1.0 PROBLEMS DEFINITION
1.1Types of Strategies used for Local and International Markets Under the International Strategic Management approach, companies can choose to either venture their business towards the Global or Regional strategy. The Global Integration strategy looks at production and distribution of products and services of a homogenous type and quality on a worldwide basis. National Responsiveness strategy requires understanding of individual consumer tastes imposed by autonomous governments and agencies. To further understand the Global and National strategies, we look into the two-dimension matrix below. (textbook, pg277)
Quadrant 1 – Global Strategy, High requirement for integration and low awareness of differentiation. Based on price competition, entry strategy used it often mergers and acquisition. Quadrant 2 – International Strategy. Low requirement for centralised quality check and strategic decision making eliminating the need to adapt to individual countries. Mixed strategy combining low demand for integration and responsiveness. Quadrant 3 – Transnational Strategy. High requirement for integration and differentiation. Emphasizing both global integration and local responsiveness. Quadrant 4 – Multi-domestic Strategy. High requirement for differentiation but low concern for integration. Emphasize on local adaption.
Adaption from the Case Studies and Research Cases
Tata Group uses two different strategies locally and internationally when dealing with its businesses. Local businesses under Tata Group’ umbrella uses the Domestic Strategy which requires product differentiation base on the local adaption. Such example is the Tata Nano Car and the Tata Ace Truck (picture below), produced by Tata Motors at an affordable price for the people in India. Ratan Tata wanted to produce a car which is super cheap yet reliable.
Aside from this example, Tata Group has also proven that the goods and services they produced have subsequently benefited the people in India. As
such would be the Solar system project which helped villages circulated off the power grid with power. Tata Group made power available to these villages at an affordable price.
International businesses under Tata Group’s umbrella develop its international strategy depending on the nature of the industry, opportunities and competitive dynamics at global stage of each operating company. We look at each of the strategy available and the application of Tata Companies to them. (Tata Group, 2012)
1.Global Strategy – Such example would be Tata Global Beverages, the Good Earth brand specialises in ﬂavoured and herbal teas. The recent re-launch in the US with 12 new organic blends, had the original sweet and spicy ﬂavoured Good Earth still the most popular blend. Good Earth teas have also made a successful UK debut. (Tata Group, 2012)
2.International Strategy – Such example would be The Indian Hotels Company Limited (IHCL) and its subsidiaries the Taj Group. Taj Hotels Resorts and Palaces is one of Asia’s largest and ﬁnest group of hotels, comprising 93 hotels across India and 16 international hotels in Maldives, Malaysia, Australia, UK, USA, Bhutan, Sri Lanka, Africa and the Middle East. Each Taj hotel offers an unrivalled fusion of warm Indian hospitality, world-class service and modern luxury. At the Taj Hotels Resorts and Palaces luxurious living and ﬁne dining ﬁnd common ground. Whether it is taking exotic world cuisines to India or taking authentic Indian fare to the world, the Taj Group is renowned for the eclectic culinary experiences it brings to its guests. (Tata Group, 2012)
3.Transnational Strategy – Such example would be Titan Industries which provides a range of products Titan Watches, Jewellery and Titan Eye+ (Eyewear). Titan Eye+ offers a variety of differentiated products to the end consumer consisting of frames, lenses, contact lenses and accessories. Frames are available in both international brands (Levis, Esprit, Hugo Boss etc.) and in-house brands – Titan Eye+ and Dash. Customers are offered a unique browse-select-buy format where all products are accessible, using world class equipment for zero-error eye testing by qualiﬁed optometrists trained at Sankara Netralaya and style consultants to help buyers make the right choice of frames and lenses. (Tata Group, 2012)
4.Multi-domestic Strategy – Such example would be Tata Motors, vehicles are exported to Europe, Africa, the Middle East, South East Asia, South Asia and South America. The company has joint venture/franchisee assembly operations in Bangladesh, Ukraine and Senegal. Currently about 63% of its revenues is derived from its international business. With the large variety of product line, every customer is sure to find a car that meets their needs and requirements. (Tata Group, 2012)
3.1RECOMMENDED ALTERNATIVE STRATEGIES
From the discussion provided earlier, clear observations were provided that international market ventures should depend on the nature of the industry, opportunities and competitive dynamics at global stage of each operating company. There should not be a definite strategy to use for international ventures.
