The Entrepreneur - The Visionary Leadership of Ratan Tata - Essay Example

The Entrepreneur Introduction “Entrepreneurs are those persons who seek to generate value through creation or expansion of economic activity, by identifying and exploiting new products processes or markets”(Blundel and Lockett, 2011, p.5). Ratan Tata is an Indian entrepreneur and former Chairman of the Tata group of companies. Recently, on 28 December 2012, he decided to step down and currently holds the position of Chairman Emeritus of the group. During the tenure of his services with TATA Company, he did succeed in making the company one of the biggest business groups, not only in India, but also in the world. Tata group has plenty of business segments such as telecommunication, steel, automobile manufacturing, education, investment industry computer software development etc. At present, TATA group has operations not only in India, but in China, Europe, Africa, Asia Pacific, Middle East, North America, South America and United Kingdom. Land Rover and Jaguar; two of the prestigious automobile manufacturers in UK has been merged with TATA recently. TATA has acquired many other companies in overseas. The visionary leadership of Ratan Tata helped TATA group to become one of the most prestigious organizations in the world. This paper analyses the skills, capabilities and leadership styles of Ratan Tata as an entrepreneur. The role of Ratan Tata According to Kirzner, the entrepreneur is at centre stage in the market process and, so, the process of economic development. In his opinion, entrepreneurs in the market, notice and exploit opportunities to earn profits by replacing “less efficient, less imaginative courses of action” with “superior ways of serving consumers” (Storr, and John, n.d., p.90). TATA’s business strategies were revolving around Ratan Tata until 2012. His decisions were accepted in the TATA group with both hands. Recently, TATA automobiles have introduced world’s cheapest car, NANO. This car is prices around $ 2000 only. Ratan TATA has realised that majority of the Indians do not have the financial capabilities to purchase expensive cars. At the same time, they are very much like the idea of having a car in their home. Moreover, Indian economy was growing at rapid rates recently. All the factors prompted Ratan TATA to think about making a car for ordinary people in India. Moreover, he estimated that this car would definitely seize the neighbouring markets such as Sri Lanka, Bangladesh and Pakistan. His calculations were right which is evident from the heavy booking experienced by NANO both in India and abroad. Another important decision taken by Ratan Tata was the acquisition of the British companies Land Rover and Jaguar. Ratan Tata has realised that British market has huge potential for automobiles and hence he decided to enter this market. The mode of entry taken by him was acquisition. Land Rover and Jaguar groups know the peculiarities of British car market very well. It is necessary for TATA group to capitalize on the expertize of Land Rover and Jaguar groups, to perform better in UK market. In short, Ratan Tata did exploit the opportunities in the heavily globalized market very well when he was the chairman of TATA group. According to Kirzner, there are two types of entrepreneurial discovery; ordinary and extraordinary. Ordinary discovery is a ’backward’ interpretation in a sense that the entrepreneur endeavours to exploit profit opportunities by doing some things better whereas extraordinary discovery is a ’forward’ interpretation that involves a new dimension of interpreting events. In this case, the entrepreneur explores profit opportunities by doing some things drastically different from the traditional (Yu, 2001, p.47). In ordinary discovery type of entrepreneurial discovery, the entrepreneur tries to modify the existing products and services by adding some new features to the existing products and services. Burns (2011, p.13) pointed out that “Entrepreneurs use innovation to exploit or create change and opportunity for the purpose of making profit” According to Bordia, et al (2005, p.1), “innovation is the ability to define and develop new products and services and deliver them to market. It is the fundamental source of value creation in companies and an important enabler of competitive advantage”. It should be noted that innovation is usually classified as radical and incremental. “An incremental innovation will build upon existing knowledge and resources within a certain company, meaning it will be competence-enhancing. A radical innovation, on the other hand, will require completely new knowledge and/or resources and will be, therefore, competence-destroying” (Incremental vs. Radical Innovation, 2006). The ordinary type of discovery would never help an organization to achieve leadership in the market. It is a kind of incremental innovation. On the other hand, in extraordinary discovery type, the organization develops something new rather than modifying the existing products. This type of discovery can be regarded as an example of radical innovation. For example, Apple’s iPhone was an example of radical innovation of extra ordinary discovery. It should be noted that extra ordinary discovery helps an entrepreneur to achieve leadership whereas ordinary discovery may not help the organization to do so. The discovery of NANO car was definitely an example of extra ordinary discovery or radical innovation which helped TATA automobiles to achieve leadership in the ordinary car segment in India. Ratan Tata was instrumental in the development of NANO car. In fact the idea of NANO car was put forward by Ratan Tata. Schumpeter had vigorously rejected the orthodox emphasis on the perfectly competitive market. He emphasized the entrepreneurial character of real-world dynamically competitive processes. For Schumpeter “the essence of entrepreneurship is the ability to break away from routine, to destroy existing structures, to move the system away from the even, circular flow of equilibrium (Kirzner, 1999, p.7) According to Schumpeter, “an entrepreneur should be essentially disruptive, destroying the pre-existing state of equilibrium”(Kirzner, 1997, p.5). Schumpeter pointed out that a kind of inertia is prevailing in the organizational world. In his opinion majority of the entrepreneurs have the habit accepting this inertia as a prerequisite for business success. They are satisfied with