Ratan Tata & Tata's Global Expansion - Case Study Example

TATA AFTER THE EXIT OF RATAN Name Course Date Individuals or a group of visionaries who had a dream and an aim of making it big in the business world started star companies. As such, they did their best to pull up resources, work force and creativity to bring these companies to life. Tata Group is one of such companies. Founded in the year 1868, Tata Group has with stood the test of time to be a conglomerate that is now quickly expanding to be a global powerhouse. In all these years, which total up to more than a century of hard work, members of the Tata family have led Tata group. This is from Jamsetji Tata who was the founder to Ratan Tata the current chairperson. Ratan Tata who is a fifth generation of the Tata family is about to exit as the chairperson of the Tata group. The critical question then arises; will the company survive, thrive and become a global powerhouse after Ratan Tata?1 As history has it, many companies that started mighty have collapsed after the loss of their founders and the chief executive officers. With the changing trends of company acquisitions and executive acquisitions, many prominent companies are under the threat of extinction without the proper leadership at the helm of the organization. Tata is a multi billion company that has taken over a century to build and its death will be tragic to the economy of India as a country. Therefore, Ratan Tata as the head of the Tata sons had to come up with a clean exit strategy to facilitate the growth and sustenance of Tata Group. Society has come to recognize the leaders of modern corporations, among many others, as heroes. Jeffrey (1988)2 As of the year 2012 December, Ratan Tata will be officially exiting the post of chairperson of the Tata group as he celebrates his seventy-fifth birthday. Having no children of his own to groom into the business world, a different person will have to come in. This will be the forty four year old Cyrus Pallonji Mistry, who is the current Deputy Chairman of the Tata Group.3 CEO succession is THE number one job of the board.4 This will be after twenty-one years at the helm of the organization. Tata Groups runs over one-hundred subsidiary companies which have invested in all sectors of the economy. Therefore, proper leadership is fundamental to its success. Diversification of Tata Group is an assurance of the company’s existence and survival after Ratan Tata. Source problems As any other international company, Tata group has various challenges that are facing its normal operations. As such, Tata’s management must have proper trick laid up its sleeves to counter these problem. After Ratan Tata leaves the job as the head of this business empire there are certain short term problems that will come up. These problems are fundamentally attached to the management. These problems are short term and mainly internal. The first problem will be communication breakdown after the change of leadership. Secondly, delegation of duties and thirdly adaptation to the new leader and his time of leadership style. Family matters may also arise as the new chairperson of the Tata Group will not be a member of the Tata Family. Secondary problems The problems that affected, ones that are still affecting and those that will affect Tata in future are not just internal. There are some factors that are beyond the control of Tata and others that are in there control but are long term. Some of these problems include the global economic meltdown, environmental issues affecting access to raw materials, court cases on alleged miss appropriation and grabbed lands, societal issues, availability of natural resources, availability of cheap and affordable labor, availability of expertise and competition. The other issues include political interference in private companies, international trade regulations, political stability of the market and production countries, company policies. All these problems have diverse effects to the survival of Tata as a company. Availability of raw materials is a great problem affecting the Tata Group. Most of its manufacturing companies require enormous amounts of raw materials. These raw materials are depreciating as time goes by and alternatives have to be sought. This is mainly affecting the steel industry and the energy industry where coal is involved. Analysis and Criteria of evaluation The survival of Tata Group is not based on the leadership only. A careful study of Tata indicates that the company is in a mission to globalize its operations. The businesses that are run by Tata group are based on seven lucrative business sectors. These sectors are communications and information technology, services, engineering, energy, consumer products, materials and chemicals. All these sectors generate a lot of revenue and are enormous business venture whose future is bright and promising. Though the Tata Group headquarters are based in Mumbai, Maharashtra, India, the company has its operations in more than eighty countries. These countries are across six continents. Tata companies and their subsidiaries export their products and services to eighty countries all over the world. Under the Tata Group’s wings are over 100 operating companies. These companies operate independently for effective management. Out of the enormous group of companies, thirty-one of them are publicly listed.5 The future of Tata Group is dependent on their main companies. These companies are Tata Steel, Tata Consultancy Services, Tata Chemicals, Tata Motors, Tata Global Beverages, Tata Power, Tata Teleservices, Taj hotels, Tata communications, and Titan. These companies generate the most revenues for Tata Group. A closer look at the current market trends indicate that almost all companies are investing in renewable energy. With the world population spontaneously growing every day, Tata will continue to make profits and sustain itself business wise. This is for the sole reason that it is creating products that will use solar energy. These products include water pumps, lamps, refrigerators, hot plates and T.Vs. that use considerable lower energy levels. With the depletion of oil wells6 (in the Middle East and other oil rich countries) and the diver stating effects of nuclear energy, Tata Group will be the next big company in the energy sector. India as a country is Tata’s biggest client. As a country, India it the third largest purchasing power globally.7 Its population also of more than one billion two hundred people is a massive market base. These factors assure Tata of a good market as long as the products are of the best quality and are affordable to the people. With a gross domestic product (GDP) growth rate of about 5.8% annually8 for the last two decades, Tata will thrive even with change in leadership. In the motor industry, the current trends and statistics are also changing. More people are buying high-end service utility vehicles. As such, there is more demand of such. Tata being a car manufacturer has a substantial market share. However, this is to the middle class car owners. With the recent acquisition of the Jaguar and Land rover high-end brands, Tata group will have a highly increased market share. This will enable the company to make more profits and serve the high-end class of the motor market. These are a huge investment that Tata group is about to make to ensure its survival even after Ratan Tata. The high end car market share of Tata has seen a late increase. The returns are high with more that 8% return on investment Tata motors is out to astonish the whole world. In the year 2012, the profits for Tata motors were over two billion dollars showing how the market development has raised the bar for the Tata Group.9 In the world over, employment