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CRITICAL ANALYSIS OF STRATEGIC

PARADOXES OF TATA GROUP

Student Name:Bawa Fazeela Samsudeen


Student No

:21325554

Subject

: Corporate Strategy

Lecturer

:Mr. Marceline Alexander

Program

: MBA
University of West London

i.
Terms of Reference
This repot has been prepared by Miss.Bawa Fazeela Samsudeen (consultant) to the
Investors .The report Critically Analyze the strategies used by of Tata group

ii.
Abstract
This report critically evaluates the strategic decisions of Tata group. The critical
analysis incorporates three strategic tensions or dichotomy (Wit & Meyer, 2014)
named Synergy vs. Responsiveness, Revolutionary vs. Evolutionary and competition
vs. cooperation. Tata managed to balance its corporate level statergy though
synergy to get the maximum output in the same time strike a balance in
maintaining it responsiveness within its SBUs. It manages its network level
strategies through cooperation while encouraging the competition within the group.
Tata is a successful conglomerate engaging in revolutionary and evolutionary
changes to hold its competitive position.

Contents
1.Introduction............................................................................................................. 4
2.Corporate level Strategy......................................................................................... 5
2.1Synergy Vs Responsiveness............................................................................... 5
2.2 Managing the Paradox through Resolving.........................................................7
3. Paradox of Strategic Change- Revolution Vs Evolution...........................................8
3.1 Revolutionary change Vs Evolutionary Change.................................................8
3.2 Managing the paradox....................................................................................... 9
4. .Paradox of Network level..................................................................................... 10
4.1Cooperation Vs competition............................................................................. 10
4.2Managing the paradox through Juxtaposing.....................................................11
5. Conclusion............................................................................................................ 12
Appendix 1......................................................................................................... 12
Appendix-3......................................................................................................... 14
Tata Acquisition and mergers............................................................................. 14
Bibliography............................................................................................................. 14

1.Introduction
3

The strategies of a company are the deciding factor of the success of the
organization. The decision taken will be based on multiple strategic perspectives.
This report analyses in detail how Tata company has continue its journey through
dichotomies Synergy vs. Responsiveness, Revolutionary vs. Evolutionary and
competition vs. cooperation.
Tata Group is a largest multinational Conglomerate which was founded in 1868 by
Jamshedji Tata. It gained the international recognition through acquiring many
global companies. Each Tata company has its own board of directors and
shareholders which operates independently. There are 29 publicly listed Tata
enterprises with a combined market capitalization on about $116.41 Billion as on
march 31, 2016. Tata companies include Tata steel, Tata motors, Tata consultancy
services, Tata Power, Tata chemicals, Tata Group Beverages, Tata Teleservices, Titan,
Tata Communication and Tata Hotels. It comprises more than hundred independent
operating companies in more than hundred countries. (Tata sons, 2016)
The growth of the Tata has been headed by different CEOs using different methods
of the strategies to overcome the threats and get the advantage of the
opportunities in the market. This has leaded the organization to grow over time.

2.Corporate level Strategy


The Tata Conglomerate could grow through creating synergizing the SBUs which
provides economies of scale and get the maximum use through effective use of
resources. This provides more control and stimulates inner business cooperation.
On the other hand it could develop different SBUs through responding to the
competitive demand of a specific business area which could respond quickly and
respond to the dynamic competitive market. (Wit & Meyer, 2014). Analysis of past
operation displays Tata had used both Responsiveness and synergy paradoxes in
their decision making. This section will critically analyze how the Tata Company has
use this paradox and how it was successful for their growth.

