BUS 323C
INTERNATIONAL MANAGEMENT
Case Analysis Report: The Last Rajah:
Ratan Tata and Tata’s Global Expansion
Prepared By : Selvermugam s/o Tanggavelu @ Angamuthu (aka Cash)Students ID : 31534071Due Date : 22nd Feb 2012Lecturer : Dr Jurgen RudolphProgram In-charge: Ms Lily PengModule Code : PT BUS323CNo. of words : 2045 (word-count on report only)No. of pages : 10 pages of report (not including pages 1, 2, 13 and 14)
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Table of Contents1 Source Problems 32 Secondary Problems 3Short Term 3
2.1 Integration processes.............................................................................................32.2 Conservation of resources.....................................................................................32.3 Economy slow-down.............................................................................................4
Long Term 42.4 Jaguar Cars and Land Rover bid from Ford Motor Co.........................................42.5 International M&A................................................................................................4
3 Analysis 4Figure 1: M&A activity...................................................................................................5Figure 2: Analysis of the Tata Group using the BCG Matrix......................................6
4 Criteria of Evaluation 6Figure 3: Adapted from Robert S. Kaplan and David P. Norton; “Using the Scorecard as a Strategic Management System, “Harvard Business Review”..............7
5 Alternatives 7Short Term: 7
5.1 Customer...............................................................................................................75.2 Financial................................................................................................................85.3 Internal Business Process......................................................................................85.4 Learning Growth...................................................................................................8
Long Term 85.5 Customer...............................................................................................................85.6 Financial................................................................................................................85.7 Internal Business Process......................................................................................85.8 Learning Growth...................................................................................................8
6 Recommended Strategies 9Short Term (1 – 2 Years) 9
6.1 Centralized Consulting Support for All Business Units.......................................96.2 Increased Transparency.........................................................................................96.3 Financial Independence.......................................................................................10
Long Term (2 – 3 Years) 106.4 Management Development.................................................................................106.5 Strategic Continuity............................................................................................106.6 Consistency of Business Practices......................................................................10
7 Justification of Recommendations 108 Implementation, Control and Follow-up 119 References 13
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1 Source Problems
It is observed from the text that the fundamental core problems surrounding Tata Group
are the continuum of recruiting talented individuals and retaining Tata Group’s traditional
value system while in the process of building a network of companies capable of thriving
in the 21st-century global competition as it gets bigger and more diversified. Others are,
the manner of both old and new companies adhering to the code of conduct and ensuring
uniformly high standards of quality and ethical business practices sustainability long after
the departure of Ratan Tata, who has been inspirationally involved in all major deals and
acquisitions up till to this present time. This primarily includes the promoting of
corporate social responsibility, a mission that dates to the group’s founding in the 1870s
by Ratan Tata’s great-grandfather, Jamsetji Tata (Luthans, & Doh, 2009).
2 Secondary Problems
Short Term2.1 Integration processes
Integration issues are generally responsible for the relatively high failure rate of
international M&As (Merger and Acquisitions). Integration of acquisitions, managing
operations in diverse international locations and changes in the local regulations are
critical risks to the success of a company’s plans. The Tata companies will face a
problem in developing an ability to understand the culture of the country where the
acquisition takes place, as well as the working environment in that country (Luthans, &
Doh, 2009).
2.2 Conservation of resources
With the takeover of Dutch-British steel giant Corus Group, Tata Steel could face a
problem in the area of manufacturing and mining technology capacity, especially in
relation to issues such as conservation of resources and safeguarding the environment.
Getting hold of adequate resources of iron ore and coal both in the immediate term is one
factor that will have significant bearing on Tata Steel’s future position (Luthans, & Doh,
2009).
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2.3 Economy slow-down
For the foreseeable future, the interesting dilemmas will come when the Indian economy
slows and some Tata affiliates inevitably stumbles. Managers could look at expensive
burdens such as Jamshedpur and rural-development projects as tempting targets for cuts
when times get tight. Tata companies could lose interest in low-cost goods for the masses
and the group could take a tougher look at businesses to spin off (Luthans, & Doh, 2009).
Long Term2.4 Jaguar Cars and Land Rover bid from Ford Motor Co.
