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Globalization And Its Impacts On Multi-national Companies

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Question:

Discuss about the Globalization and its Impacts on Multi-national Companies Tata Motors Limited.
 
 

Answer:

Introduction: Selected MNC Company from emerging economy

According to Kumar (2014), India is ranked among the leading emerging markets in the world. The growth of its gross domestic product is estimated at 8% on an annual basis. In this regard, India is the origin home country of many multi-national companies, particularly those that manufacture four wheeler automobiles. Tata Motors Limited is one of the best examples of the multi-national companies that manufacture four wheeler automobiles. According to Tata Motors (2017), Tata Motors Limited is the leading manufacturers of cars, buses, and trucks, not only in India but across the globe. The successful performance of Tata Motors across the world has been facilitated by the emergence of globalization. Globalization refers to the process of integrating the societies, economy, political, and religious activities across the world (Haller, 2016). Multinational Companies have been able to exploit the opportunities brought about by globalization to boost their production and marketing activities in order to expand their businesses. The have established their presence in foreign countries, and as a result, global companies such as Tata Motors boosted their performance and profit margins as well. Despite the numerous benefits of globalization, there are also several drawbacks of globalization to multinational companies. In line with these aspects, this research study is going to discuss the drawbacks and het benefits that the phenomenon of globalization has presented decision-makers in multinational companies by focusing on Tata Motors Limited. The paper is also going to highlight some of the vital lessons that should be learned by international managers from the interplay of the home and host country.

Analysis of the benefits that globalization present to decision-makers

Low cost of marketing

Through globalization, decision makers have found new ways of engaging in marketing activities at much reduced costs. Marketing is the most effective way to reach new customers is through marketing activist, however, the cost of marketing activities has emerged to be one of the major challenges facing business firms (Atsmon, Kertesz, & Vittal 2011). This has limited the sales volume made by business organization because of the lack of ability to reach and attract new potential customers. The challenge of high cost of marketing has been solved by the emergence of globalization, which has enabled decision makers to reduce their cost of marketing. In this regard, the decision makers at Tata Motors Limited have identified new strategies to reduce their cost of marketing their products in the various foreign countries that they venture into. For instance, Tata Motors Limited engages in the manufacturing of cars, buses, and trucks for the global market; however, they develop different design in order to fit the taste and preferences of the different market segments that it serves. Tata Motors Limited has been able to reduce its cost of production through the production of differentiated designs of four wheelers to fit the requirements of different target markets. There are different types of four wheelers with different designs to meet the needs of consumers of all economic classes. For example, Tata Motors Limited manufactures affordable cars such as Tiago and GenX Nano for the individual in the lower economic class. They also produce cars like Bolt and Indica, which target individuals of the high economic class. The ability to lower their marketing costs has enabled the decision-makers at Tata Motors Limited to reach their customers at much reduced cost.

 


Increased market share

All businesses are formed with the goal of making profits through sales. Therefore, business organizations strive to reach more clients and expand their markets in order to make more sales (Patel & Prajapati 2014). Despite this, many companies find this a challenging task because their local markets have been overcrowded by either local or other international competitors that have ventured into their countries. This has forced local companies to venture look for markets beyond their borders. In the recent decades, the problem of market saturation has been overcome by the emergence of globalization, which has enabled the decision makers in multi-national companies to choose venturing into international markets. This is because globalization has helped Multi-national companies to easily access foreign markets through ether exporting or direct investment activities. Globalization has brought about a faster and successful integration of all countries across the globe, and this has enabled many countries do away with the rules and regulations that limited international trading activities, for example, tariffs and import duties. The elimination of trade barriers has helped global companies such as Tata Motors Limited to access foreign markets with unexplored market opportunities.

