Organizational Purposes and SWOT Analysis of Tata Motors - Essay Example

?Organizational Purposes and SWOT Analysis of Tata Motors Table of Contents Table of Contents 2 Introduction 3 Established in 1945, Tata Motors is one of the leading vehicle manufacturers of India with consolidated revenue of $32.5 billion in the financial year 2011-2012. The company is a leader in passenger and commercial vehicles and is also the fourth largest bus and truck manufacturer in India. The company is listed on the New York Stock Exchange and manufactures approximately 7.5 million vehicles annually (TATA Motors, 2013a). 3 Mission, Vision and objective of the company 3 SWOT (Strength, Weakness, Opportunity and Threats) analysis 4 Strategic recommendations 7 8 Conclusion 8 References 9 Introduction Established in 1945, Tata Motors is one of the leading vehicle manufacturers of India with consolidated revenue of $32.5 billion in the financial year 2011-2012. The company is a leader in passenger and commercial vehicles and is also the fourth largest bus and truck manufacturer in India. The company is listed on the New York Stock Exchange and manufactures approximately 7.5 million vehicles annually (TATA Motors, 2013a). Mission, Vision and objective of the company The vision of the company is to develop the TATA Motors into a world class vehicle manufacturer which believes in manufacturing superior and innovative value vehicles. TATA believes that it can be a world class manufacturer by giving the cars a product appeal at a lower ownership cost (TATA Motors, 2013b). The mission and objectives of Tata Motors are stated below 1) To create shareholder’s value by generating revenue in excess or equal to WACC (Weighted Average Cost of Capital) during the business downfall. 2) To strengthen the brand value of the company and build an everlasting relationship with the customers by working closely with the business partners. 3) It believes in creating an organization which believes in innovation, excellence and complying with the core values of the company. 4) The company believes in enhancing and developing a long lasting relationship with the vendors and channel partners of the company that would ultimately benefit the customers and stakeholders in the long run. 5) The company believes in promoting the economic growth and development by initiating environment protection and awareness measures (TATA Motors, 2013c). TATA Motors believes that a company can achieve efficiency only if it practices ethical and transparent policies and develops a congenial working atmosphere which believes in excellence, integrity, passion for work, innovation, concern for the environment (TATA Motors, 2013g). SWOT (Strength, Weakness, Opportunity and Threats) analysis The results derived from the SWOT analysis helps in accomplishing the mission of the company by utilizing the opportunities and strength of the company, avoiding the threats and rectifying the weakness of the company (Griffin, 2011). Strength Research and Development: The company is the leader in the manufacturing of light commercial vehicles in each segment and among the top three in passenger vehicles in India. The company owes its credit to the exquisite research and development team. The engineering and research centre of the company was established in the year 1966 and is equipped with more than 4500 engineers and scientists (TATA Motors, 2013b). Currently, the research and development team of the company has emerged with a Hybrid series car named TATA Manza which was displayed at the Auto Expo exhibition in Delhi. The research and development team is also planning to manufacture fuel efficient buses, the program will be supported by the government of India. The company has spent 15.49 billion in research and development activities during in the year 2011 (TATA Motors, 2013d). Globalization: The company has acquired several foreign brands to increase its presence globally and has a strong presence in UK, South Korea, Thailand, Spain, South Africa and Argentina and further plans to set up its plant in Turkey, Eastern Europe and Indonesia (TATA Motors, 2013e). TATA Motors has expanded its operations in Kenya, Ukraine, Bangladesh, Russia, Senegal etc. TATA Motors has dealerships in 26 countries and across four countries (TATA Motors, 2013f). Alliance: The company had made an alliance with Italian car manufacturer Fiat since 2006. This alliance has proved to be successful as it has improved the portfolio of the Fiat