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TATA Group

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Wong Shu Wen

on 9 September 2015

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Transcript of TATA Group

TATA Group
Indian conglomerate headquartered -
Mumbai
Encompasses several primary business sectors:
chemicals, consumer products, energy, engineering, information systems, materials, and services.
Pioneers and leaders in fields ranging from crop protection and nutrition to fibre optic communication systems, from drug discovery and development to supercomputing technology and e-commerce, and from personal armour to personalised jewellery.
2013-2014 financial revenue:
$103.27 billion

Source: (The Economic Times, 2015)
Discuss how does TATA Group create value by using a diversification strategy?
Adding new business units producing
new products
and
services

separated
from the existing core business.

How diversification strategy creates value for TATA group?
What environmental factors that influence TATA Group to design TATA NANO ?
1. Inflation of oil prices (economic)

2. High demand for cheaper alternatives (demographics)

3. Competition
Evaluate the effectiveness of TATA Motor's corporate-level strategy that the company used to protect its market leadership in mini vehicle segment.
Corporate-level strategy :

Actions taken by a firm to gain a competitive advantage by selecting and managing a group of different businesses competing in different product markets.

To achieve
goals
,
objectives
,
plans
or
policies
(Beard & Dess, 1981).

Generally are for large organization (Aykan, Aksoylu & Sommez, 2013)
Which corporate strategy does TATA Motors used?
References
THANK
YOU

TATA Group
Wei Wen
Shu Wen
Willy

97% of the parts are locally sourced (cheap indian labour market & potential skilled workers)
For instance: Tata Steel
Vertical integration
Acquisition
of
customers/suppliers
.

Involves variety decisions - provide goods/services
in-house
- purchase from
outsiders
(Harringan, 1985)
Taper integration
Horizontal Integration
Acquisition of Jaguar & Land Rover
Invest outside of the Asia zone
Target not only the middle class but the luxury automobiles market as well
Acquisition of Korean truck division [Daewoo Commercial Vehicle Company]
- strong potential of export
- market shares/profits
- art of doing international business
- different work experiences (culture, language, management practices)
Cars and trucks (manufacture in different factories)
Related Diversification
Market development
Diversification
Acquiring suppliers or customers (vertical integration)
Defensive / offensive strategies
Acquiring competitors (horizontal integration)
Market development by entering different geographic markets
Jamsedji Tata
Related Diversification
Unrelated Diversification
Adding
similar
or related product and service line to an existing core business.
Related and Unrelated diversification
Foundation (1868-1931)
Textile industry (1874)
The Central India Spinning, Weaving and Manufacturing Company is set up.
Iron and steel industry (1907)
Tata Steel is established to set up India's first iron and steel plant in Jamshedpur.
Education and Training (1911)
The Indian Institute of Science is established in Bangalore to serve as a centre for advanced learning.
Consolidation (1932-1989)
Chemicals Industry (1939)
Tata Chemicals, now the largest producer of soda ash in the country, is established
Engineering Sector (1945)
Tata Engineering and Locomotive Company is established to manufacture locomotive and engineering products.
Expansion (1990 onwards)
1996: Telecom Sector
2001: Insurance Industry
Tata AIG - a joint venture between the Tata group and American International Group Inc (AIG) - marks the Tata re-entry into insurance.

2006: DTH Sector
Tata Sky satellite television service launched across the country. Foundation stone for the Tata Medical Centre unveiled in Kolkata.
2009: Tata Motors
Tata Motors announces commercial launch of the Tata Nano; Tata Motors ushers new era in Indian auto industry with its new, world-standard truck range.
2014: Aviation Sector
India’s newest airline, Air Vistara, is expected to make its debut later in the year. Vistara is a joint venture between India’s Tata Sons and Singapore Airlines.
Tata Teleservices (TTSL) is established to spearhead the group's foray into the telecom sector
Motive of diversification strategy
Greater amounts of diversification reduces managerial risk

Emerging economies’ multinationals

These companies may use acquisitions in order to access resources they do not have, rather than to deploy un-imitable ones in the way that is predicted by the standard models of traditional multinationals


Sharing resources and transferring the capabilities across two businesses to reduce cost.
For Example:
Tata Motors manufacturing plant in Jamshedpur, India.
Multi-axle tucks, tractors-trailers and mixers.
New Tata Prima (2009)
World-class Technical Training Centre and Driver Training centre.
The Plant incorporates a flexible approach to manufacturing.
Ready to respond rapidly to changing customer needs.