As for the Domestic Strategy that Tata Group uses for their local market ventures should also be applying similar concept as the international ventures. This refers to all 4 strategies rather than to stick with 1 strategy for all business ventures. There should not be a definite strategy to use so as to reach out to Indian consumers’ requirements and needs accordingly. This way the business is able to define its clear direction and make higher profits for the company. On the other hand, Tata Group keeping to the similar strategy used Domestic Strategy may also be a good thing as this can help the people in India by increasing their standards of living and continuously strengthen the company’s Corporate Social Responsibility. Do you think Joint Ventures are essential for Tata’s future success? My answer to the question is No. Joint ventures should not be the sole entry mode strategy used for future international corporations. The entry mode strategy to Tata’s future international business ventures should varies
according to the nature of the industry, opportunities and competitive dynamics at global stage of each operating company.
Of the 6 different types of entry modes, 5 of which are commonly used by Tata Group:
1.Joint Ventures and Alliances – An agreement under which two or more partners own or control a business. Any type of cooperative relationship among firms. As such example is Tata Steel with several JAs globally namely; Tata NYK, Tata BlueScope Steel Limited, Dhamra Port Company, Odisha, etc. (Tata Group, 2012) AdvantagesDisadvantages
Shared investment risk Difficult to find good partner
Complementary resources`Relationship management
Maybe required for market entryLoss of competitive advantage Difficult to integrate and coordinate
2.Wholly Owned Subsidiaries – Overseas operation that is totally owned and controlled by an MNC. As such example is Tata Motors where they are a 100% subsidiary company with a couple of companies namely; Tata Motors (SA) (PTY) Ltd., TAL Manufacturing Solutions Ltd., etc. (Tata Group, 2012)
No risk of losing technical competenceBear full cost and risk to a competitor
Tight control of operations
Realize learning curve and location
3.Mergers and Acquisitions – The cross-border purchase or exchange of equity involving two or more companies. Though not very commonly used in Tata Group, Tata Services Limited apply this strategy for one of their departments Group Legal Department. (Tata Group, 2012)
Less time consuming and quick to Diseconomies of scale if business becomes executetoo large leading to higher unit costs. Less risky compared to GreenfieldDifficult to make decisions and causes disruption in the running of the business Immediate grab of market shareClashes of culture between different types of businesses can occur, reducing the effectiveness of the integration.
4.Franchising – A business arrangement under which one party (the franchisor) allows another (the franchisee) to operate an enterprise using its trade mark, logo, product line and methods of operation in return for a fee. As such example is NTT DOCOMO part of Tata Teleservices. (Tata Group, 2012)
Fast Market EntryQuality control
Low capital costTrademark protection
5.Export and Import Operations – The process of selling goods and services produced in one country to other countries. As such example is Tata Power where they export the Tata BP Solar Regularly exports products and systems to several countries. (Tata Group, 2012)
No need for operational facilities inLose location advantages in host country host country
Economies of scale in the home countryDependence on export intermediaries Internet can facilitate exporting marketing Exposure to trade barriers opportunities Transportation costs
I would highly recommend
From currently research findings, Tata has ventured into almost all the strategies on entry modes. There shouldn’t be a clear distinction between only having to use 1 type of mode of entry for future international business ventures. This should always depend on the nature of the industry, opportunities and competitive dynamics at global stage of each operating
company. Individual mode of entry strategies has its pros and cons hence depending on the objectives of the business ventures to set the strategy to use.
Question 2: What have been Ratan Tata’s most important strategies initiatives for the company? 1.0 PROBLEMS DEFINITION
1.1 Types of Strategies Ratan Tata Uses to Sustain the Company Operational in more than 80 countries, Tata Group covers 7 business sectors (refer to the chart below) and operates more than 120 companies. Some of these major Local and International companies of Tata Group are: Tata Steel, Tata Motors, Tata Consultancy Services, Tata Power, Tata Chemicals, Tata Global Beverages, Tata Teleservices, Titan Industries, Tata Communications and Taj Hotels. (Tata Sons, 2013)
(Tata Group, 2012)
The type of business strategies employed by Ratan Tata:
Corporate Sustainability – A business approach that creates long-term consumer and employee value by not only creating a “green” strategy aimed towards the natural environment, but taking into consideration every dimension of how a business operates in the social, cultural, and economic environment. Formulating strategies to build a company that fosters longevity through transparency and proper employee development.
