Tata Group Global Business - Assignment Example

 Tata Group Global Business Companies have distinguished ways of functioning and running their operations. Each business has its organizational structure, which provides a clear guideline on the way to proceed and bind the members operating in the organization together. Various factors such as the industry the company is operating in, the size of the business in terms of employees and geographical distribution, and firm’s strategies influence the model of the organizational structure chosen by any company. Large and geographically distributed companies like the multinational corporations tend to have a hierarchical organizational structure, while the small companies with few employs prefer flat organizational structures. Tata Group of companies is a well established global business that continues to rapidly grow and penetrate foreign markets away from its origin in India. It has grown to be the best known global Indian brand that operates in 80 countries of the continents, avails its products and services to way above 85 countries, reaching a global population through its market seeking and global expansion (PTI, 2012). The business operates in different sectors in India and abroad, hence producing different products in the global market. It has invested heavily in steel works, motors, information technology, chemicals, consultancy firms, and beverages. The organizational structure of Tata group is rather complicated, due to its expansion abroad and company affiliates dealing in a particular industry. Nevertheless, the structure has remained quite the same on the top ranks of the company, since the centralization strategy brought about by Ratan Tata. Since Ratan Tata took leadership of the company, till his retirement in 2012 and the current president, Tata Group of companies has been headed by a common chairman to enable centralization. The Group Corporate Centre (GCC) and Group Executive Office (GEO) have been two crucial bodies involved in decision making of the Tata Group, to direct and define its business endeavours (Goldstein, 2007). It has a board that is chaired by the head of Tata group currently Mr Cyrus Mysty, who took over from Ratan Tata and consist of a CEO and a team of directors. That is just but the top executive of the conglomerate of companies. According to One World Trust, Tata group takes the form of an informal supra- organizational structure; such that it’s distinct high level corporate GEO and GCC has managing directors from Tata group companies, and allow various Tata companies to operate as separate legal entities with their own structures (n.d.). In its hierarchical structure, Tata group has different enterprises that operate in specific sectors and which also have their affiliate companies, either wholly acquired or merged with other local or foreign companies. For example, Tata Steel Company, Tata Motors, Tata Tele-Services and Tata Power among others. Each of the companies has their own shareholders and managing director, and an independent board of directors with a chairperson that are held accountable to (tataaia.com, n.d.). Similarly, each of these companies organization structure may be modified with time, depending on the number of mergers and acquisitions. Some of Tata enterprises have very committed committees that address varying issues necessary for the company. For example, departments in an enterprise could depend on audit, remuneration, ethics, and compliance committees to support their function. In 2008, some of Tata enterprises like the TSC and Tata Steel unveiled new organization structure that enhanced company integration. Focusing on the Tata Steel Group, which consist of Corus group limited and Tata steel, it has a strategy and integration committee headed by the Tata Group of companies chairman (initially Mr Ratan Tata), its hierarchical structure of management begins with the Board, managing director (M.D.), as well as the executives or directors who report to the M.D. and head specific functionalities in the Steel group. Tata Steel Group Organization Structure (Sprinters, 2010, p. 27) Each director in his or her department then leads a team of strategic business unit (SBU) heads that act towards the objective of the department. The GCC act to provide advisory services to various departments, such as finance when required to, while the GEO engages in the company by reviewing its portfolio and addressing most strategic issues the steel group enterprise may be struggling with, to make it more synergistic. However, due to the Tata Steel and Corus Group previous merge, the executives have to report to both the CEO of Chorus and M.D. of Tata Steel (Sprinters, 2010). Their complex hierarchical structure demonstrate the Tata group and individual companies’ governance, flow of information, the hierarchical decision making process and the underpinnings that keep the group functioning ,as well as how the organization works or is organised. Impact of the Organization Structure on Strategic Management of the Company Tata Group companies have risked and explored various opportunities in the global market, mainly due to the efforts of the dedicated team of directors and mangers in the top, middle, and lower levels. Although companies operate independently, they have to act in line with the vision and objectives set by the specific Tata companies’ executives. The company has been working on ensuring sustainable competitive advantages by strategically planning, differentiating its activities from its rivals, and making clear choices. With no doubt, the board of directors and the set committees in Tata companies are at the highest positions to offer leadership and guidance to the companies’ management. Their functions extend to companies’ supervision, control, and review of compliance reports to make decisions and initiate required actions. The management team sets the goals for the companies to realize, analyses the goals, and sets a standard to be referenced from time to time. In Tata steel Group, the management team set a vision of evolving into a world benchmark in corporate citizenship and value creation early 2008 (tatasteelindia.com, n.d.). The goals may differ from year to year based on external factors and current conditions in time. However, the structure provides for a clear line of hierarchical leadership, which has been enabling the employees to work towards a common goal, clearly putting the business structure a facilitator in accomplishment of organizational goals. Another factor is in making strategic decisions