House of Tata - Case Study Example

Initiatives by Ratan Tata Building of the equity interlocks was a good idea for the Ratan Tata that provided for a common thread running throughout the group. The thread was in the past embodied in personality but building of the equity interlocks enhanced institutionalization of certain things. These incorporated other companies that were not using the Tata brand name in their products. The companies could use the reputation of Tata in raising money for global and domestic markets, as well as accessing the financial and managerial support from the group. The group companies would have been effective in purchasing the shares from Tata Sons. However, collusion between the companies with regard to the purchase of the exchange share would have violated the law. According to the media, the plan by Ratan of increasing the equity holdings would have raised concerns regarding the overvaluation of the shares. The deal lacked the benefit for companies that invested in the initiative (Lynch 56). The initiative by Ratan of selling 20 percent stake in the TIL to colossal of the Hong Kong-based Jardine Matheson group. This was a good idea since the firm was significantly influential throughout Asia. This deal added value by pushing the share capital of TIL up by Rs. 119, and this enhanced the venture start-ups promoted through the TIL. Ratan anticipated of Jardine contributing to the expertise in most business activities like distribution and retailing, hotels, engineering, real estate, financial services and construction. This move added value to TIL since the two companies had similar interests in exploration of potential synergy in their financial businesses. This necessitated creation of major networks for distribution of cars. Jardine believed that Ratan was careful thinker and planner, with the long-term decisions being spot-on. Though Ratan admitted of the joint venture not reading the market accurately, it was worthwhile for Jardine having stakes in Ratan (Wiersema and Joseph 65). Tata was considering several steps they hoped would give the group strong collective identity. This aimed at making Tata brand take responsibility of promoting unified brand that could have been used by all members that subscribe to the Brand Equity Scheme. Every company could have derived the benefits of promoting the Tata brand and hence enhance the Tata affiliation. The Tata sons would have required annual net income contribution of each company to meet the development costs, protect and promote the brand. The idea was good since each company had to pay contribution based on the degree of brand association. Also, the involved companies had to pay the code of conduct in ensuring uniform ethical and high quality business practices. The participating companies must recognize the outstanding representation of the Tata values (Wren 98). The advantage of this initiative is that most of these countries encouraged Tata adopt a globalized and strong corporate campaign. Though the companies wanted to take advantage of the ward and opportunities off the competitive threats that emerged dramatically due to the expansion of the Indian economy, the Tata son used the fee paid by the companies in building a national and international group brand. This also enabled them emphasize on core ethics and values through advertisements. However, the domestic brand promotion would have cost the company extra Rs. 300 million yearly. The scheme also generated the debates on investment in media and public. The scheme was slated to be retroactively effective and was deferred in order to incorporate the additional features depending on the evolving views. This led to some Tata shareholders resenting the attempt by the Tata sons of asserting itself beyond the limits of the ordinary shareholder. Others doubted of the brand recognition offering immediate benefit to their companies while still others claimed that it was not necessarily the Tata name that promoted their success. Most companies, which benefited from the use of Tata name, enjoyed free access, and some of the shareholders failed to pay the subscription fee. The companies, which never used the Tata brand name in marketing their products, were invited for the scheme since Tata believed that such companies would have used the reputation of Tata Company in raising money from both global and domestic markets. They believed that such companies would also access the financial and managerial support from Tata group. Nevertheless, there was some opposition where some companies believed that Tata sons wanted to take advantage of them in gaining more. The administrative services in Tata, TAS, took the initiative of recruiting the talented individuals to enhance accelerated management careers. The TAS has been successful although maintenance of an average officer within TAS was minimal, and this led to low retention rate. Ratan planned of promoting the premium career within TAS, as well as elevate the status of the program among the business leaders by media exposure. TAS planned of developing audio-visual presentation that would promote Tata group and TAS to the prospective employees. The plans by the company of developing and redefining the TAS group resource would have increased mobility of the participants within TAS. The recruits would have been encouraged to embrace the opportunity of working in most industries. This would have enabled the individual industries participate within the TAS program and openings. The experience would have exposed the officers to the planned job rotation while special programs would have fostered teamwork, leadership