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Free «Multinationals and Conglomerates» Essay Sample

When the competition for profits and market niche intensifies, more and more companies find it necessary to take their operations overseas, where they establish themselves and fight for market share. Some factors that have contributed to globalization include the ease of market entry, the removal of trade barriers and the development of the Web platform. The Web has made it possible to conduct a large percentage of businesses online, enabling small-sized companies to trade competently with large multinationals and conglomerates. The Web has also led to the creation of multiple labor pools, as well as the integration of markets. An important driver towards the concept of globalization is financial recessions. Since the early 2000s, several major world economies, including the U.S., Japan, and the UK among others, have faced financial crises that have greatly affected companies operating in the local market at one time or another. As a result of this, many companies have found the need to diverge into other markets and to spread risks in case of instability in one region. However, globalization has come with challenges, which must be overcome for the successful establishment of companies in multiple markets, countries and continents. Such challenges include global recessions, remnant trade barriers, and vigorous competition from multiple industry players, especially those in the home market, among others. Being an exhaustive study of the concept, steps and dynamics of globalization, this paper analyzes the globalization of the Tata conglomerate, a multi-billion dollar business empire based in India.

Background to the Tata Group

Tata is a multinational conglomerate based in India and headquartered in Mumbai. It is one of the  most respected Indian companies, the largest single private employer, as well as the biggest taxpayer to the Indian government. It is also one of the leading companies by market capitalization and revenue creation. In 2006, the company’s market capitalization was $46.9 billion, and it had revenue of $21.9 billion, which was equivalent to 2.7 % of India’s GDP. The group comprises at least 96 firms operating in seven sectors, namely services, consumer products, communication and information systems, materials, chemicals, and engineering. The Tata Group was founded in the 19th century by Jamsetji Tata. Strategically aligned with the major objectives of the young nation, Tata mainly focused on steel works, luxury hotels, airlines and software companies. His first software company was founded in 1932, and another in 1968. The first steel plant was founded in 1907, and the first luxury hotel in 1903. Since its inception, Tata greatly contributed to the development of the society in the form of charitable foundations and numerous philanthropic activities. More than 60% of Tata Sons, a major holding company of the Tata conglomerate, is owned by two charitable trusts. These charitable trusts have initiated several major programs in art, scientific research, economic development and medical research. The Tata Group had expanded from 13 companies in 1938 to as many as 300 companies in 1991.

These include associate and subsidiary companies. Roy (2005) indicates that businesses of most companies of the group overlap, as result of their entrepreneurial planning and independence in expansion programs. In 1991, under the leadership of Ratan Tata, the firm was forced to streamline its portfolio and to improve the competitiveness of operating firms, such as motor and steel companies. Consequently, the group could make all businesses be economic-value–added positive. This was caused by the firm’s ability to divest and re-organize some of its operating companies to seven business sectors, resulting into the fast growth of the firm. Later, the group came up with a brand equity scheme, forcing all companies to pay for the use of the Tata brand. The resources obtained out of this venture were used to promote the group among other notable companies. Generally, considering the financial years 1995–2007, the overall market value of the group companies increased by almost 631% to approximately $60 billion in 2007. Being the country’s biggest private employer, with approximately 300,000 employees, the Tata Group has gained reputation as one of the revolutionary firms.

For instance, in 2009, the Tata Group was ranked among the 11th most reputable firms globally by the Reputation Institute. Further, in 2007, the organization was honored with the medal of philanthropy by Carnegie in recognition of the firm’s outstanding history of philanthropy activities across the globe. Based on the market value, the firm was ranked as one of the wealthiest groups as of June 2011, with a $ 98.71 billion asset base. Tata opened some of its overseas offices as early as 1907 in the U.S. and the UK. Throughout most of its history, Tata’s growth had mainly been organic until 2000, when it started its globalization efforts through mergers, acquisitions and business partnerships in various continents and global markets.

Globalization of the Tata Group

The Tata’s globalization campaign began in the early 2000s with the acquisition of the UK based steel company Tetley by the Tata Tea and Tata Sons branches of the Tata group. Tata acquired 100 % of Tetley for $ 433.6 million, making it the first major venture by Tata outside India, and also its first major acquisition. In the same and subsequent years, Tata proceeded to acquire many other companies in different industries, mainly hotels, steel making sector, agrochemicals and automobiles. Initially Tata operated in India only from its inception in 1868 until 2000, but exported its products to multiple markets all over the world. The sections below focus on various phases of Tata’s evolution from a local family business to a global corporation (Stacy 1993).

