Tata Group

1.0 Source Problems Being able to maintain Tata Groups core values and vision; during a time of uncertainty in the economy and in the internal organisation as well.

2.0 Secondary Problems These problems can be identified separately as short or long term problems. Whereby the short term problems are ones that can be solved and addressed currently or instantly, whereas long term problems having to take some careful planning and analysis and require solutions that are spread out over a couple of years instead.

Short-Term Problems 2.1 It is known that the current chairman of Tata Group, Ratan Tata is close to stepping down from his position and retiring. With this, comes the challenge of identifying a suitable and qualified successor. As Ratan Tata is seen as the person who has brought Tata Group into the global market by stepping out of their comfort zones and investing in new opportunities, filling his shoes could be an uphill task for any candidate that will eventually be selected for the role.

2.2 Tata Group would also lose its ability to help fund the society because of New Economy realities. With a much tighter budget due to the numerous investments and business acquisitions, Tata Group’s generosity will now be put to the test.

Long-Term Problems 2.3 There is a lack of a central system in the Tata Group. All its entities have been working independently and lack a centrally focused objective. It is said that the entire Tata Group does not even have consolidated financial statements. All subsidiaries and members of Tata Group will have to learn to adapt to a more central system, in order to better appreciate the entire organizations vision.

2.4 Another long-term problem would be the overall development of India and the World economy at the moment. If the country continues to be corrupt and its people are made to live in poverty, it could prove to be a stumbling block and will result in a stunted growth for Tata Group.

2.5 Tata Group has managed to establish itself in other countries besides India as well. However, the difference in cultural values could prove to be a barrier.

3.0 Analysis Tata was founded in 1868 by Jamsedji Tata in India, Mumbai. Tata currently consists of more than 100 businesses located over 80 countries in 7 business categories: communications and information technology, engineering, materials, services, energy, consumer products and chemicals. 65.8% of the ownership of Tata belongs to charitable trusts. Tata Group is India’s wealthiest group (BBC 2011) with their market value worth of USD$95.09 billion as of 16 February 2012 with 31 publicly listed Tata enterprises and a shareholder base of $3.6 million under Tata Sons Ltd. (Tata Group 2012) The group has over 250, 000 staff worldwide and diversified service and products exported to over 80 countries. (Tata Group 2012)

Under the leadership of Ratan Tata, Tata Group has greatly expanded and achieved growth. From 2011-2012, the group’s revenue grew above US$83 billion. (Tata Group 2012) His capability is further proven as he makes and commits to numerous big money investments.

Even with all the wealth and achievements he has attained, Ratan Tata displays a strong sense of giving back to the society through his unwavering efforts to promote CSR within the Tata Group. An interesting fact to back that up is that, more than half of the shares of Tata group are owned by charitable trust. (Tata Group 2012) He has been continuing the legacy of his great-grandfather (Founder of Tata Group) as a philanthropist by doing what he can to give back to the society. (Luthans and Doh 2009)

A detailed list (Tata Group 2012) shows that Tata Group is made up of a total of 95 different companies and subsidiaries. With the many companies that Tata Group is running, it has led to them not having a speciality and lacking of a central strategy. Although they have been growing financially over the last couple of years (Tata Group 2012), a lack of having a central strategy is a major concern that the organisation should be looking to address.

Having such a diverse range of services and products, Tata Group must still try to ensure that everyone in the organisation works towards a common goal and objective. Otherwise it would defeat the purpose and vision that Ratan Tata had originally envisioned for them. Currently, the group is bound together by the small staffs of Tata Sons and another holding company, Tata Industries. These two, chaired by Ratan Tata, provide strategic vision, control the Tata brand, and lend a hand on big deals. There is a need for more of the other smaller companies and subsidiaries to get involved and actually be a part of the growth, instead of taking a backseat and just going through the motion.

With the Tata Group constantly seeking new opportunities in various industries, their levels of CSR have been affected but not drastically. As CSR has been known to be a very important factor in the way the Tata Group does its business, they have continued to ensure that their targets on this front are met. However, with the economy slowing down in recent times (The Economist 2011), CSR might not take such a high priority in the way that business and operations are going to be run. It is seen that their contribution to social welfare and environment-related projects for the financial year of 2010-2011 was still considerably high at USD$59.7 million (Tata Group 2012).

It is said that Ratan Tata will retire in December 2012. So far, news is that Cyrus Mistry will be his successor (The Times of India 2011). Cyrus Mistry has been appointed as the Deputy Chairman of the Tata Group, and will be mentored by Ratan Tata himself until he eventually steps down. There has been speculation and questions being raised about the abilities of Cyrus Mistry – whether he will be able to continue the legacy that Ratan Tata has created. Importantly, how he sees the importance of maintaining a high level of CSR and contributing to the society like his predecessor did. Taking over Tata Group at such a time will be extremely challenging due to the current state of the World economy. Naturally, profit margins will be reduced as society and investors become more sceptical towards the market.

Another thing that the Tata Group might face after Ratan Tata leaves is that the employees and other board members might not accept the new changes that Cyrus Mistry brings. A different style of leadership can be expected, and there will be some form of resistance to change. The organisation could also make use of Cyrus Mistry’s vulnerability of being thrust into a new position with a lot of expectations. There might also be jealousy amongst some of the other candidates that were looking to take over Ratan Tata’s position. They could jeopardise the entire group by going against Cyrus Mistry in the future.

