TATA Strategic Management and Business Policy - Case Study Example

Strategic management and business policy: TATA Group Introduction Innovative business strategies are important for all the business organizations tosucceed in the market. Conventional business methods cannot guarantee success in the current rapidly changing business world. Organizations are spending millions of dollars for the research and development of new business strategies and the development of new products. Competition is so tough now and traditional methods cannot guarantee or bring success to business. Apart from resources like, man, materials, machine and money, strategies are also important in the growth of a business. Rather than see their jobs merely a custodians of the status quo, today’s leaders must be proactive, anticipate change and continually refine their strategies whenever required (Dess et al, 2007, p.7). Hill and Jones (2009) defined strategy as a set of actions taken by the managers to increase the company’s performances (Hill and Jones, 2009, p.3). The process of developing strategy consists of analyzing the internal and external environments of the company to arrive at organizational strengths, weaknesses, opportunities, and threats (SWOT) (Strategic management n. d, p.1). It is essential for an organization to know about the strength, weakness, opportunities and threats for their business in order to formulate strategies effectively. Indian automobile manufacturing company TATA is a better example for implementing historic strategic decisions successful in their business. Recently they have introduced world’s cheapest car NANO worth only around $ 2000. Tata Motors is expected to get close to a million bookings for the Nano during the initial year itself after the introduction of NANO (Business Standard, 2010). This paper briefly analyse TATA group and their business strategies in dealing with its competitive environment and its success. An introduction to TATA business group Indian business tycoon TATA has business subsidiaries in sectors like automobile, telecommunications, steel manufacturing, insurance, information technology, hospitality etc. They are the largest private business group in India. They are currently operating in more than 85 countries and spreading across six continents. TATA group consists of more than 100 companies and Jamsedji Tata was the founder of TATA group. The beginning of TATA group was in 1868 when Jamsedji Tata established a trading company in Mumbai. From there onwards TATA has expanded to almost every major segment of industries in India and abroad. They are currently operating in major engineering sectors, service sectors, energy sector, chemical sector and consumer product sectors. Historic strategic decision taken by TATA Because of the diversified business chain of TATA, it is difficult to write more about the TATA business group in general. TATA automobiles is taken as the base point for discussing the historic strategic decisions taken by TATA group to compete more effectively in the current business world. Strategic competitiveness is achieved when a firm successfully formulates and implements a value creating strategy (Hitt et al, 2010, p.4). TATA has realized the above fact and they assumed that India’s ordinary people cannot afford expensive cars and in order to capitalize on the mid-income people, it is necessary to introduce cheaper car in Indian market. Moreover, parking of big cars near Indian roads was a big problem because of the less space available for parking. Such problems can be easily overcome using the small NANO car. The number one car manufacturer in India was MARUTI and it was difficult for TATA to grab the number one spot from MARUTI using their existing car models. MARUTI 800 and ALTO were dominating in the India’s hatchback car market and TATA’s INDICA was the major competitor for MARUI’s small cars. But the price of INDICA was much more than that of the MARUTI cars and TATA decided to introduce a revolutionary car in Indian market in order to compete effectively with MARUTI. The current chairman of TATA group JRD Tata when announced his intention to make a car costing just $2000 (NANO) few years before, nobody took the words of TATA seriously. But around 500 TATA engineers did lot of hard work and fulfilled the dream of JRD Tata recently. Within one year of launching NANO, TATA captured more than a million booking for their NANO car. Moreover, TATA has planned to export the car to overseas countries like China, US, UK etc.. Summary of TATA’s current activities As mentioned earlier, TATA has different portfolios in Indian business sector. TATA steels is one of the biggest steel manufacturing company in India. According to CNBC-TV18, TATA steel’s GDR (global depositary receipt) issue opened today with an issue size between USD 400-750 million (Tata Steel GDR issue size between $400-750 m, 2009) TATA consultancy services (TCS) is one of the major IT Company not only in India, but in the world as well. Tata Consultancy Services Ltd provide information technology and business process outsourcing services. The Group provides services to industries such as banking and financial services, insurance, manufacturing, telecommunications, retail and transportation. It operates in America, Europe and India. On 12-May-2008, it acquired Tata Consultancy Services (Thailand) Limited. On 19-Sep-2008, it acquired Tata Consultancy Services (Philippines) Inc. On 22-Oct-2008, the Groups wholly owned subsidiary, Tata Infotech Deutschland GmbH merged with Tata Consultancy Services Deutschland GmbH. On 02-Dec-2008, its subsidiary Financial Network Services (Europe) Plc voluntarily liquidated. On 11-Dec-2008, the Group acquired 50% share capital of National Power Exchange Limited. On 31-Dec-2008, it acquired 96.26 % equity interest in TCS e-Serve Limited. On 10-Feb-2009, the Group completed the acquisition of TCS e-Serve America Inc (Tata Consultancy Services Ltd - Company Profile Snapshot, 2008) TATA automobiles is the biggest automobile manufacturer in India. According to Auto guide (2010), TATA automobile crossed 24000 crores mark in 2005-06 (Auto guide 2010). They currently make passenger