that affect the overall business unit. Tata Steel Group contains several Steel companies in dispersed geographical locations (e.g. in Thailand, India, U.K, Canada etc). The new organization structure has worked well to bind the companies’ employees toward a unified direction, and clearly identify who reports to whom in the organization. The general effect is the centralization up the ladder in the executives’ team, which limits complexities, but allows strategic decisions to be made by the senior head of the group. Since the merger between the Corus and Tata Steel, the new organization structure has promoted the global strategy by centralizing authority to Tata steel M.D. and Corus CEO, so that the business units around the globe report to the a common sector head from where decision can be made and the strategies to implement them. After a continuous struggle of the Corus since its acquisition, Tata Steel Group set up a committee headed by previous chairman Ratan Tata and six other executives from Tata steel and Corus (three each), to spearhead its union (Quigley, n.d.). Later, various decisions such as closure of some Europe Tata steel plants, development of an all weather strategy, promoting centralization functions through one company approach, and reorganization of sales and marketing to perform even in the hostile economic situations, were the (Tata executives and committee) higher authority’s decisions and recommended actions. The Tata steel management strategies follow the organization structure to ensure performance in organization. Impact of the Structure on Organizational Development Issues The Tata Steel organization structure established the different hierarchies that match responsibilities of different personnel, and created the distinguished levels of communication in the organization. Hence, the flow of information does not conflict, and the structure encourages productivity based the manner the entire organization is administered. The developed organization structure prevents structural flaws by ensuring effective channels of communication, so that information travels to where it is needed. Those working under specific strategic business units have to give feedback to their heads, so that it reaches the managers in the departments to be forwarded to the M.D. Communication is often vertical, but in a departmental level, information may move horizontally to enable coordination and achievement of department’s aim. Similarly, recommendations and decision made from the higher authority after discussions, such as the Tata steel group board can be conveyed down to the staff through the M.D., then to the directors of individual departments, without communication breakdown. The form of performance prevents responsibility lapses and improves efficiency in production. In the overall performance of Tata steel Group over 2008 though Tata steel in Europe struggled in the economic crisis, South East Asia group indicated considerable improvement in its EBIDTA and turnover, which is an indication of effective management felt in the broad member companies (tatasteel.com, n.d.). The business structure facilitated the spread of good managerial influence to the group’s companies that focused on improving quality and productivity at a lower cost. The European Tata steel assets have been operating at looses worth of millions of Euros since its acquisition, mainly due to the fallen demand and weak macroeconomic environment. The company’s organization has allowed for business expansion, but can also create room to relinquish itself of the burden arising from failing enterprises. After 2007, Tata steel was able to make positive cash flow in investments worth Rs 35, 633crores against Rs 72 lakhs (Dimpisanghavi, n.d.). The investment was well aligned with the globalization strategy, linked with the new business organization. On the other hand, the different levels of management in the companies merge to provide an advantage of a large pool of talented management individuals, who steer the companies’ growth and employees’ motivation. In the recent years, majority of Tata group companies have developed flexible organization structures to create room for creativity, empowerment, and expansions through projects. Continued improvement strategy in Tata steel group has had projects launch, such as YATRA in Tata steel Thailand, and brown field expansion project in Tata steel India among others. Flexible structures open to diversity allow differentiation and stimulate innovation at the organization level. In 2010, Tata steel managed to clinch an award for its innovative technology, developed to deal effectively with the slime the company produced (tata.com, 2010). The bureaucracy developed in the organization structure works well with the new technologies created through innovation, and encourages the organization to train its staff, so that the companies can benefit more from their ideas. The structure is well established to increase Tata Steel Group performance efficiency, but as the group grows and expand internationally, a strong and flexible corporate structure must be designed to sustain its corporate productivity. Impact of the Organization Structure on the Integration of the Functional Strategies of the Business The integration process of the functional strategies brings together different outputs from each functional area. Hence, the profits and looses of the company are generated from the performance of the functional units, as structured in the organization. Each functional area serves a unique purpose to compliment the other functional areas that generally contribute to accomplishing the general company mission. Based on the arrangement of Tata Steel functional areas, it means the failure of one department can hence be felt by the other functional areas, thus interfering with the general productivity of the individual company. Often, the cross functional teams are formed to execute the integration plan. However, sometimes the integration attempts fail productivity, due to the structural inefficiencies. The organization structure of Tata Steel has demonstrates two phases of reality; satisfactory performances may be passed up to the senior management team to benefit the entire company, while unsatisfying plans for the business area may be communicated down to the SBU. The SBU’s would then work on the laid strategies recommended by its superior management. For example, the problem of European Tata Steel operations emerged from a single functional area that failed to pass the high cost of raw material to its end consumer, hence