Question

Read the Tata Group case study (Beerel, 2009: 235–237). Answer the following questions in a written report (approx. 2–5 pages).
Questions
1. How would you describe the Tata Group’s strategy?
2. Does this strategy respond to new realities? What evidence do you have to support your response?
3. Given the new realities at this time, where is the Tata Group’s Achilles’ heel?

ORGANIZATIONAL EXERCISE: TATA GROUP CASE STUDY
The Tata Group was founded in Bombay, India, by Jamsetji Tata in 1868. Jamsetji was a nationalist and dreamed of self-sufficiency for his country. In 1886, he started Swadeshi Mills to promote the purchase of Indian textiles instead of imported British clothing. Gandhi, with his spinning wheel, became the Swadeshi movement’s most famous advocate. In 1902, Mr Tata opened the Taj Mahal, the first Indian-owned luxury hotel, after being denied entry to a British hotel where he wanted to entertain clients. Among other ambitions, Mr Tata set out to make India self-sufficient in steel production. His son was able to realize his dream by founding India’s first steel company, Tata Iron and Steel, in 1907. His son’s successor, J.R.D. Tata, supplied the steel needed for India’s post-independence five-year plans. J.R.D. Tata was a pilot and founded India’s first airline, which became Air India. In the 1990s, as India slowly opened its country to foreign trade, efficient foreign firms entered the market and local Indian businesses were unable to compete. By 2006 foreign companies had overtaken Indian brands of many household consumables. The challenges facing the century-old Tata group again paralleled those facing the nation. When Ratan Tata took the reins during the 1991 economic crisis, many of the then conglomerate’s complacent companies were unable to compete outside India or even against foreign companies selling inside India. In order to survive, Ratan Tata restructured; sold factories; jettisoned more than half of its employees; and partnered with foreign brands to return to profitability. Tata Steel was one of the toughest cases to turn around. By 2007 Tata Steel became one of the

world’s most efficient steel producers. Ratan Tata is the visionary behind the development of India’s first self-developed passenger car, the Nano. The Nano is a $2,500 automobile designed to make automobiles more affordable to Indians. Ratan Tata hopes to keep families off scooters and motorbikes in the crazed Indian traffic where many place their lives in daily jeopardy. Today Tata Group is the largest private company in India. It has interests in steel, automobiles, information technology, communication, power, tea and hotels. The Tata Group has operations in more than eighty-five countries. It comprises ninety-eight companies, twenty-seven of which are publicly listed. The charitable trust of Tata holds 65.8 percent of the ownership of the Tata Group. The Tata Group is a leading buyer of foreign businesses.

The Tata Group has helped establish and finance numerous quality research, educational and cultural institutes in India. It is a leading and highly respected philanthropic corporate entity and in 2007 was awarded the Carnegie Medal for Philanthropy.

Answer 1

1. How would you describe the Tata Group’s strategy?

When the Tata Group was founded in 1868, the strategy for the firm was aimed at self-sufficiency for India and promotion of Indian industry (Beerel, 2009). As the country liberalized its economy and opened to foreign trade, “efficient foreign firms entered the market and local Indian businesses were unable to compete” (Beerel, 2009). Facing this new reality, the Tata Group had to refocus its strategy.

In developing a strategy, “[t]he prime goal of the strategic process is to ensure the organization’s continued relevance in the marketplace and to its stakeholders confined with a business model that ensures financial sustainability” (Beerel, 2009). To remain relevant and face the new reality of a liberalized economy, Tata Group’s strategy had to focus on transformation and adaptation to compete locally and globally. First by streamlining and restructuring where the firm “sold factories; jettisoned more than half of its employers; and partnered with foreign branches to return profitability” (Beerel, 2009). The firm continued to be focused in the community as it began to expand beyond its country’s borders, with a strategy of global networking, diversification and strong innovative pioneering spirit.

As Tata Group expanded globally, it continued to be relevant in India and with local stakeholders by remaining engaged in the community, aligning with the original spirit founding the Indian multinational. Even today, Tata Group continues to honour community commitment in the firm’s mission statement: “[t]o improve the quality of life of the communities we serve globally through long-term stakeholder value creation based on Leadership with Trust” (tata.com). Present day, Tata Charitable Trusts own two-thirds of the holding company, Tata Sons, which shows the continued corporate social responsibility and a strategic commitment to community involvement.

