold. As such, any risk identified to be above the expected threshold needs immediate attention from concerned company officials in order to put it under containment before it gets out of hand. Some of the mitigation actions that would enable the company consolidate its markets and overcome the threat of competition would be engaging in extensive marketing campaigns to promote the company and its brand, and improving its vehicles through a continuous research and development program. It can also price its products at affordable but competitive market prices that would attract new customers from its competitors fold, as well as retaining its existing customers as loyal confidants and trusted users of the Tata Motors brand of automobile vehicles. j) Conclusion In general, Tata Automobiles Company is a big company with some of its operations in many countries across the world. This company has potential to grow even bigger from the collaborations it makes with the other brands in the same sector. Tata Company should invest more in the areas with little or no competition like the hybrid vehicles and electric vehicles for it to increase its profits. As the company’s mission statement involves customer satisfaction and happiness, the company should make sure that its products confer with the current technology and that they are affordable by a common person. The company has made big growth steps and achievements since its start in 1945 and this is a good sign of continual growth and expansion of its operations. Appendix Risk Register for Tata Motors Risk Number Risk Description Risk Information sources (ie references from research) Likelihood (1-5) Impact (1-5) Risk Rating (Likelihood x Impact) Above acceptable rating? Mitigation actions 1 Stiff competition Company annual financial reports 5 5 25 extreme Increased marketing and R&D 2 Growing domestic market Marketing research reports 5 2 10 moderate Increase production capacity to meet growing demand Reference List Alexander, C. (2008) Market Risk Analysis, Pricing, Hedging and Trading Financial Instruments. Hoboken, New Jersey: John Wiley & Sons. Allaoua, Z. (1996) India: Five Years of Stabilization and Reforms and the Challenges Ahead. Washington DC: World Bank Publications. Bazley, J., Cunningham, B., Kavanagh, M., Nikolai, L., Slaughter, G. & Simmons, S. 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