Strategy and Organisational Structure of Tata Motors

Introduction

As we all know, strategy and structure is one of the most fundamental and significant part of an organization. Strategy and structure is come up by planning process during processes of management in organization, therefore, it is not possible to ignore how well an organization in determining its mission and goal, planning appropriate strategies and structures of organization and implementing these strategies.

Strategy is the direct result of decision making and structure is the indirect result. Nevertheless, both strategy and structure is the result of decision making by managers through analyzing the organization and market, segmenting markets, selecting market, positioning themselves and using resources to implement the process. In this article, I will firstly) identify the mission and goals of Tata Motors, secondly) use SWOT analysis and the Five Forces Model to evaluate how well Tata Motors in strategy formulating and thirdly) evaluate the process of implementing these strategies.

Company’s mission and structure Tata Motors is a multinational manufacturing company in Mumbai, India. It has operated firms in the UK, South Korea, Thailand and Spain, moreover, it also has expanded its operations since 1961 to other countries. The Mission of Tata Motors is “best in the manner in which we operate, best in the products we deliver and best in our value system and ethics”. Through this mission, 24,000 employees are guided to produce high effective and useful automobiles to satisfy customers’ needs for maximum profits.

Otherwise, Tata Motors is in a group of companies called “Tata Group”. Tata Group was established by Jamsetji Tata in 1868, which is the largest corporate group in India and has the biggest capitalization and revenues. Tata Group has several major companies, which are Tata Motors, Tata Steel, Tata Consultancy Services, Tata Power, Tata Chemicals, Tata Global Beverages, India Hotels and Tata Communications(Shown on graph below).

This group has concentrated on seven areas: communications and information technology, engineering, materials, services, energy, consumer products and chemicals. Tata Group has two main decision-making managers who are the Group Executive Office(GEO) and the Group Corporate Centre(GCC). The GEO consider about implementing strategies in corporate governance, micro-environment and macro-environment, human resources, etc, which ensures the companies in Tata Group effectively and efficiently expands their business.

The GCC guides future adjustments and strategies to Tata Group. Therefore, Tata Motors are guided by the Tata Group and supported by all the companies in Tata Group, which ensures that Tata Motors being always in right direction and appropriate strategies to be implemented. (Omid, N and Patrica, A.N, 2012) (source from Tata Motors, 67th Annual Report 2011-2012)

SWOT Analysis on Tata Motors Strengths(Strategies with different time horizons): Long-term Strategies Three-pronged strategy: Tata Motors concentrates on better communication and recognition of innovative ideas and efforts(Omid, N and Patrica, A.N, 2012). That means, Tata Motors pays more attention on innovation and decides to put innovation in significant role in R&D. What Tata Motors have done is to improve the communication and recognition tools for exchanging ideas of innovation, and this improvement can increase frequency of information exchange.

Therefore, managers acquire innovative ideas quickly and give feedback to employees quickly, which significantly improves effectiveness in company and highly develops innovation level. Tata Motors purchases some facilities for learning from other companies. Actually, Tata Motors is always on the way learning from its competitors to improve itself through purchasing their facilities or even part of their firms and brands. It will be shown below in short-term strategies. Tata Motors supports collaborative research and partnerships with academic institutions for win-win results.

b) Pursuing innovation in two levels: High-end level: ‘Frugal Innovation’(Omid, N and Patrica, A.N, 2012), which means new products designed to appeal to poor people and the rising middle class. Tata Motors concentrates on most customers’ needs, that means, Tata Motors is going to produce more products to satisfy low and middle classes’ needs, such as providing low price products. Low-end level:

Tata Motors is a fast leaner in globalizing, absorbing lessons from other companies in innovation. Benchmarking is one of the effective method to learn from other companies, for example, when purchasing brand of JLR from Ford, Tata Motors not only purchase the authority of usage of JLR but also acquire the product line of JLR so Tata Motors learn how to produce SUV cars from this investment. (source from Tata Motors, 67th Annual Report 2011-2012)

Short-term strategies In 2008, Tata Motors purchased two world car brands- Jaguar and Land Rover from Ford Motors for US$2.3 billion and started to make JLR to be the main business of Tata Motors(Richard, L, 2009). As JLR is one of the most famous brands in the world, the investment made by Tata Motors gained both advanced products and high reputation all over the world. In 2008, there was one car called “Nano” to be produced by Tata Motors, which only costs US$2000. This product turned to be the main products to large and low-price car market both in India and other developing countries.

Obviously, Tata Motors’ targeting market is mainly low-price markets in developing countries because in these markets, customers do not have plenty of money and they only afford low price products. Many companies ignore these markets because they may think it is difficult to gain a lot profit from these markets, so Tata Motors decided to target these markets and provided low price cars that customers can afford.

