“A STUDY ON CORPORATE STRATEGY OF TATA MOTORS”

Submitted in partial fulfilment of the requirements for the award of the degree of

MASTER OF BUSINESS ADMINISTRATION

Of

BANGALORE UNIVERSITY

Submitted by

Sharath Kumar MK

(Roll. No 18OTCMD027)

Under the Guidance of

Dr. Vijay Kumar

Assistant Professor

Indian Institute of Plantation Management Bangalore

Jnana Bharathi Campus, Mallathalli Post, Bangalore- 560056
Affiliated at Bangalore University (2018-2020)
 ACKNOWLEDGEMENT

The perfect way to document this project would be to start with acknowledging all those
people who directly encouraged and supported me with their value added inputs, without them
this project would not have been this better.

I would like to thank Dr. Vijay Kumar (Assistant Professor) of India Institute of Plantation
Management (IIPM) for continuous guidance without which this report would have been
incomplete.

DATE: 2019 TEJASWINI.K

PLACE: BANGALORE
TABLE OF CONTENTS
WHAT IS STRATEGY

Strategy, narrowly defined, means “the art of the general”. The term first gained
currency at the end of the 18th century, and had to do with stratagems by which a general
sought to deceive an enemy, with plans the general made for a campaign, and with the way the
general moved and disposed his forces in war.

DEFINITIONS:

Chandler (1962) Strategy is the determinator of the basic long-term goals of an

enterprise, and the adoption of courses of action and the allocation of resources necessary for
carrying out these goals.

Mintzberg has identified the 5 P’s of strategy. Strategy could be a plan, a pattern, a position, a
ploy, or a perspective.

1. A plan, a “how do I get there”

2. A pattern, in consistent actions over time.
3. A position that is, it reflects the decision of the firm to offer particular
products or services in particular markets.
4. A ploy, a manever intended to outwit a competitor.
5. A perspective that is, a vision and direction, a view of what the company
or organization is to become.

LEVELS OF STRATEGY

A typical business firm should consider three types of strategies, which form a hierarchy

as shown in Figure 1.1

 Corporate strategy – Which describes a company’s overall direction towards growth by

managing business and product lines? These include stability, growth and
retrenchment. For example, Coco cola, Inc., has followed the growth strategy by
acquisition. It has acquired local bottling units to emerge as the market leader.

 Business strategy - Usually occurs at business unit or product level emphasizing the
improvement of competitive position of a firm’s products or services in an industry or
 market segment served by that business unit. Business strategy falls in the in the realm
of corporate strategy.

For example, Apple Computers uses a differentiation competitive strategy that

emphasizes innovative product with creative design. In contrast, ANZ Grind lays merged with

Standard Chartered Bank to emerge competitively.

 Functional strategy – It is the approach taken by a functional area to achieve corporate

and business unit objectives and strategies by maximizing resource productivity. It is
concerned with developing and nurturing a distinctive competence to provide the firm
with a competitive advantage.

For example, Procter and Gamble spends huge amounts on advertising to create customer
demand.

 Operating strategy - These are concerned with how the component parts of an
organization deliver effectively the corporate, business and functional -level strategies
in terms of resources, processes and people. They are at departmental level and set
periodic short-term targets for accomplishment.

CORPORATE STRATEGY

Corporate strategy encompasses a firm’s corporate actions with the aim to achieve company
objectives while achieving a competitive advantage.

Definition: a corporate strategy entails a clearly defined, long term vision that organisations set,
seeking to create corporate value and motivate the workforce to implement the proper actions
to achieve customer satisfaction. In addition, corporate strategy is a continuous process that
requires a constant effort to engage investors in trusting the company with their money, thereby
increasing the company’s equity. Organizations that manage to deliver customer value
unfailingly are those that revisit their corporate strategy regularly to improve areas that may not
deliver the aimed results.
EXAMPLE-

Corporate strategies may pertain to different aspects of a firm, yet the strategies that most
organizations use are cost leadership and product differentiation.