Corporate Sustainability and Social Responsibility was introduced by the group’s founder Jamsetji Tata Ratan Tata’s grandfather, in the 1870s. Ratan Tata is a passionate promoter of Corporate Social Responsibility. Corporate Sustainability Tata International Limited remains committed in being a proactive and responsible member of the community and the environment in which it operates. Stringent goals for the reduction of carbon footprint and greenhouse gases in the leather plant and other facilities, coupled with initiatives for empowering local communities in equal measure, drives the company’s long term sustainability agenda. (reference CS) With reference to
the case study; Tata Group remains devoted to good works: Charitable trusts own 66 percent of the shares in parent Tata Sons, and many of its companies fund grassroots antipoverty projects that’s moves away from the core businesses. (Gerhardvalentin, 2013)
Few ways of Corporate Sustainability provided by Tata Group: 1.Non-Government Organisations (NGO) Grants
a)Natural Resource Management and Rural Livelihoods
b)Urban Poverty and Livelihoods
e)Civil Society, Governance and Human Rights
f)Media, Art and Culture
a)Early retirement workers gets full pay until age 60 and lifelong health care
3.Corporate Social Responsibility
b)Tata spends $40million yearly in supplying to civic services and schools c)$1 a day scheme that helps family learns to grow their own crops and harvest. 3.1RECOMMENDED ALTERNATIVE STRATEGIES
Individuals will have different views of running a company, should it be for profit only or profit and social giving. There may be other business strategies that Tata Group can operate on but in order to be differentiated with any other profitable business, looking at profit making in another angle may help. As reported more than 60% of their profit is generated from Social Services. It helps in promoting products, upkeep production and still generates revenue. Should his successor follow in his footsteps or pursue new paths for growth? My Answer is No. The successor, Cyrus Pallonji Mistry should not follow the steps of Ratan Tata though the strategies used by Ratan Tata were beneficial to the organisation. If Cyrus Pallonji Mistry is to follow the steps of Ratan Tata, all the methods Ratan Tata would deem as a succession to his line. However during downfalls when he is required to
think of new strategies for new problem, he might not be able to think on the feet.
Quote from Cyrus Pallonji Mistry, on his appointment, Mistry said that he has taken this responsibility very seriously and wishes to take forward the values and ethics of the Tata Group. He also said that he is deeply honoured at his appointment and looks forward to Ratan Tata’s guidance over the next year.
Question 3: What risks might Tata face in its global expansion? 1.0 PROBLEM DEFINITION
As TATA group continues their path of expansion to a global scale, there are risks that will be faced in the different markets they enter. The fastest and most fundamental impacts that TATA would face are the financial issues, operational issues involving the employment issues (Human Resources) in the newly ventured country/market, and the structure of the organization. The risks mentioned above are effectively short-term concerns, which in any case, not managed effectively will result in failure of the expansion. Strategizing will not only prepare the group for the challenges they will face in the short run, but also result in path contingencies to approach future or long-term risks that they may encounter. According to KPMG’s Global Enterprise Institute survey, top-rated risks in going global include (KPMG LLP, 2008): •Financial risks – including taxation, transfer pricing, foreign exchange, credit, and cash management •Political risks – legal, regulatory, contracting, and other compliance risks oMacro Political Risk – political decisions that influences all enterprises in the country oMicro Political Risk – government policies that influence selected sectors of the economy or specific foreign business in the country. (Textbook) •Operational risk (arguably part of Political Risk where the government’s policies or non-policies can impact the foreign business) – such as transportation and distribution logistics, supply chain, information technology and human resources. 2.1 ANALYSIS
One significant example illustrated in the case study was the situation at one of Corus’ mills, Port Talbot in Wales. Despite continuing with the initial plan drew up by Corus to employ 3000 workers, TATA group faces the Operational risks – unions representing workers request for additional investment. Labour Unions are organizations of workers who have banded together to achieve common goals such as protecting the integrity of its trade, achieving higher pay, increasing the number of employees an employer hires, and better working conditions. The union, through its leadership, bargains with the employer on behalf of union members and negotiates labour contracts (collective bargaining) with employers. The most common purpose of these associations or unions is “maintaining or improving the conditions of their employment” (Webb and Webb, 1920). With Labour Unions being able to negotiate directly without interference of the government as the Anglo-Saxon System of Labour Market Regulation limits the government’s involvement (Hall, 1994); TATA group faces a challenging task to commit in ensuring competitiveness in Port Talbot. The impacts of political risks, lead by the lack of policy in the Anglo-Saxon System of Labour Market has seen TATA group “suffered” at the hands of Unions. TATA however named three existing members from Corus group to assist with the negotiations with the union. Using the new knowledge acquired from the experience of Corus group’s directors, TATA group was able to eventually finalize the acquisition of Corus.
How might it manage their risks?