Local Company

Tata was started in 1868 by Tata’s great grandfather, Ramsetji Tata, as a textile business operating only in the local market in India. It experienced rapid expansion in the period from 1874 to 1903, when Tata opened its first luxury hotel in 1903.

Multi-local Company

Progressing from the textile business and other smaller family-operated businesses, Tata began to take the shape of a multi-local establishment with the diversion into the hotel business in 1903. In 1907, it started its first private steel company, an airline in 1932, and a software firm in 1968. Other than mainstream businesses, Tata also established a charitable trust, Tata Sons, which was owned 66 % by charity. It also established other subsidiary companies including:

Tata Steel

This was a steel company established in 1907 in India as the Tata Iron and Steel Company. It was the biggest steel company with regard to its capital base and production in 2007. It was established in the Indian town of Jamshedpur and became a leading player in the Indian steel market, albeit because of the government support it received. Tata Steel started experiencing financial difficulties in the 1990’s because of the reduction in steel prices globally. B. Muthuraman was appointed Tata Steel managing director, and introduced new policies to the company in order to turn its performance around and realize profits. His first policies were domestic expansion, whereby Tata Steel expanded its local production in the Indian market. The second policy was a de-integration strategy, whereby Tata Steel started supplying raw materials and semi-finished products to other facilities situated near the end users. In the same phase, Tata Steel acquired some foreign companies, such as Singapore-based NatSteel in February 2005, the largest steel company in Thailand, Millennium Steel in April 2006. These strategic developments guaranteed Tata Steel the fast growth in such foreign markets, as Malaysia, Thailand and most importantly China, where steel consumption was more than six times bigger than that in India. The largest acquisition so far done by the Tata Group was the company of Corus, a multi-billion dollar steel company based in the United Kingdom.

Indian Hotels Company (IHC)

This was a company established by Tata in 1903 operating Taj Hotels, and having other facilities in the hospitality industry in 1982. The company acquired two other companies in England, marking Tata’s globalization concept take an early boost. The IHC strategy focused on foreign investments, establishing subsidiaries in such markets as New York, Boston and San Francisco.

Titan

Titan was a Tata’s company that invested in India and initially dealt with jewelry and watches, becoming a leading brand in India. In 1990, it ventured into European markets, but faced significant losses. Later, it shifted its focus to Middle East markets gaining significant success.

 

Tata’s Consultancy Services

This is a Tata’s Information Technology consultation firm. It mainly focuses on exporting IT products and services to the U.S. and UK markets, developing into a global IT services provider with more than 89000 employees as of 2010 having delivery centers in many countries, such as China, Japan, Hungary, Australia, India, Uruguay and Mexico. In 2006, the firm got 91% of revenue. It is more than $ 4.3 billion outside the Indian market. Almost half of the Tata’s market capitalization of $ 59.5 billion was in TCS.

Tata Tea

This is a Tata’s commodity producer dealing with tea packaging in the Indian market. Tata Tea focused its strategy on mergers and acquisitions in order to grow. Its first major acquisition was Tetley, a UK global tea brand that was the only major commodity-packaging brand owned by huge food product conglomerates, such as Nestle or Unilever. Tata Tea purchased Tetley for $271 million, making that the largest valued foreign acquisition by any Indian company.

Tata as a Multinational Company

Tata started gaining its multinational status with numerous acquisitions done outside the Indian market by its subsidiary companies. These acquisitions include those done by Tata Sons, Tata Tea, Tata Consultancy Services, Titan and the Indian Hotels Company. Details about these acquisitions are provided in the table below (see Table 1).

Table 1. Major Acquisitions

Year

TATA company

Acquired company

country

Stake acquired

Value ($)

 

February 2000

TATA Tea and TATA Sons

TETLY Group

United Kingdom

100%

433.6 million

 

November 2001

TATA Sons (TCS)

Computer Maintenance Corporation

India

 

 

 

February 2002

TATA Sons

VSNL

India

 

 

 

September 2002

Indian Hotels

Regent Hotels

India

100%

93 million

 

December 2002

TATA Teleservices

Hughes Telecom India

India

50.83%

178.8 million

 

July 2003

VSNL

Gempex

United States

 

 

 

January 2004

TCS

AFSS India

India

 

 

 

March 2004

TATA Motors

 Daewoo Commercial vehicle co.