the existing opportunities and do nothing to create new opportunities. Such entrepreneurs would never help the company to develop properly. For example, Nokia was the leader in the mobile phone manufacturing industry until a decade before. Nokia’s leadership never anticipated the arrival of touchscreen phones. They thought that nobody can penetrate deep into their market because of the monopoly established by them in this market segment. However, Steve Jobs thought differently and have identified the opportunities for touchscreen phones in the market. The rest is history. Ratan Tata has not hesitated to break the organizational inertia. Instead of concentrating only in Indian market, he had shown the courage to enter the European market, even though European market had plenty of prominent players in the automobile industry. The entrepreneurial personality traits of Ratan Tata The ability of an entrepreneur to give up the reins of the business to those who have management skills to take it beyond the start-up, decides the future of the company (Allen, 2006, p.13). Some entrepreneurs have the habit of keeping the top position of a company until his death. This is true mostly in the family owned businesses. It should be noted that TATA group belongs to the Tata family. Ratan Tata has no problems in continuing at the top position of the group until his death. Yet he decided to hand over the pedal to a new leadership in 2012. For Ratan Tata, the growth of TATA group is more than anything else. He realized that a new leadership is necessary for TATA group to make the company capable of meeting the business challenges in the twenty first century. According to Carter and Jones-Evans (2012, p.3), many people believe that entrepreneurship cannot be taught. Entrepreneurship is still popularly viewed as an innate talent and entrepreneurs are seen as being different from others. This argument seems to be relevant in the case of Ratan Tata. In fact TATA group was founded by Ratan Tata’s grandfather Jamsetji Nusserwanji Tata. In other words, entrepreneurship is inherited in the blood of Ratan Tata since many of his family members and predecessors were prominent businessmen. How Ratan Tata has shown his leadership acumen? Boddy (2007, p.9) described management as a universal human activity that occurs whenever people take responsibility for an activity and consciously try to shape its progress and outcome. It is often said that there are born leaders and developed leaders. Ratan Tata is definitely a born leader. Even though Ratan Tata was able to achieve an advanced management degree from Harvard business school in 1975, nobody can say that he was a developed leader. Leadership qualities were inherited in the blood of Ratan Tata. Under Ratan Tata’s leadership TATA group of companies have undertaken plenty of risky and wise decisions. In 2000, TATA has shown the courage of acquiring a UK company; Tetley. In 2001, the company has established a strategic alliance with American International Group (AIG) to exploit the opportunities in Indian financial market. In 2002, TATA Consultancy Service or TCS became the first billion dollar software company in India. In 2004, TATA has entered the New York Stock Exchange and acquired South Korean automobile manufacturer Daewoo. In 2005, TATA Steel has acquired Singapore based Natsteel steel company and in 2007, they acquired Anglo Dutch steel company; Corus. Moreover, Ratan Tata has extended his leadership capabilities in many other roles such as; the chairman of India’s investment commission, member of prime ministers council of trade and industry, member of American international group, director of New York Stock exchange etc. (Rasadya, 2013). Ratan Tata’s leadership qualities were evident in his management style. He was never an autocratic leader or manager. In fact, he was an extremely good democratic leader and manager. Under his visionary leadership, TATA group of companies have introduced many of the modern management techniques such as Total Quality Management, Six Sigma, Kaizen, Change management, strategic human resource management etc. “Taylor’s four principles of management describes management as the development of science for every job, selection of workers who fit for the job, offering incentives to workers in order to motivate them to perform based on the principles of science and supporting workers by carefully planning their works and smoothing the way as they do their jobs” (Quinn & Faerman, 2006, p.3). Ratan Tata as a manager was keen in implementing all these management principles in his company. What opportunity was spotted by Ratan Tata and how did he use his creativity to ensure they met the gap? Down (2010, p.46) has labelled entrepreneurs as special actors in the economy. Ratan Tata is definitely a special actor in Indian economy. In other words, the growth of TATA group is definitely helping Indian economy very much. Deakins and Freel (2012, p.3) have identified some of the key roles of an entrepreneur. These roles are illustrated in the table given below. Key role of entrepreneur Additional insights Organizer of factors of production Catalyst for economic change Ability to spot opportunity Entrepreneur’s key ability is creative alertness Innovator Entrepreneur as hero figure Risk taker Profit is reward for risk taking Organizer of resources Key influence of the environment Creativity Uncertainty creates opportunity for profit (Deakins and Freel, 2012, p.3) Ratan Tata was a shrewd businessman who has the ability to identify the opportunities in the market. It should be noted that recent global recession has caused plenty of problems to the UK companies. Many of the UK companies have struggled for survival. Utilizing this opportunity very well, TATA group has acquired many UK companies recently and expanded its business to Europe. “Since the mid 1990’s, organizations have been attempting to redefine themselves to be truly global” (Hirsrich, 2010, p.7). Globalization has opened many opportunities for organizations in international market. Foreign direct investment is welcomed in almost all the countries. As a result of that international organizations are facing little troubles in entering overseas markets. Until recent times, TATA group was focusing only in Indian market. At present, TATA group is exploring opportunities in overseas market also under the visionary leadership of Ratan Tata. In what ways has Ratan Tata grown