TATA Group Case study
Introduction
Tata group is a multinational conglomerate company with its headquarters located in Maharashtra, Mumbai, India. The group comprises of seven sectors: engineering, information and communications technology, materials, services, energy, consumer products and chemicals. It was started by Jamsetji Tata in 1868 as a trading company. Currently, it is operating in more than eighty countries across six continents with around 200, 000 employees. It has more than 100 independent operating companies where 32 are listed publicly. The group went through some major organizational phases such as rationalization, globalization and currently innovation. It has a vision of reaching revenue of $500 billion by 2020-21. Its major companies are Tata Motors, Tata Steel, Tata Consultancy Services (TCS), Tata Chemicals, Tata Teleservices, Tata Global Beverages, Tata Communications, Tata Industries and Taj Hotels (Hill, 2011).
The recent study conducted on September 2013 shows that the group has a market capitalization of INR 6 Trillion. This is from the 32 listed companies, where 58% of the revenue comes from outside India. The group remains a family owned business under the current chairman Cyrus Pallonji.
The survey conducted by the ASSOCHAM indicated that the groups’ companies and enterprises are the best-known Indian global brand both within and outside the country. It was positioned at number 11 as the most world reputable company in 2009. It has helped in establishing and financing education, quality numerous research and Indian cultural institutes. The group holds the Philanthropy Carnegie Medal awarded in 2007 as a result of its long history of having philanthropic activities. This case study analyzes the group’s strategy in its home and international markets, its most strategic initiatives, secondary problems of over diversification, recommendations and solutions of the over diversification problems.
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... Korea are from Tata Daewoo. • The Tata group has also acquired a quarter stake i.e. 21% in a Spanish company Hisoana Carrocera which ... just 2500 US$. Tata Group have roots all over the world through its joint ventures and subsidiary companies around the globe ... contributes their inclination towards affordable alternatives. As per the study conducted by the Wardsauto, India has seen world’s largest ...
Market strategies
A strategy refers to a plan or a method that is considered to bring out the desired future, such as achieving the organizational goals or providing a solution to a problem (Kerin, 2009).
Tata group operates both locally and internationally.
Home market strategies
Tata group operates within the Indian markets where it operates entities like Indian hotels, Tata power, Tata coffee, and Tata Communications among others. It has been transforming its businesses face across the industries, geographies and functions. It started the strategic management group (TSMG) in 1991 with an aim of advising clients on areas of formulating strategies, improving performance, strategy deployment and business analytics. It exclusively operated in the strategy space and cooperated mostly with its companies. For clear services in its home markets, TSMG has strategized on coming up with expert teams.
TSMG started projects within the group as a strategy study relating to Tata Oil Mills. This was meant to culminate the group sale to Hindustan lever. They also reconstructed Voltas, a strategic study relating to lame. The strategy led to cosmetics business sale to Unilever, the acquisition of a British-owned retail chain (little woods) in south India, and entry of Trent into apparel retail through Westside retail of food and grocery through star Bazaar.
TSMG integrated with Tata Economic Consultancy (TECS) in April 2006. This integration was meant to come up with strategies such as infrastructure, investment advisory and government sectors. It led to a pull of a large number of infrastructural projects that facilitated efficient operations of Tata group companies in India. Another strategy used by the Tata group under the leadership of Ratan Tata was through creating technologically exciting and superior products. This was aimed at distinguishing Tata group companies with other companies through low costs and its innovations.
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International market strategies
The group has an international approach to business out of its inception. The founder began his career in business in international trade in England and China. In 1962, Tata Exports currently Tata international was set up. This facilitated export of the Tata companies products and services in more than 150 countries (Chaudhuri, 2011).