Korea

100%

102 million

 

March 2004

VSNL

Dishnet DSL (ISP Division)

 India

 

 

 

March 2004

Aviation Software Dev

India

 

 

 

 

June 2004

TATA Chemicals

Hind Lever Chemicals

India

Amalgamation

 

 

July 2004

TCS

Phoenix global Solutions India

India

 

 

 

November 2004

VSNL

Tyco Global network

United States

 

130 million

 

February 2005

TATA Steel

NatSteel Asia

Singapore

100%

285.4 million

 

February 2005

TATA Motors

Hispano Carrocera

Spain

21%

16.1 million

 

March 2005

TATA Chemicals

Indo Maroc Phosphore

Morocco

Equal partner

38 million

 

April 2005

TATA Motors

TATA Finance

India

Merger

 

 

July 2005

Indian Hotels

The Pierre

USA

Lease

9 million

 

July 2005

TATA Industries

Indigene Pharmaceuticals

USA

< 30%

 

 

July 2005

VSNL

Teleglobe International

USA

 

239 million

 

August 2005

TATA Technologies

INCAT International

United Kingdom

 

 

 

August 2005

Trent

Landmark

India

76%

24.09 million

 

Sep 2005

TATA AutoComp Systems

Wundsch Weindger

Germany

 

8.6 million

 

Sep 2005

VSNL

TATA Power Broadband

India

 

 

 

Oct 2005

Tata Tea

Good Earth Corp. and Fmali herb.

USA

100%

31 million

 

Oct 2005

TCS

Financial Network services

Australia

 

 

 

Oct 2005

TCS

Pearl group

UK

 

 

 

Nov 2005

TCS

ComiCrom

Chile

 

 

 

Dec 2005

Indian Hotels

W Hotel Sydney

Australia

100%

29 million

 

Dec 2005

TATA Chemicals

Bruner Mond

UK

63.5%

111.6 million

 

Jan 2006

TATA Metaliks

Usha Ispat (Red Unit)

India

100%

26 million

 

Jan 2006

TATA Interactive

Tertia Udosoft Gmbh

Germany

90 %

 

 

Jan 2006

TATA Interactive

Tertia Udosoft AG

Switzerland

90.38 %

 

 

Feb 2006

TCS

TATA Infotech

India

 

 

 

March 2006

TATA Chemicals

Brunner Mond

UK

36.5 %

65.4 million

 

April 2006

TATA Steel

Millennium Steel

Thailand

67.11 %

167 million

 

May 2006

TATA Tea

JEMCA

Czech republic

 

21.7 million

 

June 2006

TATAT Coffee

Eight O’clock Coffee

USA

100 %

220 million

 

August 2006

TATA Tea and TATA Sons

Energy Brands

 USA

30 %

677 million

 

Sep 2006

TATA Tea

Joekel Tea Packers

South Africa

33.3 %

1.72 million

 

Oct 2006

TCS

TKS Technosoft

Switzerland

75%

80.2 million

 

November 2006

TCS

Total Comm. Solutions

Australia

100%

11.6 million

 

Jan 2007

Indian Hotels

Ritz Carlton Boston

USA

100 %

170 million

 

March 2007

TATA Steel

Rawmet Industries

India

100 %

23.1 million

 

April 2007

TATA Steel

Corus

UK

100 %

12.1 billion

 

April 2007

Indian Hotels

Hotel Compton place

USA

100 %

58 million

 

April 2007

Noetel

Transtel Telecoms

South Africa

100 %

33 million

 

April 2007

TATA Power

Coastal Gujarat power

India

 

 

 

June 2007

TATA Tea

Mount Everest mineral water

 

25.7 %

 

 

June 2007

TATA Power

PT Kaltim Prime Coal

Indonesia

30 %

1.1 billion

 

July 2007

Indian Hotels

Innovative Foods

India

70%

 

 

 

 

 

 

 

 

 

(Richter 2007)

Most major acquisitions done by Tata happened between 2000 and 2012. The Tata Group acquired more than 50 major companies in various sectors. This has made the Tata Group one of the largest business groups in terms of its asset base, market capitalization and revenues as of 2012.

