International Environmental Analysis of Tata Group - Assignment Example

?INTERNATIONAL ENVIRONMENTAL ANALYSIS: A CASE STUDY OF TATA GROUP Month, Year Introduction The Tata Group which isan Indian corporation based in Mumbai has spread its wings into foreign markets. Its operations in motor vehicle, ICT, steel and tea have succeeded due to proper management and application of appropriate corporate strategies. The internationalization of Emerging Economy Multinational Corporations (EMNCs) therefore is congruent to proper management of business activities within value chains. This paper gives a critical PEST and SWOT analysis of the Tata Group. Moreover, the internalization of EMNCs has been discussed exhaustively in relation to Porter’s model of the value chain. The implication of internalization of the Tata Group on Europe has also been explained in this paper. The Tata Group The Tata Group is a multinational corporation from India with its headquarters being in Mumbai. In India, the Tata Group is among the biggest companies. This group has a large annual revenue and extensive market capitalization. The investment of the company includes the ICT sector, materials, energy, engineering, services, chemicals, and consumer products. According to Pandit (2005, p. 61), the multinational company has extended its arms across the world with its operations covering over 80 countries. The company is an active exporter of goods and services to many countries across the six continents of the world. This corporation has more than 144 subsidiaries and companies, which include Tata Steel, Tata Technologies, Tata Motors, Tata Tea, Titan Industries, Tata Sons and Tata Teleservices. Sen (2009, p 31) says that the Corporation is reputable in the world because it has financed and established many institutions and funded research initiatives within India and across the world. The corporation gets more than two thirds of its revenue from countries outside India and therefore this demonstrates its international expansion. Tata Group SWOT Analysis The vision of the Tata Group is to improve the quality of life. The company’s strategies facilitate the achievement of its vision. Taylor (2011, p. 86) says that the strategies of the company are designed to enable the corporation overcome its weaknesses and make maximum utilization of the opportunities available within the local and international markets. Capabilities and resources are the main strengths of the Tata Group. The resources of the corporation are the capable employees and the raw materials, which give it its business capabilities. New markets, acquisitions, and exports are the business opportunities of the corporation. The weaknesses, which the corporation aims to overcome, include the macro environment, innovation of its value chain and distribution. To allow the company serve the local and international market effectively with quality services and products, overcoming its weaknesses is inevitable. Furthermore, the Tata Group needs to provide goods and services at reasonable prices so that it will not lose its loyal customers. Sen (2009, p. 42) explains that the mergers of the corporation with global companies and its internationalization have led to local threats such as competition. However, the international strategy of the corporation is part of its strategic plan, which does not compromise the need to achieve its essential goals within the local market. Taylor (2011, p.91) asserts that as a way of expanding its business internationally, the Tata Group uses the corporate strategy of mergers and acquisitions. This is an opportunity in the international market, which the company utilizes to overcome its weaknesses. For example, the Tata Group acquires companies in the steel industry so that it would get raw materials at lower prices to enable it serve the automobile industry with low steel prices. This will enable the group to provide its customers with value added and low price products as a way of overcoming the competition in the market. Through the mergers and acquisition of the steel companies, the group is at apposition to overcome the weakness it has on distribution of its products. This is because distribution of steel leads to high costs associated with exportation. The aim of the company is to acquire raw materials near its manufacturing plants. Sen (2009, p. 44) says that this could only be possible through mergers and acquisition of various companies across the world. The Tata group uses its long presence in the market as a strength, which enables it to enter new markets authoritatively. For example, the group acquired the Corus Steel and the Tetley Group, which are located within the United Kingdom. Through this acquisitions and mergers, the Tata Group is likely to obtain a larger portion of the United Kingdom market share. Pandit (2005, p. 65), demonstrates that the stakeholders of the steel industry within the UK are therefore likely to suffer from stiff completion due to the dominance of the Tata Group. Furthermore, the corporate strategy of the Tata Group will lead to the access of the raw materials within the UK with its growing dominance in various sectors. The group also uses appropriate business strategies to help it access suppliers of raw materials for its manufacturing industries. Tata Group PESTEL Analysis The political factor is important to the Tata Group because its runs its operations within a wide range of countries. This is because the political climate within the nations in which the companies of the corporation operate is likely to implicate on the corporate functions of the group. Moreover, the legal framework of the countries in which the group runs its business affects the business. Pandit (2005, p. 67) explains that the laws of different countries on trade, investment, growth and commerce vary. Their respective governments enforce these laws. This shows that the political and legal factors