Tata, India’s largest company,

Assignment 2 – Case study (40 marks)
Tata Group: India’s New Global Challenger
Tata, India’s largest company, operates in seven distinct business sectors, including automobiles,
chemicals, IT, consumer products, engineering, and consulting. Altogether, Tata comprises more
than 90 separate firms. The chairman of Tata Group is Ratan Tata, the charismatic descendent of the
company founder. Now in his seventies, he has emerged as a popular and respected corporate titan,
known around the world. An avid aviator, he often flies his own Falcon 2000 jet to meetings around
India.
As the group’s chief visionary and dealmaker, Mr. Tata has been aggressively expanding the Tata
Group into world markets. For example, one of the group subsidiaries, Tata Steel, recently
purchased the Dutch-British steel giant Corus Group, for $13 billion. The move boosted the firm’s
steel-making capacity fivefold. In 2008, another group subsidiary, Tata Motors, became the focus of
world attention when it acquired Jaguar and Land Rover from Ford for $2.3 billion. Tata Motors
launched the Nano in 2009 which, at approximately $2,500, is the world’s cheapest car. The Nano
addresses a long-time dream of Ratan Tata to develop reliable but supercheap automobiles,
revolutionize the global auto industry, and make India a major economic power. “Nano” means
“small” in Gujarati, the language of Tata’s founders.
Background on the Tata Group
Founded in 1868 in Bombay as a textile trading company, Tata gradually expanded into hotels,
power plants, chemicals, steel production, and several other industries. The government of India
long discouraged international trade by imposing high trade barriers and bureaucracy. As these
restrictions loosened in the 1990s, Tata’s international operations flourished. Tata Motors began
producing cars in joint ventures with Fiat and Daimler-Benz. Tata bought 30 percent of the coal
subsidiaries of an Indonesian mining company to supply coal for Tata’s power plant in India.
Altogether, the Tata Group has factories in numerous emerging markets, including Kenya, South
Korea, Malaysia, Russia, and Thailand.
As India’s biggest firm, Tata has many competitive advantages, including vast financial resources and
access to capital on favourable terms; strong corporate image; connections with countless highquality business partners; competitive cost structure, thanks to the huge, low cost Indian labour
pool; and long-standing relationships with national and state governments in India. In the auto
industry, Tata Motors’ reputation is growing. It counts on sister subsidiary Tata Steel to continuously
provide steel to manufacture Nanos and other cars, a key advantage. The purchase of Corus Group,
in addition to increasing steel capacity, also greatly expanded Tata’s access to automakers across
Europe and the United States.
Tata is arguably the most important of the new global challenger firms charging out of big emerging
markets such as China, Brazil, India, and Russia. The emerging giants tap abundant low-cost labour,
tech talent, and mineral resources to increasingly target the world’s biggest growth markets.
Brimming with cash and confidence, they export innovative business models honed in some of the
world’s most challenging markets. Governments and state-owned enterprises influence the
procurement activities of corporations. Tata capitalizes on its family conglomerate networks to
enhance its position as government supplier in numerous business sectors.
Tata Motors
Today Tata Motors, or “Tamo,” is one of India’s largest motor vehicle companies. At present, Tamo’s
main market is India, but the firm also operates in other countries, especially in Asia. In 2008, Tamo
unveiled the Nano, the world’s cheapest car. Manufactured in India, the Nano seats up to five
people and gets extremely good gas mileage. Initially, the car was targeted to India’s middle class,
the approximately 200 million people who earn $20,000 or more per year.
In general, about one-quarter of all cars and trucks sold in India bear the Tamo brand. The firm’s
next logical target will be countries outside India, especially emerging markets that provide key
growth opportunities. Tamo aims to transfer its vast experience in India to markets in Africa, Latin
America, and the Middle East. In Asia, the countries of Indonesia, Thailand, and Vietnam appear ripe
for sales of a cheap car. Millions of low-income consumers worldwide would love to own a car, but
until the launch of the Nano, they have had few or no alternatives. The acquisition of Jaguar and
Land Rover has increased Tamo’s visibility through globally recognized brands and provided an
entree to Europe and the United States.
Challenges
Tamo faces numerous challenges in making the Nano a success. For one, despite its very low price
tag, management needs to market the Nano as an aspirational status symbol. Tamo will need to
provide attractive financing packages for potential owners. The Nano has numerous other
challenges, including various problems in India, the threat of environmental harm, growing
competition and the ongoing impact of the recent global recession.
Challenges in india
In India, 70 percent of the population still lives in the countryside, and the transition of land from
agrarian to industrial use often meets with angry protest. In 2008, Tamo was forced to abandon
construction of a factory in West Bengal, India, intended to manufacture the Nano. Protesters
surrounded the new Nano plant and blocked roads to prevent workers or deliveries from reaching
the facility. In Calcutta, activists burned the Nano in effigy. Violence and threats to worker safety
ensued for months during construction of the plant. West Bengal politicos encouraged labor unrest,
leading to capital flight and making the region unfriendly to business. Despite being 80 percent
complete and costing $350 million, Tamo had to abandon the plant due to violent protests from
farmers and political activists. Production of the Nano was moved to another location in India.