Tata Structure and International Business Strategy

The Tata Group is made up of several key companies outlined above. These companies include Tata Sons, Tata Tea, the Indian Hotels Company, Tata Steel and Titan. The main owners are Tata Sons, the Jardine Matheson Group, and other TATA companies. Tata operations are divided into the following categories: engineering, services, materials, energy, chemicals, information systems, and communications, as well as consumer products (Timmons 2008). The table below shows companies listed under each category and their contribution to the group revenue in the FY 2007.

Table 2. The List of Companies

Category

Main companies

Revenue percentage FY 07

Engineering

TATA Motors, TATA Auto Comp Systems, Voltas

30.1%

Services

Indian Hotels, TATA Asset mgmt. TATA Realty and Infrastructure

7.3 %

Materials

TATA Steel, TATA Advanced Materials

21.4 %

Energy

TATA Power, TATA BP Solar TATA Petrodyne

5.7%

Chemicals

TATA Chemicals, Rallis India, Advinus Therapeutics

5.1%

Information Systems and Communications

TATA Consultancy Services, VSNL,TATA Teleservices, NELCO

25.1 %

Consumer Products

Trent, Titan Industries ,Tata Tea

5.3 %

(Sriwastawa 2006)

The most profitable branch of the Tata group is engineering with 30.1% of revenue contribution. The major acquisitions by Tata in the motor vehicle industry include Jaguar, Ashok Leyland, Daimler Chrysler and Land Rover. Therefore, this purchase was a progressive decision by the group. An information systems sector, which falls under Tata Consultancy Services, is the second best revenue generator with the group revenue of 25.1%, closely followed by the materials division with the contribution percentage of 21.4%. Consumer products, chemicals, energy and services are minor contributors to the group’s annual GDP.

 

Tata’s Globalization Strategy

Sutherland and Conwell (2004) define globalization strategy as the sum of all processes aimed at coordinating and driving an entire organization towards the realization of specific goals and objectives. In order to expand its interests in the global trade platform, Tata has adopted various policies in different regions. The most common globalization strategies include mergers, acquisitions, licensing, subsidiaries, exporting, and partnerships among others. Acquisition is the most prevalent globalization strategy of Tata. To a less extent, it has also adopted other methods, such as exportation (which has been ongoing for more than 100 years), mergers and partnerships. The purchase of the UK steel company Corus was one of the biggest acquisitions undertaken by Tata. Expanding to international markets, where the group’s presence may by meaningful, is the main driving objective of the group. Steel production and fabrication is a fundamental ingredient of Tata’s success. This is caused by the usability of steel in many other products, which Tata produces, besides steel is a high revenue export material, even in its raw form. The Tata’s motor vehicle industry, a major revenue earner of the company, also significantly utilizes steel or steel products in body hulls, engine blocks and components, as well as shafts.

Another significant strategy of Tata was establishing processing facilities or utility companies and factories near the end users. This strategy is aimed at reducing transportation costs, as well as avoiding possible barriers because of importation and trade blocs among other related factors in the target markets. Therefore, Tata established steel processing facilities in major markets to supply its increasing demand for these materials. Tata has focused on producing goods in the intended market, gaining the competitive advantage of a local producer. In this way, it also avoids other penetration barriers normally associated with exporting and licensing. Tata has also embarked on brand acquisition in order to avoid harsh brand discrimination that is possible in some regions. For instance, having purchased Jaguar, Land Rover and Leyland, Tata retained the names that these models went by. Doing so, Tata took advantage of the already well-marketed and prestigious models without having to re-brand them. While satisfying new buyers, Tata takes advantage of the market inertia created by the former owners of the brands to gain profits coming from sales of these prestigious car models.