Source: Tata Motors (2015)
Indonesian coal mines couldn’t meet some of its “financial covenants” last fiscal.
Tata Power Co. Ltd plans to transfer three quarters of its stake in Indonesian coal mines.
This restructuring gives comfort to the cash flows.

Source: Shivanshtyagi (2012)
Economic of scope
Tata's Corporate Relatedness
Restructuring of assets
What is a Tata Nano?
100,000 rupee (US$1,500)
A car that has :

NO AIRBAGS
NO RADIO
NO AIR-CONDITIONER
NO POWER STEERING

Tata Nano (2008)
Manufactured in India, Sanand plant in Gujarat
Target market : low- middle income earners mainly rural population

(Strategic Direction, 2009)
Environmental factors that affected Tata Motors :
Economic segment
: nature and direction of an economy of which a firm competes in
Rise in oil prices around the world (1.3% increase India)
Developing countries (eg : India) suffer more
High Demand for cheaper alternatives
Demographic segment
: concerned with the characteristics and features of a population
Population size is 1.175 Billion (70% rural)
Income groups in India :
Low (0 - 3,000 Rs)
Middle (3,001 - 25,000 Rs)
High (25,000 Rs and above)

Travel demand and road transport led to a increase demand for cars by 9.8%
Competition
Related and supporting industries
: where firms coordinate or share activities in the value chain or value system (supply chain)
Industrial production growth rate (7.5%)
Communication :
a) Internet users (5.3%)
b) Telephone mobile users (6.1%)

Main competitors : RE 60 (Bajaj Auto), Maruti 800 & Alto (Suzuki)
Inflation of oil prices
(Bhattacharya, 2001; World Bank 2015)
(Storchmann, 2005; World Bank, 2015)
Conclusion : Competitive
Factor Conditions
: refers to inputs used as factors of production
India's automotive industry provides very low average manufacturing wages (US$ 430 in 2006)
Inbound FDI ( 6,598 million US$)

Demand Conditions
: the size and growth as well as the sophistication of domestic demand
Domestic Automotive sales growth (7.5%)
Home country firms need to continually innovate and upgrade their competitive positions (Smit, 2010)
Indian consumers demand sophisticated products at a lower price (Choudhary et.al, 2012).
Consumer Goods Industry (1917)
Tata Oil Mills Company being established to make soaps, detergents and cooking oils.
Aviation Sector (1932)
Tata Airlines, a division of Tata Sons, is established, opening up the aviation sector in India.
Beverage Industry (1962)
Tata Finlay (Tata Tea), one of the largest tea producers, is established. Tata Exports is established.
Source: (Allen. D & Gorgeon. A, 2002)
TATA Motor
Thus,

it remains the world cheapest car
increase pollution
Diversification
Unrelated Diversification
Operational Relatedness
Corporate Relatedness
Tata Motor
Tata Nano
Truck/Buses
Cars
Magic Iris
Tata Bus
Tata Bolt
Sumo Gold
Super Ace
source: Tata Motors, 2015
Source: Tata Motors, 2015
Related diversification increases performance as compared to unrelated diversification (Park & Jang, 2013).
source: Tata Motors, 2015
Acquisitions
of
competitors.

Same industry doing the same stage of production for the creation of a monopoly.
TATA Motors
Unique designs to suit different requirements in international market (Africa, South Asia, Latin American)
(Sardy & Fetscherin, 2009)
(Sardy & Fetscherin, 2009)
Expand the business to different countries :
Europe, Russia, Africa, Middle East, South America & South-East Asia
source: Tata Motors, 2015
source: Tata Motors, 2015
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