cars, trucks and buses in their manufacturing plants in India. Recently TATA group has acquired the British automobile manufacturers, Jaguar and Land Rover. Ratan Tata and his team were as stunned as the rest of the industry when Ford put both Jaguar and Land Rover on the market. The result of this has culminated in Tata Motors now effectively the new owners of two of the motoring worlds greatest brand names. (Times of India, 2008) Saurav Mukherjee and R Radhakrishnan (2002) have mentioned that TATA’s turnover crossed the 10000 crores mark in 2002 (Mukherjee and Radhakrishnan, 2002). TATA crossed the $50 billion (Rs1.97 trillion) revenue mark in 2007, following the acquisition of Corus Group Plc according to Kumar (2010) TATA’s current competitive position As mentioned earlier, TATA was able to penetrate to international markets. They already acquired some of the prestigious European companies. Because of their diversified business portfolios, TATA companies were able to complement each other in growing the group as a whole. For example, steel is one of the essential components in the automobile manufacturing. TATA has both steel manufacturing and automobile manufacturing businesses. So, TATA steel can help the growth of TATA automobiles immensely by providing steel at a cheaper rate. The introduction of NANO helped TATA to compete more strongly with the arch rival MARUTI in Indian market. Recently TATA automobiles made collaboration with Fiat to sell and service Fiat cars in India. TATA has realized that MARUTI was successful in their collaboration with SUZUKI in capturing Indian car market. In order to counter MARUT’s collaboration with SUZUKI, TATA decided to collaborate with Fiat to compete more effectively in Indian car market. Taking cues from Maruti Suzuki, Tata and Fiat plan to launch multiple brands under their Joint Venture. This move has been inspired from Suzuki’s strategy to launch Wagon-R and Alto in the same segment as Zen and hence giving people wider choices. Following suit, Palio will be seen competing with Indica and the soon-to-be-launched Grande Punto, just like Linea will hustle along with Indigo (Tata-Fiat collaboration to follow the Maruti-Suzuki example to capture market, 2008) Recommendations TATA automobiles even though was the biggest in the Indian automobile market in general, they are not so in the passenger car segment. MARUTI is dominating in this segment because of their superior quality of vehicles and after sales services. TATA should improve their after sales services. They should establish more service centers across India in order to compete effectively with MARUTI. TATA vehicles are not good in their designs compared to the vehicles of the competitors. They should improve the quality of their vehicle designs to attract the customers. Even though quality wise TATA’s supremacy is unquestionable, same thing cannot be said about the looks and appearances of TATA vehicles. TATA’s collaboration with Fiat is a right step in the right direction. Fiat can help TATA immensely in providing more looks to the TATA vehicles. At the same time, there are stories spreading in India about the failure of this collaboration. Both the parties should take their collaboration more seriously to grow in Indian market. Conclusions TATA group is one of the prominent business groups not only in India, but in the world as well. TATA has diversified business portfolios which helped them to compete effectively in the Indian and international markets. TATA automobile’s NANO car is one of the better examples of historic strategic management decisions taken by the TATA organization. The above decision proved to be a big success and the importance of strategic decisions in business is underlined by the success of NANO. References 1. Auto guide (2010), Tata Motors Limited, Retrieved on 28 April 2010 from http://auto.indiamart.com/cars/tata-motors-cars.html 2. Business Standard, (2010), Nano bookings expected to touch a million Retrieved on 28 April 2010 from http://www.business-standard.com/india/news/nano-bookings-expected-to-touchmillion/356240/ 3. Dess G, Lumpkin G.T. & Eisner A, (2007), Strategic Management: Text and Cases Publisher: McGraw-Hill/Irwin; 4 edition (October 31, 2007) 4. Hitt M.A., Michael A. Hitt (Author) › Visit Amazons Michael A. Hitt Page Find all the books, read about the author, and more. See search results for this author Are you an author? Learn about Author Central Ireland R. DR. Duane Ireland (Author) › Visit Amazons R. Duane Ireland Page Find all the books, read about the author, and more. See search results for this author Are you an author? Learn about Author Central 1. & Hoskisson R.E (2010), Strategic Management: Concepts and Cases: Competitiveness and Globalization, Publisher: South-Western College Pub; 9 edition (January 1, 2010) 5. Hill C & Jones G (2009), Strategic Management Theory: An Integrated Approach Publisher: South-Western College Pub; 9 edition (October 14, 2009) 6. Kumar A. (2010) Post-Corus, Tata group revenue crosses $50 bn, Retrieved on 28 April 2010 from http://www.livemint.com/2008/01/08233252/PostCorus-Tata-group-revenue.html 7. Mukherjee S and Radhakrishnan R, (2002), The Tata re-engineering co, Retrieved on 28 April 2010 from http://www.tata.com/company/Articles/inside.aspx?artid=dDBN0ZBfOCI= 8. Strategic management (n. d), Retrieved on 28 April 2010 from http://media.wiley.com/product_data/excerpt/9X/04700835/047008359X.pdf 9. Tata Steel GDR issue size between $400-750 m, (2009), Retrieved on 28 April 2010 from http://www.moneycontrol.com/news/cnbc-tv18-comments/tata-steel-gdr-issue-size-between-36400-750-m-sources_407019.html 10. Tata Consultancy Services Ltd - Company Profile Snapshot, (2008), Retrieved on 28 April 2010 from http://wrightreports.ecnext.com/coms2/reportdesc_COMPANY_C3568B600 11. Tata-Fiat collaboration to follow the Maruti-Suzuki example to capture market (n.d), Retrieved on 28 April 2010 from http://www.driveinside.com/news/headlines/post-details.aspx?headlineid=5MLU3Y 12. Times of India, (March 27, 2008)Cats with grace, space and pace, Retrieved on 28 April 2010 from http://www.tata.co.in/company/Media/inside.aspx?artid=3jLh/HMCGTA= Read More