Competitive Advantage

Another important strategic step taken by Tata is ensuring that it creates conditions that give it a competitive advantage over other industry or sector players. To do this, Tata came up with a business model referred to as the Tata Business Excellence Model (TBEM). Designed by Malcolm Baldrige to achieve business excellence, the TBEM was adopted in 1990. It has been operational ever since. Tata Quality Management Services (TQMS) focus on the process of helping different Tata companies achieve high levels of efficiency through streamlining specific processes using the TBEM. The TBEM helps Tata companies evolve and stay at par with changing global business trends (Sutherland and Canwell 2004). Concerning a competitive advantage, the Tata strategy is efficient in keeping with growing trends and consumer demands. For instance, the company introduced low-cost vehicles in the Indian market to replace two wheelers in an effort to capture the local growing market, as well as to gain a competitive advantage. This was a venture, which became a great success. Such strategic decisions help the group beat competition and add to the group’s value chain to fit with its development agenda. Tata also enjoys support from the government, and this contributes to its continued growth in the local and international markets. It is the biggest Indian taxpayer, as well as the leading employer in the local economy, making it an important source of government revenue through GDP, and indirectly through its large number of local employees.

Tata reacts accordingly to changes in market trends. The primary advantage is the Indian population, which is the biggest single market entity with revenues above one third of the group’s total revenues. The advantage specifically refers to low costs of materials and labor, as well as product differentiation caused by diverse market segments supported by a huge market population (Stacy 1993). Because of the fact that the majority of people in India, which are the main market of Tata, are low and medium income earners, the cost of production becomes vital as a determinant of prices of products, because affordability is the key aspect. Therefore, Tata’s strategy to incorporate the steel, power and fabrication industries in its assets provides low-cost materials at a convenience (Roy 2005).

Strategic Capabilities and Resource Capabilities of the Tata Group

TATA has both tangible and intangible resources, by means of which it implements its globalization strategy (Ritcher, 2007). The key value of the Tata’s strategy is to bring quality to customers. To achieve this, the firm had to rely on cost efficiency as a strategic capability. The source of cost efficiency for Tata is economies of scale, the cost of supplies, as well as the experience in product design (Robson 1997). For instance, TCS (Tata Cost Efficiency) has a solid experience in the IT industry. Further, Tata has a competitive human resource division that ensures visionary leadership. The only skepticism about TCS is its lack of specific focus on certain goods and preference to manufacture a range of IT products. This may necessarily make the company compromise the quality of products. According to the Tata website, its major profit generators are automobile, technology, chemical, and pharmaceutical divisions. Therefore, the focus of the firm is laid on expanding these divisions to new enlarging markets, such as Africa, Latin America, and East Asia. According to Sutherland and Canwell (2004), those companies, which had previously focused on organic growth in their traditional markets, became aware that there was neither a potential, nor a scale to allow sustainable growth. Hence, they were forced to go global.

With the asset base approaching $100 billion, Tata can handle challenging market conditions, such as financial crises, market dynamics and competition. It has already invested in multiple sectors dealing with entirely different products and services, and this enables it to maintain strong overall performance when certain sectors, such as agrochemicals or information systems, are badly affected by unstable markets, reducing revenues or new products competition. Tata has traditionally relied on the large Indian population as a key resource. With over one billion people, India is a big market for Tata’s products, besides being a good source of labor for the group. Currently, Tata is the largest private employer in India, as well as a significant employer in multiple foreign markets. Another key factor influencing Tata’s resources is the economics of scale in its production and services divisions. Apart from the large-scale production of steel, Tata also generates its own power. All ventures, in which Tata is engaged, are large-scale, making the cost of production per unit cheaper for all its products. This way the conglomerate can remain ahead of competition by means of fixing product prices below those of competitors without necessarily compromising the standards of products.

One important intangible asset that the group has is the support of the Indian people. The group has cultivated a long culture of aiding in the local development through job creation, an innovative approach to solving challenges facing people, its long line of products and services specifically made for the Indian people, as well as its philanthropic activities, especially by the Tata Sons Company. These factors have given Tata a strong foothold and support of the local market throughout most of its history. There were challenges in the past regarding the alleged manipulation of government authorities by Tata to give it undue advantage over other local competitors, but even that did not significantly erode the confidence of the local market in Tata.

Tata has created a solid value chain that relies on the differentiation of products and services and the selection of specific targets for specific goods or services. The table below shows the relationship between various Tata companies in creating a value chain.

Table 3. Tata’s Value Chain

Stars- cost leadership

(BROAD TARGET).