his business? Diversification of business is one of the major success factors of TATA. It should be noted that TATA group of companies are virtually available in almost the entire business segments. Software industry, hospitality industry, healthcare industry, telecommunication industry, energy sector, automobile industry, tourism, steel industry, education, plantation, etc are some of the areas in which TATA group of companies are currently doing business. Diversification helped TATA group to survive in the market. While TATA’s steel and automobile sectors faced big headaches recently, its tea business, tourism and hospitality business and IT business brought them dividends. In order to inform the presence of TATA in overseas countries, plenty of merger and acquisition deals were undertaken by TATA in recent times. It was difficult for TATA to penetrate into European and American market with the help of Indian made products such as TATA cars. The deal with Ford or Jaguar and Land Rover helped them to change their face from an ordinary car manufacturer to a prominent car manufacturer in the world. Even though TATA faced some setbacks in the sales of Jaguar and Land Rover in recent times, they are still investing heavily to the modernization of these prestigious brands. Peter Marsh (2011) pointed out that Jaguar Land Rover is investing around & 8.2 billion over the next five years to catch up on quality with BMW, Benz and Audi. Democratic management styles are implemented in all TATA group of companies. Employees of TATA get enough remuneration, incentives and career development opportunities. As a result of that, talented employees are looking for an opportunity in TATA group of companies. Work life balancing is given more importance in TATA group of companies. As a result of these management strategies, employee turnover rate in TATA companies is less compared to that in other companies. Change management principles and modern production techniques are implemented in TATA group of companies. These strategies help the company to move in the right direction. What are the international achievements and how did Ratan Tata achieve this?  Apart from many local achievements, Ratan Tata has succeeded in getting many international recognition. He has served as the member of many international organizations such as American international group, Asia pacific advisory committee, JP Morgan Chase and Rolls Royce. Moreover, he was one of the board directors of New York Stock Exchange. The Ohio state university honored him with a doctorate degree in business administration while London School of Economics honored him with a fellowship. Fortune magazine included him in the list of 25 most powerful businessmen in 2007. Moreover, Time magazine selected him as one of the world’s most influential people in 2008(Rasadya, 2013). Is Ratan Tata aware of business ethics? Ratan Tata was instrumental in introducing a unique business culture in TATA group of companies. While most of TATA’s competitors are concentrating more on profit making, TATA gives enough importance to sustainable development and corporate social responsibility. Ratan Tata believes that it is the duty of TATA companies to deliver something in return to the communities in which they operate since community resources are utilized by TATA companies. Service without sin is the slogan reflected in every business activities of TATA. Graham (2010, p.8) pointed out that “TATA’s business structure includes 11 charitable trusts that together earn 66% of TATA Sons and that are intimately involved in its governance. (Family members own only 3%)”. Moreover, TATA group of companies are currently funding many social service activities in India such as clean water delivery, literacy, prenatal care etc. Moreover Indian Institute of Science, Tata institute of fundamental research, the national center for performing arts, Tata memorial hospitals, etc are founded or supported by the TATA group (Graham, 2010, p.8). In fact TATA is spending a substantial portion of their business profits for charity activities. Because of the huge attention given to social activities, members of TATA family are comparatively poorer than their business counterparts in India. In 2009, TATA spent $ 159 million for social service activities (Graham, 2010, p.8). The word TATA is developing a feeling of attachment in the minds of Indians because of the immense charity and social works undertaken by TATA group of companies. It should be noted that while other local business groups in India such as Reliance is facing heavy criticisms, TATA group of companies never heard much criticisms from the ordinary people social activists, environmentalists or politicians. The corporate image of TATA has increased considerably under the leadership of Ratan Tata. Conclusions Ratan Tata is one of the prominent entrepreneurs in the world at present. His visionary leadership and management skills helped TATA group of companies to become one of the major business groups in the world. Ratan Tata is a born leader and entrepreneur. Many of his family members were businessmen in the past. One of the most important qualities of Ratan Tata as a businessman is his ability to read the market trends well. He has the uncanny ability to introduce the right product at the right moment in the market. Moreover, he was able to seize the opportunities not only in Indian market but also in overseas market. Ratan Tata never bothered much while taking risks in business. While others have raised some doubts about the possibility of success of certain business strategies of TATA in the past, Ratan Tata had no such doubts in implementing those strategies. Strong determination and quick decision making helped Ratan Tata to become one of the most successful entrepreneurs in the world. Ratan Tata was instrumental in making TATA group of companies global. Moreover, he had given enough importance to diversification of business. His commitments towards corporate social responsibility and sustainable development, helped TATA group of companies to become the most reputed company in India. References Allen, K. R. 2006. Growing and Managing a Small Business: An Entrepreneurial Perspective (2nd ed). Boston, Houghton Mifflin Boddy D. 2007, Management: An Introduction, Publisher: Financial Times/ Prentice Hall; 4 edition (December 10, 2007) Blundel, R. and Lockett, N. 2011. 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