The purpose of this paper is to explain the strategies that Tata group embraces for it to effectively achieve their internalization program. Jamsetji Tata is the company that engineered the establishment of Tata Group in 1868. It is an international enterprise with its headquarters in India, constituted by over 100 self-regulating functional companies across six continents. It has strong markets across North Africa, South America, North America, Middle East, Europe, Australia, Africa, and Asia. The group’s main aim is to improve the quality of life in the communities they serve alongside making profits and improving the company. Through their leadership styles and global competitiveness, they have developed a practice of giving back to the society, a practice that has convinced employees, consumers, shareholders and the community to trust the company. Their values of responsibility, unity, excellence, understanding and integrity have added the trust to their customers making the company more competitive (Witzel, 2011). Their vision is that by the year 2025, at least 25% of the world’s population will have experienced the Tata commitment to improving the customers’ quality of life as well as that of the communities where they operate. It had 29 enterprises that were on public listing with a collective market capitalization that was approximated to be $134 billion as at March, 2015. It should, also, be clear that Tata companies that have considerable scale comprise of Indian Hotels and Tata Communication, Tata Global Beverages, Titan, Tata Teleservices, Tata Chemicals, Tata Power, Tata Motors, Tata Consultancy Services, and Tata Steel.
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The company’s major initiatives include implementation of initiatives that promote health, education, arts, sports and that aim at changing the people’s lives. They have organizational culture, which promotes value systems, ethics, learning opportunities as well as comfortable environment. They are also engaged in various community improvement projects including relief and rehabilitation. Tagging on that are projects that preserve the environment, like reducing emissions and effluents, repairing green cover, maintaining native ecologies as well as refining long-term corporate sustainability. Their products and services range from information technology, engineering products and services, materials, services, chemicals, energy, consumer products. Tata companies have faced both domestic and international rivals. For example, Tata Motors are facing stiff competing with the entry of global brands like Mercedes-Benz, Volvo and Navistar, at the international market. While domestically, they have competition from Mahindra & Mahindra and Ashok Leyland (Witzel, 2011).
The top foreign markets for Tata group are Brazil, China, India and Russia. The major problems affecting the Tata group are common rising global problems like the rising prices of oil and gas, and increase in environmental pollutions. This has added to their expenses since it has to come with measures of improving environmental quality. The group had to spend lots of resources on research and development in order for it to compete with its rival and meet the changing economic demands (Ramadorai, 2011). Under the Tata Strategic Management Group, they have been able to build a good reputation in strategy formulation and operation, performance improvement and company analysis. The Tata Strategic Management Group was formed as a division of Tata Industries and offers solutions to problems being presented by their clients. This body helps Tata Group to assess their market demands and remain competitive in all the sectors. The companies utilize the Tata Business Excellence Model (TBEM) that covers aspects of business, which range from safety and climate change to strategy and leadership. This model encourages continuous improvement through formal system of assessment and benchmarking. It comprises aspects that enable firms to capture the leading global business practices and processes and transforms into capacity to evolve and cope with the ever dynamic business performance parameters.
According to Witzel (2011),Tata group was formed as a trading company but is has grown into a giant in many companies including steel, hotels and auto industry in which they are performing best in, employing about 450,000 employees. Its development into the United States has been accompanied by its expansion around the world. Almost 58 percent of its revenues are generated outside India, considering the fact that only 25 percent of its employees are outside India. Their portfolio in the United States generated more than $8 billion in revenue in 2011, a figure that was deemed to be small compared to the group’s overall yearly revenue of $100billion that was realized in 2010, this did not discourage the group to exit U.S. because of the availability of good talent and innovations, that they considered a big factor for their growth.
