The Rationale Behind Strategic Analysis at Tata Motors

The Rationale of the Strategic Analysis

Tata Motors is a global company that is developing the strategy of aggressive market expansion and diversification of its production. It acquires car manufacturing companies and forms joint ventures in different counties all over the world. Considerable diversification of production allows the company to cover the needs of various customers.

However, this strategy leads to lower control over the operational performance, misunderstandings with employees, inability to build reliable prospects and understand market trends, and the threat of inability to withstand against rivals. These issues were identified based on the information from various journals, the official web site of the company, and reviews of employees. The analysis of these issues helps to determine several alternatives for further actions and chose the most reliable recommendation. Tata Motors can continue the acquisition of manufacturing facilities to increase its market share. However, this strategy may lead to a further lowering of control over operational performance. The company may stop the acquisition and focus its intentions on the improvement of management. The second alternative is considered to be more beneficial because it will allow us to resolve existing issues and to eliminate similar problems in the future. The special plan of action for the proper realization of the chosen alternative is developed in the final part of the current work. It will enable the firm to take consistent steps and minimize the possibility of any failures during the realization of proposed recommendations.

Nowadays a lot of global companies are facing various issues connected with expansionary strategies. The current work provides an analysis of internal and external issues of Tata Motors for the determination of the key causes. The data is collected from the secondary sources and analyzed with the help of the descriptive type of research design. It is collected from various internet sources: official web site and magazines. All the data is properly analyzed. The attention is paid to concrete figures and reviews of employees. The analysis has revealed the following issues: an inability to make correct predictions concerning future market trends, possible threats in the local markets, and misunderstandings with employees. These problems are rooted in the excessive diversification of production and the acquisition of manufacturing facilities. Recommendations include a temporary stoppage of increasing diversification and growth and focusing on the improvement of the quality of management.

The rationale behind the strategic analysis in the current work is to help the company to improve its performance. The major aim of the paper is the identification of the key issues that cause problems in the organizational performance and the development of effective strategies. This aim can be reached through the following objectives:

1. Evaluation of the internal environment of the company (labor, performance) and identification of the existing problems
2. Evaluation of the external environment of Tata Motors and identification of the related problems
3. Determination of the roots of the problems listed above
4. Development of alternatives and recommendations

This work will help to develop a rational and realistic plan of actions that will help Tata Motors to solve its issues and to improve its effectiveness.

Research Method and Design

Tata Motors is a global company that is represented in different countries all over the world. Consequently, proper evaluation of the performance of this company is possible only after the thorough analysis of information that depicts problems in different aspects of the organizational performance (financing, local markets, and interaction with employees). This information was obtained from various secondary internet sources. The chosen methodology helps to collect the data from different locations and fields, understand the views of authors of articles who base their assumptions on concrete figures, and study as well as analyze existing trends in the economy and local markets.

One of the issues depicted in the current paper concerns misunderstandings between the company and employees who work at British manufacturing facilities. The information concerning this issue was taken from the article “Tata Motors must sort out labor issues at the JLR plants” (Vats, 2014) and supported by employees’ reviews placed on various sites, such as Glassdoor (2016) and Indeed (2016). The data was gathered from secondary sources because there was no possibility to go to the factory and perform personal interviews with workers. The above-mentioned sites provide about 200 reviews of people who are or have been employed by Tata Motors in the UK. They are both men and women of different ages, nationalities, races, and religions. No ethical approval is required for this research because people clearly understand that if they place their reviews on freely accessible sites, then this information can be used for research.

The investigation was performed according to the following plan:

• determination of the sources where employees place relevant and grounded reviews;
• choice of the reviews which depict the information concerning labor-related problems;
• allocation of reviews into three separate groups (fully satisfied, partly satisfied and not satisfied by the labor policy of the company);
• analysis of information;
• construction of graphs and conclusions.

Descriptive statistics were used in the current work for the investigation of labor issues in the manufacturing facilities of Tata Motors in the UK. This statistical method was chosen because it was able to provide a clear understanding of the descried issues through graphical visualization.