2.1Synergy Vs Responsiveness
Tata has expanded its operation through related as well as unrelated diversification.
Tata Group acquired Tetley which is a UK base in the year 2000. The Tata tea was
recognized as super brand in India and was leading the market in terms of Value
and Volume. It was 100% export oriented and manufactured in the state of Kerala.
Usually tea is exported in the early stage in the production chain where the blending
and the packaging , The most lucrative part of the tea trade is mostly done in the
buyers country where the larger profit is absorbed nearly 30% to 50% of the
consumer price in Europe. Since the Tetley was named for its blending and branding
synergizing was very successful to the group. It helped to improve the production
line of the company. The acquisition was a major penetration and helps to expand
its market share. Tata tea was able to get a globally accepted brand name which
was already established in Europe. The operating efficiency increased from 10 % to
14%. (Tata Global Beverage Ltd, 2015-2016) This was a correct move taken by the
company (annual report 2016).Since Tetley was a direct competitor where both were
operating in the related horizontal diversification. The merge of both the entities
improved the bargaining power, the competition position in the market and was
able to create economies of scope by sharing activities (Wit & Meyer, 2014).
We could classify the acquisition of two iconic British brands Jaguar and Land
Rover from American Automaker Ford Motor Corporation in 2008 as horizontal
intergration of tata. This gave the opportunity to access to premium car
market. Tata was a manufacturer of commercial vehicle and small car
manufacturer. This helps Tata motors to access latest technology which could
be used in other auto motors such as Indica and Safari. It helps to recognition
and credibility across the globe. The high cost involve in manufacturing the
vehicle was the major issue in Europe which was added value for Tata
through cost synergy. (Mukherjee, 2016) .Tata acquiring JLR was able to
create synergies through operated relatedness due to the replications activity
involved in automobile manufacturing. Tata group add value to its portfolio

companies by encouragement each other operation, conducting more


interaction and support and optimizing their resources.
Tata headquarters provides advanced knowledge management in between
the related SBUs through vertical and horizontal integration with a control
provided by the Group executives while they share the core competence they
must maintain the tight control of each SBU,s. (Vikaj, 2012).The multipoint
competition is noticeable at the downstream vertical integration for example
acquiring Shy satellite television service, Pan India GSM service with NTT
DOTCOMO and Joekels Tea packs in Tata group. (Tata sons, 2016) Tata was
able to add value to the group through integrated value chain through
sharing the common operation while allowing the SBUs to operate
independently within their scope. The table below will indicate how the global
strides have improved the value chain of the Tata motors.
Yea
r
200
9
200
9
200
8
200
4
(Tata

Company
name
Hispano
Carrocera
Marcopolo

Type of
relationship
Acquisition

Contribution to the group

Join venture

Jaguar Land
Rover
Daewoo

Acquisition

Competitive advantage in designing


buses and coaches
Outstanding design and engineering
Proficiencies
Competency in heavy Commercial
vehicles

Acquisition

Competency in Bus manufacturing

sons, 2016)

Tatas strategy is acquisition and mergers of other businesses globally. They


operating in the steel industry give value addition to automobile industry
where they could lowest possible price of steel.
Individual companies listed under common Tata brand umbrella which
expands the market share as well as group synergy helps to improve the
efficiency and cut costs also improves the knowledge capital of the Tata
group.

Tata group was able to reduce the cost of its marketing expenditure through
the project call Tata group Agency-on-Record (AoR) project for consolidated
buying.20 Tata group companies joined the project and able to negotiate with
Media houses and got access new media opportunities will be a good
example for synergy. (Mukherjee & Radhakrishnan, 2002)
Integrating the Value chain than independent operations gives synergy to the
company but it will be difficult due to different cultural barriers and practical
difficulties to Tata group since there are internal competition in between the
SBUs
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Tata is a conglomerate operates in different sectors such as Auto mobile, Tea,


Airline, Communication etc. Tata use responsiveness on all related and
unrelated diversification where each SBU are responsible of their outcomes
and performance for the group. Tata find the common plat form to synergies
but each unit holds their responsiveness with their freedom of decision
making which helps the unit to take its own quick decision to achieve
competitive advantage.
Tata has lined up the business units in a manner where it could work
independently under group guideline to react to the environmental changes
.It has limited synergy under unrelated diversification. Tata purchasing Videsh
Sanchar NigamLTD (VSNL) currently named as Tata communication can be a
classic example for an unrelated diversification which only provides financial
synergy to the group. Unrelated diversification is managed through the
perspective of portfolio, to be responsive to the competitive demand in a
timely manner (Wit & Meyer, 2014)

2.2 Managing the Paradox through Resolving


In a Portfolio Organization such as Tata the business units must be
responsible for their own competitive strategy if not they will not be
accountable and could not react to the competition available in the market.
Corporate level must understand the limited ability to get involved and
stimulate synergy in the group. Tata group has grown using mostly through
unrelated diversification through acquisition and merges .As a portfolio
organization they should emphasis on responsiveness and in the meantime
needs to take advantage of group synergy to get a better return to its
shareholders.