Throughout India, Tamo works continuously to satisfy government authorities. India has a
reputation for “suffocating bureaucracy” and its civil servants are among the least efficient in Asia.
The country is awash in trade barriers, business regulations, and administrative hurdles. Many
commodities can be imported only after receiving government approval. Import tariffs on parts and
components can be substantial, often exceeding 25 percent. Licensing fees, testing procedures, and
other hurdles are expensive and time-consuming. The commercial environment in India is still
evolving and poses numerous hurdles for firms that do business there.
Pollution and Overcrowding in India
Growing car ownership is severely straining India’s already congested urban infrastructure. If the
Nano proves a big success, India’s road network seems unable to absorb millions of new cars.
Burgeoning car ownership in India and China are straining the world’s already selfdestructive carbon
footprint. India suffers from severe pollution. Throughout southern Asia, a thick brown cloud of
particulate continually blocks the sun, altering weather patterns and causing health problems. The
cloud is a by-product of emissions from coal-fired power plants, cars and trucks, and wood-burning
stoves. Similar plumes containing carbon dust also rise over parts of Africa and Latin America. The
World Bank says that, as India industrializes, the country’s water, air, and soil are under increasing
environmental pressure. Most Indians make their living from farming, and hazardous air pollutants
have damaged growth yields of rice, wheat, maize, and sorghum. Partly due to food shortages,
millions of people in Asia go hungry every year.
Competitors
In addition to Tamo, several automakers have plans to enter the cheap car market in India. For
example, Renault, Nissan, and India’s Bajaj Motors plan to jointly build a $2,500 car. Nissan CEO
Carlos Ghosn aims to make emerging markets a cornerstone of his firm’s plans for global growth.
Ford, Hyundai, Toyota, and General Motors are all developing inexpensive, small cars for emerging
markets. Several Chinese companies already manufacture various car models, both for export and
domestic consumption, and a few firms are exploring ultra-cheap options. Japan’s Suzuki sells the
Maruti 800 in India, retailing for about $4,500.
Global Financial Crisis and Opportunities for Emerging Global Giants
Just as automotive sales declined in recent years, many automakers have launched new models,
which boosted global competition. Toyota, Honda, GM and several other competitors have made
great strides in developing and launching hybrid cars based on green technology. However, many car
makers are suffering, and the industry is overcrowded, with consumer demand declining in some
areas.
Despite such problems, Tamo is well positioned to weather the recent global financial crisis. First, it
enjoys low-cost production capacity, partly based on employing inexpensive labour in India. Second,
the firm has significant experience in emerging markets, which are growing rapidly. By contrast,
advanced-economy markets are largely saturated. Third, as the global financial crisis unfolded, many
advanced-economy MNEs retrenched and focused more heavily on their home markets, especially in
Europe and North America. For example, bankruptcy and restructuring led General Motors to
refocus on the United States.
Corporate Social Responsibility
For decades Tata has promoted good works in India. Ratan Tata is a passionate promoter of
corporate social responsibility. Many Tata companies fund grassroots anti-poverty projects that
seem far removed from their core business. For example, Tata Steel spends millions every year on
education, health, and agricultural development projects. It has developed irrigation systems that
allow Indian farmers to grow cash crops. The firm has built schools, hospitals, and electrical plants
and undertaken countless other socially responsible projects throughout India.
Similarly, Tamo undertakes various charitable activities in the communities where it operates. In
2008, Tamo acquired a major stake in Miljo Grenland/Innovasjon, a Norwegian electric car producer.
Tamo is leveraging Miljo’s know-how to launch a new electric vehicle, the Indica. Another group
company, Tata BP Solar, makes rooftop solar-electric systems for buildings. The firm offers low-cost,
solar-powered water pumps, refrigerators, and lanterns for areas that normally lack electricity. It has
fitted 50,000 homes with $300 systems that can power lights, hot plates, and TV sets.
Conclusion
In emerging markets and developing economies, family conglomerates are leveraging various
advantages to dominate home-country markets. Today, the conglomerates are applying these same
advantages to extend their reach to markets worldwide. Tata’s numerous home country resources
provide the firm with substantial competitive advantages and should allow it to perform well and
capture market share from incumbent players in markets around the world.
Case-Study Questions
1.
a. Describe the various advantages that firms like Tata employ to become large industrial
conglomerates. (6 marks)
b. How can Tata use these same advantages to succeed in foreign markets? (4 marks)
2.
a. What is the relationship between trade barriers, bureaucracy, country risk, and the emergence
of Tata as a major player in world trade? (4 marks)
b. What is the role of declining government intervention in Tata’s success in India and its ability
to internationalize? What should Tata do to manage country risk in India and other emerging
markets? (6 marks)
3.
a. Given growth rates and other characteristics of emerging markets, what markets should Tamo
target for sales of Nano cars and why? (4 marks)
b. What country-level factors should Tamo consider as it evaluates the potential of various
emerging markets? Discuss the potential implications of these factors on Tamo’s operations.
(6 marks)
4.
a. As Tamo prepares to expand abroad, how can it improve its corporate social responsibility
toward future customers in emerging markets? (6 marks)
b. What can Tamo do to minimize the impact of its operations on the natural environment in Asia
and elsewhere? (4 marks)

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