Current research will help to understand the relevance of the problem. This research is beneficial to Tata Motors because it emphasizes the extent of the existing labor issues. Additionally, this information will be useful for employees who work at British manufacturing facilities of Tata Motors, because they will understand the attitudes of other staff members. The further indexing of the current research in relevant databases can be performed by using the following specific keywords: Tata Motors, problems, diversification, labor, competition.

Data Collection and Data Analysis

The collection of data for the preparation of current work was a rather complicated and long-lasting process. Tata Motors is a globally developing company, and thus it is rather hard to perform correct identification of its problems and determine its roots. All the information was taken from various Internet sources: an official site of the company, journals, magazines, etc. The analysis of gathered data was conducted according to the following steps: collection and studying the data, its comparison, determination of similarities and differences of the described issues, and the formation of a grounded conclusion.

Literature Review

No similar research has been performed before or is being prepared at the moment. Consequently, the thesis of the current work will not duplicate other researches. General information about Tata is taken from the official website of the company. The weaknesses of the organization’s performance were described in several articles. For example, the authors of the article “Lower China sales and large investments to weigh on Tata Motors’ fiscal 2015 results” (Trefis Team, 2015) noted that the company’s performance was affected greatly by the Chinese economic slowdown. Richit Vats (2014) put special emphasis on the existing labor issues.

This information was supported by employees’ reviews from Glassdoor (2016) and Indeed (2016). Additional attention should be paid to the fact that some features of their automobiles have helped Tata Motors to gain market share. Vanessa Able (2014) pointed out the low price of Tata Nano that made it one of the most popular models in India.

The rationale for the study of the abovementioned problem has been explicated. Abundant literature enabled the researcher to obtain a deeper understanding of the internal and external problems of Tata Motors. Additionally, it was possible to identify the roots of these issues and develop a relevant and well-grounded strategy.

The Analysis of Findings

Information about the Company

Tata Engineering and Locomotive Company (also known as Tata Motors) is one of the biggest Indian automobile manufacturers in the world. Its headquarters are located in Mumbai, India (Tata Motors, 2015). The major products of the company include cars, vans, trucks, buses, coaches, military vehicles, and construction equipment. The firms have numerous auto manufacturing facilities and assembly plants in such countries as India, Argentina, Thailand, South Africa, and the UK (Tata Motors, 2015). The research centers of Tata Motors can be found in South Korea, the UK, and Spain.

The company has purchased other car manufacturing facilities with an aim of expansion of its market share. Tata Motors has purchased Jaguar Land Rover (the producer of Land Rover, Range Rover, and Jaguar) and Tata Daewoo (Tata Motors, 2015). Moreover, it has formed several joint ventures with such companies as Marcopolo S.A. (car manufacturer), Hitachi (manufacturer of construction equipment), and Fiat Chrysler (manufacturer of automotive parts) (Tata Motors, 2015).

More than 900,000 vehicles have been sold since the establishment of the company in 1945 (Tata Motors, 2015). Nowadays, the products of Tata Motors can be found in 175 countries (Tata Motors, 2015). Nowadays more than 60,000 employees work for this company and its subsidiaries (Tata Motors, 2015).

The company directs its efforts towards bringing “a proven legacy of thought leadership with respect to customer-centricity and technology” to the consumer (Tata Motors, 2015). Tata offers leading technologies, powerful vehicles, and the lowest possible life-cycle costs. All these features are combined with superior comfort and high-quality performance. Therefore, the mission of the company is “to be passionate in anticipating and providing the best vehicles and experiences that excite our customers globally” (Tata Motors, 2015).

Critical Analysis of the Current Company’s Strategy

The Background of Problems

At the moment the company is facing several issues that have been formed on the background of shifting orientation from the Indian market to the global markets. As the Indian car manufacturer focused on the production of vehicles for the coverage of needs of local customers, Tata has become a global company oriented on the production of a great variety of vehicles in different continents. The considerable success of Tata is based on various factors. It is “more diversified than Western companies, more engaged in the life of the community, and better equipped to prosper in both developed and developing markets” (Jamshedpur, 2011). Major events that express the company’s intention to enter international markets and become a global car manufacturer include the acquisition of Jaguar Land Rover and South Korean Daewoo trucks, and the establishment of a great variety of joint ventures (Jamshedpur, 2011).

