Discuss about the Collaboration and Performance in Markets.
The question seeks an explicit description of numerous advantages that companies such as Tata apply to transform into large industrial conglomerates.
According to Alfaro and Chen (2014), a conglomerate company is a term used to define a highly differentiated field company. Typically, a conglomerate company operates two or more different business lines under a single and unified corporate structure. Initially, Tata was established as a textile company, but later expanded to include various business operations such as schools and steel production among other operations. Tata has gradually been increasing its dominance of the Indian market since 1990s enabling it to develop an extensive business network that include expanded production resources and large capital among others. According to Buckley and Ghauri (2004), big companies such as Tata employs various advantages to remain large industrial conglomerates.
Some of these advantages include increased access to capital under favourable terms from financial institutions (Buckley and Ghauri, 2004). This has allowed Tata to expand its operations and transform into a massive industrial conglomerate. Tata also banks on its strong corporate image to sustain its strong business connections with numerous high-quality market partners. As a result of this positive corporate image, Tata has been able to develop and maintain its good relationships with both national and state governments in the country (India). Besides, Tata has a very competitive cost structure that is generally attributed to India’s low cost labour.
The company has also been able to achieve this low cost structure through using its subsidiary companies such as Tata steel to provide necessary raw materials for its manufacturing processes. Moreover, Tata banks on India’s high tech talent and large mineral resource bases that have increase its competitive advantage among other international business competitors. The company has similarly developed a strong interdependence relationship with the Indian Government, a cooperation that is instrumental in a socialist economic system like India’s. This, among other advantages discussed have helped Tata to transform into a large industrial conglomerate.
The question is asking about how Tata can uses the above stipulated advantages to flourish especially in foreign markets.
Since Tata has vast access to both financial and human resources, and on relatively favourable terms, the company can use such advantages to attain pertinent data and information in the market. Moreover, according to Dunning and Lundan (2008), large and quality capital requirement for entry into the automobile industry in emerging markets implies that Tata has an upper hand given its massive financial resources.
Such advantages will enable Tata to better understand the operations and need of the foreign markets by tailoring their products and strategies to heighten their market success. Moreover, Tata could also use its past rich market experiences and vast operational knowledge to increase its chances of success in foreign markets. The company’s various business sectors such as Tata steel could also be used to facilitate the production of high-quality products to enable Tata to reduce its operational costs in its foreign market activities. Besides, given the company’s well-established business connection with high-quality market partners, it can easily reduce associated risks and capital requirements in foreign markets.
Tata could also use such connections to develop and sustain good relationships with governments and other important market players. This could enable them to successfully overcome infrastructural-related challenges among other associated problems especially in foreign markets. Tata has used these advantages and many others to grow its reputation and to further expand its access in other established markets such as the U.S and Europe. Undeniably, Tata has also been able to use its advantages such as low cost labour and presence of relevant professionals to surpass some of its close global market competitors. For example, the company can use the low-cost labour structure in Indonesia to manufacture more cheap cars. The company aim at cementing its already strong production capacity in emerging markets. Moreover, Tata, together with its long years of market experience, aim at remaining a global business leader. This question seeks to explore the relationship between trade barriers, bureaucracy, country risk and the advent of Tata as an important player in global trade.
Irrefutably, according to location theory of internalization, the location of production is based on factors such as trade barriers, high tariffs and related costs of operations among others (Keller and Yeaple, 2009). For example, most multinational companies fear operating in countries that do practice repressive bureaucracy such as India. Similarly, authoritarian trade restrictions and unnecessary political influences could significantly affect operations of a multinational company. According to Kim et al. (2015), a bureaucratic system of governance may occasionally introduce certain trade barriers that may increase the risk of doing business in a particular country.
Throughout its operations, Tata has always followed strict government legislations and laid-down standards of operations. These government legislations and issues include various trade barriers, government interferences and the associated risks in the respective countries of operations. The inherent ability of Tata to remain efficient in India, a market that is crammed with numerous trade barriers, business regulations and various government interventions is commendable. In India, importation has to receive special government approval given the numerous import tariffs on vehicle parts and components among other commodities. Political influence from the West Bengal Politicos have resulted into widespread labour unrests further paralysing Tata’s operations in certain parts of India.
This question aim at examining the specific role of decreasing government intervention in Tata’s global market success especially in India and the ability of the company to sustain its internalization efforts.
According to Madhok and Keyhani (2012), every corporation wishes for a market system where most of the operations in the marketplace are conducted freely and the respective governments rarely intervenes resulting into reasonably balanced market conditions. A market with decreased government intervention stresses on the existence of minimal externalities, and that related external costs are adequately controlled. According to Goldstein (2009), decreasing government control implies that the forces of demand and supply are allowed to control market conditions.
