Assignment 2 – Case study (40 marks) 

Tata Group: India's New Global Challenger  

Tata, India's largest company, operates in seven distinct business sectors, including automobiles,  chemicals, IT, consumer products, engineering, and consulting. Altogether, Tata comprises more  than 90 separate firms. The chairman of Tata Group is Ratan Tata, the charismatic descendent of the  company founder. Now in his seventies, he has emerged as a popular and respected corporate titan,  known around the world. An avid aviator, he often flies his own Falcon 2000 jet to meetings around  India.  

As the group's chief visionary and dealmaker, Mr. Tata has been aggressively expanding the Tata  Group into world markets. For example, one of the group subsidiaries, Tata Steel, recently  purchased the Dutch-British steel giant Corus Group, for $13 billion. The move boosted the firm's  steel-making capacity fivefold. In 2008, another group subsidiary, Tata Motors, became the focus of  world attention when it acquired Jaguar and Land Rover from Ford for $2.3 billion. Tata Motors  launched the Nano in 2009 which, at approximately $2,500, is the world's cheapest car. The Nano  addresses a long-time dream of Ratan Tata to develop reliable but supercheap automobiles,  revolutionize the global auto industry, and make India a major economic power. 'Nano' means  'small' in Gujarati, the language of Tata's founders.  

Background on the Tata Group 

Founded in 1868 in Bombay as a textile trading company, Tata gradually expanded into hotels,  power plants, chemicals, steel production, and several other industries. The government of India  long discouraged international trade by imposing high trade barriers and bureaucracy. As these  restrictions loosened in the 1990s, Tata's international operations flourished. Tata Motors began  producing cars in joint ventures with Fiat and Daimler-Benz. Tata bought 30 percent of the coal  subsidiaries of an Indonesian mining company to supply coal for Tata's power plant in India.  Altogether, the Tata Group has factories in numerous emerging markets, including Kenya, South  Korea, Malaysia, Russia, and Thailand.  

As India's biggest firm, Tata has many competitive advantages, including vast financial resources and  access to capital on favourable terms; strong corporate image; connections with countless high quality business partners; competitive cost structure, thanks to the huge, low cost Indian labour  pool; and long-standing relationships with national and state governments in India. In the auto  industry, Tata Motors' reputation is growing. It counts on sister subsidiary Tata Steel to continuously  provide steel to manufacture Nanos and other cars, a key advantage. The purchase of Corus Group,  in addition to increasing steel capacity, also greatly expanded Tata's access to automakers across  Europe and the United States.  

Tata is arguably the most important of the new global challenger firms charging out of big emerging  markets such as China, Brazil, India, and Russia. The emerging giants tap abundant low-cost labour,  tech talent, and mineral resources to increasingly target the world's biggest growth markets.  Brimming with cash and confidence, they export innovative business models honed in some of the  world's most challenging markets. Governments and state-owned enterprises influence the 

procurement activities of corporations. Tata capitalizes on its family conglomerate networks to  enhance its position as government supplier in numerous business sectors.  

Tata Motors  

Today Tata Motors, or 'Tamo,' is one of India's largest motor vehicle companies. At present, Tamo's  main market is India, but the firm also operates in other countries, especially in Asia. In 2008, Tamo  unveiled the Nano, the world's cheapest car. Manufactured in India, the Nano seats up to five  people and gets extremely good gas mileage. Initially, the car was targeted to India's middle class,  the approximately 200 million people who earn $20,000 or more per year.  

In general, about one-quarter of all cars and trucks sold in India bear the Tamo brand. The firm's  next logical target will be countries outside India, especially emerging markets that provide key  growth opportunities. Tamo aims to transfer its vast experience in India to markets in Africa, Latin  America, and the Middle East. In Asia, the countries of Indonesia, Thailand, and Vietnam appear ripe  for sales of a cheap car. Millions of low-income consumers worldwide would love to own a car, but  until the launch of the Nano, they have had few or no alternatives. The acquisition of Jaguar and  Land Rover has increased Tamo's visibility through globally recognized brands and provided an  entree to Europe and the United States.  