The company has extended to comprise consumer brands like Eight O’clock Coffee, Tetley, Jaguar Land Rover, and Activate, which is a vitamin beverage and, also, Tata Chemicals that mines soda ash. Their method of marketing the brand of Eight O’clock Coffee to increase accessibility through the introductions of products like K-cups in Canada and United States showed their level distinctiveness in the competition arena. The group’s key business within the United States is Tata Consulting Services and information Technology Company. This shows that there being able to be very competitive in the United States, which has the leading economies; they can apply the strategies to be competitive in other nations. For the group to improve its future global competitiveness, they should emphasize more in attracting the best talents and retaining them (Cullen & Parboteeah, 2013). These can be done by offering competitive salary packages and further training and developments of their employees. The firm should acquire more resources like the acquisition of more competitive companies in different nations to suit their market demands. It can also build some of the resources internally.
A section of Tata’s contributions in nation building is the creation and sustainability of institutions of learning, intellectual capital, knowledge and research. It facilitated the formation of institute of science and technology, Tata Institute of Social Sciences, The Tata institute of fundamental research, and Tata Medical Centre. This emphasized the importance of developments and innovations by the company, and it is in these institutions that the laws, rules and regulations for running the economy was established (Verbeke, 2013). One of the cultural conditions for the group is that, they are able to help and change the livelihoods for the communities in they are working with. Whether in a foreign nation or not, the group emphasizes achieving it goals and at the same time meeting the demands of their customers and the communities they are involved with.
Tata groups’ domestic cultural norm compares to those its foreign partners by use of the Hofstedes’s five dimensional national culture model (Verbeke, 2013). Through the rule of individualism verses collectivism, the different companies forming the Tata group are able to work independently while at the same time sharing the resources available for the collective group mainly through the brand. The rule of masculinity verses femininity resolves around the issue of gender equity in the company, which is run on values and gender equity is a must in all the subsidiaries. Tagging is uncertainty avoidance, which shows the extent to which all the members of the group are to cope with any future uncertainty without stress. This is well elaborated by the well-defined standard procedure and structures in the organization.
The power distance between the different companies provides room for internal competition making the group more competitive to their rival companies. And finally, the dimension of indulgence versus restraints provides room for happiness among all the members of the group, since a society that practices indulgence enables the gratification of natural and basic human drives pertaining to having fun and enjoying life. However, despite of cultural distance providing beneficial effects to individuals in the group, of greater concern is the institutional distance. This is because it adds up to the general performance of the group and the demands of their customers and shareholders. The group should in future consider the rising importance of the recombinant capabilities and restructure their institutional and cultural factors to suit the competing market demands (Verbeke, 2013).
In order for the group to remain competitive and grow, the application of the basic entrepreneurial strategies is necessary. It has remained focused in its operations and aim at their end goals, always finding new ways of achieving their missions. The group also emphasized on the importance of building the right team that would steer head the productivity of the overall group performance. The group believed in their perfections and competitiveness by entering competitive markets like the United States of America, and it was ready to exploit the talents and innovativeness of the available market. They also ensured that they had proper funding since enough finding is essential for the growth of any venture in business (Cullen & Parboteeah, 2013).
Though the marketing of their brand, and forming of coalitions with other companies that subscribed to the brand, they were able to generate more funds that facilitated their expansion in different continents. Finally, they considered market penetration and development very seriously. By looking for countries that needed for of their products and services, they established their firms in those regions and became very competitive. There are institutions like the formation of TATA First Dot, by the Tata group and power NEN in India that promotes entrepreneurship. They have unique initiative that facilitates the promotion, mentoring and showcasing dynamic and young entrepreneurs in India (Witzel, 2011).
The Tata group possesses enough resources and capabilities to offset its liability of foreignness. Despite all these challenges, the group is well equipped with enough resources to overcome them and market the company brand. The Tata Trusts, Tata Brands, Products and Services and the groups’ mergers and acquisitions all provide enough resources to shield them from failure. For the group to align its strategic goals with the specific location’s advantages of its global footprint they considered core competence and competitive strategy (Ramadorai,2011). The internalization came through expansion into foreign domains and competing with foreign companies in their domestic environment and holding a leadership position in those regions. Another goal is taking advantage of the effects of leveraging the domestic market, firms in smaller countries like Holland have no option but to move into the foreign markets, but for Indian firms, domestic markets provides huge opportunities.