Each operating Tata group company developed its own international strategy in the form of an integral part of its overall strategy. This depended on the nature of the company, available opportunities and the competitive dynamics of the global stage. In 2000, Tata Tea Company acquired Tetley. The group companies made several important acquisitions overseas. These acquisitions include Land Rover and Jaguar by Tata Motors, Corus by Tata steel and Brunner Mond by Tata chemical all from UK. Others were South Korea Daewoo commercial vehicles by Tata motors, Millennium steel in Thailand and NatSteel in Singapore, general chemical industrial products by Tata chemicals and the US Tyco global network by Tata communications. Important strategic initiatives
Strategic initiatives refer to the means through which an organization vision is translated into practice (Goeke, 2010).
These initiatives involve collections of finite-duration discretionary programs and projects. Tata group companies grew at a very high rate according to the research done on 31st March 2010. Revenues obtained grew by 5.38%, net profit by 29.01%, operating profits by 18.02%, and the operating margins to 26.5% compared to 2009 analysis. The group started some strategic initiatives on social responsibilities across the different companies.
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Tata steel
Self-Help Groups
Currently over 500 self-help groups have been initiated and are operating under various alleviation poverty programs. 200 of them are engaged in income generation activities through micro enterprises. Extension of women empowerment programs has been spread to 700 villages. Survival project of infant and maternal survival covered 42 villages from the year 2003 to 2006 (Antony, 2009).
Healthcare projects
These initiatives were started by Tata steel centenary projects. The health care projects that were initiated include immunization and childcare, facilitation of child education, creation of AIDS awareness, plantation activities and healthcare projects.
Economic Empowerment
It is a program that is aimed at empowering the economy through improvised agriculture (Cargil 2010).
It has been developed in three backward tribal blocks that are Orissa, Jharkhand, and Chhattisgarh. It is a program with an estimated expenditure of Rs 100 crore and expected to benefit 40,000 tribes in more than 400 villages within the three states.
Tata Motors
Pollution control
It became the first enterprise in India to invent vehicles with Euro norms. In 1992, the company joined venture with USA Cummins Engine Company. This collaboration was meant to introduce control technology of emission in India. The company introduced environmental friendly engines with the help of the world-renowned engine consultants such as AVL and Ricardo (Mahajan, 2009).
Restoring Ecological balance
Through the initiative, the company has planted 80, 000 trees in the township and the works where more than 2.4 million have been planted in the region of Jamshedpur. Through the effort of maintaining ecological balance, the company directed its suppliers to have alternative materials of packaging their products rather than wood (Bhatnagar, 2011).
Employment generation
Employees at Pune have been encouraged to come up with industrial co-operatives to engage in productive activities such as welding, re-cycling of scrap wood into furniture, battery cable assembly, and steel scrap baling (Kulkarni, 2010).
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The company started a society of social welfare to assist women employees’ departments. They make products of different types, ranging from pickles to electrical cable harnesses making then financially stable.
Economic capital
The company formed two societies in Lucknow that is Jan Parival Kalyan Santhan and Samaj Vikas Kendra. They were meant to provide rural healthcare and development. They made great efforts for education, health and women empowerment in rural areas.
Human capital
Tata motors have offered many scholarship programs to children going for higher education. Through Vidyadhanam scholarship program, the company has offered support to 211 students. Out of the group, 132 students are from marginalized communities. Through the effort of upgrading the Industrial Technical Institutes (ITI) in India, the company joined a Public-Private Partnership (PPP) (Rongers, 2008).
Tata chemicals Ltd
The company has been making an effort for ensuring sustainability. This means honesty and transparency towards environmental protection, stakeholders, and promoting human rights, generating economic value and creating social capital (Pillania, 2012).
The company supports UN global compact with the effort of reporting its sustainable performance according to Global Reporting Initiatives (GRI) guidelines. Its main effort of protecting environment includes alternative fuel sources and raw materials, optimal use of resources, maximizing recycling and reuse. In 1982, Tata chemicals became the first company to hold an impact camp at Mithapur. This camp provided eye care to more than 100 patients in Mithapur hospital.
