International Business in Asia - TATA - Case Study Example

International Business in Asia - TATA Name Class Unit Table of Contents Table of Contents 2 Brief history of Tata Group 2 Relevant business traditions of the company 3 Pioneering 3 Outward oriented culture 4 The tradition of trusteeship 5 Relevant business traditions development 6 Corporate Innovation 6 CSR and trusteeship 8 Strategic intent (mergers and acquisitions) 8 Future challenges the organisation faces 10 Strategies to meet challenges successfully 11 Conclusion 12 References 14 Brief history of Tata Group Tata group is one of the oldest and largest business groups in India. The group consists of 28 public listed companies and a huge number of private companies. The business group was founded in 1874 by Jamsetji Nusserwanji Tata. Tata group is more than 150 years old and all its operating business are currently 96 (Witzel, 2010). The group employs about 330,000 people both permanent and temporary. The group has been active in seven major business lines which are; energy, services, engineering, information and communication and chemicals and consumer products. At the moment, Tata group operates in over 54 countries and they export products and services to 120 states (Goldstein, 2008). Tata has been able to revolutionise the Indian business practices over the years. This is through creating the standards to which other companies have followed. The conglomerate manages Tata brand globally. This is through comprehensive training and philanthropy activities. Relevant business traditions of the company Pioneering Tata has been a pioneer in major industrial practices in India. The company was the first to operate private steel mill in India, private sector power utility and the first international airline among others (Goldstein, 2008). This was based on the group focus on diversification. At the moment, Tata group is one of the most diversified companies in the country. Diversification has helped the group a lot in minimising business risks (Bruche, 2010). All companies within Tata group share the core values. These values are; excellence, unity, responsibility, integrity and understanding. The companies have a main guiding principle of building the nation. The group of companies have come up with various ways of coordination. Through Tata administrative services, the group ensures that they have recruited managers who are talented (Lala, 2004). This has been used in developing talent for the group for many years. The administrative services have been very critical in selecting young professionals who will lead the companies in future. All the trainees are taken through the core sectors in Tata group, shown its current and future challenges and what drives it. All companies wishing to use Tata brand are expected to sign an agreement based on brand equity and business promotion. This involves an agreement to pay an annual loyalty to Tata sons which is between 0.1 to 0.2% of the generated revenues. The agreement also ensures that the companies adhere to Tata code of conduct and they adopt the Tata business excellence model (Goldstein, 2008). Tata group were the pioneers of corporate social responsibility in India. Tata group is highly engaged in philanthropy and social engagement. For example, almost two thirds of Tata Sons Company is held through philanthropic trusts. Following the death of Sir Ritan Tata, a trust was established in his name. The main aim of the trust is advancement of learning, education and industry (Lala, 2004). Another trust is Sir Dorab Tata who was the eldest son of Jamsetji. He bequeathed all his wealth before death and the trust has been operating to promote institutions which have national importance. The trustee in most cases belongs to the family though there are few appointee executives. The group ensures that they contribute to humanitarian assistance annually. Through the Tata Index for Sustainable Development which has been developed through collaboration with United Nations Development Program (India), the company has been working in enhancing community work and measuring their impacts (Bruche, 2010). Outward oriented culture Since the formation, Tata group has been outward oriented. The company globalisation efforts started very early through establishment in London as Tata Limited (Jain, 2011). The company made light armoured cars that were highly used by British army which was engaged with North Africa front. The company have been cooperating with foreign partners as well as setting plants abroad. Through globalisation, the group was able to set new business and subsidiaries across the globe. Tata Africa holdings were set in Johannesburg in 1990 as a wholly owned subsidiary of Tata international (Goldstein, 2008). The group has worked hard to make their business visible globally. This is through ensuring brand equity is enhanced and making acquisitions. Most of Tata group business is growing through acquisitions (Andrea, 2008). With a lot of business and deals, TATA fits well into the internationalisation categories. For example a Tata chemical which is the world third largest manufacturer of soda ash has been able to expand through acquisitions (Lala, 2004). The