These actions have led to considerable results. Tata Motors has gained a stronger position in the European, Asian, and American automobile markets. Moreover, the company has become able to cover the needs of representatives of various classes (lower, middle, and upper) because it offers products with different characteristics. For example, Jaguar is more oriented towards customers of the upper class who can pay high prices for comfort and reflection of their social status. At the same time, Daewoo is more focused on the representatives of lower and middle classes who pay more attention to the lower price of products. Moreover, Tata Nano with zero safety is considered to be the cheapest automobile in the world (Able, 2014). This model was created for the poorest customers in India.

Problems

The strategies of globalization and enormous diversification of production have formed the background for considerable problems related to the company’s performance and its inability to withstand harsh market conditions. The managers of Tata direct all their efforts towards the expansion into new markets and do not pay sufficient attention to the proper evaluation of employee satisfaction. Poor judgment of the global economic situation causes considerable losses: “the widespread suspicion that Tata had overpaid for Corus and JLR seemed to be confirmed when the world’s stock markets tumbled in 2007-08” (Trefis Team, 2015). Several years before the manager of Tata failed to predict the stagnation of the growth of demand for the company’s products (Trefis Team, 2015). This failure was one of the major reasons for the fall in profits before tax of 6.4 % and the fall of the Indian automaker’s stock price of 5.3 % in 2014 (Trefis Team, 2015).

Additional attention should be paid to the fact that the production of Tata, its subsidiaries, and joint ventures are directed towards various markets and regions: Asian, American, and European. During the previous two years, the managers of the company failed to take successful actions of minimization of the negative impact of fluctuations in these markets. The example of such fluctuations is a considerably lowered demand in the Chinese automobile manufacturing market caused by the slowdown of the economic development of this country, decrease of the GDP, industrial overcapacity, and crisis in infrastructure and real estate sectors (Trefis Team, 2015).

These trends have led to a decrease in sales of vehicles of 9 % (Trefis Team, 2015). Tata Motors did not predict these negative changes and thus did not implement relevant and effective measures, such as a decrease in the production of vehicles for this market or expansion into other locations. Moreover, the company keeps making considerable investments in research and product development of the Jaguar Land Rover. In the previous year, it spent more than $ 3.5 billion for this purpose with an expectation that these investments would be returned (Trefis Team, 2015). Large investments can hurt the cash flow structure of Jaguar Land Rover and Tata Motors.

Moreover, the company may face an issue of falling demand for Jaguar models in the Chinese market, because the price of this luxurious car is about 1.6 times higher than the price of a locally produced Audi Q5 that is also oriented towards upper-class customers (Trefis Team, 2015). At the moment, Tata has no definite strategy for dealing with this problem.

Due to its focus on increasing and strengthening its presence in the emerging markets, the company “has become obsessed by serving its customers and matching international standards” (Jamshedpur, 2011). According to the official statement of Unite –UK’s largest union, the “overwhelming majority of JLR’s workers, had unanimously rejected the company’s pay offer and pension changes through a consultative ballot” (Vats, 2014). This announcement shows that the company faces some issues in its acquired firms. This information is supported by employees’ reviews from Glassdoor (2016) and Indeed (2016). They have thus been analyzed and grouped according to the level of workers’ satisfaction with the company’s policies.

Key Issue

The above information forms the background for the understanding of the key issues at Tata Motors. They include the lack of control over the performance, which causes poor predictions of economic trends; susceptibility to the negative influence of markets; inability to withstand competition; and problems in operational performance due to excessive diversification.