Weaknesses: The weaknesses of Tata Motors are mainly too many competitors form domestic and foreign: Domestic competitors: Because of the barriers to entry Indian automobiles markets by government policy, there are mainly three major competitors:

The first one is “Maruti Suzuki”, which is controlled by Japanese company Suzuki and is the largest passenger car segment in India.The second one is “Mahindra and Mahindra”, which is targeting Multi-Utility Vehicle Sector (MUVs) market. MUVs are the cars that are larger than passenger cars and also can be used in transportation, and Mahindra is the market leader in MUVs market who stands for about 50% market shares. The third competitor is “Hindustan Motors”, which is targeting passenger cars, trucks and other commercial vehicles.

Even though Hindustan Motors is the smallest among above four companies, because of its ownership of famous family, the Birla Group, Hindustan has potential to follow up. (Richard, L, 2009) Name of CompetitorsTargeting Market

Maruti Suzukipassenger car MahindraMulti-Utility Vehicle Sector (MUVs) Hindustan Motorspassenger cars, trucks and other commercial vehicles

Foreign competitors Even though Tata Group has been the leader in auto industry in India already, it has many foreign competitors such as Ford Motor Co., Toyota, General Motors Corporation, etc. For expanding its business to other countries, especially some developing countries such as China and Korean, Tata Group has to compete with these multinational auto companies through analyzing their strategies. As below shown the main foreign competitors.(Richard, L, 2009) Opportunities

Since Tata Motors uses three-pronged strategy, which includes better communication of ideas, learning from other companies and supporting collaborative, Tata Motors firstly focuses on efficiency of exchanging of ideas, and this strategy provides ideas changing rapidly and smoothly, that means, innovative ideas can be discussed among all employees and brainstorm can be easily applied so that innovative ideas will be applied soon also.

Tata Motors secondly focuses on learning from other companies, benchmarking is used by managers that Tata Motors will get advanced technologies and experiences from other leading companies such as Ford and Toyota. Thirdly, Tata Motors supports collaborative research that some academic institutions will give suggestions to Tata Motors so Tata Motors can get professional improvements from this strategy. Tata Motors is focusing on innovation. Innovation is the most fundamental and essential factor in growth of company.

Without innovation, companies can not acquire competitive advantages compared with other innovative companies because innovation significantly satisfy customers’ changing demands. Tata Motors has been applying two short-term strategies includes acquiring JLR brand and producing cheapest cars called “Nano”. Actually, these two strategies are based on long-term strategies mentioned above. Acquiring JLR brand improves reputation of Tata Motors and also Tata Motors acquire acknowledge of JLR and producing cheapest cars “Nano” is innovative activity to Tata Motors’ targeting market.

Threats: As weaknesses showed above, Tata Motors are facing to many competitors includes domestic and foreign competitors. Among these competitors, the domestic competitors that contains Maruti Suzuki, Mahindra and Hindustan Motors are all followers compared to Tata Motors. However, in some specific area such as in passenger market, Maruti Suzuki is the leader and in Multi-Utility Vehicle Sector market Mahindra has more than 50% market shares. Therefore, they are threats to Tata Motors in India market and they set barriers to entry to Tata Motors because of their economic of scale in their targeting market.

Otherwise, among foreign competitors, Toyota is the leader in Asian market, and Ford and General Motors have big market shares in Euro market. If Tata Motors wants to expand its business abroad, it is difficult to challenge them. Tata acquired JLR brand and has made great success on it especially in China market. However, the activities of purchasing other companies’ brands will make Tata Motors facing to risks because the payment costs a lot. Meanwhile, the other strategy of producing innovative cars “Nano” did not bring expected profit to Tata Motors which cost plenty of capital and human resources.

Conclusion and Implications All in all, Tata Motors has been in a good structured group, Tata Group, and has many strategies for improving itself. Tata Motors has been the biggest automobile company in India because of the passion from the Chairman Jamsetji Tata. What he wanted to see Tata Motors is going to be the top one in India and abroad. Even though Tata Motors has a lot of competitors in both domestic and abroad, Tata Motors insists on innovation strategy and purchasing other world brand for learning and improving reputation.

However, as the loss of producing Nano cars, what Tata Motors needs to do is focusing on segmenting market, selecting targeting marketing and exactly positioning market position. For doing these, Tata Motors need to deeply understand what customers’ real needs and demands and following this direction, Tata Motors’ innovation strategies can attract new customers and remain existed customers to get profits.

References:

  • Omid, N and Patrica, A.N (2012), ‘Strategy and Structure: The case of Tata Group’, CF, Vol.10, No.1, 2012 Richard, L (2009), ‘Business Strategy Case Study: Tricky Time for Tata Motors’, 2009 Tata Motors, 67th Annual Report 2011-2012.
  • Waddell, D, J. Devine, G. Jones and J. George (2011), Contemporary management (2nd edition), North Ryde, NSW: McGraw-Hill, Australia.