Because globalization have provided easy access to international markets, this has provided the decision makers of Tata Motors Limited with the opportunity to venter into international markets. The decision makers at Tata Motors saw an opportunity to expand their markets, and as a result, the company has established itself in many foreign countries across Europe, America, Asia, and Africa. Tata Motors is present in both first class and third world countries such as UK, USA, and Kenya, where the company has enjoyed numerous sales of its four wheel products (Tata Motors Limited 2017). The company has recorded large volume of sales of personal cars because of the increased economic status of consumers in the foreign countries that they venture into. They have also recorded an increased sales of buses used for human transportation as well as trucks that are used in the logistics industries across the globe.

Access to experts at a reduced-cost

One of the most vital stakeholders of a business are the employees because they are the ones who manufacture and distribute the products and services; however, the cost of acquiring and maintaining employees has been a major challenge to many organizations (Atsmon, Kertesz, & Vittal 2011). However, due to the emergence of globalization, multi-national companies such as Tata Motors Limited to make decisions that enable them to acquire workers at lower cost. In this regard, the decision makers have chosen to venture into other emerging markets where they have been able to gain access to low-cost workers. These opportunity has helped Tata Motors Limited to significantly reduce the cost associated with production. Tata Motors Limited has taken advantage of this opportunity to establish its wholly owned subsidiary branches in countries that have low-wage. These include developing countries such as Kenya, Senegal, Brazil, Indonesia, Vietnam, and other AAsian countries that have cheap labor.  This has helped the company to engage in the mass production of four wheelers, whereby a large percentage of these products are consumed locally in the countries in which they are produced, while other are exported into other countries (those with expensive labor) for sales purpose. This strategy has helped Tata Motors Limited to significantly cut its costs of production of four wheelers.

 

Increased access to inputs of production and technical expertise

Another major opportunity that globalization has presented to the decision-makers of multi-national companies is the ability to gain access to technical expertise from other global countries (Cavusgil, Knight, & Riesenberger 2012). Because of their large size, international companies have been able to employ a pool of talented expertise from all countries across the globe. This opportunity has played a significant role in enabling these business firms to engage in the constant production of goods and the delivery of high-quality services. Tata Motors Limited has been able to hire a talented team of engineers to design, develop and manufacture their product, and this has enabled the company to produce high-quality products that meets the taste and preferences of their target clients across the globe (Tata Motors Limited 2017). This include products that are offered at cheaper prices as well as those that are more costly. Pricing has not be an issue for this company because the majority of consumer do not mind about paying high prices for high-quality products. In addition, globalization has also enabled the decision makers at Tata Motors Limited to acquire critical inputs that are used in large volume production. By gaining free access to international markets, global companies such as Tata have managed to get these production inputs that are costly or that they cannot access at the local markets (Daniels, Radebaugh, & Sullivan 2011). Tata Motors Limited has gained access to raw materials that are vital for the production of the four-wheelers from first world countries like the Germany, the US and UK. Because of the opportunities of globalization, the decision makers at Tata Motors to engage in partnership with other global manufacturers of four wheelers from these two countries, for example, the Isuzu of Japan, Ferari of Italy and Mercedes of Germany to acquire vital important raw materials as well as engineers who play an important part in the production and distribution activities.

Drawbacks of globalization to decision makers

The opportunities that are brought about by the benefits of globalization has enabled multinational companies to venture into international markets. This has helped companies such as Tata Motors Limited to increase their sales volume and expand their market share; however, globalization has also come a long with numerous drawbacks to these companies as discussed in the paragraphs below (Niu & Wang 2016).

Rivalry and tight competition from other global business firms

The decision makers have experienced a major threat resulting from the intense rivalry and stiff competition in the markets as a result of globalization. Due to globalization, there has emerged stiff competition and the availability of substitute products from other international business organizations that chose to venture into foreign markets ((Banutu-Gomez 2014). The decision makers at Tata Motors Limited are incessantly faced with the threat that is brought about by the presence of competition and substitute products from other companies. In In India and other foreign countries that Tata Motors Limited has chosen to establish itself, there are numerous international business companies that produce high-quality four wheeler automobiles that have brought about rivalry and stiff competition for Tata Motors Limited. At the global stage, Tata Motors Limited faces stiff competition from four wheeler manufacturers such as BMW, Mercedes Benz, Toyota and Isuzu.