Verbeke (2011) argues that, the entry of the group into a foreign market has both the advantageous and disadvantageous sides of it. The first is for strategic reasons, with the sense that unless a company has the reasons to hit the foreigner in its domestic market, it will always have greater advantage when it attacks the company’s domestic market. The entry mode choice can be influenced by the demands for side economies of scale; most industries like the automobile industry can work best when operated in many nations, since demands vary with the locations. A company might also need to seek multinational market agitating the need to enter foreign markets. When the domestic markets are saturated, a firm might be forced to look for more markets in different nations.
If the entry choices and timing are not done critically, it might result to more harm than good. When the group enters any foreign nation, especially outside their home origin, they exposed to some kind of vulnerability. First, they need to break through the resource recombination efforts from existing or new inter-national rivals. They may also face problems posed by running dispersed internal affiliate networks. The other liability is the decisions from sovereign governments, stakeholders including host customers and employees, the scrutiny of international media and internationally operating pressure groups (Cullen & Parboteeah, 2013).
The diversification strategy used by the Tata group is acquisition of international companies and merging with top performing companies as well in order to gain from their technology and innovations. The acquisition of Tetley Tea by Tata Tea in 2000, Corus by Tata Steel 2007 and Jaguar Land Rover by Tata Motors in 2008. These have contributed to improved performance of the group since it generated increased revenues. It has also employed a diverse workforce in different locations contributing to significant local investments in the locations (Witzel, 2011). It also promotes its diversification through the provision of assistance to non-governmental organizations working in areas of education, healthcare and promotion of livelihoods of the communities.
Performances of the group have benefited from the international acquisitions strategies since most of the acquired companies were bigger that the Tata group companies that acquired them. It has promoted the marketability of the company brand (Ramadorai, 2011). The Tata group should think of pursuing complementary strategic options because of the changing market demands and the fact the gross global production is likely to grow in the near future, meaning that they will have to expand more into the new emerging markets.
The strategy commonly used in the group is that of internal resources and capabilities. It is from here that the company is able to establish its areas of strengths and weaknesses use it exploit new market penetrations and developments and know where to concentrate more to have better profits. It should also fit its institutional and cultural conditions to suit that of its IBS goals for it to achieve maximum effects. This approach offers learning advantages to the group over the approaches of its top rivals. It is able to know where to focus in future, which market to enter or exit and which of their products are in high demands in which regions (Verbeke, 2013).
Tata group have developed specific capabilities to differentiate on corporate governance dimensions. The corporate team have discovered through observation of many MNE’s that they all have common problems. This includes facing opportunities and challenges needing difficult analysis and building upon a set of conceptual building blocks (Verbeke, 2011). These building blocks include specific advantages on locations and non-location bound, creation of values through resource recombination, complementary resources of other economic actors, bounded reliability and rationality. These building blocks allow managers to know and identify the limitations of normative messages and models of how to conduct international business strategy.
From these building blocks, themes are derived that show that the world of international business strategy is not flat and is unlikely to become flat in the unforeseen future .From a stakeholders point of view, these themes are dominance of regional over global strategies, having knowledge of the new forms of international expansions, realizing the tension between radical international innovation and internal coherence. The other major theme is realization of the problems faced by MNE’s to link effectively their back office operations with the front office. Finally, is knowledge on the rising importance of recombinant capabilities which is more important because the gross global production will be more likely to grow by more than 2 to 3 percent per year and MNE’s will have no option but to expand into larger emerging markets with double digits macroeconomic growth (Cullen & Parboteeah, 2013). This initiative will boost the competitiveness of the group.
In conclusion, the Tata group is very prepared for all the challenges that are facing the organization because of the well trained workforce and very committed corporate team. All the shareholders including the staff are informed of the organization’s strategic policies to achieving internalization (Verbeke, 2013). Through the heads of different companies forming the general group, information, knowledge, skills and experiences are equally passed for the common good of the group.
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