 

Automobile

Chemicals

Tea

 

Differentiation

Technology

Consultancy

Engineering Services

Cash Cows- cost focus

(NARROW TARGET).

 

Steel

Power

Oil and Gas

 

 

Focus: Differentiation- dogs

 

Information and Communication

(Thompson 2001)

The relation shows a highly evolved differentiation strategy, whereby the group categorizes different divisions according to their present usability, group revenue contributions, future opportunities, as well as the sustainability of growth as contrasted with immediate profitability. Companies with a broad target include Tata Automobiles, Tata Chemicals and Tata Tea. These companies may not generate high instant returns, but they are prestigious investments that will market the group overseas. Cost leadership is the major control factor in order to ensure their success. Companies with cash cows, or high revenues, and the low cost of production, are those mainly operating locally and dealing with utility goods and services, such as power, steel, oil and gas. They have a narrower target. The division of Information Systems and Communications heavily relies on the differentiation and innovation of new services and products. The same is applied to the Technology, Consultancy and Engineering Services division. Tata’s value chain is independent from company’s resources, but largely dependent on the place of manufacturing goods. The place is chosen in order to offer reliability to the transporter and the consumer, encouraging customers to buy from Tata companies.

To ensure sustainability, a good business model should contribute positively to the customer’s benefit. One of the problems facing Tata’s business model may be group’s over-reliance on steel as a means to achieve cost leadership. This risk becomes more pronounced as trends move away from metal to cheaper and more flexible plastics and fiber. As stated by the managing director, Mr. Harsh K., in 2004, Tata prides in receiving positive reviews from customers regarding its products (Sutherland and Canwell 2004). Acquisitions are another key method, which Tata uses to add to its value chain. This is achieved through the purchase of related firms or companies with the aim to add value to its products and to take advantage of brand awareness and existing market preparedness through avoiding market entry barriers.

Tata’s Globalization Entry Modes

Tata has applied different international market entry methods over time. The first method was exportation, then licensing, the creation of subsidiaries in foreign markets, mergers and acquisitions. The group chose such entry modes in order to take maximum advantage of geographical regions through its strategies. One such instance was the acquisition of Corus, a strategically positioned steel company in the UK. The location of Corus gave Tata favorable access to a large consumer base in the UK and overseas. Another strategy employed by Tata is timing its entry, when competitor companies in the target markets experiencing financial problems cannot raise or even sustain significant competition with the incoming industry player. Such was the case of the acquisition of Jaguar and Land Rover vehicle models in England at a time, when the Ford Motor Company running these motor vehicle divisions was experiencing financial constraints recording losses on the sale of these two models. This strategy gives Tata a chance to acquire without having to pay heavily when the acquired company is doing financially well.

Table 4. Strategies employed by Tata taking globalization efforts

Year

Strategy

Tata Company

Acquired company

Country

Stake acquired

Value ($)

 

February 2000

Acquisition

Tata Tea and Tata Sons

Tetly Group

United Kingdom

100%

433.6 million

 

September 2002

Acquisition

      Indian Hotels

Regent Hotels

India

100%

93 million

 

March 2004

Acquisition

Tata Motors

 Daewoo Commercial Vehicle Co.

Korea

100%

102 million

 

February 2005

Acquisition

Tata Steel

NatSteel Asia

Singapore

100%

285.4 million

 

Oct 2005

Acquisition

Tata Tea

Good Earth Corp. and Fmali herb.

USA

100%

31 million

 

June 2006

Acquisition

Tata Coffee

Eight O’clock coffee

USA

100 %

220 million

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

April 2005

Tata Motors

Tata Finance

India

Merger

 

 

February 2005

Tata Motors

Hispano Carrocera

Spain

21%

16.1 million

 

July 2005

Tata Industries

Indigene Pharmaceuticals

USA

< 30%

 

 

August 2005

Trent

Landmark

India

76%

24.09 million

 

August 2006

Tata Tea and Tata Sons

Energy Brands

USA

30 %

677 million

 

June 2007

Tata Tea

Mount Everest mineral water

 

25.7 %

 

 

June 2007

Tata Power

PT Kaltim Prime Coal

Indonesia

30 %

1.1 billion

 

 

 

 

 

 

 

 

 

March 2005

Tata Chemicals

Indo Maroc Phosphore

Morocco

Equal partner

38 million

 

