The House of Tata - Case Study Example

and Section # of Background: The House of Tata, India’s oldest and largest group of companies, was also one of the country’s most respected business organizations. The Tata Group enterprises, worth a market value of Rs. 290 billion in FY96, included 84 separately traded companies spanning 25 sectors of the economy, with 270,000 employees and FY95 sales of Rs. 220 billion.2 Ratan Tata, chairman since 1991 of the group holding company. Jamsetji Tata planted the roots of the Tata Group by establishing a single textile mill in 1874. Throughout his expansive career, he never lost sight of his goal to encourage India’s industrial and intellectual development. The House of Tata built world-class capacity in steel and hydroelectric power, and developed modern manufacturing methods, technical education, and research capabilities. Jamsetji founded the J.N. Tata Endowment Trust in 1892 to provide loan scholarships for Indian nationals with outstanding academic records to pursue higher studies abroad. The later Tatas lived up to their patriarch’s legacy, and by the mid 20th century, 85% of the Tata family’s original share in Tata Sons was transferred to two charitable trusts, the Sir Dorabji Tata Trust and the Sir Ratan Tata Trust. Ratan Tata’s Initiative towards Efficient development of the Company: House of Tata, 1995: the Next Generation (A) Tata Sons had already launched several strategic initiatives that were changing the very character of the group. In early 1995, Ratan proposed a fee scheme whereby, for the first time, Tata companies would have to pay for the use of the Tata brand name. Ratan was taking steps to increase the degree of group ownership in the individual companies, to revitalize its management development programs through Tata Administrative Services, and to move into uncharted territories in new industries. In late1995, Ratan contemplated selling a 20% private equity stake in Tata Industries Limited (TIL), a holding company wholly owned by Tata Sons, to a Hong Kong conglomerate. In 1993 Ratan began taking steps to convert the Tata Group into a tighter, leaner organization by selling the loss-making Tata Oil Mills Company Ltd. (Tomco) to Hindustan Lever Ltd., a subsidiary of the Anglo-Dutch group Unilever. One of TIL’s latest plans was a joint venture with Singapore Airlines (SIA) to create a domestic Indian airline. The project required the approval of the Foreign Investment Promotion Board (FIPB) of the Ministry of Industry, and the Ministry of Civil Aviation. The plans Ratan had implemented thus far—from the brand fee and share increase to continued diversification—had generated much criticism both inside the group and beyond. It was apparent that the character of the Tata companies had already changed, and Ratan now had to ask himself whether he had chosen the appropriate course for the future. Main Argument: By evaluating the initiatives taken by Ratan Tata above, there are certain arguments that arise: what strategies in regards specifically to Corporate Strategies was Ratan Tata following, and implementing. What seem to be his aims regarding the running of his organization along with being able to maintain healthy competition? The company seems to be following both a competitive strategy and a corporate strategy wherein, both the businesses that the companies will operate in and the businesses on whose basis the company will compete are outlined clearly. ‘ According to Michael Porter, a Harvard Business School professor and the reigning guru of competitive strategy, competition within an industry is driven by five basic factors: Threat of new entrants, Threat of substitute products or services, Bargaining power of suppliers, Bargaining power of buyers, Rivalry among existing firms. Porter also indicates that, in response to these five factors, competitive strategy can take one of three generic forms: (1) focus, (2) differentiation and (3) cost leadership’.(Nichols 2000) By further evaluating the strategies adopted By Ratan Tata in the case study it can be deduced the One of the many key strategic responsibilities the company has identified was sharpening the Groups focus. The company’s planning seems to be aimed towards concentrating on business sectors in which the Tatas could be a leading player. The company is entering a number of emerging businesses, and it seems that in the future they still would want to continue the of being very diverse. The company also seems to hold real tight to the vision of refocusing into more tighter bunches of business sectors. The predicament, of course, is what the company should do when attractive new sectors open up. What should their strategy be? Future Strategy: The company has been criticised for some of its initiatives – but the company seems to have decided what they are going to do in the future. The company seems to realize the fact that India is a developing country and the business sector should move on to newer business avenues rather than just hanging on and running the old present ones. The company does also seem to respect and embrace new opportunities in new sectors and letting go of the old sectors that it has been catering to. But the company should be aware of the risk elements involved and the management should also consider that their earnings might possibly drop. When the company will enter a genre which is still in its developing phase. Moving onto uncharted territories, and by continuing to diversify the company seems to realize that in the future they would have to face challenges in both India and abroad. But the at the same time their aims point towards more of expansion and diversification globally. The company before divulging into the act would have to plan on how the Company tends to face the new challenges. There are a lot of avenues the company should consider and be able to comprehend prior to them accessing the new avenues can the companies make sure that they are technologically advanced enough? Can the company with this rapid development process and rate be globally competitive? At the same time being able to provide consumer’s access to products that are equally good or better than the ones they have current access to? The company would also need to identify and hence realize the fact that they would have move a lot faster .Invest more funds upon the improvement of innovation, production We can conclude that In the case of the House of Tata, it is very obvious that the company is a well established one. Innovation is in the minds of management and thus they desire to evolve and develop in terms of this. The Indian Government In order to boost , foreign investment in the country has made changes in policy favoring foreigners , but should also pay attention to the fact that by doing this they have given them an opportunity to invade the local market and take up share. The company seems to be diversifying into whole new genres. This would mean a whole lot of research and analysis of market would be required. The company should along with diversification make sure that the current fields within the company are in control performance wise. Works Cited 1. Tarun Khanna Krishna Alepu Danielle Melito House of Tata, 1995: The Next Generation (A) AUGUST 3 0, 2 0 0 6 2. Competitive Strategy (1986). Michael Porter. Harvard Business School Press. 3. The Concept of Corporate Strategy, 2nd Edition (1980). Kenneth Andrews. Dow-Jones Irwin. 4. "Customer Intimacy and Other Value Disciplines." Michael Treacy and Fred Wiersema. Harvard Business Review (Jan-Feb 1993). 5. The Discipline of Market Leaders (1994). Michael Treacy and Fred Wiersema. Addison-Wesley. 6. The Rise and Fall of Strategic Planning (1994). Henry Mintzberg. Basic Books. 7. Strategy (1967). B. H. Liddell Hart. Basic Books. 8. "What is Strategy?" Michael Porter. Harvard Business Review (Nov-Dec 1996). 9. ‘Three forms of Strategy’, by Fred Nichols 2000 Read More