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MGMT3101 Tata Group Case Study

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by

Stella Huang

on 15 October 2014

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Transcript of MGMT3101 Tata Group Case Study

Tata Group
Tata Group
Creating A Corporate Advantage
Agenda
Overview of Tata Group's Business Structure
Analysis of Current Corporate Parenting Approach
Recommendations
100+ operating companies
business sectors
communications & IT
engineering
materials
services
energy
consumer products
chemicals
operate in 100+ countries, 6 continents
employ 540, 000 people worldwide
Business Structure
Business Group
Holding Company/Companies
Company 1
Board of Directors
Board of Directors
Board of Directors
Company 2
Company 3
Tata's Business Structure
Controlling Stake
Controlling Stake
Controlling Stake
Tata Trusts
66% shareholding
Others
34% shareholding
Tata Sons Limited
Tata Industries
Tata Strategic Management Group
(
TSMG
)
Tata Interactive
Tata Services
Tata Quality Management Services
(
TQMS
)
Group Strategic Sourcing
Tata Financial Services
50% shareholding
What Approach Should Tata Group Pursue
1. Long Term Sustainable Approach
(value adding)
2. Short Term Opportunities
OR
Tata Group Value Adding Approach
long term sustainability
do you want high investments?
under the leadership of Ratan Tata
Corporate Parenting
unified look to the future (Tata brand)
defining vision and future strategies
flexible
Value Adding Approach
2 main decision bodies
developing a common identity
BEBP agreement
Group Executive Office (GEO)
Group Corporate Centre (GCC)
Brand Equity Business Promotion (BEBP
1. signatories use logo and name
2. known as Tata Enterprise
3. joint ventures
Value Adding Approach
consisted of Tata Business Excellence Model (TBEM) and Tata Code of Conduct
TBEM
show scalable improvement and increasing performance standards
Analysis
Analysis
Centralised Services
centralised services
operated on a no profit, no less basis
funded through BEBP
significant advantages across the Group
available to all Tata companies
no mandate to use services
Tata Services
Centralised Services
Provision of Financial Services
decision making related to capital raising and structure - linked to the Centre
Tata Sons involved in all financial decisions
Group companies able to leverage financial strength of the Group with help of financial Sons
One can count on financial support from the other Group companies...
Benefits of Value Adding Approach
network of firms
members benefit from:
resources
status
flexibility
access
reduced uncertainties
diversification
knowledge
costs
Rallis received funding
Tata brand reputation
freedom to choose services
services - legal, HR
Tata Sons
learning
Negatives of Corporate Parenting
potential lock-in
leakage of information
organisation/coordination
loss of short-term opportunities
loss of autonomy
adhering to a standard
pressure
all financial decisions have to be approved by Tata Sons
e.g. Tata Chemicals
brand image
Tata-ness
way of life
distinct culture
critical glue
common identity
balance between small companies and Big Fish
Are There Other Alternate Methods?
Project Prune
downside to the Tata-ness
some cost saving oppotunities present
economies of scale and scope opportunities
aim of creating commercial value for group companies
short-term opportunities
discretionary - firms didn't pursue this method
Recommendations
Macro Recommendations
Group Selection Committee:
Conglomerate Diversification
continue with a diversified portfolio of companies, which helps to mitigate risk and improve profit across the Group
occurs when there is no common relationship or relatedness between companies, such as with Tata Group
Group Selection Committee:
Prevent Sales Cannibalism
increase control over existing Tata companies that are competing in the same industry
screen potential new companies to ensure there is no industry overlap with existing Group companies
Macro Recommendations
Macro Recommendations
Group Selection Committee:
Vertical Integration & Synergies
ensure that the portfolio offers competitive inter-company synergies
i.e. vertical chain integration
the idea of Keiretsu (an informal business group) could be utilised in pursuing great integration
Micro Recommendations
Group Selection Committee:
Conglomerate Diversification
short term losses hurt smaller companies the most
Tata culture (Tata-ness) has been described as a good support network between companies
BEBP agreement = wealth distribution system
helped to support smaller Group companies
Recommendations
Micro Recommendations
TETB Surveillance
surveillance of individual companies to ensure cooperation with TETB and proper maintenance of the Tata brand
Recommendation Criticisms
Conglomerate Diversification
Small Company Support and Development
not immune to large systematic shockes
i.e. financial crises
ease of access to financial support can promote risk taking by individual companies
Recommendation Endorsement
continue with existing long-term value adding approach
also introduce proposed Group Selection Committee to facilitate:
Conglomerate Diversification
Prevent Sales Cannibalism
Vertical Integration & Synergies
Questions
Full transcript