Challenges  

Tamo faces numerous challenges in making the Nano a success. For one, despite its very low price  tag, management needs to market the Nano as an aspirational status symbol. Tamo will need to  provide attractive financing packages for potential owners. The Nano has numerous other  challenges, including various problems in India, the threat of environmental harm, growing  competition and the ongoing impact of the recent global recession.  

Challenges in india 

In India, 70 percent of the population still lives in the countryside, and the transition of land from  agrarian to industrial use often meets with angry protest. In 2008, Tamo was forced to abandon  construction of a factory in West Bengal, India, intended to manufacture the Nano. Protesters  surrounded the new Nano plant and blocked roads to prevent workers or deliveries from reaching  the facility. In Calcutta, activists burned the Nano in effigy. Violence and threats to worker safety  ensued for months during construction of the plant. West Bengal politicos encouraged labor unrest,  leading to capital flight and making the region unfriendly to business. Despite being 80 percent  complete and costing $350 million, Tamo had to abandon the plant due to violent protests from  farmers and political activists. Production of the Nano was moved to another location in India.  

Throughout India, Tamo works continuously to satisfy government authorities. India has a  reputation for 'suffocating bureaucracy' and its civil servants are among the least efficient in Asia.  The country is awash in trade barriers, business regulations, and administrative hurdles. Many  commodities can be imported only after receiving government approval. Import tariffs on parts and  components can be substantial, often exceeding 25 percent. Licensing fees, testing procedures, and  other hurdles are expensive and time-consuming. The commercial environment in India is still  evolving and poses numerous hurdles for firms that do business there. 

Pollution and Overcrowding in India  

Growing car ownership is severely straining India's already congested urban infrastructure. If the  Nano proves a big success, India's road network seems unable to absorb millions of new cars.  Burgeoning car ownership in India and China are straining the world's already selfdestructive carbon  footprint. India suffers from severe pollution. Throughout southern Asia, a thick brown cloud of  particulate continually blocks the sun, altering weather patterns and causing health problems. The  cloud is a by-product of emissions from coal-fired power plants, cars and trucks, and wood-burning  stoves. Similar plumes containing carbon dust also rise over parts of Africa and Latin America. The  World Bank says that, as India industrializes, the country's water, air, and soil are under increasing  environmental pressure. Most Indians make their living from farming, and hazardous air pollutants have damaged growth yields of rice, wheat, maize, and sorghum. Partly due to food shortages,  millions of people in Asia go hungry every year. 

Competitors  

In addition to Tamo, several automakers have plans to enter the cheap car market in India. For  example, Renault, Nissan, and India's Bajaj Motors plan to jointly build a $2,500 car. Nissan CEO  Carlos Ghosn aims to make emerging markets a cornerstone of his firm's plans for global growth.  Ford, Hyundai, Toyota, and General Motors are all developing inexpensive, small cars for emerging  markets. Several Chinese companies already manufacture various car models, both for export and  domestic consumption, and a few firms are exploring ultra-cheap options. Japan's Suzuki sells the  Maruti 800 in India, retailing for about $4,500.  

Global Financial Crisis and Opportunities for Emerging Global Giants  

Just as automotive sales declined in recent years, many automakers have launched new models,  which boosted global competition. Toyota, Honda, GM and several other competitors have made  great strides in developing and launching hybrid cars based on green technology. However, many car  makers are suffering, and the industry is overcrowded, with consumer demand declining in some  areas. 

Despite such problems, Tamo is well positioned to weather the recent global financial crisis. First, it  enjoys low-cost production capacity, partly based on employing inexpensive labour in India. Second,  the firm has significant experience in emerging markets, which are growing rapidly. By contrast,  advanced-economy markets are largely saturated. Third, as the global financial crisis unfolded, many  advanced-economy MNEs retrenched and focused more heavily on their home markets, especially in  Europe and North America. For example, bankruptcy and restructuring led General Motors to  refocus on the United States.  

Corporate Social Responsibility  

For decades Tata has promoted good works in India. Ratan Tata is a passionate promoter of  corporate social responsibility. Many Tata companies fund grassroots anti-poverty projects that  seem far removed from their core business. For example, Tata Steel spends millions every year on  education, health, and agricultural development projects. It has developed irrigation systems that  allow Indian farmers to grow cash crops. The firm has built schools, hospitals, and electrical plants  and undertaken countless other socially responsible projects throughout India. 