 


Reduction of the market share

These global four wheel manufacturers have established themselves into the same foreign markets where Tata Motors Limited has also ventured. In this regard, they present a serious threat to the total market share of Tata Motors Limited because they provide products that are similar to those of Tata. Four wheel manufacturers such as BMW and Mercedes Benz supply very high-quality four wheeler products that are of high-quality than that offered by Tata Motors Limited. Therefore, three is a fierce rivalry between them and Tata Motors Limited. They also present a serious threat to the existence of Tata Motors Limited because the clients of the current century are not discouraged by the high prices that are placed on goods. Provided the product is of the desired quality, they will go ahead to purchase regardless of the price (Richardson & West 2010).

Leadership and cultural conflicts

Globalization has brought workers from different cultural backgrounds in the same place of work. This is because international companies strive to achieve diversity which is important for increased organizational output (Atsmon, Kertesz, & Vittal 2011). The differences in the culture results into differences in preferred leadership and work styles, for example, there are those workers who prefer teamwork while there are those who like to work at individual level. Including individualistic employees into a team results into conflicts and poor teamwork, hence, reduced productivity (). On the same note, the workers like teamwork are not productive on their own. There are also those who prefer transformational forms of leadership while some prefer those who embrace democratic or autocratic styles of leadership. The performance of Tata Motors Limited is impacted by cultural differences, and this is a source of threat to the decision maker who face challenges while tackling cultural differences.

Lessons that international business managers should learn in the interaction between the host and home country differences to ensure success

Meeting the needs of the consumers

The managers of international businesses should learn the importance of producing and offering products that meets the taste and preferences of the target consumers in the host country as compared to the home country (Truss, Shantz, Soane, Alfes, & Delbridge 2013). Different target groups have different tastes, and this is attributed to the difference in culture of host and home countries. The international managers of Tata Motors Limited have learned this lesson. They have successfully identified the different strategies. Manufacture cars, buses, and trucks in a manner that satisfies the taste and preferences of their target clients across the globe. Tata Motors Limited has developed a portfolio of differentiated products, for instance, four wheelers that are used for transport and personal use.

 


Differences in culture, beliefs and attitudes between home and host country

Culture is an important dimension of every society, and therefore, culture plays an important role in the successful business operation. In this regard, the ability to understand the cultural differences between the home and the host country is a key lesson that international business managers should learn to achieve success (Banutu-Gomez 2014). International business managers are required to understand the various cultural aspects in the host countries and compare them with those of the home country so as to identify strategies to business success. These include cultural practices such as the style of leadership that is preferred in the host country. A leaders inspires workers to attain the established goals and objectives within an organizational setting. In this regard, Tata Motors Limited has identified and implement the preferred style of leadership in the host countries, and this has helped the company to achieve employee engagement and increase performance (Van Den Born & Peltokorpi 2010).

Employee training

Managers of international should learn the critical role that is played by constant employee training to equip them with the work ethics and knowledge and skills to lead the business into success. According to Peng (2011), offering training is important in equipping workers with the necessary knowledge and skills to enable them to increase their productivity at the workplace. The training of workers in the host countries where Tata Motors Limited has ventured has played a vital role in the company’s outstanding performance all over the world. For example, Tata Motors train their workers across Asia and Africa to equip them with the required skills to maintain a competitive edge in the market.

Adherence to the legal requirements

International managers should learn to take into consideration the rules and regulations of business activities in the host country. These include observing the requirements such as trade tariffs, license requirements, and tax requirements in order to ensure successful business operations in the chosen country (Polesello, Amal, & Hoeltgebaum 2013). In line with these aspects Tata Motors Limited has successfully complied with all the legal requirements of operating a business in all their host countries.