3. Paradox of Strategic Change- Revolution Vs Evolution


As Peter Drucker says in Management Challenges for the 21 st Century: A change
leader looks for change, knows how to find the right change and know how to make
them effective and outside the organization and inside it this change could be done
in two ways where there could be a radical change take place within a shorter time
which could be a clear break with the past which is revolutionary. If not small
changes can be carried out continuously as a process gradually accumulate over a
long time period where the end result could be large which is an evolutionary
change. (Wit & Meyer, 2014)
The organizational culture has a major impact on the changing process of the Tata
group. If we have a close Look Indian employees job security as a key factor but the
liberalization in 1991 did not support the practice. This clearly evidence continues
renewal was not possible to carry out by Tata due to the external factor changes in
the Environment.

3.1 Revolutionary change Vs Evolutionary Change


Tata former CEO, Ratan Tata identified internal rigidity like lethargic cultural lock
which creates organizational rigidity through psychological resistance to change will
be a limitation for a revolutionary change. He bought novelty to the company
through recognizing and breaking the fundamental assumptions. He looked at it in a
discontinuous perspective and introduced the Tata Business Excellence Model
(TBEM) through Tata quality Management service ( (Wit & Meyer, 2014)). It provides
strategic direction and drive business improvement at Tata conglomerate on 1995.
(Tata Business Support Service Ltd, 2016) The Tata TBEM has attached in appendix
1 for further reference. It helped Tata to identify the outdated factories and closing
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down the unprofitable Tata steel factories and modernizing the mines and steel work
which helps to improve the performance of overall Steel productivity. TBEM frame
work was introduce to overcome the organizational crisis and created the urgency
to change. Tatas business model changed and it was contributing into a forceful
inorganic growth strategy. His business model helps the conglomerate to convert
the culture into more visibility, structural and process change under the leadership
of Ratan Tata. He did not have a phase to change in a gradual manner to match with
the external factors and bench mark against the global companies. The time taken
to implement the process, the effectiveness of towards Tata group evidence this as
an revolutionary change (Tata Business Support Service Ltd, 2016)
The competitive, regulatory and the environmental pressure pushed for a
revolutionary change Tata constantly carried out constant stream of moderate
change to gradually improve the existing completion and maintain and grow its
market share which is an evolutionary change. (Wit & Meyer, 2014)
Tata motors the first company Indias engineering sector to be listed in New York
Stock exchange in September 2004. (tata motors, 2004).They have developed new
product development such as Tata

Nano, Indiva(The seven seat MPV) through there innovative solutions and cost
reduction strategies which they studied over a time period by experiencing the
automobile market. They came up with different features which uplift the quality of
the vehicle in the latest model for instance Indica V2,Safari storme, Bolt, Indigo,
safari stome etc. Tata motors was successful in changing the business process
effectively and coming up with new product developments over time. The higher
research and development expenditure which is 2.7% of the group turnover in year
2014-15 indicate how the group invests on the evolutionary change. (tata sons,
2016).These changes did not have an impact on the business model changes but
changes within the SBUs through continues renewal perspective identified as
evolutionary change.
The continuous enhancement of the value chain and the further improvement
helped Tata motors to launch again the Tata Nano with new features and advertising
complain in the year 2013.This was as a result of systematic improvement in their
value chain, technological improvement; continuous learning process .This proves
the success of evolutionary change they have achieved in the automobile industry
to increase the return for shareholders. (Tata sons, 2016)

3.2 Managing the paradox


It would be useful to carry out a parallel and balancing method by Tata group since
it operates in different industries and in different countries. As a result it got
different level of human resource different structures and process which operates
independently and as a corporate which was discusses in the corporate strategy. Its
a immense fact to get the maximum output Tata should strike a balance between
both the paradox .Since Tata plays the market leader in many industry such as steel
automobile etc in India it must come up with evolutionary change to get the first
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mover advantage .In the mean time since there is high competition all over the
world it must continuously improve its output using evolutionary change because to
mitigate the risk involved.

