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Growth Strategies Formulated By Tata Group

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Question:

Discuss About The Growth Strategies Formulated By Tata Group?

 

Answer:

Introduction

This case study will focus on the growth strategies of Tata, which is the largest conglomerate in India. The growth strategies formulated by Tata Group can be viewed in two dimensions; inorganic and organic growth strategies as pointed out by Schiele (2014, p. 106). However, the organic growth strategies as observed have dominated over inorganic growth strategies. The organic growth in Tata Group includes upgrade of technology, innovation, and product development. These growth strategies have also been the main contributing factor in the establishment of other substituent industries such as; airlines, steel, hospitality, and power. In 1991, when Ratan Tata took over as the Cooperate account chairman, there was a restructure of the business which was marked by a global expansion as asserted by Back, Parboteeah, and Nam (2016, p. 249). The first inorganic growth was experienced in the year 2000 after Tata Tea bought Tetley which is a company based in the UK. One of these acquisitions is the move taken by Tata Motors in the year 2008 to buy Land Rover and Jaguar. A similar incidence was seen in the year 2007 where Tata Steel acquired Corus. Though there has been a rapid increase in the revenue registered by the Tata Group, mainly because of inorganic growth, integration, and management challenges have been evident in the Companies’ portfolio.

 

Portfolio, Integrated Organization Perspective, and Competitiveness

The integration process that brings about competitiveness involves the efficiency in the distribution of a product from a manufacturer to the final user who is the customer for example as asserted by Thite, Wilkinson, Budhwar, and Mathews (2016, p. 435). To deal with such competitiveness, the Tata steel company had to improve the quality of their goods and services, for instance, they put rail Wagon after doing away with Wooden saddles which promoted faster and easier steel coils transportation. There was also a technique developed to help in cooling the blast furnace which was done in Jamshedpur. To deal with competition from Chinese and European Companies, the Tata Company concentrated on the introduction of new products, value addition of products, diversification, reduction of costs, and development of operational and commercial inventions as eluded by Kotabe and Kothari (2016, p. 729). By increasing the volume of exports and improving the product mix, the Tata Group has stood out in the midst of stiff competition.

There several demerits and merits that are related to the application of portfolio organization perspectives. One of the advantages is the reduction of risk. The management can also reduce the cost of their projects through resource maximization brought by portfolio perspective management. An effective decision-making process can also be initiated, and this speeds up a project being undertaken since the management can multitask the current and past initiatives. The major demerit of portfolio organization perspective is the difficulty experienced by the company in bringing positive change into the business. There are several advantages and disadvantages of integrated organization perspective as reported by Jensen and Petersen (2014, p. 557). The advantages are; lower cost of infrastructure and efficient decision making which is promoted by openness in sharing of ideas and information.

In the case study of Tata steel, it was noted that the company had saved the cost incurred on labor and this reduction in cost saw them spend $ 140 compared to the period before implementing the integrated perspective when they spent $200 for each ton, labor cost. The carrying cost of inventory was also reduced to Rs155 from the previous cost of Rs190. After implementation of the integrated perspective, there was an overall save on the cost incurred by the Tata Steel and the cost saved was about Rs33. In my point of view, it is possible for Tata to adopt both perspectives simultaneously because by doing so they will be able to utilize the available systems to the maximum.

 

Business Model and Technological Innovation through Strategic alliances M & As

The acquisition of Tata steel company and Corus which is located in the UK created the necessity of collaboration to facilitate coordination of employees working in different areas. There was, therefore, some effort put by Tata to adopt Microsoft SharePoint which would help in asset management by the employees who were working for different organizations all over the world. With the adoption of Microsoft SharePoint, most employees are using MYSQL database in the storage of files and sharing of programs. This platform did not give a lasting solution since a large number of employees and stored data demanded a strong backup.

The solution to this problem was found when the company decided to adopt a strong backup called DocAve backup and restore which helped in the management of the large number of workers and data stored in the database as asserted by Ghezzi (2015, p. 346). There are recurring challenges that have continued to affect the Tata steel company. The cause of these challenges is; fluctuating security cost and capacity expansion which is excessive. This was the scapegoat of the global crisis that was experienced in the year 2009 which saw a drastic decrease in the demand for steel all over the world. To recover from this crisis, the Tata steel company had to minimize their cost of operation and also the cost of their assets.

There was growth experienced by some countries such as China in the year 2009. This growth was marked by the increase in steel demand which in turn increased the price of raw materials like iron and scrap (Eisert 2014, p. 269). This was a big hit on Tata Group, and they had to increase their source of raw materials so as to deal with this issue. The increase in the level of raw materials obtained by the Tata Group increased especially after they signed a contract with Mozambique Benga coal project. It led to an increase in the demand for coal not only locally but even in the global market. The mining processes affected the efficiency of operations directly. In the year 2015, the coal bill was passed, and this led to the coal mines remaining closed (De Beune & Sels 2016, p. 604). It  interrupted the day-to-day activities undertaken by the company. However, this did not stop Tata Company from going on with their extraction process since they negotiated with the state government so that they could be allowed to exploit the raw materials and lease the mines. This would increase their production level by 3%. In my opinion, the Tata Group of companies has adequate resources and capability to integrate digital and mobile technologies so as to achieve the common goal.