and TATA Motors in terms of production and knowledge exchange. Fiat Palio Style was launched by TATA Motors in the year 2007 and the companies have future plan related to the production of cars in South and Central America (TATA Motors, 2013i). Weakness Luxurious items: TATA Motors do not manufacture luxurious cars for domestic purposes. The company is at a disadvantage in manufacturing cars in the domestic market. The cars are generally targeted for the economy class and not the upper middle or rich class. Safety standards and measurement: The standard safety features of the cars are not available in the domestic market. Consumer base: The consumer base of the company is very limited as it has managed to create a large consumer base in the Asian region, Italy, Spain and South Africa. Passenger vehicles: The company has a relatively lower market share than the other automobile companies in the passenger vehicle. Figure 1: Market share of passenger vehicles (Source: Ghosh, Ray and Dewan, 2008) Opportunity Political: The government has planned to spend $1 trillion on infrastructure development by 2017 (Bear, 2011). If the infrastructure of the company is developed then the consumers will increase their spending on cars and other vehicles. TATA Motors can use this opportunity to manufacture more domestic and passenger vehicles. Environment: Corporate Social Responsibility has become one of the most important aspects of business in India. The common people are usually attracted to those companies which comply with the corporate social responsibility charter (Kapoor, 2013). TATA Motors is one of the few companies to have taken energy conservation initiatives at its plants and plans to take further initiatives for the conservation of environmental resources (TATA Motors, 2013b). Economic: Currently, India is recovering from an economic slowdown and the consumer spending has decreased to a large extent. The TATA Nano 800 will be preferable by the common people as the price of the car is low and will feature an 800 cc engine (Trehan, 2012). Threats Luxury cars: The company does not manufacture luxury vehicles hence, it has left itself open to overseas companies manufacturing luxury vehicles. For example DaimlerChrysler and ICICI Bank have invested in a Pune based plant which would manufacture 5000 Mercedes Benz annually (Oommen, n.d.). Resources: Depletion of natural resources and climate change has become a huge matter of concern. There is huge amount of carbon emissions during the manufacture of the passenger and domestic vehicles which has a negative impact on the environment (Spoolman and Miller, 2011). Although, the company has adopted various environment protection measures by manufacturing fuel efficient cars and vehicles and recycling rainwater it has not been able to take strong measures against carbon emissions. Environmental regulation: It is mandatory for all the companies to abide by the Corporate Social Responsibility (CSR) charter and adhere to the environmental regulations implemented by the government. Investment in sustainability of the environment programs may prove to be costly for the company. Cost of manufacturing: The increase in the rise of price of raw materials like aluminium and steel can pose as a threat to the company. With the increase in the prices of the raw materials the cost of manufacturing a car has also increased. Safety Standards: Low safety standards can hamper the public trust of the common people and tarnish the image of the company. Rise in the price of fuel: There has been a steady increase in the price of the diesel fuel which might hamper the sales of TATA Motors. From the above SWOT analysis we can observe that TATA Motors has been able to utilize its strength and external opportunities effectively. The company has already started taking measures against depletion of natural resources and other environmental issues. This shows that the company has the ability to avoid the external threats in an effective and intelligent manner. Strategic recommendations Companies like Toyota, Honda and Ford Motors are targeting Indian markets by manufacturing luxury cars and this can have a negative impact on TATA Motors (India Transport, 2013). The management of the company needs to consult with its research and development team and plan in manufacturing luxury cars and vehicles. If the company manufactures luxury cars then it will be able to garner attention from investors and potential customers. The target