Similarly, Tamo undertakes various charitable activities in the communities where it operates. In  2008, Tamo acquired a major stake in Miljo Grenland/Innovasjon, a Norwegian electric car producer.  Tamo is leveraging Miljo's know-how to launch a new electric vehicle, the Indica. Another group  company, Tata BP Solar, makes rooftop solar-electric systems for buildings. The firm offers low-cost,  solar-powered water pumps, refrigerators, and lanterns for areas that normally lack electricity. It has  fitted 50,000 homes with $300 systems that can power lights, hot plates, and TV sets.  

Conclusion  

In emerging markets and developing economies, family conglomerates are leveraging various  advantages to dominate home-country markets. Today, the conglomerates are applying these same  advantages to extend their reach to markets worldwide. Tata's numerous home country resources  provide the firm with substantial competitive advantages and should allow it to perform well and  capture market share from incumbent players in markets around the world. 

Case-Study Questions 

1. Describe the various advantages that firms like Tata employ to become large industrial  conglomerates. (6 marks) 
2. How can Tata use these same advantages to succeed in foreign markets? (4 marks) 2.  
3. What is the relationship between trade barriers, bureaucracy, country risk, and the emergence  of Tata as a major player in world trade? (4 marks) 
4. What is the role of declining government intervention in Tata's success in India and its ability  to internationalize? What should Tata do to manage country risk in India and other emerging  markets? (6 marks) 
5. Given growth rates and other characteristics of emerging markets, what markets should Tamo  target for sales of Nano cars and why? (4 marks) 
6. What country-level factors should Tamo consider as it evaluates the potential of various  emerging markets? Discuss the potential implications of these factors on Tamo's operations.  (6 marks) 
7. As Tamo prepares to expand abroad, how can it improve its corporate social responsibility  toward future customers in emerging markets? (6 marks) 
8. What can Tamo do to minimize the impact of its operations on the natural environment in Asia  and elsewhere? (4 marks)

Introduction 

The current assignment focuses on the case study of Tata Group and it is found to face so many challenges while running the business. There are more than 90 separate firms of Tata Groups in India. In 1868 Tata Group, a textile company in Bombay expanded into hotels, power plants, chemicals and other several industries. The assignment highlights the Advantages Tata Group employs to be a large conglomerate. The assignment also sheds light on the relationship between country risk, bureaucracy and trade barriers. Some of the factors Tata Motors should consider while they analysing the potential emerging markets. Some of the recommendations are also being provided to Tata Motors for improving corporate social responsibility and stepping towards international business.

1 a. Advantages that TATA employs to be large industrial conglomerates 

Tata Group is considered as one of the largest business groups in India. There are ranges of advantages Tata Group employs that help the company to become one of the largest conglomerates. As commented by Shenkar, Luo, and Chi (2014), economies of scale and specialisation of the roles are two major advantages that large industries have for becoming the largest conglomerate. Being one of the biggest conglomerate firms, in India, the group includes vast financial resources that have access to ranges of favourable terms. Moreover, Tata Group also has the strong corporate image that helps the company in connecting with a countless number of high qualities of business partners. The company also have the competitive cost structure which also helps in becoming a large conglomerate. Another advantage that Tata Group employs to be large conglomerate is an acquisition of other companies.  Tata Industry can also think to introduce more products in the market at low cost like NANO. Tata Industry should give chances to the employees to present their idea for innovation. Tata Industry can use their money to collect information, which can help them to understand the needs of foreign market easily. The launch of NANO can allow the people to buy a vehicle at very low cost (Tata group, 2018). People who do not even think to drive the car but after launching NANO, they can do that. As commented by Forsgren and Johanson (2014), more diversified revenue streams and more opportunities for advancements create a profile for becoming an excellent conglomerate on the country. Tata Group also employs the business in seven distinct sectors that include automobiles, Consumer products, IT and consulting. Since 1991, the strategy of Tata Group has been changed; Mr. Tata increases the competitiveness of the company and the remaining affiliates and introduces the initiatives. These major advantages of Tata Group are helping the company in becoming a large conglomerate. 

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