influence the Tata Group. The success of the local markets in countries where the group operates will influence the regulations of the local authorities on trade functions. The Tata Group should consider the political climates and legal frameworks in its strategic plans so that the corporation is protected by the prevailing political and economic policies of various governments. Taylor (2011, p. 89) illustrates that the Tata Group regulates and controls its international operations through its headquarters in Mumbai. The regulation of the international manufacturing companies by the company’s management aims at ensuring that the group obeys the labor laws within various countries. In addition, it is important for the company to comply with the changing political climate in various countries so that its operations do not go against the political policies and the legal regulations and guidelines of the countries in which the group operates. According to Taylor (2011, p. 87), the Tata group’s business functions are carried out with an international business perspective. At the same time, the Group focuses specific markets within the international economic sectors. These conditions illustrate that the Group is not immune to the implications of the world economy on its overall success. The joint ventures of the Tata Group enable it to learn the economic environments of the various regions of the world. Tata Motors for example uses the joint venture corporate strategy to help it adapt to the changing economies of the automotive industry. Because of the internationalization of the Tata Group, it obtains its resources from different regions globally. As a result, the economic factors, which influence resources directly, affect the group. The variations in the prices of steel and aluminum are some of the economic factors, which affect the business operations of the Tata Group. Pandit (2005, p. 62) asserts that the shifts in world currencies and the varying exchange rates have an impact on the business performance of the Tata Group. As a result, the corporation must watch the fluctuation of world currencies because they influence the prices of its vehicles. The exchange rate of world economies affects the profitability of the Tata Group. The value of the US dollar and the Euro in relation to the Indian Rupee therefore is important especially for the companies of the group, which operate locally within India. The economic influence of the currency on the Tata Group is illustrated by its implication on the prosperity of the capital investments of the group in different areas of the world. The social factor in the operations of the Tata Group is not to be overlooked. This is because the opinions, beliefs, and attitudes of the customers and stakeholders of the Tata Group companies affect its performance. In addition, the business culture of the human resources of the group influences its productivity and quality of service. Sen (2009, p. 45) asserts that because of the impact of the social factor on the success of the group, integration is the business strategy used by the group in its acquisitions. This is opposed to the separation technique used by some companies in their business mergers. Through integration, the Tata Group companies are allowed to understand the social environment in which they operate. The acquisition of the Korean Daewoo Commercial Vehicles Company by the Tata group in 2004 for example used the integration approach. As a result, the Korean management did the group continued to apply the global marketing of the company’s car models in the same way as it. Sen (2009, p. 33) emphasizes that the technology factor is considered by the Tata Group as shown by its value for the consumer needs. Tata Motors has engineers and technology experts who research on innovation of its car models to meet the technology needs of the users. For example, the design of sports vehicles by the company uses up to date technology because of the growth in the motor vehicle technology. This is a measure used by the group to allow it stay in business. The technologies used by the group are aimed at solving the economic problems in the industry such as increasing prices of oil. The group therefore values the global trends in technology so that it would adapt and thus remain competitive within the various sectors it operates in especially the Information and Communication industry. The Tata Group makes this possible through investment on research and development. Internationalization of Tata Group The Emerging Economy Multinational Corporations (EMNCs) such as the Tata Group have been internationalized due to their strategic business strategies especially in their value chain. According to Sen (2009, p 32), the Tata Group has been international oriented in its business expansion strategies. In 1907, the Tata Group established the Tata Limited in London. The international company of the Tata group in London thus acted as the representative of the group within Europe. Moreover, the Tata Incorporated demonstrates the expansion of the Tata group in America, which is a representative of the group based in New York. Taylor (2011, p. 92) says that the internationalization of EMNCs is based on the concept of business value chain. The Tata Group for example is a system with many subsystems. The group is the main system with its constituent companies, subsidiaries, and agents acting as the subsystems. The Porter’s values chain illustrates that an organization is a system with subsystems, which are comprised of inputs, outputs, and the transformation processes, which convert the inputs into the subsequent outputs. The processing of business operations by EMNCs such as labor, materials, money, buildings, equipment, land, management, and administration determines their success in terms of profitability. The success of the EMNCs leads to their expansion into the international market and this is