The New Economy realities also mean that Tata Group will have to control its spending in the coming years. Instead of continuing to make investments, they will now have to look at ways to reduce business costs and marginalise the number of industries that remain profitable. India is currently understood to be a developing country. However, there is still a high amount of corruption taking place. Although Tata Group is a globally recognised organisation that has done a lot of good for the society, people will still look at them from their roots. The instability of the country seen from the public eye could prove to be a hurdle that Tata Group has no real control of overcoming.

On the issue of expanding outside of India, there will certainly be a lot of challenges faced. Cultural differences have to be taken into consideration when doing business away from your home country. Being humble and accepting the way things are done in a foreign land will be very crucial to Tata Group. Even better, if they could embrace in the change and feel like they are a part of them as well.

4.0 Criteria of Evaluation Tata Group will have to remain focussed on their pursuit of being a globally recognised company that contributes greatly to the society through a high level of CSR. Everyone involved in the organisation must have a common understanding of this and work together towards it.

They need to get the house in order and ensure that there is a central strategy to the way Tata Group is going to be run in the future. Minimising and cutting off fringe industries and companies or grouping them all under a bigger unit could help to solve this issue. This would foster a greater sense of belonging amongst the organisation.

The organisation needs to allow Cyrus Mistry to prove his worth when he eventually takes over Ratan Tata. People cannot be too critical about his initial approach and give him a chance to learn.

Overall, entering new markets and making big investments will definitely stop in the near future. Tata Group will now have to start making more calculated steps and measures to ensure that the current state of the World economy does not affect them too badly and cut costs if necessary to keep profitable components running.

5.0 Alternatives Short-Term Problems 5.1 Cyrus Mistry has to remain grounded even with the current position that has been given to him. Making sure that he stays focussed on the objective of Tata Group and remembering their roots and ideas on CSR.

5.2 Cutting off non-profitable businesses or merging smaller their companies to make sure that the group looks more unified and whole.

Long-Term Problems 5.3 The organisation has to start working together as a unit. Each company and subsidiary has to play its part and contribute instead of just being a backbencher.

5.4 Tata Group should hold out at the moment and not make anymore rash investments. The current state of the economy is very volatile and they should hold out until there is more stability in that sense. Monitoring and trying to help improve the situation in India at the moment will seem more feasible.

5.5 The organisation will have to come out of its comfort zone on certain occasions, and learn about the ways that businesses operate outside of India and across the World.

6.0 Recommended Strategy Short-Term Problems 5.1 Monitor Cyrus Mistry’s work and development. Allow him to make certain key decisions at the moment and see how he deals with the pressure that comes with the job. This allows Ratan Tata to prepare him better if needed.

5.2 Cutting off non-profitable businesses or merging smaller their companies to make sure that the group looks more unified and whole.

Long-Term Problems 5.3 The organisation has to start working together as a unit. Each company and subsidiary has to play its part and contribute instead of just being a backbencher.

5.4 Focus on helping India grow as the cost of implementing new ideas there is much cheaper and thus less risky when compared to other parts of the World.

5.5 Instead of going abroad to invest and start new ventures, try to make themselves attractive enough for investors to notice them.

7.0 Justification of Recommendation The many changes that are about to affect the Tata Group are inevitable and have already been made known to the public in numerous forms. The World economy will continue to be unstable and investment opportunities are going to be harder to come by. However, it is a proven trend that as the economy declines it is bound to escalate again eventually. Therefore waiting for the right time to begin investing again is crucial.

On the issue of Cyrus Mistry, it has been seen in history that change is not always a bad thing. Given the opportunity and the right guidance, he could eventually prove to be as good as or maybe better than Ratan Tata himself.

Also, having a more central strategy will help to keep a group more focussed. In any sporting team, everyone has a specific role to play – but the eventual goal is always the same. This is what is currently lacking in Tata Group.

8.0 Implementation, Control and Follow-Up Majority of the steps that are necessary will require a great deal of planning and thorough observation. As there is a large amount of change that is taking place now, strong and effective leadership will be very important to ensure the organisation continues to run efficiently and effectively. The observation must be concise and leaders of Tata Group must be prepared to deal with any other changes that might arise.

References 1. Tata Group. 2012. Tata Group, Our Businesses, Tata Companies. http://www.tata.com/company/index.aspx?sectid=21vxqwHGkoo= 2. Tata Group. 2012. Tata Group, Investor Desk, Group Financials. http://www.tata.com/htm/Group_Investor_GroupFinancials.htm 3. The Economist. 2011. The World Economy: Be Afraid. http://www.economist.com/node/21530986 4. The Times of India. 2011. Ratan Tata’s Successor: Cyrus Mistry to lead Tata Group. http://timesofindia.indiatimes.com/business/india-business/Ratan-Tatas-successor-Cyrus-Mistry-to-lead-Tata-Group/articleshow/10843952.cms 5. BBC.2011. “India: Tata becomes India’s wealthiest group”. BBC news, June 20. http://www.bbc.co.uk/news/world-south-asia-13838362