and the group values. Corporate Portfolio, 1995 The Ratan group proposed a corporate portfolio in 1995 where the Tata companies were to pay the fee for using the Tata brand name. Several group heads from Tata Company questioned the move, but Ratan was aiming at increasing the degree of ownership to the individual companies, revitalizing the management development programs and moving into the uncharted territories within the new industries. Most of Ratan’s admirers and colleagues puzzled at the bold decisions by Ratan. The business world in India, media and all Tata companies, waited eagerly for the unfolding plans of Ratan. This move was realistic since prior to Ratan’s propositions, the balance of payment crisis was rampant and there were reforms of liberalizing the old central planning economy. The move by Ratan would have decreased the government control and encourage the move towards the market-based economy. This would have delivered most industries from the protected mindset which permeated the nation. This would also have decreased the bribery culture in most industries where corrupt officials inconvenienced the bidding process. The bidding process was characterized by corruption when the bidders who lost would bribe the officials to declare that the winning bidders were insufficient. This would have called for the repeat of the bidding process. Therefore, the corporate portfolio by Ratan would have enhanced better management practices. This is because the move by the government of controlling industries in 1970 benefited only the politicians. The licenses were only given to some powerful groups with the aim of pre-emptying others from certain activities. Though the house of Tata was opportunistic in a way, its collection of businesses was rational. The rationality can best be understood through the use of the triangle of corporate strategy, which composes of businesses, resources processes and systems. Managers must understand all the elements to enhance management of their strategies. The strategy for growth involves shaping the business based on the resources available. The degree of specialization reflects the extent of niche towards effective competition. Straying from the resource base adds value to resource base by creation of conglomerate. Using the resources on the basis of the decisions on growth creates value through leveraging the available resources. This is clearly demonstrated when Ratan aimed at getting two flagship companies in Tata before crafting the group strategy. The two companies accounted for over half the total sales. This would have reduced extremity of losses incurred. Rebounding of the two companies directly translated into increased earnings. The allocation of resources in corporate strategy determines the outcome. Expansion of business may require different resource base. Strong reputation in the industrial market may not always translate directly to strong consumer market. However, focus the resources available on the current needs enhances growth. Ratan promoted both solo ad joint ventures where he signed all the contracts. This also encouraged other companies become co-promoters in areas where they had resources. The control systems influence the organization of the business. These include the operating and financial controls. A firm possessing highly specialized resources may benefit through shifting the emphasis on the operating controls. Control systems reduce vulnerability of the business to economic fluctuations. The strategy aimed at promoting corporate communications and this could have enabled them develop an acceptable but not mandated structure. These strategies aimed at promoting Tata brand that would have enhanced group brand identity. Restructuring strategy aimed at converting Tata group into leaner and tighter organization. The corporate strategy also aimed at increasing the investment capabilities of the Tata Sons through legal purchase of the shares. The Tata administrative services enhanced and accelerated the management careers. The corporate strategy also aimed at attracting foreign investors despite the restrictions by Indian industrialists (Croukamp 23). From analysis, the divesting in some areas like selling the stakes to foreign countries was inappropriate. Though he aimed at developing international business contacts, most of such companies aimed at taking advantage of the strong points in Ratan like planning and thinking. This would have been a disadvantage in case of rapid market changes. I would also discourage investment in cement plants that was a major source of conflict between the groups, and this would have enhanced more coordination. Based on the assessment of the Tata group of companies, the investment in airlines was still relatively low. Any plans for the joint venture would have would have increased the stake by 40 percent. This would also have contributed to change of the airline industry in India (Colley 34). Works Cited Colley, John L., Jacqueline Doyle, and Robert D. Hardie. Corporate Strategy. New York: McGraw-Hill, 2002. Print. Croukamp, Ryk Ludolph. The Role of Corporate Social Responsibility in Retrenchment. N.p.: n.p., 2007. Print. Lynch, Richard L. Corporate Strategy. Harlow, England: FT/Prentice Hall, 2006. Print. Nanda, Ashish, and James E. Austin. The House of Tata. Boston, MA: Harvard Business School Pub., 1992. Print. Wiersema, Margarethe, and Joseph Beck. Corporate Strategy. Cheltenham, UK: Edward Elgar Pub., 2011. Print. Wren, Daniel A. "The Influence of Henri Fayol on Management Theory and Education in North America." Entreprises Et Histoire 34.3 (2003): 98. Print. Read More