June 2004

TATA Chemicals

Hind Lever Chemicals

India

Amalgamation

 

 

July 2005

Indian Hotels

The Pierre

USA

Lease

9 million

 

 

 

 

 

 

 

 

                                   

(Hazarika, 2009)

The table indicates various strategies applied by Tata companies, including seven acquisitions, seven mergers, a partnership, amalgamation and a lease. These methods are diverse in their modes of operation, cost implications, control level and profit sharing. Tata evaluates its short and long-term goals of an entry mode before deciding on which approach to use. In acquisitions, Tata completely retains ownership and control of its investments, but in partnerships, mergers and leases, it gains only partial control of the joint investment.

Tata’s Governance and Responsibility Model

Tata is primarily controlled by members of the Tata family. At any particular moment, one member of the family becomes a group chairman, but the rest of the management may involve professionals from the Indian community, as well as from outside it. At the initial stages of Tata’s growth, it was fully owned by the Tata family, but ownership was diversified to include the public after its shares had been publicly traded. Its ownership has also grown to include charitable trusts (mainly Tata Sons), and several other investors. Since its globalization began, Tata has also formed several partnerships, thereby sharing ownership of new businesses with its partners. In other instances, its various companies have merged with foreign companies. This makes the company have both concentrated and diffused ownership. The largest shareholder of the Tata Group is Tata Sons, being its chief decision maker. There is a minimal conflict of interests, as various companies under the Tata umbrella operate their own budgets and have different niches. This helps to reduce an internal competition between various divisions within the mother company. It follows a dominant shareholder model, in which the major shareholder has influence in the board of directors and in the senior management of the firm.

Tata adopts a proactive strategy in dealing with statutory, regulatory and internal issues. In many instances, Tata has cooperated with stakeholders and authorities to enhance community and industry development. It has continually included consumer suggestions in its line of products, making it a highly adaptable and very profitable organization. However, in several cases, it has been accused of monopolizing the domestic market to disadvantage local competitors. Accusations laid against Tata have implicated imbalance government support for Tata at the expense of the development of other local investors competing with Tata companies. The strategy adopted by Tata during these allegations was both reactive and defensive. It denied these allegations and counter-accused the sources of these allegations of attempting to ruin its reputation in the local Indian market.

The Future of Tata Group’s International Business

In order to stay in business and possibly expand it, the Tata group will need to focus on value creation, adaptability, constant market analysis, and technological expertise to keep its present competitive advantage. Tata has several strengths and weaknesses as revealed by its SWOT analysis. Building on its strengths and correcting its weaknesses will be the main way forward for it.

Strengths, Weaknesses, Opportunities and Threats (SWOT) Analysis of the Tata Group

This analysis is a crucial tool of determining the strengths and weaknesses of a business or a company, and therefore its chances for future success (Huggler 2007).

Raw Materials

Tata has traditionally operated in India, where it concentrates its efforts and strategies on taking advantage of India’s vast resources. Some of the traditional ventures of Tata were metal fabrication and automobiles. Apart from the domestic market, Tata is always careful to merge with or acquire other companies, as opposed to establish itself organically in other domains. In this way, the Tata strategy served well to get not just the market share and expertise of the acquired company, but also its resource base and favorable negotiation capacities (Hazarika 2009).

Labor

The traditional Indian market is very populous having sustained Tata’s organic growth for more than a century. Today, more than two thirds of Tata’s revenue comes from its vast investments and ventures outside India, but the company owes its roots and initial growth exclusively to the Indian people and the local market. In India, Tata is the biggest private employer, as well as the number one taxpayer. The firm globally employs more than half a million people.

Experience

Tata has vast experience in the steel and vehicle manufacturing sectors. This experience serves well to give it an upper hand in fabrication, product development, innovative capabilities, and ability to cut favorable bargains during its production stages as a result of mass production of cheap dependable products.

Other Factors

Other factors that favor Tata’s growth include Indian micro-environment with its inherent Indian culture, of which the Tata’s management team is a part. Strategy formulators and product developers are more likely to understand the requirements of the market, because they are a part of the nation. The Tata Group has also traditionally held a very strict business model of hard work and a dynamic product range to provide a variety of quality products, and to bring interests of c

   

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