As a result, Tata Motors should develop various initiatives to solve the abovementioned issues. As a matter of fact, the mentioned key issue is strategic, because the failure to address it would lead to even more problems. Money may be lost because of ineffective and untimely financing, the negative impact of economic fluctuations in various countries may increase, market share may be lost because of the company’s competitive failure, and a larger number of misunderstandings with employees can give rise to conflicts and even stoppage of manufacturing.

If the strategic issue will be addressed partly, Tata Motors will not be able to reach the total improvement of the situation. For example, managers cannot pay attention only to the minimization of the negative impact of economic and political fluctuations in countries where the company’s production is conducted. If they do not devote their efforts to more precise predictions of the economic reliability of investments, the company will still lose considerable amounts of money. The opposite situation will lead to successful investments, but still, funds may be lost because of changing market conditions (i.e. discrepancy between the supply and demand for vehicles in a certain market). Hence, the demand may be uncovered and customers will turn to the products of other manufacturing companies, or the production will remain non-demanded. These outcomes may also cause losses.

Based on the above discussion, it may be interpolated that the very roots of Tata Motors’ issues lie in over-diversification. The company has to address these challenges before proceeding with the acquisition of other car manufacturing companies, which offer products that cover a different type of demand (for example, ecologically friendly technologies). A failure to resolve internal issues will cause the loss of managerial control over the quality of performance of various departments of the company.

It would lead to the lowering of the company’s ability to withstand growing competition, changing market conditions, and misunderstandings with labor unions. As a result, market share will be lost, profits and sales will fall, and communication with employees will worsen causing the stoppage of work and even strikes. The company has to strengthen its control over the existing subsidiaries and joint ventures and implement procedures for an effective and timely response to market fluctuations. In such a case, any negative impact would be softer than in the worst-case scenario, but the company would still lose its funds, demand, and relationships with workers. In the best case, the company will develop more effective managerial strategies and build reliable predictions concerning market trends. A well-grounded analysis of the auto manufacturing industry and rivals as well as compromise with employees and labor unions will make the firm stronger and less susceptible to financial losses. These initiatives would help to strengthen the company’s position in the market, make it more competitive, create a brand image that always considers customers’ expectations, increase revenues and profits, and improve productivity and retention of workers.

Alternatives

The current work will also contain two mutually exclusive alternatives for Tata Motors. They will be directed towards the resolution of the described problems and issues. The main scenarios that will be addressed in this section include the stoppage of the acquisition of new manufacturing facilities, and proceeding with their acquisition.

The first alternative represents a total refusal form the acquisition of new companies connected with car manufacturing and direction of all the efforts of the company to the improvement of control over existing branches, subsidiaries, and joint ventures. This approach will also help to pay more attention to the resolution of issues with employees and more relevant market predictions.

The current alternative contains several disadvantages. First of all, Tata Motors can lose its market share, because it will stop its aggressive politics of acquisition. Its closest rivals, such as Audi, can meanwhile successfully purchase other car manufacturers and occupy a strong leading position in the automobile market. Consequently, Tata’s opportunities for further development would vanish. Moreover, relevant and precise assessment of the possible market changes may require much time. Consequently, the company may miss the most advantageous time for investment in successful projects.

The second alternative is reflected in the proceeding of the acquisition of car manufacturing companies in different parts of the world and expanding to new markets. This initiative will lead to further expansion of the global car manufacturing market. Its position will be strengthened by the increasing diversification of production and new experiences. The critics’ assessment of this strategy helps to understand that it can lead to further loss of control over the operational performance of Tata Motors. Moreover, relations with employees and unions will be worsened. Relevant predictions concerning further economic fluctuations and market vulnerability will become unattainable due to insufficient attention to these matters. Lastly, the competitive position will be lost due to the inability to develop strong strategies in local markets.

Recommended Scenarios

The situation described in the first alternative will be more beneficial for Tata Motors. This decision is based on several assumptions. First of all, the company will make considerable changes to its management system, which will improve the efficiency of work. As a result, it will become more equipped to withstand harsh market conditions, make more relevant predictions, and satisfy the demand. Moreover, the company will pay attention to the development of a set of actions that will help to improve its competitive position in the market. Lastly, it will be able to improve its communication with unions.

