Recommendations of Strategies for Tata Multinational Company - Book Report/Review Example

International Management: Tata 1.0 Source Problems Tata is a multinational company that is run by Ratan Tata. The company has embarked in a concerted effort that has seen it gain control of different industries in takeovers and buyouts. Although the company’s revenue base has substantially grown and its profits have considerably increased, the problem is that it has many conglomerates that are centrally run with an unorthodox structure which could hurt its profitability in the long term. 2.0 Secondary Problems The company has not fully utilized the mills it acquired including the one in Port Talbot, Wales. The absorption of the Corus Group means that the margins of the group will reduce as it has inherited a $7.4 billion debt. Tata is currently involved in corporate social responsible initiatives that burden it. The major question for analysts is whether this manoeuvre is sustainable in the future or whether the costs will be cut once the current chief executive has retired and when the boom in the economy slows down1. Another indicator of the problems that surround the company is the failure in some of its investments. Short Term problems There are a few problems that face the company in the short term. These include: The underutilization of some of its assets including the steel mill in Port Talbot, Wales The underutilization of the vast resources including labour and raw materials in the country. The lack of marketing initiatives for the marketable brands. Reluctance to open up new markets in developing economies as well as the lucrative markets in the West. Long Term problems There are problems that have dogged the company for many years and need addressing. They include: The reduction in the number of products that the company produces and which are not performing as to the envisaged standards. The lack of an organisational structure that can aid the company in management in the future The presence of business entities that are not profitable and add the least value to the Tata brand and range of products and services. 3.0 Analysis Ratan Tata has driven the business from a modest one into one of the most reputable companies in and outside India2. He has been the brainchild behind the success that the company now enjoys3. His efforts have been on the production low cost products for the betterment of the poor. The worry is that if he leaves, then his successor, whom he is working with for a year, might abandon such projects and concentrate only on high-end brands in order to spin off during tougher times. The sayings that “if it is not broken then don’t fix it” can apply perfectly once the successor assumes the mantle at Tata. The system that has been adopted by the company has worked well in propelling it to the heights it is at presently. The successor should therefore follow with the same model of operation while looking for areas where improvements might be required. India is the second largest country in the world in terms of population. Therefore, the company should aim at maximizing the opportunities that are present in the domestic market. Its strategy in the domestic market has been the production of low cost products using cheap labour. If the population at the disposal of the company was to be fully utilized, then, the company would produce more low cost products for the domestic markets. The company uses the domestic scene as a source of raw materials. This is the reason why it mines metal ore in the country and then ships it to other countries for processing and manufacture. A strategy should be in place to ensure that the domestic market is utilized with both high end and low cost products being widely marketed and sold. Tata Company acquired Ford’s Jaguar brand as well as Land Rover. Undoubtedly, these brands will improve the company’s portfolio in the market but could face an uphill task in the resurgence of the brands to global prominence4. Currently, the company has not built the capacity to produce products along the needs of the global citizens in the new age. The global citizenry is increasingly being aware of the value of the environment and struggle to curb the emission of harmful greenhouse gases. This is part of the responsibility that companies have to bear. The most obvious way of protecting the environment is through the use of alternatives to fossil fuels. Since the company has not embarked in the creation of hybrid or electric cars, it should consider a joint venture with companies that have developed the capacity. In the future, joint ventures will be very beneficial as teamwork undoubtedly increases the capacity of production and innovation. The Indica has been a revelation for the company. It has received good reception in India, Italy, South Africa and Spain. Whereas this is an indicator that the brand has the potential for success, the company has been relatively reluctant to promote the brand in other markets which may be lucrative for the brand. Compared to other makers of affordable automobiles like Toyota and Nissan, the company is minimally involved in the marketing of its brands. Tata group relies on the individual companies to capitalize on the opportunities and threats that occur in the distinct markets that they operate in5. This strategy, or lack of it, has worked well so far for the group as it operates in a developing economy. However, the trend is not healthy as the economy could stagnate in the future hence the market will become saturated. Korea’s Daewoo, Thailand's Charoen Pokphand and Indonesia's Salim Group are some of the companies that performed exemplarily during high economic tides but collapsed ones the conditions became rough due to the lack of a sound strategy. 4.0 Criteria of Evaluation The goal of the Tata group is to be a global leader in the various markets that it operates in. There is thus a couple of recommendations that if implemented could propel the company to such heights. The companies that compose the Tata group should have precise standards that they uphold. These include product qualities and specifications, the level of service that they accord their customers and the speed at which they penetrate the market and gain a substantial market share6. The purpose of this analysis is to provide the different alternatives that can aid in the success of the company both in the short and long term. The company should command at least 20% of the global medium car market by 2014 and should grow to over 40% in the provision of trucks in the same period. Additionally, it should reduce its portfolio from the current 100 companies to about 90 by 2013. 5.0 Alternatives The Tata group of companies should aim at more profitability. There are different alternatives that should be considered in order to achieve the goals set. Short Term In order to grow the medium car and the trucks market, the company should seek to open more market in both the risky developing economies as well as in the developed economies. This will require concerted marketing efforts so as to create awareness in the market. Tata should ensure that its initiatives are sustainable before it embarks into them to avoid unnecessary usage of resources The company should seek to develop a group of guidelines that will seek to control the activities of each company as well as spur them to grow. Long Term The company should roll out research in the environmentally friendly brands. This may include development electric or hybrid cars for the sake of the future. Tata should develop a strategy that enables it to run the group in a manner that will give the group an edge in all markets it competes in. The group should work towards the reduction in the number of companies in its portfolio. 6.0 Recommended Strategy Short Term In order to grow the medium car and the trucks market, the company should seek to open more market in both the risky developing economies as well as in the developed economies. Lean manufacturing and franchising should be adopted to reduce costs of operation and increase revenues7 The company should seek to develop a group of guidelines that will seek to control the activities of each company as well as spur them to grow Long Term Tata should develop a strategy that enables it to run the group in a manner that will give the group an edge in all markets it competes in. 7.0 Justification of Recommendations The competition from other manufacturers poses a risk for the future development of the company´s products as the others might be way ahead in terms of innovation. Tata should increase its market share by competing with Toyota in the production of low cost vehicles since it produces steel relatively cheaper and is also in the same labour market as that of Toyota. Arguably, china and India being the largest two countries in the world are the source of the cheapest labour. Furthermore, Toyota practices lean manufacturing as well as franchising where it is not involved in the specific marketing in different markets.8 The current unorthodox method of operation where the constituent companies are responsible for their own selves and only receive basic guidelines from the executive management is a risk to future growth and profitability. The cutting down on the resources that are used in other ventures was not as good an alternative since it meant that the company shun its long term policy of corporate social responsibility. There is need for the development of a strategic plan that allows the company to have goals and ways of meeting these goals in given time lines9. There are many examples of companies that entered the market without a sound strategy and did well at first only to deteriorate later. To ensure that this does not happen to Tata, a strategic plan should be put in place. Implementation, Control and Follow-up The recommendations above should begin with the commitment from the management. All the marketing initiatives that will be required including franchising and lean manufacturing decisions can only be successful if the management supports them. Once the executive management has rendered its support, then specific policies and strategies should be formulated so that the middle management can have the specific tasks that they need to carry out to ensure that the recommendations are successful even at the lower levels. The major deterrent to implementation of new ideas is usually the organisational structure as well as its culture10. People are very resistant to radical change and a lot of training and retraining of employees will be required to ensure that they are receptive to change. Both top and middle management will require being on the lookout to ensure that developed medium and long term goals are achieved at all References Drucker, P.F. 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