determined by the extent to which business costs impact on its profits. Figure 1: Porter's Value Chain Most EMNCs engage in processing activities which aim at transforming inputs into meaningful outputs as explained by Singh (2011, p. 142). The success of the EMNCs is thus congruent to activities, which transform inputs into outputs. According to Sheehan & Foss (2009, p. 243), Porter’s value chain the primary activities of business operations include inbound logistics, business operations, outbound logistics, sales and marketing and services. The internationalization of the EMNCs is facilitated by their inbound logistics, which include effective relationships with company suppliers across the world. This helps the companies to efficiently acquire, store and send inputs into the transformation processes. The Tata Group for example has succeeded in its international business due to solid relationships with its suppliers across the world. This has therefore facilitated the acquisition of raw materials, storage and distribution to the production plants. The products and services of EMNCs are the operations of the companies, which determine their success in international markets. The goods and products of companies, which aim at internationalizing the operations, should therefore meet international standards. Sheehan & Foss (2009, p. 254), adds that the success of a company’s expansion into the international market is made possible through customization of its goods and services so that they meet the local needs of the societies in which they operate. The outbound logistics of EMNCs in collection, storage distribution of their output must be efficient so that the high international demand for goods and services is effectively met. Singh (2011, p. 161) illustrates that sales and marketing is an important strategy of EMNCs which determines their internationalization. Companies must be able to invest in the promotion and advertisement of their products and services across the world if their internationalization is to be achieved. Moreover, the service of companies as a primary activity include serving clients after the products have been sold or after delivery. The Tata Motors for example provides after sell services to clients of its car models as a primary business activity as a way of promoting itself. Ala (2010, p. 195) says that the company activities which enhance the internationalization of EMNCs include procurement of resources, proper management of staff, and application of innovative technology and use of appropriate infrastructure. The Tata Technologies for example has grown into the international market due to its value for modern technology. Moreover, the Tata Group as a whole uses modern hardware and business applications in enhancing its business activities. The Tata group has also been able to grow into international business due to its good management of human resources through proper training, compensation, acquiring, and motivation of its personnel. Implications of Tata Internationalization The Tata Group has committed itself to various responsibilities within the societies of it operations. The investment of the Tata Group in the United Kingdom has led to economic and social development in the region. However there are negative implications of the Tata Group’s entry into the European market as illustrated by Taylor (2011, p. 88). Stakeholders in the motor industry have faced stiff competition from the Tata Motors. In addition, the acquisition and mergers of the Tata Group with European companies has caused increased dominance of the group in the UK. This is likely to result into the control of the suppliers of raw materials by the group. The implication of the Tata Group on the stakeholders of telecommunication services within Europe is seen in the operation of the Tata Consultancy Services (TCS). According to Pandit (2005, p. 66), the company has dominated telecommunication market in Europe. The market share in this industry has been taken by the Tata group because internet and telephone services provided by the TSC serve over two million customers in the United Kingdom. The presence of Tata Group in the UK also acts as learning for European industries especially in the steel industry in which Tata Steel has a reputation of admirable technical skills. Conclusion The Tata Group has grown into the international market through its corporate strategies of expanding its business operations. The company has invested in various sectors of world economies by utilization of its strengths and the opportunities in various markets. Because of its global reach, the legal and political framework has affected of its operations. The internationalization of Emerging Economy Multinational Corporations (EMNCs) is due to the application of various strategies to promote their growth. The Porter’s value chain for example is used by EMNCs as a model for growth and hence business success. The implications of the internationalization in Europe include its influence on the supply or raw materials, competition and market share in various sectors. References Ala, C 2010, "Multinational Companies from Emerging Economies: Composition, Conceptualization and Direction in the Global Economy", Labor Capital and Society, Vol. 43, no. 1, pp. 195-197. Pandit, R 2005, 'What's next for Tata Group: An interview with its chairman', Mckinsey Quarterly, 4, pp. 60-69 Sen, S 2009, "Tata Group: Transforming the Sleeping Elephant", IUP Journal of Business Strategy, Vol. 6, no. 1, pp. 31-45. Singh, N. 2011, "Emerging Economy Multinationals: the Role of Business Groups", Economics, Management and Financial Markets, vol. 6, no. 1, pp. 142-181. Sheehan, N. & Foss, N. 2009, "Exploring the roots of Porter's activity-based view", Journal of Strategy and Management, Vol. 2, no. 3, pp. 240-260 Taylor, I 2011, 'Tata Takes on the World Building an Auto Empire in India', Fortune, 163, 6, Pp. 86-92 Read More