Tata tea
Since 1980s, the company has been working hard to fulfill the specially-abled people’s needs. It started a spirit welfare centre at Munnar. It has various programs that provide training, education and rehabilitation of young adults and children with special needs (Bruche, 2010).
The company welfare officers encouraged handicapped children of their employees to join the welfare centre for rehabilitation and special education.
Tata group source problems
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Over diversification
This occurs when investors puts their money into too many investments (Gabaix, 2010).
This form of investment can be too many similar investments or quantity of investments in a portfolio. Contrarily, these investments can be hazardous to an entity if the investments are beyond the business control. Tata group is among the largest entities in the world that are facing the problem of over diversification. This has been the source of the problems the group is encountering today. Its many large and over diversified entities such as the Tata Teleservices (Maharashtra) are unable to meet their daily expenses. This led the entity to obtain debts and resulted to other problems within the group. These problems can be classified as primary, secondary or tertiary.
Secondary problems
Over diversification have caused secondary problems in the Tata group, these problems can be classified as short or long term problems (Henning, 2012).
Short term problems are those problems that can be addressed and solved instantly or currently. Long term problems require careful analysis and planning with spread out solutions over a number of years.
Short-term problems
One problem facing the Tata group is about management due to it is over diversified markets. The current chairman Mr. Ratan Tata has brought the group into the global market. He led the group companies to step out of their comfort zones and made investments in new opportunities. The problem arises as the shareholders sees that no one could take the position of Ratan Tata and play the management role effectively.
Secondly, the group is faced with a challenge of maintaining its ability to fund the society due to the prevailing economic disparities. The group has a tighter budget as a result of its business acquisitions and numerous investments. For instance, one of its entities Tata teleservices (Maharashtra) has been faced with debts of Rs. 3,400 crore. This problem has made its operations stagnate on one point forcing it to close some of its few circles.
Long-term problems
The group lacks a central system. This was as a result of its companies operates independently thus lacking a centrally focused objective. Lack of consolidated financial statements is also a challenge to the entire Tata group. This is caused by it’s over diversified markets.
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Another problem is the overall development of the world economy and India at the moment. If both the Indian citizens and the world in general continue being corrupt, the level of poverty will continue increasing. This problem becomes a stumbling block to the stunted growth of the Tata group.
Analysis
Tata group is subdivided into several entities that operate within different countries. Among their areas of operations are India, Europe, Singapore, United States, Thailand and Kenya. The different entities of the group operate independently though under the leadership of one chairperson of the entire group. This independence has created problems such as lack of a central position, consolidated financial statements among others. Despite the fact that the group has served for a long period under such system of leadership, a change can be incorporated, and the existing problems solved.
Recommendations/solutions
1. The group should start a firm of managers who will be alternating among the different sectors. This will minimise the problem of inconsistent management in case of retiring of the current manager. For instance, the whole group has been operating under the system of one chairperson since 1896.
2. The shareholders should plan for in-service training for all employees. The group has about 200,000 employees who should be equipped with the necessary skills. This will facilitate better services and efficient operations within the group.
3. The management should start a central system of leadership incorporating all the companies. The group has more than 100 operating companies within their seven sectors in the world. They should have a unified system rather than each operating independently.
4. The companies should have consolidated financial statements. As the group has a high market capitalization of $96.87 billion, it needs consolidated financial statements for proper accounting and auditing.
5. The group should have proper strategies when investing. This has led to a problem of managing economic disparities. They should avoid over diversification problems through investing into manageable projects.
6. They should have proper debt management. Tata teleservices (Maharashtra) has been faced with a debt of Rs.3, 400 crore. This problem has made the company close up some of its few circles.
In conclusion, Tata group is one of the largest organizations in India and the world in general. It promotes the Indian economy through its initiative programs. It offers better services through its distinguished companies. Their company operates independently which creates a problem of effective management and proper accounts auditing.
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