Posted: April 1st, 2015
case( TATA case )
266 PART 2 ~ _THE ENVIRONMENT OF INTERNATIONAL BUSINESS 7
“iii; 5 ‘ CLOSING CASE ‘ Tata Group: lndia’s New Global Challenger fig
Tata, India’s largest company, operates in seven distinct business sectors, operates in other countries; especially in Asia. In 2009, Tamo unveiled
i], ‘, including automobiles, chemicals, IT, consumer products, engineering, the Nano, the world’s cheapest car. Manufactured in India, the Nan’o _g;
flijl j and consulting. Altogether, Tata comprises more than 90 separate firms. seats up to five people and gets extremely good gas mileage. initially,
f it; I The chairman of Tata Group is Ratan Tata, the charismatic descendant of the car was targeted to lndia‘s middle class, the approximately 200 mil-
ill: ‘ the company founder. Now in his seventies, he has emerged as a popu- lion people who earn $20,000 or more per year. Recently the country ‘7″:
f Iar and respected corporate titan, known around the world. An avid has experienced double-digit annual growth in car sales. India’s popu.
aviator, he often flies his own Falcon 2000 jet to meetings around India. Iation of 1.2 billion people, most of whom do not own cars, represents
As the group’s chief visionary and dealmaker, Mr. Tata is aggres-t an enormous untapped market.
sively expanding the Tata Group into world markets. One of the group About one-quarter of all cars and trucks sold in India bear the
flit subsidiaries, Tata Steel, recently purchased the Dutch-British steel giant Tamo brand. The firm’s next logical target will be countries outside
Elli. Corus Group, for $13 billion. The move boosted Tata’s steel-making India, especially emerging markets that provide key growth opportuni~
ill: capacity fivefold. Another group subsidiary, Tata Motors, became the ties. Tamo aims to transfer its vast experience in India to markets in 1’»
llilj focus of world attention when it acquired Jaguar and Land Rover Africa, Latin America, and the Middle East. In Asia, the countries of
from Ford for $2.3 billion. Tata Motors launched the Nano in 2009, Indonesia, Thailand, and Vietnam appear ripe forsales of a cheap car.
which, at approximately $2,500, is the world’s cheapest car. The Millions ofiow-income consumers worldwide would love to ownacar,
Nano addresses a longtime dream of Ratan Tata to develop reliable but until the launch of the Nano, they have had few or no alternatives.
i 1in but supercheap automobiles, revolutionize the global auto industry, Theacquisition oflaguar and Land Rover has increased Tamo’s visibility 5.:
5 and make India a major economic power. “Nano” means “small” in through globally recognized brands and provided an entree to Europe
I Gujarati, the language of Tata’s founders. and the United States.
Background on the Tata Group Challenges
Founded in 1868 in Bombay as a textile trading company, Tata gradu: In India, 70 percent of the population still lives in the countryside, and
ally expanded into hotels, power plants, chemicals, steel production, the transition of land from agrarian to industrial use often meets with if
ll}: and several other industries. The government of India long discour- angry protest. Tamo was forced to abandon construction of a factory
3 aged international trade by imposing high trade barriers and bureau- in West Bengal, india, intended to manufacture the Nano. Protesters
cracy. As these restrictions loosened in the 19905, Tata’s international surrounded the new Nano plant and blocked roads to prevent workers
operations flourished. Tata Motors began producing cars in joint or deiiveriesfrom reaching the facility. Violence and threats to worker
ventures with Flat and Daimler-Benz. Tata bought 30 percent of the safety ensued for months during plant construction. West Bengal po-
coal subsidiaries of an indonesian mining company to supply coal for liticos encouraged labor unrest, leading to capital flight and making
i I Tata’s power plant in india. Altogether, the Tata Group has factories in the region unfriendly to business. Ultimately, despite being 80 percent ” if
numerous emerging markets, including Kenya, South Korea, Malaysia, complete and costing $350 million, Tamo had to abandon the plant.
if ‘ Russia, and Thailand. Nano production was moved to another location in india.
As lndia’s biggest firm, Tata has many competitive advantages, Throughout India, Tamo works continuously to satisfy govern-
‘I including vast financial resources and access to capital on favorable ment authorities. india has a reputation for “suffocating bureaucracy”
terms; strong corporate image; connections with countless high-quality and its civil servants are among the least efficient in Asia. The country
I ‘ . business partners; competitive cost structure, thanks to the huge, low- is awash in trade barriers, business regulations, and administrative
I I cost Indian labor pool; and long-standing relationships with national hurdles. Many commodities can be imported only after receiving
and state governments in India. In the auto industry, Tata Motors’ government approval. Import tariffs on parts and components can
reputation is growing. it counts on sister subsidiary Tata Steel to con- be substantial, often exceeding 25 percent. Licensing fees, testing
tinuously provide steel to manufacture Nanos and other cars, a key procedures, and other hurdles are expensive and time-consuming. The
advantage. The purchase of Corus Group, in addition to increasing commercial environment in India is still evolving and poses numerous
steel capacity, also greatly expanded Tata’s access to automakers across hurdles for firms that do business there.
Europe and the United States. ‘ Perhaps the biggest challenge facing the Nano is generating sales
Tata is arguably the most important of the new global challenger in a tough market. Despite its low price tag, management needed to
firms charging out of big emerging markets such as China, Brazil, market the Nano as an aspirational status symbol. Tamo provided at-
if India, and Russia. The emerging giants tap abundant low-cost labor, tractive financing packages for buyers. By 2012, however, Tamo had
I! . tech talent, and mineral resources to increasingly target the world’s sold fewer than 200,000 Nanos. This is a low number, especially for
biggest growth markets. Brimming with cash and confidence, they a car whose profit model depends on high-volume sales. Production
export innovative business models honed in some of the world’s most cost overruns forced Tamo to increase the Nano’s starting price.
I challenging markets. Governments and state-owned enterprises influ- Management admits the firm has not done enough to market the car.
5 . ence the procurement activities of corporations. Tata capitalizes on its
family Conglomerate networks to enhance its position as government Pollution and Overcrowding in India
Supplier in numerous bUSiness SEUOVS- Growing car ownership is severely straining India’s already congested
urban infrastructure. lndia’s road network seems unable to absorb
l Tata MOtorS miilions of new cars. Burgeoning car ownership in india and China
ll Today, Tata Motors, or “Tame,” is one of India’s largest motor vehicle are straining the world‘s already self-destructive carbon footprint.
companies. At present, Tamo’s main market is India, but the firm also India suffers from severe pollution. Throughout southern Asia, a thick
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