Tata Group’s Problems and Recommended Strategies

Introduction

Ratan Tata is recognised as a person that transformed the Tata Group (a massive Indian conglomerate) from a random collection of businesses into a nimble group that is ready to use new opportunities to expand and grow. The Tata Group is very quick an efficient in expanding its global existence, owning companies in almost every market on the international arena¹. The company vested a combined capitalization of the market of more that thirty-two billion dollars with regards to a diversified operations range, which included energy, engineering, consumer products, IT, communications, and others².

Source Problem

The source problem is associated with the liberalisation of the Indian economy at the beginning of the 1990s along with the worries of Ratan Tata about the future of his company had a tremendous influence. Although the company could boast of its achievements in expanding its global geographical presence, uncertainty as to the direction in which to go remained. Such uncertainty was largely associated with the lack of development of facilities in India, which can limit Tata Groups’ local expansion.

The problem seems even larger if to mention that a trillion dollars in it sector investment is needed to fund the infrastructure to overcome poverty, which suggests that Tata Group’s perspectives are far from bright. Another issue pertains to the absence of a person that will manage the business after Ratan Tata; this issue can make the company deprived of an effective leader that can help Tata Group expand and achieve new heights³.

Secondary Problems

Short-Term

Issues with Development and Retention of Talent at Tata

According to the case study regarding Tata Group, the unsatisfactory environment for work coupled with disparities in income forced local workers to leave their jobs in a search for better conditions overseas. Moreover, Rajan Tata experienced was often pressured into having a committed team of managers and leaders who will successfully resolve the problem of the lack of talent in the company as well as its retention in the business strategy of Tata Group⁴.

Issues with Corus Onwership

The acquisition of Corus, a UK/Netherlands steel company, forced Tata Group into more than seven billion dollars debt, which presents a tremendous challenge. Moreover, the trade Union that represented the interests of Corus workers required the new owners to pay six hundred million into assuring their security and livelihood. Thus, to be socially responsible with regards to its employees, Tata Steel had an undoubtedly hard decision on their hands⁵.

Long-Term

It can be hypothesized that the diversification of Tata Group’s operations has expanded too wide, with the company losing its focus. It should have placed emphasis on leading industries that usually generate more profit. Ratan Tata has been unsuccessful in streamlining the operations of his company and now has to face long-term challenges of an eventual successor carrying the weight of the company.

Analysis

With the shortages in the Indian talent⁶ and poor working conditions in cities such as Jamshedpur⁷, and poor working conditions in cities such as Jamshedpur, Tata Group experiences a tremendous lack of resources for efficient operation. Since 2006 when Tata acquired Corus, Tata Steel have been experiencing pressure in the aftermath of the recession. With the production of steel in the UK hitting bottom due to volatile demands from different industries⁸, it is impossible for Tata to achieve growth.

Moreover, despite the fact that Tata Motors has a history of manufacturing trucks, SUVs have lost their appeal to customers, which resulted in the decrease of demand. Bad economy influenced the decrease in the desire of owning premium cars, which placed Tata in a tight position⁹.

On the other hand, it is an understatement to think that Tata Group os the only company in India in debts. A report concluded that the public debt of India constituted up to seventy percent of its gross domestic product¹⁰. It is evident that that borrowing was created so that Indians break free of their financial scarcity through the development of infrastructure.

The overall management of the company can be regarded as lacking direction and focus. On the one hand, Ratan Tata is vocal about not throwing all resources when it comes to investing in one business while on the other, he is likely to give in to the intention to reach international growth¹¹. The over-diversification of the business resulted in negative implications such as debt and resentment from employees associated with downsizing. Such an unfavorable set of circumstances can only be improved by paying more attention to good management and looking ahead in the future¹².

Alternatives

The criteria for evaluation will be associated with the framework of goals and timeline for helping the management of Tata Group improve the company’s operations.

Short-Term

1. The management of Tata Group should develop a cohesive business plan to address the development of talent, their retention, as well as the preservation of occupational health and safety.

2. For the next three years, the strategy of Tata Group should be focused on increasing its local presence and revenue to break the cycle of the negative attitudes shown by local consumers.

Long-Term

To achieve long-term success, Tata Group should concentrate on the highest earning departments of the company such as Tata Motors, Tata Steel, and Tata Consultancy Services in order to recover from debts and increase the international revenue of the company.

Tata Group is advised to decrease the number of under-performing departments that the company has acquired. During the process of downsizing, the management should not venture into the diversification of businesses that can potentially lead the company into more debt.

Recommended Strategy

It is advised for Tata Group to re-evaluate its current orientation and try to keep its focus on a limited number of priorities¹³. The process of diversification and expansion globally did not bring any results, so for the easier management and increased profitability, it is worth for Tata Group to stop branching out. It is also recommended to integrate social responsibility efforts for retaining talent¹⁴ in the corporation since the country is already experiencing immense shortages of workforce.

Justification of Recommendations

The recommendations regarding the retention of talent are justified by the fact that intangible skills or workers are hard to maintain, so it may be worth to consider an increase in the wage rate for the technical and frontline staff. As to the reduction of industries, the company could concentrate on the main holdings¹⁵.

Implementation, Control, and Follow-Up

• Increase wage rates for workers at least $0.25 per hour;
• Introduce group insurance schemes across the board;
• Make the senior staff train inexperienced employees;
• Train managers through coaching sessions and courses;
• Disregard under-performing industries gradually (e.g. ten a year);
• Introduce micro-management through the concentration of funds¹⁶.

References

1. International Business: An MNC Perspective (New York: Palgrave Macmillan, 2017), 113-114.
2. Charles Hill, Gareth Jones, and Melissa Schilling, Strategic Management: Theory & Cases: An Integrated Approach. (Stamford, Cengage Learning, 2015), 337-338.
3. Fred Luthans and Jonathan Doh, International Management: Culture, Strategy, and Behavior (Asia Higher Education Business & Economics Management), 9th ed. (New York: McGraw Hill, 2015), 87-89.
4. Jonathan Doh, Shawn Howton, Shelly Howton, and Donald Siegel, “Does the Market Respond to an Endorsement of Social Responsibility? The Role of Institutions, Information, and Legitimacy,” Journal of Management 36, no. 6 (2010): 1461.
5. Luthans and Doh, International Management, 88.
6. “48% of Indian Employers up Against talent Shortage: Survey,” DNA India. Web.
7. James Crabtree, “Welcome to Jamshedpur, India’s Steel Citadel,” Financial Times. Web.
8. EY. “Indian Steel,” EY. Web.
9. Ketan Thakkar and Lijee Philip, “Tata Motors Faces a Tough Situation with Its Ill-Fated Small Car Nano: To Continue or Ditch It,” Economic Times. Web.
10. Kanhaiya Singh, “Budget Deficit and National Debt: Sharing India Experience,” Crawford. Web.
11. Alok Soni, “After Kalaari Capital and Jungle Ventures, Ratan Tata,” Your Story. Web.
12. Alexander Izosimov. “Managing Hypergrowth,” Harvard Business Review. Web.
13. Peter Cappelli, Harbir Singh, Jitendra Singh, and Michael Useem, “Leadership Lessons From India,” Harvard Business Review. Web.
14. Tracey Keys, Thomas Malnight, and Kees van der Graaf, “Making the Most of Corporate Social Responsibility,” McKinsey. Web.
15. Paul Bloom and Philip Kotler, “Strategies for High Market-Share Companies,” Harvard Business Review. Web.
16. Deborah Jacobs, “How to Manage a Micromanager,” Forbes. Web.