customers should be customers belonging to middle class, upper middle class and the rich class. TATA Motors has a limited customer base and this strategy would help the company to expand its customer base. TATA Motors is a strong brand which has expanded through its parent company (TATA Motors, 2013h) and various acquisitions and mergers. The company should expand into European and American countries and target customers belonging to the middle class since these countries have a strong presence of companies manufacturing luxury cars. Conclusion Based on the above strategic recommendations, the company can improve its current market share and become the leading company to manufacture and develop passenger and domestic vehicles. The political and environment policies of India are favourable for further expansion of the company. By conducting and external and internal analysis of the company, the management can rectify its error and strengthen its network further. This will also help the company to assess and improve its current strategic position. TATA Motors should focus on manufacturing of fuel efficient domestic cars and vehicles. If the company plans on manufacturing fuel efficient cars and buses at lesser prices then it will not only become the market leader in the automobile industry but will also improve the current outlook of the transportation system of India. References BBC News, 2011. India's economic growth slows as rising prices hurt. BBC News, [online] 31 May. Available at: < http://www.bbc.co.uk/news/business-13592833 > [Accessed 13 April 2013]. Bear, M., 2011. UK-India partnership: A partnership of the future. The Economic Times, [online] 08 October. Available at: < http://articles.economictimes.indiatimes.com/2011-10-08/news/30258129_1_uk-and-india-bilateral-trade-infrastructure> [Accessed 13 April 2013]. Ghosh, A., Ray, S. and Dewan, S., 2008. Indian passenger vehicle industry: growth momentum to continue [pdf] Available at: < http://www.icra.in/Files/ticker/PV-Industry-201103.pdf> [Accessed 13 April 2013]. Griffin, R.W., 2011. Fundamentals of management. 6th ed. London: Cengage Learning. India Transport, 2013. The Indian luxury car market [pdf] Available at: < http://indiatransportportal.com/2011/10/the-indian-luxury-car-market/> [Accessed 13 April 2013]. Kapoor, M., 2013. The changing perception of CSR in India. The Economic Times, [online] 12 March. Available at: < http://economictimes.indiatimes.com/news/news-by-company/corporate-trends/the-changing-perception-of-csr-in-india/articleshow/18951906.cms > [Accessed 13 April 2013]. Oommen, A., n.d. Driving in style [pdf] Available at: < http://www.ibef.org/download%5Cluxury_cars_131107.pdf> [Accessed 13 April 2013]. Spoolman, S.E and Miller, T.G., 2011. Living in the environment. 17th ed. London: Cengage Learning. TATA Motors, 2013a. Company profile [pdf] Available at: < http://www.tatamotors.com/know-us/company-profile.php> [Accessed 13 April 2013]. TATA Motors, 2013b. Sustainability [pdf] Available at: < http://www.tatamotors.com/sustainability/pdf/annualSustainabilityReport2011-12.pdf> [Accessed 13 April 2013]. TATA Motors, 2013c. Mission and vision [pdf] Available at: < http://www.tatamotors.com/know-us/pdf/mission.pdf> [Accessed 13 April 2013]. TATA Motors, 2013d. Passenger vehicles [online] Available at: < http://www.tatamotors.com/products-services/passenger.php?ref=india> [Accessed 13 April 2013]. TATA Motors, 2013e. Worldwide [online] Available at: < http://www.tatamotors.com/products-services/passenger.php?ref=worldwide> [Accessed 13 April 2013]. TATA Motors, 2013f. Dealerlocator [online] Available at: < http://www.tatacars.com/global-presence/dealer-locator.aspx> [Accessed 13 April 2013]. TATA Motors, 2013g. Sustainability in motion [pdf] Available at: < http://www.tatamotors.com/sustainability/pdf/GRI-10-11.pdf> [Accessed 13 April 2013]. TATA Motors, 2013h. Group profile [online] Available at: < http://www.tata.com/aboutus/sub_index.aspx?sectid=8hOk5Qq3EfQ> [Accessed 13 April 2013]. TATA Motors, 2013i. Fiat announces the launch of the new Palio Stile [online] Available at: < http://www.tatamotors.com/media/press-releases.php?id=299> [Accessed 13 April 2013]. Trehan, K., 2012. Tata Motors likely to launch 800 cc Nano in 2013; May be priced at around Rs 2.5 lakh. The Economic Times, [online] 26 December. Available at: < http://articles.economictimes.indiatimes.com/2012-12-26/news/36008082_1_cheapest-car-tata-nano-pantnagar > [Accessed 13 April 2013]. Read More