3.1RECOMMENDED ALTERNATIVE STRATEGIES
Recommended strategies for managing the risk are as follows: 1.Instead of acquisition to enter new geographical locations, TATA should start by building strong relationships with the local players involved in the value chain with the help of acquired or merged business entity. A Joint Venture may not be always a good option but it can be exercised where the company does not want to expose itself to substantial risk. This could allow TATA to access the political environment exhaustively. 2.Changes in the human resource management practices and optimally restructure the human capital by including local employees at different levels with Tata group senior managers at certain strategic senior management positions. Vast experience
can arrive from the different employees of different background. 3.TATA Group Management skills must be tuned to incorporate the needs to new markets. The technological assets should be created to build innovation (Marris & Wood, 1971). The current management of the group is qualified and experienced enough to handle the business activities across multiple geographies, given its experience on globalisation. The diversified market sectors that the group is currently engaged in serves as risk mitigation factor and hence company can take bold decisions.
1.Tata Sons. (2013). Leadership with trust. Available: http://www.tata.com/aboutus/sub_index.aspx?sectid=8hOk5Qq3EfQ= . Last accessed 18th June 2013. 2.Tata Group. (2012). Tata Group Presentation. Available: http://www.tata.com/pdf/Tata_Group_presentation.pdf. Last accessed 18th June 2013. 3.Tata Group. (2012). The Tata Commitment. Available: http://www.tata.com/pdf/Tata_Group_Brochure.pdf. Last accessed 18th June 2013. 4.Gerhardvalentin. (2013). Corporate sustainability. Available: http://en.wikipedia.org/wiki/Corporate_sustainability. Last accessed 18th June 2013. 5.Lalatendu Mishra . (2013). Cyrus Mistry says he is honoured to be named Ratan Tata’s succesor. Available: http://businesstoday.intoday.in/story/cyrus-mistry-reacts-on-named-ratan-tata-successor/1/20394.html. Last accessed 18th June 2013. 6.KPMG LLP, 2008 Tackling the Risks of Going Global, Global Enterprise Institute. 7.Webb, Sidney and Webb Beatrice, 1920, History of Trade Unionism, Longmans and Co, London, ch 1 8.Marris, R., and A. Wood, 1971, The Corporate Economy (Cambridge, Mass.: Harvard University Press). 9.Hall, M, 1994, Industrial relations and the social dimension of European Integration: Before and after Masstricht, pp. 281-331 in Hyman, R. & Ferner A., eds: New Frontiers in European Industrial Relations, Basil Blackwell Publishing 10.Tata Consultancy Services . (2013). Corporate Social Responsibility.Available: http://www.tcs.com/about/corp_responsibility/corporate-social-responsibility/Pages/default.aspx. Last accessed 18th June 2013.
Corporate Social Responsibility
At TCS, sustainability is seen as a state of being in balance between
Corporate Economic Responsibility (CER) and Corporate Social Responsibility (CSR). The guiding principle of TCS’ Corporate Social Responsibility programs is “Impact through Empowerment,” where empowerment is a process of strengthening the future today, so that risks are minimized, value created and certainty is experienced. We strive to ensure that the communities engaged through our CSR initiatives also experience certainty in their lives. The core areas for TCS’ CSR programs are education, health and environment. The choice of education as a theme flows from TCS being in the knowledge domain. Similarly, attention to the cause of health acknowledges that health is a vital precondition for promoting social good. Concern for the environment is in line with our belief that this global cause demands our attention to ensure a sustainable and productive planet. These themes are established centrally for adoption or adaptation across all geographies. TCS’ Approach
TCS has chosen the following channels to drive its CSR initiatives: •Developing innovative solutions to address large-scale societal problems by utilizing our IT core competence. •Volunteering for projects that address the felt need of communities in which TCS operates, while aligning with the core themes of TCS’ CSR. •Participating in community development program championed by our clients. •Partnering with select non-government and civil society organizations and other government bodies. •Supporting large-scale causes such as disaster relief or any other cause as determined by the Corporate CSR Council. TCS’ Initiatives
Some of the initiatives include the following:
RegionSustainable Community Initiatives
IndiaAdult Literacy Programs
TCS’ BPO Employability Program
Academic Interface Program
TCS Maitree village development initiative
TCS Maitree’s Advanced Computer Training Center
CSR Technical Team’s support to social organizations
North AmericaFirst Book Club
UK and EuropePassport to Employability
UK School Partnerships
Stepney Football Club
Today is a Good Day
Asia PacificInsighT- Australia
SINDA Computer Training
Go for IT!
Library Program in China
Latin AmericaEnvironment Leaders
Middle East and AfricaLandmark computer training
Scholarships at CIDA City Campus
City Ambassadors Football Club
Support to Reach for Dreams
Key Facts And Figures
In the year 2011-12 year TCS associates volunteered 58,362 hours on CSR initiatives and through these initiatives reached out to 57,90,604 beneficiaries.
(Tata Consultancy Services, 2013)