trends are also changing. This is attributed to the availability of quality and affordable education to many countries. Countries and their governments bring about these initiatives. As such, the unemployment rates are also increasing. The availability of cheap labor in India assures Tata of continued survival and thriving business. This is because the low cost of production that will be incurred by Tata will help change the market prices towards the lower end. Low cost of production translates to lower process which intern helps Tata to increase its market shared. More clients for Tata therefore mean they have to produce more to satisfy the current demand. With a perfect demand and supply curve for its products, the sustainability of the business is assured for many more years to come. In the recent years, Tata has upgraded its technology. The upgrade, which cost the company more than two and a half billion dollars, ensured automation of most of the processes that are done in Tata Group. Automations came in handy to reduce costs of running the company. Lower costs translate into more profits. Cost cutting measures are employed by many companies to ensure survival in the tough economic times that are being experienced by most companies in globally. Over diversification is another problem that may lead to the decline of Tata as a business empire. With more than one hundred companies under its wings and over three hundred subsidiaries, Tata has invested in almost all sectors of the economy. Not all these sectors have an assured growth projections. A collapse in one of the sectors that may have a massive investment from the company will be a big blow to the company’s financial structure. Depending on the global trends, market, demographics and social trends, Tata has a substantial chance to survive harsh economic times. This is due to the various cushioning mechanisms that have been put in place by its management structure. The cushioning involves the business diversification, opening up of a global client base and aggressive marketing strategies being employed. Tata Group products influence the daily lives of their customers and their businesses and therefore the reputation and necessity make a clear promise to Tata of a brighter tomorrow. The independent running of all the Tata Companies and their subsidiaries is another factor that is assuring the Tata Group survival and thriving existence even after the exit of Ratan Tata. No companies will lose their individual executives, and this will help stream line the operations while at the same time limiting the organization’s structural change. With revenues of $ 83.3 billion a profit of $ 5.8 billion,10 the Tata Group is assured of success. With its new acquisitions in the steel, energy and motor industries, the sustenance of the profit margin is promising. This is based on the projection of the sectors in which Tata Group is investing. The Tata group has assets totaling to US $ 68.9 billion.11 All these assets are a sign of a promising future for the company and its employees who are over four hundred and twenty thousand and distributed all over the world. With the eighty nations client base, the sustenance of business in the ever-expanding market for Tata is not a factor to worry about as the reputation of the Quality of its products known. In the year2009, an annual survey conducted by the Reputation Institute brought out satisfying results to the people of Tata Group. This is because it ranked Tata Group as the 11th most reputable company in the whole world.12 This survey was among six hundred global companies with the best reputations. On the philanthropic side, he Tata Group has done a lot. This is through helping to establish and finance numerous quality researches, supporting sporting activities, and establishing educational and cultural institutes all over India. In the year 2007, Tata Group was awarded the coveted Carnegie Medal of Philanthropy. This was to recognize its long history of philanthropic operations.13 The controversies that undermine the existence and thriving force of Tata as the fiftieth most valuable brand in the world. These controversies include land grubbing cases, supply of motor vehicles to the anti-democratic and severely oppressive military junta of Burma and environmental issues on their soda ash extraction plant in Tanzania.14These are just but some of the ethical, moral, environmental issues that threaten the smooth running of Tata. However, challenges are there to be faced and conquered. Alternatives In order to have an assured future in the business world, there are a number of issues that the Tata group has to put into consideration. These factors include full automation of the production and processing of goods and products, implementation of cost cutting measures, full compliancy with the national and international laws, proper succession procedures. Recommended strategy The recommendations for the success of the Tata group revolve around leadership, production, cost cutting and marketing. There should be effective structures and departments to create both short term and long term strategies for the Tata group. These strategies will be the guide and the path that the leaders and the staff will follow. There should be a proper and detailed production plans, marketing plans and leadership plans. There should also be core values of the company formulated by the management to guide the business through time. Justification of recommendation With full automation of the industrial process, the companies will be able to deliver more products within a shorter period with a standard quality. Cost cutting measures will help reduce the costs of running business and therefore more profitable. Proper succession procedures help in smooth transfer of leadership positions without noticeable effects to the company. Implementation, control and follow up. Without proper implementation strategies, control measures and follow up, the measures put in place will not turn out to be as successful as intended. As such, there should be an implementation strategy. This strategy will involve the detailed delegation of duties and setting up of time lines within which the work should be done. There should also be control measures and evaluation of the progress of the staff and the company. This will help keep the plans on track. Finally, a follow up department should be formed to oversee the implementation of the work and strategies. This will be the watch dog of the company’s progress. Conclusion In conclusion, this $68-billion conglomerate Tata Group has a bright future ahead of it even after the exit of its leader and the last Rajah. The survival and promising future is evidenced by the proper succession and leadership plan, the current strong and viable investments that the company has made and its global reputation and customer base. Increase in market share and a substantial return on investment of about twelve percent per annum is adequate for thriving business. Various short term and long term problems will be faced by Tata group. These will come about through the change of leadership, management of the company, the global market and existing trends and finally other external factors that Tata cannot control. However, Tata have shown tenacity and adaptability that assure the investors of its survival and growth in the near future. Therefore, the critics and pessimists can hold their horses and patiently wait to see what the future holds for the Tata Group. 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Examining the impact of SEC guidance changes on CEO succession planning. Financials of Tata Motors Limited. CNN. http://money.cnn.com/magazines/fortune/global500/2012/snapshots/11629.htm Read More