Mission Vision and Objectives of TATA - Case Study Example

? Case Study: TATA Company Analyse how Tata’s culture as described in graham . Exhibit 16 influences, their mission vision and objectives. TATAseems to be following a unique business culture. While most of their competitors are concentrating on expansion of their companies using the profits, TATA seems to be more interested in doing charity works using the profits they earned. In other words, TATA is one of the largest socially committed organizations. They do believe that it is their duty to deliver something in return to the community in which they operate since community resources are utilized for their business units. Service without sin is the slogan reflected in every business activities of TATA. Graham (2010) 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%)”(Graham, 2010, p.8). No other company in the world may have the same reputation as TATA has as far as social service is concerned. TATA is currently funding many social service activities such as clean water deliver, 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). TATA believes that community support is the most important requirement for a business group to sustain its growth. It should be noted that Coke like international giants failed to operate successfully in India because of their failure to offer something to the community in which it operates. Coke’s bottling plant in Kerala was closed recently because of the allegations against Coke with respect to the exploitation of underwater resources in Kerala. At the same time, it should be noted that millions of hectares of land in Kerala are used for tea plantation by TATA and the people in Kerala do not have much problems with that. This is because of the fact that TATA is servicing the people in Kerala in many ways even though they use Kerala’s land for tea plantation. Recently TATA has introduced world’s cheapest passenger car (NANO) priced only $ 2500. In fact TATA wants to help the poor people with this product. Poor families of medium income families can afford a car with the introduction of NANO. While most of the other car manufacturers are trying to develop luxury cars, TATA thinks in the opposite direction. They wanted to make car which is affordable to even poor people and the outcome was NANO. Contaminated drinking water is causing thousands of deaths in India. In order to help poor people to purify drinking water, TATA introduced TATA Swatch or water purifier priced less than 1000 Indian rupees in 2009(Graham, 2010, p.9). It should be noted that there is no need for TATA like big companies to introduce products such as water purifier. However, they introduced this product only to demonstrate their social commitments. “The TATA group has a set five core values; integrity, understanding, excellence, unity and responsibility” (Angwin, 2011, p.133). These core values can be seen in every TATA business segments. Even though TATA’s business groups are operating independently, they understand each other work strictly in accordance with the vision, mission and core values of TATA group. In short, TATA’s business culture is more oriented towards the servicing of poor. For TATA, business is not at all about making money or profits; it is about how well an organization can service the community without sins. Community servicing has many roles in TATA’s business strategies which is evident from the fact that charitable trusts hold majority of the TATA shares. Analyse the different directions in which Tata group has grown over the years and examine the reason why it has pursued diversification when this is generally regarded as a high risk strategy. TATA group was established in 1868 when Jamsedji Tata established a trading company in Mumbai. During the last 144 years of operations, TATA group has grown significantly and they are one of the prominent companies in the world at present. Even though TATA started its business operations as a trading company, they are currently operating in different fields such as engineering sectors, service sectors, energy sector, chemical sector and consumer product sectors. Steel industry, investment industry, telecommunication industry, automobile industry, tea plantation and distribution etc are some of the major business portfolios of TATA. They have business units in various parts of world including India, China, Europe, Africa, Asia Pacific, Middle East, North America, South America and United Kingdom. Even though diversification is perceived as a business strategy which involves high risk, TATA had no hesitation in accepting it. In fact they perceived diversification as a strategy for survival in international market. It should be noted that TATA is currently producing ordinary cars such as NANO as well as luxury cars. Their acquisition of Jaguar-Land rover clearly states that they are interested in luxury car manufacturing segment also. In other words, TATA group is interested in doing business is all consumer segments irrespective of the abilities of the consumers in purchasing ordinary products or luxury products. They know very well that both luxury segments as well as ordinary product segments are important for them to prosper in international market. It should be noted that the purchasing power of the consumers depend on their financial abilities. Since each country has different consumer segments, it is necessary to have products which cater the needs of all people irrespective of their purchasing abilities. That is why TATA is producing NANO like cars on one side and acquiring firms such as Jaguar and Land Rover on the other side. According to Graham (2010), the purchase of Britain’s Tetley Tea Company for US $ 450 million in 2000, clearly indicates that TATA wants to transform itself from a sleepy farming operations to a global distributor of speciality teas and other beverages (Graham, 2010, p.3). It should be noted that TATA has many tea estates in India. In fact millions of hectares of land in India are used by TATA for tea plantation. In other words, TATA’s products range from sophisticated technology oriented