Strategy and planning management assignment help online: Case study analysis of The Last Rajah Ratan Tata
The case talks about the global expansion strategy that Tata group, under the leadership of Ratan Tata, has undertaken in the recent past. The expansions have been done through acquisitions of stakes in international companies in automotive, steel, mining, hotel industries etc. Ratan was inspired by the global expansion of Chinese projects. Ever since the global expansion strategy has been started, the Tata group has seen several phases of hardships and success. The heavy deals such as Corus have led the company debt ridden and hence put to test the group values such as Corporate Social Responsibility and sustainable business model. Some of the projects taken in rural areas or for cause of society upliftment might face a situation where they may not be viable for the company. So, the central challenge is “To empower the group companies to survive in difficult global economic scenarios and at the same time not compromising with the traditional values that group stands for.”
The group now has 100 companies with 300 subsidiaries present in 40 businesses. The businesses are more or less independent working entities. The group faces several short term and long term problems in its pursuit of global expansion which are listed below.
Short term problems
The short term problems that any company faces while it expands into various geographies are the fundamental problems as mentioned below and same have been true for Tata group:
- Short term financial issues
As the company synergizes the newly acquired entities, there are lot of short term borrowings that the company requires to finance the day to day operations of the companies.
- Human resource issues
As the two entities merge, there is bound to be cultural differences among their employees. The company may also undergo restructuring of the resources but will have to stick to the traditional Tata group’s philosophy of not firing the employees (Barkema, Bell & Pennings, 1996).
- Organization structuring
As the group consists of multiple businesses, adding new business lines as well as strengthening of existing businesses by merging them with new entities is a daunting task.
Long term problems
The long term issues that the company will face are to build up the assets that match with the changing technologies and markets. Some of the long term issues have been described below:
- Building technological assets
Robust R&D is needed to build up the technological capabilities of the group in various domains.
- Building a client base
The company will have access to the existing client base of the acquired or merged entry. The new clients have to be added to get business more profitable. Since the market share of the company will expand, the company should build a brand that attract more clients. Hence a proper market strategy and marketing plan is important keeping in view the long term objectives of the company.
- Maintaining a talent pool
The human resource management in long term will also be a big challenge as the company needs to chalk plans to sustain the current businesses as well as aim for future business expansion through organic or inorganic growth.
The short term and long term problems mentioned above have significant impact on the way the company is currently managing its businesses and various other resources. The strategic thinking has always been influenced by old orthodox philosophy of the group which may not be fruitful in the modern economy.
SWOT model can be helpful to understand the context as below:
|Strong group financials:
As businesses like steel, power etc. are capital intensive as well as the ones having long gestation periods, the company should utilize the group balance sheet to fund expansions as well as the cash flows from current businesses to repay the debt as soon as possible and at the same time maintaining the profits intact.
Strong brand name:
The client base the company will build in the new markets will be supported by the brand name of the acquired or merged entity. Utilizing that client base will need an effort by the company to convince those clients about the quality of the products and services once the acquisition or merger happens. At the same time, the company should try to create new markets in the new geographies.
Building the R&D and other technological assets require huge commitment and research. The company will get an advantage of multi-dimensional technological knowledge base once it acquires any foreign firm such as Corus. The technological capital such as patents and the processes will expand. The endeavour of the company will be to tap these advantages and build up the resources that can match the future technologies as well as bring in the efficiency within the current processes and systems. The company has to build a long term plan to utilize these assets once they are in place (Hitt, Hoskisson & Kim, 1997).
The age old philosophy of the group to give the society some share of benefits will also pose huge challenges (Bodnar, Gordon, Charles & Joseph, 1999). The projects undertaken for corporate social responsibilities need big investments and hence the company will have to rethink on them if it needs cash for future expansions. The challenge will remain to maintain the brand value that Tata group stands for and at the same time ensure that the business expands swiftly and profitably.
Human resource management:
Managing the existing and the new talent pool will be a big challenge. The local talent pool should be tapped where the company has expanded into foreign territories. At the same time the senior management must be from the existing Tata group management so that the group values and philosophy are not compromised upon. The group has to ensure that the employees of the new entities and newly recruits follow and abide by the group culture, values and philosophies (Ghoshal, 1987).
The company has to rethink the management structure so that the businesses run smoothly on the path to achieve profitability. This has to be achieved by setting common objectives and values framework. The overall strategy should be to be global and act local in the new markets. The management at different geographies should be able to assess the needs of the market and provide insights on the market strategy. The market presence should be strengthened by building relationships with new vendors and other players across the value chain. The management structure of the company should be flexible enough to accommodate any dynamic requirements specific to the geography (Capar, & Kotabe, 2003).