Conclusion

In conclusion, the emergence of globalization has presented decision-makers in numerous ways. Tata Motors Limited as a MNC has gained access to new markets, and hence, increased the volume of its sales. The emergence of globalization has also helped Tata Motors Limited to gain access to highly qualified workers that has facilitated the manufacturing of high-quality four wheelers across the globe. It has also enabled Tata Motors Limited to gain increased access to resources and inputs for production that are not available in India. Globalization has also presented threats to the decision makers, for example, it has brought substitutes four wheelers that has negatively impacted its performance in international markets. The host and home country interactions have important lessons for the managers of international business managers. These lessons are vital for successful business venture in foreign countries. The interactions has allowed managers to learn the vital role that the difference in culture plays in successful business. According to this research, understanding the culture of the host country in relation to that of the home country helps in implementing effective business practices, which leads to successful venture. It has also taught the international managers to adhere to observe the legal requirements between the host and home countries. The interaction has also taught international managers to design their products to meet the taste and preferences of consumers.

 

Bibliography

Atsmon, Y., Kertesz, A. & Vittal, I., 2011, Is your emerging-market strategy local enough? McKinsey & Company.

Banutu-Gomez, M. B. 2014, ‘The role of culture, language, and ethics in global business’, European Scientific Journal, special edition, pp. 231-242.

Cavusgil, S. T., Knight, G. & Riesenberger, J. R. 2012, International business, The New Realities, Pearson Education Inc, Upper Saddle River, NJ.

Daniels, J. D., Radebaugh, L. H., & Sullivan, D. P. 2011, International Business Environments and Operations (13th Ed.). Prentice Hall, Upper Saddle River, NJ.

Gutierrez, B., Spencer. S. M. and Zhu, G. 2012, ‘Thinking globally, leading locally: Chinese, Indian, and Western leadership’, Cross Cultural Management, vol. 19, no. 1, pp. 67-86.

Haller, A. P. 2016, ‘Globalisation, multinational companies and emerging markets’, Ecoforum, vol. 5, no. 1, pp. 9-14.

Kumar, V. 2014, ‘Trend of FDI in India and Its Impact on Economic GROWTH’, International Journal of Science and Research (IJSR) VOL. 3, 10, pp. 638-642.

Niu, Y. & Wang, C. L. 2016. ‘Revised Unique Selling Proposition: Scale Development, Validation, and Application’, Journal of promotion management, vol. 22, vol. 6, pp. 874-    896.

Patel M. K., & Prajapati, K. D. 2014, ‘PEST analysis of two wheeler automobile company’, Asian journal of research in business and economics vol. 4, no. 4, pp. 109-118.

Peng, M. W. 2011, Global Business. (2nd Ed.). South-Western College Pub, Ohio, IL.

Polesello, D., Amal, M. & Hoeltgebaum, M. 2013. ‘Determinants of International Entry Mode Choice: A Case Study of a Brazilian Multinational’, BASE – Revista de Administraçãoe Contabilidade da Unisinos, vol. 10, no. 2, pp. 181-194.

Richardson, J. & West, M.A. 2010, Engaged work teams in Albrecht, S.L. (Ed.), in Handbook of Employee Engagement: Perspectives, Issues, Research and Practice, Edward Elgar Publishers, Cheltenham, pp. 323-340.

Talaja, A., 2012, ‘Testing VRIN framework: resource value and rareness as sources of competitive advantage and above average performance’, Management, vol. 17, no. 2, pp.          51-64.

Tata Motors, 2017. Tata Motors Company Profile, [Online] 2017. Available at: <https://www.tatamotors.com/about-us/company-profile/>

Truss, C., Shantz A., Soane, E., Alfes, K. & Delbridge, R. 2013, Employee engagement, organisational performance and individual well-being: exploring the evidence, developing the theory. The International Journal of Human Resource Management, vol. 24, no. 14, pp. 2657-2669.

Van Den Born, F., & Peltokorpi, V. 2010, ‘Language Policies and Communication in multinational companies’, Journal of Business Communication, vol. 47, no. 2, pp. 97-118.

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