4. .Paradox of Network level


Whether the group deliberately surround themselves in a web of durable
collaborative relationship through cooperative inter organizational interaction to
achieve long term goal or work independently as possible through its competitive
power to achieve its goal will be discussed under network level paradox. (Wit &
Meyer, 2014)
Equity, Non-equity strategic alliances and joint ventures (JV) are the main three
types of corporate strategy Tata uses in their corporate strategy. The details are
provided in appendix 3 .When observing the past Tata used relational orientations
strategies to control resources through learning. Tata group Integrated similar
activities to gain economies of scale. (Wit & Meyer, 2014).It tried to mitigate the risk
of investors through alliance with other organizations. (Tata sons, 2016)

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4.1Cooperation Vs competition
Joint venture will be a quick way to increase the market share and enter into new
market and expand the business. Tata used this strategy to expand its operations.
Tata SIA Airlines known brand name as Vistara had join venture with Singapore
Airlines in 2015 will be a good move to cooperate. This help Tata group to serve for
passengers travel low cost and passengers travel in a full service airline. It improved
the domestic services and helps to become one of the top three airlines. It helps to
overcome the international traffic which had dominated by foreign airlines. (tata
sons, 2016)
Tata Global Beverages strategically share the knowledge and skill through 50:50 JV
with Starbuck (Tata Global Beverage Ltd, 2015-2016). This cross border
collaborative JV provides a win-win situation for both the parties to increase the
revenue. Since Starbuck could not easily enter to Indian market which is a 80% due
to the specific economic restriction in the country. In the meantime Tata got an
opportunity to enter into international food and beverage industry through the JV.
(Wit & Meyer, 2014) Tata Starbuck generates total revenue of Rs.171.2 crore in the
year end march 2015 which is an 80% increase than the year 2014. (Sagar, 2015)
Tata motors and the fiat signed an agreement to share the dealer network in India
and Europe. Tata sells fiat branded cars through its selected outlet and fiat sells Tata
brands in Europe. It helped Tata to reach the market beyond India during 2006.
(Deshbandhu, 2006). They 50;50 join ventured to setup a joint SUV assembly line
investing around Rs.3000 crore with a capacity of 100000 units in 2015. Tata
manufacture Q501 and Q 502 where fiat uses for its jeep models. (economictimes,
2015)
Working through cooperation over competition gives cost reduction in the
infrastructure and process where both parties works based on trust cost and
relationship basis to gain a win-win situation to give a better return to the investors.
But it will not be always the case to win the global market. Ratan Tata tells his
priority given to inter organizational competition and lay a foundation to look at as a
separate organization for better performance. As investors we must understand the
ambidextrous nature in the network level of Tata.
Completion over cooperation is where one entity wins while the other loose. Tata
must have sufficient capabilities and willingness to use the power to overcome the
competitor to win the market. (Wit & Meyer, 2014). Even the resources are share
among the other organization as investors we must understand that there is an
internal competition as well. When looking at the joint venture of Fiat and Tata
motors evidenced they did not merge or acquire each other business .The only
created a synergy across multiple functions which are common but compete each
other through different product range, marketing strategy and after sales services.
This reflects juxtaposing balancing in managing the strategic paradox of network at
Tata.
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Even Fiat share there dealership network of Tata motors some of the product offered
by the fiat stable ( The Petra) might reduce the sales of Tata products such as Indigo
and omitted Petra from displaying and selling through joint dealership provides a
clear picture to investors how Tata manage the completion over cooperation in the
market strategically. (ICMR, 2012)

4.2Managing the paradox through Juxtaposing


Tata managing its competition and cooperation even with the same network
partners such as fiat (Wit & Meyer, 2014).Managing both to gather can be done
through strategic outsourcing. Since Tata was operating in different industries they
have focus the competencies and outsource the minor activities to the subcontractors who are specialized in their field through that Tata was able to share the
competence of the other entities and take advance over it. Since the technology
drastically changes in a continuous process it borrows and shares the knowledge
with the other companies while maintaining the competition. It encourage the
competition with in the alliance and internal group for higher performance and to
differentiate its products and services from other competitors. This provides to
increase the return of the overall performance and expand the brand of Tata.

5. Conclusion
Tata group has gone through several stages of growth under different leadership.
Since it operates in diverse industries it has used all different paradox to get the
maximum benefit through the opportunities arises. It was mostly based on the
leadership of the Tata group. It is evidence the former CEO Radan Tata went through
revolutionary radical change by taking quick decision based on the environmental
changes and the Tata expanded through inorganic growth. The former CEO Cyrus
Mistry was more concentrating on organic growth through capitalizing on internal
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resources and integrating the SBUs with less decision making powers. He sold less
profit making entities to reduce its debt capital but the overall revenue also did not
grow as expected by the investors. This resulted in management change on
December 2016 and the investors expected an aggressive growth in the future.
Appendix 1

Appendix 2

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14

Appendix-3
Tata Acquisition and mergers

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