These acquisitions present an excellent opportunity for Tata Motors to establish their
presence in the United Kingdom (UK) and European car markets, but could also
potentially undermine the focus of Tata Motor’s core business. Ratan Tata did mention
his dream of building a one-lakh (about $2,500) car, to be launched in early 2008. But
with Tata Motors bidding for two of the world’s most luxurious brands, Jaguar and Land
Rover, the question here is whether winning trophy brand’s is a correct strategy when the
ultimate objective is to gain the appropriate production scale and technology to be the
world’s lowest-cost car producer (Luthans, & Doh, 2009).
2.5 International M&A
The Corus’s acquisition creates challenges of balancing Old World ways with New
Economy realities. Tata Steel will be put to test, now that it owns struggling Corus. The
deal loads the Indian steel maker with $7.4 billion in debt, and absorbing Corus’ higher-
cost operations will also weaken its profit margins. In addition, the union representing
most Corus workers wants Tata Steel to invest an additional $600 million in Port Talbot
to ensure it will remain competitive so it won’t have to cut jobs, which incidentally Tata
executives declined to give guarantees (Luthans, & Doh, 2009).
3 Analysis
Managing a portfolio of close to 100 companies is an extremely huge task for any
company. This could be explained in the case of the Tatas accelerated inorganic growth,
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through leveraged buyouts and sometimes audacious deals, which brings about the
challenge of integration and proper management of the portfolio of companies. The top
management has to often answer the question mark over the business’s role in keeping all
these companies under one roof. The group operates in seven broad sectors ranging from
steel, automobiles, energy, chemicals, hotels and consumer goods to communication
systems (Sen, 2009).
Over the last ten years, the group’s strategy has revolved around building a very strong
presence in international markets. Starting with the Tetley Acquisition in 2001 for USD
432 million, the group has made acquisitions in most of the sectors it operates in. The
highlight of its international acquisition strategy was the USD 11.2 billion acquisition of
Anglo-Dutch firm, Corus. Other significant acquisitions include the Tata Motors’
acquisition of Daewoo Chemical Vehicle Company and Ford’s Jaguar and Land Rover
(JLR), Tata Power buying a 30% stake in PT Kaltim Prima Coal Prima and hotels
acquisition of Ritz-Carlton Hotels. Please see Figure 1; Merger & Acquisition (M&A)
growth strategy (Mukherji, 2009).
Figure 1: M&A activity
The group however should be careful about integrating all these companies under one
roof. Focusing on methods to facilitate easy integration of companies while preserving
the Tata culture will be of paramount importance in future acquisitions. With accelerated
inorganic growth comes the need to optimize the portfolio of companies held. This is
explored using the Boston Consulting Group (BCG) Growth Share Matrix.
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The analysis reveals that Tata Steel, Tata Power, Tata Motors and Indian Hotels emerge
as clear Stars (high market growth, high market share). Hence, they should be retained
and the investment in these companies should be increased. Tata Chemicals and Tata Tea
emerge as the Cash Cows (low market growth, high market share) and should be held on
to for the time being. Some of the Question Marks (high market growth, low market
share) are Tata Teleservices, Voltas and Tata Communications (Kakani, & Joshi, 2006).
Please see Figure 2.
Figure 2: Analysis of the Tata Group using the BCG Matrix
4 Criteria of Evaluation
A key evaluation that would help Tata companies to further grow and establish
themselves on the global stage is to have a strong business excellence movement in the
group. This could potentially be achieved by applying the balanced scorecard strategy to
assess the performance of businesses by virtue of their internal competencies measured
using key performance indicators (KPIs). The balanced scorecard is presented in Figure 3.
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Figure 3: Adapted from Robert S. Kaplan and David P. Norton; “Using the Scorecard as a Strategic Management System, “Harvard Business Review”
The criteria on performance excellence shown by the Balanced Scorecard are built on
four primary factors that balance each other in a strategic framework – Customer, Financial,
Internal Business Process and Learning and Growth (Tata Motors Ltd., 2008).
5 Alternatives
Below is a comprehensive listing of all major feasible courses of action opens to the
decision-maker which in this case would be Mr. Ratan Tata himself since his
involvement in almost all the varied sectors of the economy, right from the Automobiles
to InfoTech. The below short and long term courses of action is considerably viable,
practical and realistic.