Indeed, the Indian government has for a very long time been discouraging international trade and imposing repressive trade restrictions and unnecessary bureaucracy. For example, the Indian government and state-owned enterprises for e very long time influenced various procurement activities among corporations operating in the country. However, some of these high trade barriers were loosened in the 1990s enabling Tata to increase its international trade operations in India. For instance, Tata started producing cars in joint ventures with various companies around the world such as Fiat and Daimler-Benze. The company also acquired a 30% stake in an Indonesian Coal mining company to sustain its power plant in India.
Correspondingly, the company is taking advantage of its family conglomerate business networks to strengthen its market position as a major government supplier. In general, decreased government intervention rejuvenated Tata’s global market operational successes particularly in India. The company has been able to sustain its internalization efforts majorly through joint ventures and diversification of its production processes.
This question seeks to scrutinise the growth rates and other specific features of emerging markets, and such markets that Tata should target to sell its products and why.
Ideally, Tata should target markets comprising of comparatively large sectors of low-income consumers to sell their products. According to Shrader (2011), emerging markets are majorly characterised by larger populations and stabilizing economies. Also, income levels in such countries are increasing steadily, and this implies that an increase in disposable income and purchasing powers.
Some of the emerging markets that Tata Company should target include Thailand, Vietnam and Indonesia markets that have a rising population of middle income earners. These countries also have expanding per-capita incomes, and this implies an increase in purchasing powers which is good for a company like Tata. The increased purchasing powers can be attributed to the increase in income level among many households in these emerging markets. Thus, due to enhanced disposable incomes, many families in these emerging markets can manage to comfortably purchase cheap Tata Cars. This is because most of Tata’s products are charged moderately low compared to other related merchandises. Another reason why Tata should target the aforementioned countries is that there is a large population of motorcycle-driving customers that could really make use of cheaper Tata cars.
For example, in Indonesia, there is an increase need for alternative transportation system aside from the famous motorcycles that are generally family-oriented. Therefore, Tata should offer these consumers in the mentioned emerging markets cheaper Nano cars to further facilitate their movements. Tata should also take advantage of increased brand recognition especially after its acquisition of Jaguar and Land Rover to venture into these emerging markets. Therefore, Tata Company should feel more confident investing in these identified emerging markets to capitalize on their massive economic growth among other potentials.
The question is asking about such country-level issues that Tata should take under consideration to evaluate the prospective of different emerging markets, and how such factors can possibly affect its operations.
Some of the country-level factors that the company should consider in its evaluation of the prospective of various emerging markets include per-capita income and the population of the middle class. Also, the company should comprehensively evaluate the market size of the emerging markets to ascertain whether such markets are feasible for international operations. Besides, the company should determine the intensity of the market operations and the rate of market growth.
Other factors include market consumption capacity, commercial infrastructural developments, economic liberty, market receptivity and country risk. For instance, violent protests from the surrounding communities can significantly affect the production activities of a particular company. Therefore, before investing in a particular country, Tata should closely scrutinize these country-level issues that can seriously influence its operations if not properly mitigated.
This question seeks to establish how Tata can advance its CSR initiatives towards future consumers in emerging markets as it prepares to expand its international operations.
According to McWilliams and Siegel (2011), CSR is increasingly being perceived by many companies as a creative opportunity to increase their competitive advantage and implementation of organizational objectives. Research by Slack (2012) further stipulate that CSR is a company’s direct involvement in the welfare and interest of consumers and other stakeholders. As such, to enhance its corporate social responsibility (CSR) towards its future consumers particularly in emerging markets, Tata should direct immense investments towards raising educational standards, health promotion and various grass root agricultural development projects.
For instance, Tata Steel should increase its investments on irrigation schemes to allow farmers in emerging markets to increase their agricultural productive capacities. The company should also build schools and hospitals among other projects in emerging markets as part of their CSR initiatives. These charitable activities among others will help Tata to capture and sustain large consumer bases in the emerging markets. For instance, through its affiliate company Miljo Grenland, the company is currently producing electric cars called Indica that are environmentally friendly. These production of these eco-friendly cars should also be extended in the emerging markets to further plummet the company’s position in international operations.
This question aim at determining some of the actions that Tata should undertake to minimize the impact of its operations on nature in Asia and in other parts of the world.
According to Kolk and Van Tulder (2010), a comprehensive CSR can significantly improve the effectiveness of an organization especially when dealing with external conflicts such as environmental protection. Some of the common CSR initiatives that Tata can apply include improving it organizational operations and creating self-protection awareness among its consumer bases (McWilliams and Siegel, 2011).
Specifically, from the case study, to minimize the possible impact of Tata’s operations on the natural environment in Asia and in other parts of the world, the company should consider applying various eco-friendly energy such as a reduction in the use of wood-burning stove by introducing solar lanterns. The company should also introduce more low-cost solar-powered electronics such as refrigerators and water pumps to further minimize the impacts of its operation on the natural environment. Overall, such initiatives will enable Tata to reduce its carbon dioxide emissions and operate in a relatively clean environment.
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