In the year 2014, the PraveshDoors were launched at Contai. The Pravesh door developed by the Tata was made from a combination of wood and steel which was an improvement in the quality to attract many customers. The special features with the Pravesh doors include; light weight, termite proof, resilience to rust and difference in colors and sizes, resistance to fire and crack. In the Pravesh doors, steel plays the role of strengthening while the wood is for aesthetic value. There is no maintenance cost incurred by the Pravesh doors and they are pest-free. What makes the Pravesh Doors most popular is their ease of installation as asserted by Buckley (2017, p. 1). The Doors are also user-friendly through their favorable prices, high quality, security, and durability.

 Competition in the Blue Ocean has no clearly defined rules and boundaries in the market. Adequate resources and detailed analysis are required for a company to create a strategy in Blue Ocean as reported by Back (2014, p. 390). Most companies consider several factors when creating a Blue Ocean strategy including; the level of innovation, technology, shares available in the market, market prices and globalization. The blue ocean strategy is purposely developed to eliminate a threatening competition.

Governance is the process of planning and controlling all the resources in a company to achieve an objective (Trong 2012, p. 547). Therefore, corporate governance is set rules, activities, and processes through which are used to manage a business. Corporate responsibility is more concerned with the policies governing a group of shareholders, the government, and the societies (Allen et al. 2016). In other words, corporate social responsibility is essential to both the business and the community, an aspect that helps in creating harmony and corporation between the community and the business.

Tata corporate company is in India. It came to an establishment in 1962. It consists of enterprises that operations in over seven 80 countries in the world. The main products of Tata are steel like iron, soft iron, cast iron, and alloys (Mumford et al., 2013, p. 90). These products are exported to many countries making the greatest steel producing in the globe. Tata corporate has endeavored in good corporate governance for an extended period. These were achievable through good leadership and proper management style.

 

Leadership skills that led to the firm use of CSR in the company

Innovativeness resulted in the creation of the Lifeline Express train, a health train that is governed by the Impact India Foundation (Trong 2012, p. 548). The train was more of a mobile hospital and mainly serves a large number of poor people in the country. The main aim of this train was to assist the disabled individuals who were unable to access medical facilities in the remote areas. The primary objective was to create awareness among the needy people of how to help themselves and one another. At present, the trains are two but operate under the Lifeline Express, a project that has been adopted by countries like China and Bangladesh.

Motivational skills- Jamshedji insisted that quality and innovation are mutually inclusive. Jamshedji believed in the positive effect towards the staffs. According to Jamshedji, for any successful labor policy, the workers must feel wanted by the company. Jamshedji continuously believed in the positive Pygmalion effect which led to a significant expansion of the Tata group with the perticipation of all the motivated and inspired workers. Therefore, Jamshedji dwelt more on Human Resources Department.

Compassionate and supportive skills- Jamshedji believed in improving the lives of other people through the adoption of various skills focused on projects such as creating HIV/AIDS awareness as recommended by Tilt (2016). Tata Corporation, in conjunction with State Aids Control Society, organized a nationwide campaign to raise awareness to the community. The project was aimed to fight against HIV/AIDs by reaching across to every corner of the country. Tata steel has also created Community Care Center for the people living with HIV/AIDS. Through this community, PLWHIV were able to access counseling services.

Responsibility skills- the responsibility skills of Jamshedji led to the initiation of Green faction. It is a project that aimed at creating a greener future in India (Allen et al. 2016, p. 89). Tata steels together with Wildlife Federation and National Geographic and through radio stations, on several occasions, initiated biodiversity among the Indians. Greenfection aimed at spreading the awareness of a greener environment. The challenges helped in protecting the environment. At schools, the help of Tata Steel and World Life Federation led to the development of clubs that participate in tree planting campaigns within the area. As at present, the environment is in a state of irreversible damage unlike before.

Visionary skills led Jamshedji, to create educational foundations. Through the foundations, the company was able to give back to the society through offering scholarships to the best needy students (Chopra 2013). The academic course gained by the students help the seek employment within the country and the global market. The Tata corporate company through the foundation known as Sumant Moolgaokar Development Foundation (SMDF) came up and with the flagship initiative. The initiative is known as 'Amrutdhara' aimed at providing access to clean drinking water to the vulnerable, needy societies since the inception of this project a total of 330 drinking water projects have come to the completion aid large number of lives.

Nationalist skills- Jamshedji was an industrial revolution. Chopra (2013) concluded that the economic self-sufficiency and political independence are mutually dependent hence created three essential elements: the steel basis of heavy industry, the hydro electric power that gave the cheapest energy to be generated and finally technical education.