The company can resort to aggressive mergers and acquisition strategy as it has strong financials.
The current balance sheet of the group stands strong but huge debt can create some short term financial imbalance. The company thus needs to think of the strategy to fund the new business entities as well as ensuring that the profitability of the current entities should not suffer. When there are deals like Corus that sought for $7.4 billion of debt, the company needs to constantly check its balance sheet.
Threat from local players:
The company will face threats from local players which may create several barriers for the company to enter into the market. The company thus needs to tie-up with some local player while it enters into a new geography.
Criteria of evaluation
The company’s goals and objectives will keep intact the strategies and plans of the company. Though the revenue targets can’t be set in the beginning considering the size and complexity of the businesses involved, the company should set the quantitative goals in terms of profitability of the businesses and group as whole and qualitative goals to emphasize upon future course of action (Slater, 1980).
The goals that may be set by the company are mentioned as:
- Based on current growth rate for profits as 33% annually, the company should at least aim to maintain ~30% annual growth in profits as new businesses will not start making money as soon as they come under the group.
- Company should also aim to become one of the top three players in each of the geographies over the next five years.
- In terms of building a brand, the group should continue its corporate social responsibility projects across the geographies and hence create goodwill among the local population.
Based on the goals set above, the company can define the overall objective statement for the group as “Serving clients and population across multiple geographies to emerge as a socially responsible market leader.”
The goals and objectives will define the strategies that company should undertake to foray into global expansion.
The alternatives worked out based on the criteria of evaluation can be described as below:
Short term alternatives
In order to achieve the immediate profitability, the company needs to optimize the production systems. The knowledge curve of Tata group must be applied to new business entities. It is also recommended to overhaul the human resource management process to have a decentralized decision making process.
The long term objectives can be met by overhauling the existing structure and processes. This can be analysed using McKinsey 7S framework as below:
|Hard elements||Soft elements|
In the long term, the company needs to add more clients as well to optimize the utilization of assets that will be built. The business plan must follow the simultaneous cost cutting as well as ramping up the production and marketing processes.
The long term growth must be optimally financed by utilizing group balance sheet with an objective to repay the outstanding debt as quickly as possible (O’Brien, 2003).
The decentralized management structure should be implemented in phased manner so as to act local and be global.
The processes and systems, mostly HR processes, should be tunes to match the needs to geographies as well as the group objectives (Zaheer, 1995).
The group values must be nurtured by engaging the local employees to undertake activities in Corporate Social Responsibility projects. The funding of these activities should be done from the revenues of respective local business entities. The local youth must be employed and hence creating goodwill for the company.
Management skills must be tuned to incorporate the needs to new markets. The technological assets should be created to build innovation (Marris & Wood, 1971).
The company should do away with age old philosophies and must ensure the profitability of the businesses.
The staffing must be done by engaging local employees wherever possible.
The recommended strategies for the group are as follows:
- Build a strong relationship with the local players involved in the value chain with the help of acquired or merged business entity. A Joint Venture may not be always a good option but it can be exercised where the company does not want to expose itself to substantial risk.
- Overhaul the human resource management practices and optimally restructure the human capital by including local employees at all levels with Tata group senior managers at certain strategic senior management positions.
- Ramp up the marketing activities and utilise the Tata brand name to establish its presence in new geographies. New client base must be built up in addition to the existing client base of the target business entity.
- Undertake CSR activities to the extent which the local entities can fund without hitting their profitability.
Hence, the core of the strategy is to maintain the group values and at the same time tune the business processes to the changing market needs (Stopford & Wells, 1972).
Justification of recommendations
These recommendations are justified as the group has a strong balance sheet to implement these strategies. The glorious history of the group has given it an added competitive advantage in terms of brand name as well as the knowledge curve.
The current management of the group is qualified enough to handle the business activities across multiple geographies. The diversified portfolio of the group serves as risk mitigation factor and hence company can take bold decisions.
The group’s values have been the core of their businesses over the years and hence it is recommended to keep them intact while pursuing global ambitions.
Implementation, control and follow-up
The implementation of these strategies will have to be done in phased manner starting with the short term alternatives till the time the businesses come on board with the group philosophy and objectives. A typical period of 2-3 years should be set for stabilization before the company starts activities for long term strategies. Once the stabilization is complete then the optimization of resources along with other long term strategies should be implemented (Penrose, 1959).
The monitoring of these activities should be done by analysing the balance sheet and income statement of the company showing the underlying profitability. Any gaps in achieving profitability targets must be followed-up and closed. The CSR activities might be put on hold till stabilization period.
Overall, the company has to plan, co-ordinate, implement and monitor its strategies and change them accordingly.
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