acquisitions have made Tata chemicals to be in a better position to consolidate their stake. The company acquisitions have shown a combination of market efficiency motivations, resource seeking motivations. While a lot of Tata group companies are growing through acquisitions, the company has invested a lot in projects that helps in sustaining global network delivery model (Andrea, 2008). The tradition of trusteeship This is a view which is based on ones wealth as a trustee on the behalf of the others. Tata group believes in trusteeship as inspired by Gandhi through JRD (Sarukkai, 2012). The group has a great impact on those people who are associated with them (Gopalakrishnan, 2008). The group relation with the employees is excellent. The company impact goes beyond their immediate employees to the society especially through the trustees established by the family. Trusts have helped a lot of people regardless of their caste, religion among the rest (Lala, 2004). The fact that the wealth of some of the family members is being used for public service is a sign of trusteeship. The trustees are able to support greater good for the people for a long time than charities. The trustees grant towards education has been one of the most successful areas (Kakani & Joshi, 2008). Relevant business traditions development Corporate Innovation Innovation management in an organisation is always a complex task. As the organisation becomes more globally engaged, the need for new digital technologies emerges. Tata group has engaged in corporate innovation strategy with an aim of allowing more room for creativity while at the same time providing high level direction and support. In Tata, innovation has always been part of their agenda. In 2007, Tata group was able to set up a group innovation forum. Tata Group innovation Forum (TGIF) was aimed at rolling out group based initiatives which could help the groups to innovate. TGIF has been used for corporate innovation ecosystem at the group level (Mithas & Arora, 2015). TGIF has been encouraging the companies in the group to innovate. This is through giving them innovation capability advice and creating a community of innovation. The initial focus was on creating capability through workshops, missions and disseminating concepts. Various tools and processes have been used by TGIF which includes enhancing leadership communication and other programs. The activities used by TGIF falls into four categories; measuring innovation, facilitating innovation, recognising innovation and lastly rewarding innovation (Mithas & Arora, 2015). To measure innovation, Tata group uses a questionnaire called Innometer. This helps in looking at innovation process, innovation culture and a strategic focus on innovation. The respondents are asked questions which helps in measuring innovation. The outcome of Innometer helps the group to identity its weakness and areas that they should address. This has helped Tata group to make innovation more robust (Mithas & Arora, 2015). Tata group has been facilitating innovation through IT. This has helped the group to improve idea generation and selection. The group has been using Tata Innoverse as their in-house social networking platform. The platform has Facebook like features in addition to features which help in market prediction, which helps in augmenting innovation life cycle. The platform has made it possible to engage employees through creative problem solving and evaluating their ideas. Through the platform, it becomes easy for the users to generate ideas, impressions and challenges. The group has been considering using the platform to track the selected ideas for commercialisation (Mithas & Arora, 2015). Tata has been recognising and rewarding innovation. This is through celebrating the innovation based on Tata innoVista. The goals have been to recognise innovators and encourage innovation within the group. The program has been used to enhance the culture of risk taking among the companies in the group. The awards are based on four categories; promising innovators, dare to try innovators, the leading edge proven technologies and design honour. All these have promoted a culture of risk taking that is very vital for innovation to occur (Mithas & Arora, 2015).The group has over the years eliminated the stigma associated with failure in innovation. This is through making the culture of innovation central to business success. The company has embraced IT as a drive to innovation. The company corporate innovation program has been manifested in a disciplined autonomy. IT is used also in sustaining corporate innovation making an enterprise that is digital (Mithas & Arora, 2015). CSR and trusteeship Tata is the pioneer of CSR in India. The company has 65% of the equity capital from the Tata Sons being held through trust. Tata trusts are philanthropic in nature and over 75% of the funds come from dividend on the shares owned by Tata Sons (Sarukkai, 2012). The rest of the funds are gained from the statutory investments. Tata culture is central to the group overall corporate social responsibility. This involves working for the benefit of the community they are operating on (Gopalakrishnan, 2008). The company focus on community development