A second aspect of Tata Group’s strategy is diversification, collaboration and networking globally. Tata Group successfully networked and expanded globally by purchasing many different companies including Tetley Teas, the Pierre Hotel in New York, Daewoo Commercial Vehicle Company, Tyco Global Network, Millennium Steel Thailand, Eight O’Clock Coffee, Ritz Carlton Boston, General Chemical Industrial Product, Jaguar and Land Rover, China Enterprise Communication and Neotel South Africa (Beerel, 2009). The companies within Tata Group represent highly diversified industries around the world. This diversification strategy helped to increase Tata Group’s adaptive capabilities to face new realities as they emerge. It also represents a strong system mind set globally and across industries.

Tata Group business operates under five core values: integrity, excellence, unity, responsibility and pioneering. The pioneering value is described as: will be bold and agile, courageously taking on challenges, using deep customer insight to develop innovative solutions. It is this value that aligns the organization in a way they can be innovative leaders in industry and successfully recognize and adapt to new realities.

With its pioneering and entrepreneurial spirit, the Tata group has spawned several industries of national importance in India: steel, hydro-power, hospitality and airlines. The same spirit, coupled with innovativeness, has been displayed by entities such as TCS, India’s first software company, and Tata Motors, which made India’s first indigenously developed car, the Tata Indica and the smart city car, the Tata Nano. Pursuit of excellence has similarly been manifested in recent innovations like the SilentTrack technology developed by Tata Steel Europe and the next-generation Terrain Response, including infrared laser scanning to predict terrain, and Wade Aid to predict water depth, by Jaguar Land Rover

2. Does this strategy respond to new realities? What evidence do you have to support your response?

The strategy of transformation based on innovation and diversification positioned Tata Group to identify and successfully adapt to new realities. Coupled with the value placed on community involved and community social responsibility, the evidence to support the strategy’s ability to respond to new realities is in the success of the firm to transform and adapt through economic crisis, both in the past (e.g. Indian economic liberalization in 1991) and more recent events (e.g. the economic and financial crisis of 2008).

Liberalization of the Indian economy in the early 1990’s, effectively the country’s second independence, opened up the Indian economy to the world and the global market to Indian firms. Previously, the economy had been so tightly regulated that you could be fined or even imprisoned for exceeding your output quotas. “By 2006 foreign firms entered the market and local Indian businesses were unable to compete” (Beerel, 2006). Tata Group had to transform and adapt to the new reality where it could successfully compete in India and globally.

The leadership of the Tata Group recognized this new reality as an opportunity. Focus was first placed on the most successful six industries to streamline and restructure (Beerel, 2009). From the stronger footing within India, Tata began their determined and diverse global expansion. 1995-2003 Tata companies made, on average, one purchase a year; in 2004 they made six; and in 2005-06 more than 20.

The success of Tata Group through the economic crisis in Indian and in the current global market is evidence that supports the success of their strategy in responding to new realties. The group has grown to include over a 100 operating companies spread across six continents where all of the companies taken together, generated revenues of $100.39 billion (around Rs673,347 crore) in 2016-17, with 64.1 percent of this coming from international businesses. Tata group reports an increase of 4.4% increase in total revenues in 2016/17 with [s]hares of the Tata group companies have been among the star performers on the Indian stock market over the last three years.

3. Given the new realities at this time, where is the Tata Group’s Achilles’ heel?

Tata Group has emerged from the economic crisis in India to become a successful multination that has forged a long-term strategy that could power its growth for years: producing a stream of innovative products that will both cater for the rising masses of the emerging world and shake up markets in richer places.. Given the strength of Tata Group in the global economy, it may have an element of weakness or vulnerability in its level of diversification and a high growth rate.

While diversification has allowed a degree of flexibility and financial strength among all its industries and firms, Tata Group is highly susceptible to economic changes and pressures around the globe and in many markets. It may also be argued that because of the high level of diversification, Tata Group may lose some of its ability to effectively respond to new realities, something that ensured its success in the past.

Reference:

1. Beerel, A. (2009). Leadership and Change Management. Los Angeles: Sage Publications.

2. Tata website.

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