products such as computers and automobiles to agricultural products such as tea powder. It should be noted that agriculture is a major revenue source for majority of the ordinary people in India and abroad and TATA has no hesitation in diversifying its services to agricultural sector also. Throughout the twentieth century, TATA concentrated more on Indian market for the production and distribution of tea products. However at the beginning of twenty first century, TATA’s business culture has undergone many changes. Globalization has enhanced global trade immensely and the barriers for international trade became weak. Tata utilised this opportunity very well by acquiring different companies, mainly from UK. Corus, Jaguar-Land Rover, Tetley Tea Company etc are some of the prestigious companies acquired by TATA recently. TATA seems to be more interested in adopting mergers and acquisition strategies as the mode of entry to overseas markets. Tata wants to cement their place among high end customers as well as low end customers. That is why they acquired Jaguar –Land Rover on one side and developed NANO on the other side. In other words, Tata wants to cater the needs of all people irrespective of their financial abilities. However, Jaguar –Land Rover sales suffered lot of setbacks in recent times. Moreover, NANO brand also suffered lot of setbacks in recent times (Khan & Lamont, 2011). This is because of the fact that Indian and European economy are facing some severe problems at present. Tata is currently trying to identify market for NANO in overseas countries. TATA believes that NANO may excel in underdeveloped and developing countries. Moreover they have already stepped up its effort to boost NANO sales through marketing campaigns and attractive financing options for the car (Khan & Munshi, 2011). Along with the setbacks in car industry, Tata group suffered setbacks in steel industry also in recent times. India’s largest and Europe’s second largest steel manufacturer Tata steel was hit hard in the quarter ending in September 2011, sending its share prices down by 4.19% (Munshi, 2011). Corus was one of the worst affected companies in Europe because of recession. However, Tata steel in India has not faced many problems in recession periods. In other words, Tata steel compensated for the losses they suffered in Europe with the help of the revenues obtained from Indian market. In short, diversified markets helped Tata steel to survive even in the recession period. Tata believes that the setbacks they faced in Europe are purely because of the recession. It should be noted that Europe was the major sufferer as far as recent recession is concerned. Majority of the industries in Europe faced huge problems because of recession. So, there is no point in arguing that everything lost to Tata in European market. Tata has the ability to bounce back since they have huge reputation and financial capabilities in international market. In short, TATA continues with its diversification activities even though it faced some serious setbacks in recent times because of diversification. Tata believes that the current problems are only temporary and they can bounce back strongly in near future itself. They believe that the recent recession may not last long and it can still work on its business principles with respect to diversification. Examine a) the motives for Tata steel’s acquisition of Corus and b) Tata motor acquisition of jaguar-land rover and analyse whether these have been successful. TATA’s recent acquisition of Anglo Dutch firm Corus made Tata steel the eighth biggest steel producer in the world (Angwin, 2011, p.134). It should be noted that the acquisition of Corus helped TATA steel to control the steel market more effectively by reducing competition. Arcelor Mittal is the largest steel producer in the world at present (Johnson & Scholes, 2011, p.56). They are controlling almost 10% of the steel production in the world. The acquisition of Corus would definitely help TATA steel to resist the competitions from its rivals like Arcelor Mittal. “Ratan Tata, chairman of the Tata group that owns Tata steel was keen on Corus because of its sophisticated steel making technologies, its broad customer base in Europe and its size which was four times bigger than Tata steel in terms of shipment” (Angwin, 2011, p.134). Tata’s intention at the time of Corus acquisition was to expand its steel business to European markets. However, it suffered lot of setbacks in recent times in Europe because of the ongoing recession problems in Europe. Production, constructions and manufacturing activities in Europe have been considerably reduced as a result of recession. In the first nine months of 2009 alone, Corus suffered more than $ 1 bn loss. In short, Tata’s acquisition of Corus has not brought the desired results yet. The case of Ford’s Jaguar and Land Rover acquisition deal by TATA is also not an exception. According to Paul Betts (2007), the 2 billion acquisition of Ford’s Jaguar and Land Rover by TATA is a transformational deal (Betts et al., 2007). Reed and Leahy (2008) mentioned that while Land Rover is making profits, Jagauar sales have been declining (Reed and Leahy, 2008). While may become profitable to TATA. However, Reed and Leahy (2009) pointed out that this deal has caused major financial burden to TATA group. According to JD Power, jaguar’s 2009, first quarter sales in Europe was 14% lower whereas that of Land Rover was 42 % lower than the previous year. It should not be forgotten that year 2008 and 2009 were some of the worst years in recent times as far as Europe’s economy is concerned. In fact all car manufacturers in Europe faced negative results during these periods. In order to compensate for the lost market in Europe, TATA is currently trying to find places for Land Rover in Indian market (Leahy, 2009). Tata used this deal to cement their place in European market. It was difficult for TATA to penetrate to European and American market with their Indian made 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 (Marsh, 2011). The above move definitely shows Tata’s confidence