has been one of their core values since the earliest days. The community are enabled in ways that helps in sustainable development (Kumar, 2007). Strategic intent (mergers and acquisitions) The current strategic intent for Tata group is mergers and acquisitions both locally and globally. The group has been exploiting the opportunity of mergers and acquisitions in expanding their business (Andrea, 2008). The group always looks for the presence of raw materials which can help in serving other industries in the group. For example, the steel industry will look for availability of steel with an aim of serving the automotive industry will low cost steel. This has enabled the company to overcome the weakness caused by distribution due to high cost of transport and export (Witzel, 2010). This has led to the group looking for the critical raw materials in their areas of production. Acquisitions and mergers have helped the group in attaining a large market share as they expand. To attain market requires having high degree of value drivers. This has made Tata to ensure that they acquire authoritative access to raw materials. This has helped the company to attain strategic capabilities to fulfil their objectives (Kakani & Joshi, 2008). Tata has been able to attain tangible and intangible resource that enables them to perform in a good level (Kedia, Debmalya & Somnath, 2006). The core strategic capability for Tata group has been cost efficiency. The group gains their cost efficiency from economies of scale, experience, product design and supply cost. Tata is positioned as a global brand. The group has been able to gain business excellence through a holistic methodology that enables them to attain high quality in their products and operations (Kumar, 2007). The group adopted Tata Business Excellence model (TBEM) in the 1990s and has helped a lot in attaining business excellence. The model has been in use to determine the quality movement within the group. Through use of core capacities required, the group has made the business model possible. This has given the group a competitive and value chain which is in line with their company strategies. During change, Tata responds in a manner that helps in implementing the change. The company has been utilising differentiation strategy through a broad approach which involves differentiating different ranges of products (Bruche, 2010). The company value chain has been highly independent from their resources. The value chain is developed to produce resources at the place of manufacturing. The core strategy has been to acquire resources that can be used to feed other industries. The resources are well exploited creating a good competitive advantage. The group never diversify from their core strengths and competencies (Kumar, 2007). The senior management are well versed with the micro and macro business environment. This has acted as the basis for the management intuition and credibility. The customer is listened to and the main emphasis is to deliver quality and reliability. Tata group has been setting high standards for their products with an aim of meeting the customers’ needs. The group main strategy has been to expand globally. The group has been rapidly acquiring other companies in different parts of the world (Kakani & Joshi, 2008). Future challenges the organisation faces The high use of business acquisitions by TATA group may derail the core business which is the major risk faced by the company (Lala, 2004). As the company expands globally, there have been a lot of issues which may lead to Tata group losing their main focus on cost advantage and appropriate production scale as they expand. The issues associated with integration have been the main cause of failure for mergers and acquisitions. Managing operations in a diverse international environment and changes in local regulations acts as risk factor as the company is expanding (Bruche, 2010). Emphasis on collaboration instead of controlling as the business model may make it hard for Tata brand to keep their distinct brand equity in future. It will be hard for Tata group to maintain a modicum of coherence with their current strategy (Lala, 2004). Another problem is the possibility that the Indian company will be treated as a sub-standard entity. The company corporate social responsibility will also face a challenge as the company expands. This is due to fact that different countries have varying human rights, labour standards and human rights. The need for these peoples varies hence the CSR programs will have to be tailored to meet them (Kakani & Joshi, 2008). Strategies to meet challenges successfully To meet the above challenges Tata should adopt strategies that will make integration within mergers and acquisitions possible. A cooperative strategy should be established to help the development of the multinational (Kedia, Debmalya & Somnath, 2006). This will ensure that the risk of conflict and disintegration is reduced. The group can also engage in complementary rather than related acquisitions to add value. The acquisitions can be used by Tata group to add value to their operations. The acquisitions by Tata should be used to add value to the group and overcome the power of