Short Term:5.1 Customer
To continue to provide high quality products to customers with localized customizations.
At the same time, to develop Tata Nano to meet global standards.
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5.2 Financial
To improve financial performance in terms of cash flow by ensuring positive present
value of cash flow. This will eventually help to re-pay principal components of debts as
fast as possible. In addition, to also relook into the payment of dividends to investors so
that it is consistently paid out.
5.3 Internal Business Process
To improve the Supply Chain by using global suppliers and to enhance the customer
delivery and support processes specifically to meet the commitments of Tata Nano.
5.4 Learning Growth
To be more effective in managing the systematic risks of the company by learning from
the past, and developing an open and receptive culture of innovativeness (Graham, 2010).
Long Term5.5 Customer
To develop new small car markets in developed as well as developing countries more
aggressively.
5.6 Financial
To improve market capitalization on NYSE and established as a powerful global player.
5.7 Internal Business Process
To get the best out of Jaguar and Land Rover’s acquisition deal.
5.8 Learning Growth
To establish as many plants possible in quickest possible time to meet the delivery
commitments of Tata Nano (Blitterswijk, & Karadzhov, 2009)
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6 Recommended Strategies
Based on all the problems mentioned and courses of action detailed herein, it would be
advisable if Tata Group could:
Refine its internal definition of sustainability,
Create a separate subsidiary to coordinate, manage, communicate, and expand
sustainability efforts across every business unit, and
Establish a market-specific global strategy tailored to the unique challenges and
opportunities of each country and business (Kakani, & Joshi.2006)
These changes will allow Tata to optimally position its economic, social, and
environmental sustainability efforts while addressing the company’s growing global
presence, and the increasing demand from stakeholders for measurement and
transparency. It is suggested that a three year timeline, valuations, and specific
implementation strategies for Tata’s core lines of business is recommended. The three
year sustainability strategy is designed to complement the business growth of the
organization. This global growth will focus on the following industries: hotels,
automobile, steel, software consulting, energy, chemicals, tea, engineering, and
communications (Goldstein, 2008). They include:
Short Term (1 – 2 Years)6.1 Centralized Consulting Support for All Business Units This consulting function could be used externally to provide the same services as
consulting firm, effectively providing funding for future internal sustainable initiatives.
6.2 Increased Transparency
Utilize outside auditors and consultants to validate its numbers which would be the key to
providing outside stakeholders with a transparent view of funding and returns for
sustainability projects.
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6.3 Financial Independence
Tata’s management to ensure that cash is infused into the subsidiary after certain profit
and dividend / stock buyback criteria are met. This would continue the movement
towards transparency in finances and satisfy all shareholder groups and would ensure
funding reserves for sustainability in recessionary times (Firstpost, 2011).
Long Term (2 – 3 Years)6.4 Management Development
Management development would involve a significant rotation in this subsidiary, and
training on relevant sustainability practices and measurements would be provided. This
would not only ensure top managerial talent in the group but also continue to spread ideas
and best practices throughout the organization after employee rotations are complete.
6.5 Strategic Continuity
Creating a separate business subsidiary and a document with shareholders/stakeholders
that details the funding and reporting processes would ensure that the company’s
sustainability initiatives themselves are clear throughout the organization and allow for
quick implementation in the event of a CEO leadership transition (India Knowledge of
Wharton, 2010).
6.6 Consistency of Business Practices
Tata will need to maintain clear and consistent treatment of employees, business partners,
and NGOs in all of its worldwide markets (Business Monitor International, 2008).