in conquering European market through Jaguar and Land Rover. In short, Tata’s recent acquisition deals have not brought any success to them. In fact these deals are serving as big burdens to them now. These deals were took place at the wrong time. Tata never anticipated such huge problems in Europe as a result of the recession. Critically evaluate the challenges facing Corus Mistry as he takes over the reins at Tata from rattan Tata. Cyrus Mistry will be the new chairman of Tata group of companies. . The current chairman Ratan Tata will hand over his charges Mistry in December 2012. At present, Mistry is taking training under Ratan Tata. In fact Mistry will be the first chairman of Tata group without a Tata surname. The reputation of Tata in Indian business circle is immense. Even a lay man in India recognizes the name of Tata. Mistri do not enjoy such charisma in Indian business sector as Tata does. So, business pundits in India and abroad are eagerly waiting for the take of Tata group by Mistry. Mistry is only 43 years of age. Even though he has completed engineering and management studies in Britain, his academic credentials may not help him much in this difficult period. It should be noted that theoretical perspectives of business are entirely different from practical perspectives. Even Ratan Tata with such a huge experience in Indian business circles, was failed to read the pulses of modern customers and anticipate the trends in European markets. Tata group is facing huge problem not only in overseas markets, but also in Indian market. Its prestigious Nano car was failed to click in Indian market. This was not because of the problems in Indian car market, but because of the poor response shown by Indian customers towards Nano. It should be noted most of the other car manufacturers taste big success in Indian market. Under such circumstances, Mistry should decide whether to continue the production of Nano or not. For the expansion of steel business in Europe, Tata group already planned to spend billion in Europe in coming years. Many business experts are of the view that this decision may cause further troubles to Tata. Europe has not shown any signs of revival yet. Under such circumstances, spending too much for expansion purpose in Europe may become suicidal for Tata group. Mistry has to decide whether he should go ahead with the expansion activities in Europe or not. Jaguar and Land Rover are no more attractive brands in Europe even though it has big reputations still in Britain. The intrusions of so many attractive models of cars from competitors, pushed Jaguar and Land Rover far behind. At present, Tata is trying to introduce these cars in Indian market. Indian market on the other hand is already filled with lot of international car brands. Many people have doubts about the success of Jaguar and Land Rover in Indian conditions. It should be noted that these cars were made for the European conditions in the past. Tata needs to implement lot of corrections in these models to make it suitable on Indian roads. Mistri has to decide whether he should introduce these cars in Indian market or not. Tata group’s structure needs attention. Its cash generation and debts are mismatched among its subsidiaries. The steel business for example is highly indebted and investing heavily while the technology business TCS generates lakes of cash and has a balance sheet with a net cash position (The Magical Mistry tour, 2011). These statistics clearly suggest that Tata is currently investing heavily in sectors which bring losses whereas it invests less on sectors which brings huge profits. Software business has lot of scopes in India. In fact millions of IT job opportunities are coming to India from America and other western countries in the form of outsourcing. Being a prominent software company in the world, TCS can definitely think about further expansions in India. TCS do not have many business centers in India yet. Mistry should think in terms of giving more importance to the IT sector. One of the major advantages of IT sector is that less investment is required to generate more revenue. Moreover, raw materials and manpower required to improve IT infrastructure in India are immense. Diversification helped TATA group to survive in the market. While its steel and automobile sectors caused big headaches, its tea business, tourism and hospitality business and IT business brought them dividends. Mistry should think in terms of further diversification of business. The coming days are going to be challenging for TATA group. Mistry needs to think far ahead before implementing any new strategies in Tata’s business portfolios. Ratan Tata committed a serious mistake while he has given more attention to automobile and steel business sectors. He failed to realize or exploit the potentials of IT sectors in India. Mistry should think differently even though he has taken training under Ratan Tata. In short, Mistry’s success would depend on how well he reads the present market and anticipate future challenges. References Angwin, C. S. 2011. Strategy path finder. Wiley second edition. 2011. Betts, P., Hill, A. & Leahy, J. 2007. Jaguar acquisition risks scratching Tata’s reputation. Financial Times. November 8 2007. Graham, A. 2010. Fail. Strategy + Business issue 58 Johnson, W. & Scholes. 2011. The environment: Chapter 2. The consolidating steel industry. Khan, J.F. & Lamont, J. 2011. Tata motors sees sharp fall in domestic sales. Financial Times. April, 11, 2011. Khan, J.F. & Munshi, N. 2011. TATA fails to engineer success for nano. Financial Times October 9, 2011 Leahy, J. 2009. Tata push for land rover in India. Financial Times. May 29, 2009. Munshi, N. 2011. Europe hits Tata steel hard. Financial Times. November 11, 2011. Marsh, P. 2011. Tata hands jaguar ?5 bn to match German rivals. Financial Times. May 5, 2011. Reed, J and Leahy, J. 2008. Ford and Tata finalize $ 2.3 bn deal. Financial Times. March 26, 2008. Reed, J and Leahy, J. 2009. Tata strained by UK acquisitions. Financial Times. May 21, 2009. The Magical Mistry tour, 2011. The Economist. Nov. 26. 2011. Read More