the established brands. This should be followed by own research and marketing in all companies that have been acquired. Employee resistance in the acquired companies should be reduced through agreements (Jain, 2011). The group should also make mergers and acquisitions to be country specific. In developing countries, Tata should be seeking the opportunities for diversification based on unrelated businesses. This is based on the home country trajectory. This should vary when in developed countries such as UK. Tata should take into context that developed countries vary from the developing countries. Conglomeration will give Tata advantages in developing countries as compared to developed countries (Jaipuria, 2002). Tata should focus more on understanding the culture of the country in which acquisition is to take place. This involves gaining an in-depth understanding of the country working environment. This will work as a strategic tool for handling any post-merger issue that may arise (Kiggundu & Ji, 2008). There is need for Tata to create a virtual organisation that will be across all of their combined businesses. Tata has to ensure that their brand has a global appeal. This is a proposal that has a very large outlay of funds. Instead of creating their own expensive distribution network, Tata group can leverage in the distribution channels created by their partners, joint ventures and alliances. Use of consulting groups can help a lot in integration. This is through creating task forces that can be used in determining areas of integration that are important (Kedia, Debmalya & Somnath, 2006). Tata must keep their strategic focus on corporate social responsibility as they expand globally. This is through being engaged in initiatives that helps in promoting social economic development in the host countries (Kiggundu & Ji, 2008). The group should continue engaging UN as a key instrument when coming up with principles in human rights, labour standards and stand on anti-corruption. This should be incorporated in Tata code of conduct in the country of operation. The corporate innovation program must continue being implemented in all countries of operation. This is through use of IT to ensure that corporate innovation is sustained in all their operation. All the companies’ strategies must be viewed as interdependent strategic choices. This will help the group to transform itself and attain the innovation required to perform well in the global arena. Tata must continue embracing the IT as a drive for its innovation and creativity. Through these strategies, it will be possible for Tata group to continue expanding through mergers and acquisitions while at the same time maintaining their corporate social responsibility (Gupta, 2012). Conclusion Tata group is one of the oldest Indian family owned businesses. The group has been able to maintain strong traditions instilled by their founder through their business operations. Tata companies have been very keen on global expansion since inception. Tata group is also well known for their tradition of corporate social responsibility in their business operations. The group has been very dedicated to the social responsibility through use of trustee funds. This is through Tata sons which funds most of the social initiatives. At the moment Tata group has increased their investment in innovation. The group has created a tradition where risk taking culture is encouraged and innovation rewarded. Corporate innovation strategy has helped the group in coming up with new ideas and succeeding in their global expansion. This is being driven by adoption of modern technologies. Currently, the group has been focusing more on mergers and acquisitions as they expand globally. This is based on their tradition of globalised business. The tradition of Tata Business Excellence model (TBEM) in the 1990s and has helped a lot in attaining business excellence. There have also been a lot of efforts to acquire strategic resources that can be used within the industries such as steel. The main challenge is the fact that Tata may deviate from their core business if they continue with mergers and acquisitions. There are also problems associated with working in a diverse social economic environment. There is also problem of maintaining the distinct Tata group brand identity. In some cases, the Indian conglomerate may be treated as a substandard entity. The challenges can be addressed through adopting a cooperative strategy, engaging in complementary acquisitions and making agreements. The brand global appeal must be maintained irrespective of funds used. There is also need to use consulting groups when making mergers and acquisitions. Social corporate responsibility must be maintained as the group expands globally. The group must continue embracing IT and technology as they expand globally. References Andrea Goldstein, (2008).The Internationalization of Indian Companies: The case of Tata, Center for the Advanced Study of India, Casi working Paper Series , Number 08-02 Bruche, G. (2010). Tata Motor's transformational resource acquisition path: A case study of latecomer catch-up in a business group context (No. 55). 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