7 Justification of Recommendations
Tata currently has four “pillars” of sustainability within the organization – Tata Trusts,
Tata Relief Committee (TRC), Tata Council for Community Initiatives (TCCI), and Tata
Quality Management Services (TQMS). This organizational structure can be rightly
credited with maintaining Tata’s cultural core values with the creation of a company
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subsidiary devoted to social and environmental stewardship. With the aim to achieve the
above recommended strategies, this subsidiary would function like any other Tata
business unit (Tata Motors, Tata Chemical), except that it would operate at first as a cost
center / support function rather than a profit center. It would centralize a number of
company functions, including educational trusts, TRC, and TCCI. The subsidiary would
have a number of key functions, including internal (and eventual external) consultation
support for sustainable initiatives, an intra-company knowledge sharing and training
functions, a cross-functional “innovation center”, a financial reporting & analysis and
auditing unit, and an internal/external fundraising team (Freeman, Gopalan, & Bailey,
2008)
8 Implementation, Control and Follow-up
International managers can employ many different approaches to implementation, control
and follow up (Jha, & Joshi, 2009). Here, the Tata Group will implement, control and
follow up with a direct and indirect method of controls. Therefore it will:
Implement the new Tata Sustainability through a multi-faceted corporate
communication process including CEO and business unit communications/
training in town-hall meetings, allowing for employee engagement and input
Legally establish a separately capitalized corporate subsidiary. Draft rules
governing the excess profit criteria from each business unit that will fund
expansion in future years. Collaborate closely with key shareholder blocks on
these rules (Goldstein, 2008)
Form a cross-company task force, including senior executives, to validate that all
internal sustainability opportunities have been identified and explored
In collaboration with senior management, establish rules for equitable employee
treatment across all countries of operations, building on current TCCI initiatives
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Standards may not be equal across all countries, but should be favorable
compared to local standards, especially in the case of less developed countries
Expand program to reduce carbon footprint to additional steel plants beyond the
Port Talbot plant site. Add five plants per year in order to achieve 20% carbon
reduction goals by the year 2020. Conservation efforts can be rolled out in current
and emerging markets (Ashley, O’Brien, Reiter, & Richards, 2010)
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9 References
Ashley, M., O’Brien, B., Reiter, R., Richards, Kevin (2010) Tata Leadership with Trust: Tata Group Sustainability Strategy, 1-9
Blitterswijk, M.V., Karadzhov, R. (2009) Financial and Strategic Analysis of Ford Motor Company and Tata Motors: CBS - M.Sc. Finance and Strategic Management, 1- 145
Business Monitor International. (2008) M&A Analysis - Tata's M&A Freeze: Bad News For West: Country Risk, Industry and Company Intelligence on Global Markets, 1-1
Firstpost, (2011) Ratan Tata Radical Chieftain: The Ratan Tata Legacy, 1-63
Freeman, K., Gopalan S., Bailey, S. (2008) Achieving Global Growth through Acquisition - Tata’s Takeover of Corus: Journal of Case Research in Business And Economics, 1-17
Goldstein, A. (2008) Emerging economies’ transnational corporations: the case of Tata: Research Notes, 93-111
Goldstein., A. (2008) THE INTERNATIONALIZATION OF INDIAN COMPANIES: THE CASE OF TATA: Organization for Economic Co-operation and Development (OECD), 1-49
Graham, A. (2010) Tata Too Good To Fail: Conscious Capitalism of Institute at Bentley University, 1-65
India Knowledge of Wharton. (2010) Tata Group, Infosys and Others: The 'Painful' but Necessary Succession: Wharton School of the University of Pennsylvania, 1-5
Jha. V.S., Joshi, H. (2009) Relevance of Total Quality Management (TQM) or Business Excellence Strategy Implementation for Enterprise Resource Planning (ERP) – A Conceptual Study: Practice-Oriented Paper - Research Paper 1-16
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Kakani, R.K., Joshi, T. (2006) Cross Holding Strategy to Increase Control -Case of the Tata Group: XLRI Jamshedpur School of Management, 1-24
Kakani, R.K., Joshi, T. (2008) The Tata Group after the JRD Period: Management and Ownership Structure: XLRI Jamshedpur School of Management, 1-25
Luthans., F, Doh, J.P. (2009). International Management - Culture, Strategy, and Behaviour: McGraw Hill International Edition, Seventh Edition
Mukherji, S. (2009) The Tata Group - Challenges in Managing a Large Portfolio: An IIMB MANAGEMENT REVIEW Initiative, 1- 3
Sen., S. (2009) Tata Group: Transforming the Sleeping Elephant: The Icfai University Press, 1-16
Tata Motors Ltd. (2008) Tata Motors Ltd. Corporate Sustainability Report 2008: CORPORATE SUSTAINABILITY REPORT, 1-174
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