 

Personal Reflection

This case study will focus on the growth strategies of Tata, which is the largest conglomerate in India. The growth strategies formulated by Tata Group can be viewed in two dimensions; inorganic and organic growth strategies from the case study, I have come to learn that all manufacturing companies considered being global, share certain principles and operation strategies that make them stand out as compared to other competitors. These include coordination, control, compatibility, and configuration among other essential management styles. However, there are several aspects that can affect the successful operation of such organization hence calling for effective evaluation. The challenges facing such organizations are often professionally handled so as to maintain a positive business legacy. For instance, the alliances formed by different companies are for the mutual benefit and the benefit of the entire society. These alliances may take the form of acquisition or mergers. There is a management board employed to ensure that the companies’ goals are achieved, and the employees are treated properly.

It is evident that Tata Steel Corporation came to be the world’s successful steel manufacturing company as a result of the excellent leadership skills of the founder as well as the management. The excellent leadership skills created good team work among the motivated workers, an aspect that enabled them to meet their professional objectives as well as those of the company. The firm CSR aided the success of the initiations and implementations of all the projects. Tata Steel as it strives to be a world steel producing company is also committed to protecting the environment. Its main goal is to reduce carbon dioxide emitted during the production to less than 1.7 tonnes per liquid tone of the steel.

The acquisition of Tata steel company and Corus which is located in the UK created the necessity of collaboration to facilitate coordination of employees working in different areas. There was, therefore, some effort put by Tata to adopt Microsoft SharePoint which would help in asset management by the employees who were working for different organizations all over the world. With the strategies as mentioned earlier, it is evident that the understanding of the global steel manufacturing market has stiff competition. To remain competitive in such a business environment, it is necessary that strategic alliance, corporate leadership, and M$As the need to be adopted. In doing so, companies can ensure that they sustain growth through effective and relevant practices and policies that will work in line with the set objectives. 

 

References

Allen, M. & Craig, C. 2016. Rethinking corporate social responsibility in the age of climate change: a communication perspective. International Journal of Corporate Social Responsibility, 1(1).

Back, Y., Parboteeah, K.P. and Nam, D.I., 2014. Innovation in emerging markets: The role of management consulting firms. Journal of International Management, 20(4), pp.390-405.

Buckley, P.J., 2017. Internalisation Theory and Outward Direct Investment by Emerging Market Multinationals. Management International Review, pp.1-30.

Chopra, A. & Marriya, S. 2013. Corporate Social Responsibility and Education in India. Issues and Ideas in Education, 1(1), pp.13-22.

De Beule, F. & Sels, A., 2016. Do innovative emerging market cross-border acquirers create more shareholder value? Evidence from India. International Business Review, 25(2), pp.604-617.

Eisert, U., 2014. SAP: Bringing Economic Viability to the Front End of Innovation. In Management of the Fuzzy Front End of Innovation (pp. 269-273). Springer International Publishing.

Ghezzi, A., Cortimiglia, M.N. & Frank, A.G., 2015. Strategy and business model design in dynamic telecommunications industries: A study on Italian mobile network operators. Technological Forecasting and Social Change, 90, pp.346-354.

Jensen, P.D.. & Petersen, B., 2014. Value creation logics and internationalization of service firms. International Marketing Review, 31(6), pp.557-575.

Kotabe, M. & Kothari, T., 2016. Emerging market multinational companies’ evolutionary paths to building a competitive advantage from emerging markets to developed countries. Journal of World Business, 51(5), pp.729-743.

Mumford, M., Todd, E., Higgs, C. & McIntosh, T. 2017. Cognitive skills and leadership performance: The nine critical skills. The Leadership Quarterly, 28(1), pp.24-39.

Narula, R., Narula, R., Kodiyat, T.P. and Kodiyat, T.P., 2016. How weaknesses in home country location advantages can constrain EMNE growth: The example of India. Multinational Business Review, 24(3), pp.249-278.

 Ranganadhan, S. 2012. Corporate Social Responsibility in Rural India. International Journal of Scientific Research, 3(8), pp.200-201.

Schiele, H., Harms, R. and Banerjee, S., 2014. A national competitiveness-based portfolio approach for international strategic management: illustrated with the case of the TATA industries. European Journal of International Management 11, 8(1), pp.106-125.

Thite, M., Wilkinson, A., Budhwar, P. and Mathews, J.A., 2016. Internationalization of emerging Indian multinationals: Linkage, leverage and learning (LLL) perspective. International Business Review, 25(1), pp.435-443.

Tilt, C. 2016. Corporate social responsibility research: the importance of context. International Journal of Corporate Social Responsibility, 1(1).

Trong, L. 2012. Corporate social responsibility, ethics, and corporate governance. Social Responsibility Journal, 8(4), pp.547-560.

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