affected other departments and the company, due to the high cost that went unregulated. Supportive technology deployment across the functional areas also supports integration. Tata Steel Group evolution and integration of procurement functions are enabled by the supplier relationship management (SRM), and the instituted group IT roadmap (Gerretse, 2013). The finance strategies have to affect the human resources and Research and Development, such that the plans for the activities held in each functional area have to support those of others to achieve the main aim. Impact of the Organization Structure on the Corporate Culture of the Business Tata group of companies is a mixture of family and other private shareholding individuals and companies. The business organization of Tata companies influences the selection of the employees, who work in the companies and the management structure, which directly links to the corporate culture. According to Mitchell, the industry the company is involved with and the ownership structure of the company elaborates more on its corporate culture (2009). The corporation organization chart reveals less autonomy in decision making, due to the highly structured culture. The managing director and the CEOs may be in charge of the Steel group, but certain strategic decisions require longer time, due to the involvement of other directors, boards, or committees to negotiate. Tata Consultancy Service and steel companies seek for talented and trained individuals to fit the distinctive roles of the organization. These companies have transformed themselves in the drive for globalization, by providing ways to fit an individual’s skills and competencies into their organizational processes and routines. The business organization also promotes external social development projects on SC/ST communities, from which a percentage of its workforce are from (Rodrigues, 2010). They hire or train their own personnel and recognize diversity in their work places, to develop their own professionals in the fields. Challenges Facing the Company Tata Group as a global company has to be able to handle and solve wide range of problems within India and abroad, where the companies are established, and where it exports or imports to. Its business structure enables various solutions to the challenges facing member companies, but it has also proved to be an obstacle in addressing certain sensitive issues in the management and companies operations. One of the greatest challenges for the Tata group is the management of a large portfolio; close to a hundred companies that require attention to offer sustainable solutions for effective performance (Mukherji, Bhansali and Das, n.d.). The groups of companies continue to internationalize through new mergers and acquisitions. Over the last decade, the company has tried to streamline its operations, investing and divesting in particular sectors to align itself with potential markets and business objectives. However, business expansions come with their benefits and difficulties, because some are risky and failing businesses seeking to be part of the Tata Group brand. Managing them requires dedication of worthy company resources and close monitoring, which may interfere with the performance of sustainable and influential Tata companies. This is what the current president of Tata group, its board, GCC, GEO and top executives have to focus on, when dealing with the conglomerates of Tata Group companies. The second challenge for individual companies’ leadership and Tata group top management is the need to improve the productivity of dominant and profitable, but sinking businesses. According to Pannu and Singh, Ratan Tata’s successor would face the challenge of revving up flagship companies like the Tata motor and Steel Groups that have lost substantial market shares (2013). Tata steel group has persistently had problems in its management and financial areas that seem to remain adamant from the past decade, and are now passed on to the new leadership. Tata Steel group investment abroad as part of its recent expansion strategy has enabled the group to realise its opportunities and threats, arising from the internal business organization and external environmental factors. For the Corus Group limited in Europe, the company struggles reflect on its management changes that have occurred severally since the Tata merge. According to Dutt, though Tata Steel acquired Corus, its technical capabilities must have been exaggerated to give the image of good performance, not to mention that patterns of management changes were driven by individuals, causing Tata steel Europe to have been passed along three CEOs since its acquisition (2013). The short term changes are a result of conflicts, interference, and lack of confidence to the assigned leaders, preventing the company from realising their potential impacts. Thirdly, Tata group debt has been on the rise because most acquisitions have been made at a premium payment, to ward off competitive bidders. Their outstanding foreign currency convertible bonds is approximately over $1 billion, and risks ending up into debts if at maturity, the share price falls below the conversion price. Currently, each of the Tata enterprises has outstanding bonds worth millions. Similarly, the financial health of certain Tata group enterprises is deteriorating, due lack of market to steer demand from the enterprises. Tata Motors, Tata Steel and Tata Teleservices profits continue to decline in the presence of sales and demand decrease. The fourth factor is the shortage of raw materials and increasing costs of production. For example, Tata Steel Europe opted to purchase its raw material requirements back in 2009, which increased the cost of production and affected the supply of its products, especially in the economic downturn during the time. Lack of such resources could limit its future competitive advantage, due to the high cost. Fifth, expansion in any business means an additional number of employees to manage, which requires tolerance and experience. There is a subtle rift between the international employees and Indian ones that needs to be addressed by the management of the companies (Fontanella-Khan, 2011). Employees are vital to Tata group, but sensitive to any arrogance in their service. Another challenge for the HR s is attracting and maintaining requisite talents, in order to utilize their skills to solve the existing challenges in Tata industries. Reference List Creating Value for the Community. n.d. 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