These strategies can be realized through special courses of action. The first one contains the following initiatives: analysis of the markets; assessment of past and current organizational performance; study of the exiting trends, advice from professionals from outside of the company. The second course of action incorporates the following steps: a study of local markets; determination of rivals, strengths, and weaknesses; identification of competitive advantage of Tata Motors; identification of Tata Motors’ weaknesses; development of the strategy aimed to increase market share. The last course of action involves the identification of reasons for employee dissatisfaction, the study of their requirements, and the development of strategies to cater to the employees’ needs. These courses of action are considered to the best alternatives because they provide a precise analysis of the existing issues. Thus, they help to design efficacious strategies.

Another alternative was not selected for the consideration in the current work because it may worsen the company’s position, as it will make the existing gaps deeper. Tata Motors may lose control over its branches as well as its ability for successful prospects. The competitive position can become weaker, and the car manufacturer will become unable to withstand rivalry. Hence, Tata Motors will lose considerable sums of money and, as a result, its market position. The implementation of the alternative strategy poses more threats than opportunities.

A major goal of all recommendations presented in the current work is the direction of efforts, funds, and sources of the company to the improvement of the effectiveness of its decisions. The following objectives will be achieved under the mentioned plans:

• fewer funds will be lost due to irrelevant predictions
• market share will be regained and sustained
• conflicts with employees and unions will be eliminated.

The proposed strategies can be implemented within the next six months. The company will be obliged to spend more on the proper market analysis, economic trends evaluation, and assessment of the workers’ needs. As a result, the benefits of the proper realization of the described initiatives would be reflected in the strengthened market positions, eliminated financial losses caused by poor managerial decisions, and improved relationships with the labor force. The proposed research makes considerable contributions to the knowledge about global automobile manufacturing because it helps to identify possible issues connected with aggressive expansion.

Discussion

This part of the paper will provide an analysis of the results of the study of Tata Motors. The findings help to identify issues in various spheres of operations and determine their roots. The company should implement specific activities described in the proposed courses of action. These activities should be performed by specially created units and monitored by the designated managers. Each unit will be responsible for the development and realization of specific actions. These activities, their costs, time frames, and rates of success or failure are described in table 1 (Market Research, n. d.).

Table 1: First Unit of ManagersActivities, costs, time frames, and measures of success or failure of the most relevant units of managers.

Activities	Costs	Time frame	Measures of success and failure
Market analysis	USD 5,000	2 months	Success: grounded market analysis that helps to determine the company’s position by using the strategy of 5Ps and develop strategies for its improvement Failure: non-performance of the analysis; non-completion of the analysis; false or incorrect information
Study of economic trends	USD 2,000	1 month	Success: Ability to make effective and relevant predictions Failure: false predictions concerning changes in the auto manufacturing industry
Assessment of organizational performance	USD 1,500	1 month	Success: proper and reasonable assessment of the work of organization, determination of strengths, weaknesses, threats and opportunities Failure: incorrect determination of organizational issues
Development and discussion of courses of action	USD 4,000	2 months	Success: designation of effective strategies, their analysis and improvement Failure: inability to form future strategies or perform their proper analysis

Possible coordinating issues are connected with the inability of timely performance of the described actions and the failure to link the information from market analysis with the assessment of organizational performance. Moreover, Tata Motors should pay attention to such obstacles as the lack of understanding between Indian top managers and foreign (British and Asian) employees because of cultural differences and discrepancies in attitudes to the working process.

Conclusion

In conclusion, the current work provides a short description of Tata Motors and investigates its internal and external problems. The analysis was based on newspaper articles, the data from the official website of the company, and was supported by the reviews of employees. This work shows that Tata Motors has problems with making predictions concerning market economic trends, faces a threat from rivals in local markets, and suffers from misunderstandings with employees. All these problems have one root – excessive diversification. It leads to an inability to focus on proper operational performance. It is recommended that the company stops the acquisition of new manufacturing facilities and expansion to new markets until the moment when it resolves the above issues.