Leading The Group - Case Study Example

? Ratan Tata: LEADING THE GROUP INTO THE 21ST CENTURY Question The first major change in Ratan Tata’s management was the introduction of the mandatory retirement age policy. This aims at getting rid of the top management, who were a liability to the main purpose of the group and thus making the growth slow. This initiative enabled the management to have young people with new ideas in the management, therefore, encouraging innovation. Ratan Tata also made significant changes in the management structure of the group. He created a group Executive office with representatives in the tea companies. This enabled the management to have their ideas and initiatives passed on to all the companies (Ambani, 2001). He also introduced a democratic form of leadership that encouraged openness of ideas. Through this form of leadership, he developed the openness and braveness amongst the management and executives. Apart from this, he also dealt with their ideas and plans in a supportive manner. This was one of the matters that influenced creativity and innovation in the companies leading to various inventions. Ratan Tata also insisted on lowering prices of their product, which increased the level of demand for their goods. During the first few year of his management, Rajan Tata realized that there were some companies owned by the Tata Group that were irrelevant to the Indian market. He took a brave step and let go of these companies. This action got Ratan Tata massive criticism, but the eventual outcome was encouraging. There was very minimal income change that was as a result of this move. However, this move was followed by acquisition of many other companies. The company was able to acquire twenty two companies as from the year 2000 to 2012. He also ventured into intentional investments. The group has invested in countries like Uganda, South Africa, and 54 other countries. The group also has their product selling in 120 countries globally. These leadership steps have highly increased, by about 10 times, the net income for the group over the last decade (Ambani, 2001). Question 2 The advantages the Tata Group gained through streamlining businesses Ratan Tata was able to enforce a mandatory retirement age policy, which enabled him to replace all the old and influential CEOs who were running the business as their own and hindering the achievement of the vision of the Group. The replacing of the old CEOs led to introduction of young and innovative talents into the Group. The creative youths aided in bringing in fresh ideas into the business and implementing them successfully for the benefit of the Group. A Group Executive office remained created to facilitate higher incorporation among the Group institutions. The venture of Tata sons in the Group organizations remained added to not less than 26% to shield them from harsh takeovers. The culture in the Group had few amendments to make it favorable to a success environment since the previous one guaranteed employment protection and toleration of wayward practices. Ratan felt this culture slowed down growth and thus should have alterations to reflect current situation. Tata Business Excellence Model (TBEM) structure remained implemented by Tata Quality Management Services, a Tata institution given the role of assisting Tata institutions attain their trade goals by particular procedures of yearly analysis. The Group Corporate Center remained developed, which was a top organ for reviewing the Group practices on a monthly basis, and this ensured that the Group institutions performed to their maximum level to avoid facing the consequences of underperformance. The TBEM structure facilitated conversion of the Tata Group’s behemoths into more inclined and lively industries. Thorough quality assertion steps remained launched into the institution’s plants and an unpaid retreat system to lower the quantity of workers. Actions remained also taken to lower the figure of vendors by half. The spotlight of the organization changed from producing to marketing, and this facilitated increase in the number of sales made during that period thus the Group recording improved incomes. A variety of commuter vehicles remained instigated and distributed in various markets where they remained sold and increased the enterprises revenue (Ghuman, 2010). Disadvantages of streamlining business Some of the top executives lost their jobs, and they had to look for other means of survival to cater for their needs and those of their households. Workers lost employment security, and accountability on their part for any action they did remained high. This meant that any wayward act resulted in stern measures taken against someone. The trade atmosphere became unfavorable, and this resulted in dormant growth in 1997. This affected the Group negatively as revenues reduced, and the Group could not afford to pay for its debts, as high rates of losses remained reported. The losses being high, the Tata Group through Ratan Tata restructured the business through selling some of the institutions, which contributed little share to the Group revenues, and thus, not largely supportive of the vision of the Group set for achieving. The Group during the depression period lost many of its customers since they could not meet their demands and could not pay the vendors in time, and thus, their association with them deteriorated (Ghuman, 2010). The Group has gone through many struggles, achieved a lot, and at the same time lost in the process. Initially, the Group after the streamlining process enjoyed much success due to high revenues recorded during that time. However, the Group faced stiff challenges towards the end of 1999 and had to restructure its business to remain competitive in the market, and foremost pay the debts and recover the losses. This involved selling of many businesses, which contributed less to the development of the group. However, this prompted the chairperson of the Group Ratan Tata to rethink the strategy, and he saw globalization as the only solution to the challenges faced now by the Group. The Group decided to acquire several businesses in other economies to counter the effect of economic depression in the mother country and get boost from the other economies. Therefore, as at 2009, the Tata Group has still so much involvement in so many businesses since it had acquired so many businesses from other nations, which ventured in the same lines of specialization, thus bringing more revenue to the Group and helping the Group be able to pay its debts and cut down losses (Ambani, 2001). Question Three Benefits and risks of acquisition Acquisition has so far benefited Tata Group and brought much revenue to the Group. The strategy by Ratan to venture into new markets internationally through acquisition had significant benefits, which many people could not figure out. First, he understood very well that there is always a challenge of entering into new markets and establishing yourself as a firm and reliable trader, and especially in a foreign nation. Thus, Ratan knew well that through acquiring these already existing businesses, the Group will encounter fewer challenges in establishing themselves in the market, and within no time, the business would thrive. The legal requirements of establishing a new business in a foreign nation may have complications and hence end up hindering the investor from investing in that country, but through acquisition, the process has fewer complications (Ghuman, 2010). Resistance to the establishment of the business will be low since the residents in the foreign nation will view the business as beneficial because it will create job opportunities, be a means of raising revenue to the government, and hence contribute to the improved living standards of the people. In addition, acquiring a business in a new economy will help to counter the effect of depression in other economies, therefore boosting the revenues of the Group when one economy or a number of them experience downturns. This is a major boost to the Group since it will not register huge losses and will be able to offset its debts even if halfway (Ambani, 2001). On the other side, the risks associated with acquisition include sudden economic depressions in the new economy, subjective legal regulations in the new economy, cultural factors, among others. First, the economy in the nation Tata wants to acquire the other business from may be at boom the time the Group acquired the business; then, all of a sudden, the economy declines affecting adversely the business in the country. This will lead to great losses to the Tata Group since they may even remain forced to quit the market or look for money from other sources to boost the acquired business. The government in the new market where the Tata Group wants to acquire business from may have set subjective legal regulations to foreigners who want to invest in their country such that the Group may shy away from investing in the nation. If there are no benefits the Group gets, or the costs exceed the gains, there is no need of investing in such market. Then, the culture of the people in the area where the Group may have acquired business may not support the practices of the group management team, and thus, they oppose the acquisition of the business (Ghuman, 2010). References Ambani, M. (2001). Part IV: Comprehensive Cases; Case 10.Ratan Tata: Leading the Tata Group into the 21st Century. Center for Management Research. Ghuman, K., & Aswathappa, K. (2010). Management: Concept, practice and cases. New Delhi: Tata McGraw Hill. Read More