 Cost leadership is a strategy that organizations implement by providing their

products and services as low as consumers are willing to pay, thereby being
competitive and realizing a volume of sales that allows them to be the leaders in
the industry. Typical examples of cost leaders are Wal-Mart in the retail industry.
 Product differentiation refers to the effort of organizations to offer a unique value
proposition to consumers. Typically, companies that manage to differentiate their
products from the competition are gaining a competitive edge, thereby realizing
higher profits. Often, competitors employ cost leadership to directly compete with
these companies; yet, customer satisfaction and customer loyalty are the factors
that eventually make or break a strategy.

WHY CORPORATE STRAGEY:

Strategic management is basically needed for every organization and it offers several benefits.

1. Universal
Strategy refers to a complex web of thoughts, ideas, insights, experiences, goals,
expertise, memories, perceptions, and expectations that provides general guidance for
specific actions in pursuit of particular ends. Nations have, in the management of their
national policies, found it necessary to evolve strategies that adopt and correlate
political, economic, technological, and psychological factors, along with military
elements.

2. Keeping pace with changing environment

The present-day environment is so dynamic and fast changing thus making it very
difficult for any modern business enterprise to operate. Because of uncertainties, threats
and constraints, the business corporation are under great pressure and are trying to find
out the ways and means for their healthy survival.
 3. Minimises competitive disadvantage

It minimizes competitive disadvantage and adds up to competitive advantage. For

example, a company like Hindustan Lever Ltd, realized that merely with companies like
Lakme, Milk food, Ponds, Brooke bond, Lipton etc which make fast moving consumer
goods alone will not make it market leader but venturing into retailing will help it reap
heavy profits.

4. Clear sense of strategic vision and sharper focus on goals and objectives

Every firm competing in an industry has a strategy, because strategy refers to how a given
objective will be achieved. ‘Strategy’ defines what it is we want to achieve and charts our
course in the market place; it is the basis for the establishment of a business firm; and it is a
basic requirement for a firm to survive and to sustain itself in today’s changing environment by
providing vision and encouraging to define mission.

5. Motivating employees

One should note that the labour efficiency and loyalty towards management can be expected
only in an organization that operates under strategic management. Every guidance as to what to
do, when and how to do and by whom etc, is given to every employee. This makes them more
confident and freer to perform their tasks without any hesitation. Labour efficiency and their
loyalty which results into industrial peace and good returns are the results of broad-based
policies adopted by the strategic management

6. Strengthening Decision-Making

Under strategic management, the first step to be taken is to identify the objectives of the

business concern. Hence a corporation organized under the basic principles of strategic

management will find a smooth sailing due to effective decision-making. This points out the

need for strategic management.

WHAT ARE THE COMPONENTS OF CORPORATE STRATEGY?

There are several important components of corporate strategy that leaders of organizations
focus on.  The main tasks of corporate strategy are:

1. Allocation of resources
2. Organizational design
3. Portfolio management
4. Strategic tradeoffs.

 
In the following sections, this guide will break down the four main components outlined above.

#1 Allocation of Resources

The allocation of resources at a firm focuses mostly on two resources: people and capital.  In
an effort to maximize the value of the entire firm, leaders must determine how to allocate these
resources to the various businesses or business units to make the whole greater than the sum of
the parts.

Key factors related to the allocation of resources are:

 People
o Identifying core competencies and ensuring they are well distributed across the
firm
o Moving leaders to the places they are needed most and add the most value
(changes over time based on priorities)
o Ensuring an appropriate supply of talent is available to all businesses
 Capital
o Allocating capital across businesses so it earns the highest risk-adjusted return
o Analysing external opportunities (mergers and acquisitions) and allocating
capital between internal (projects) and external opportunities

#2 Organizational Design

Organizational design involves ensuring the firm has the necessary corporate structure and
related systems in place to create the maximum amount of value.  Factors that leaders must
consider are, the role of the corporate head office (centralized vs decentralized approach and
the reporting structure of individuals and business units (vertical hierarchy, matrix reporting,
etc.).

Key factors related to the allocation of resources are:

 Head office (centralized vs decentralized)

o Determining how much autonomy to give business units
o Deciding whether decisions are made top-down or bottom-up
 o Influence on the strategy of business units
 Organizational structure (reporting)
o Determine how large initiatives and commitments will be divided into smaller
projects
o Integrating business units and business functions such that there are no
redundancies
o Allowing for the balance between risk and return to exist by separating
responsibilities
o Developing centers of excellence
o Determining the appropriate delegation of authority
o Setting governance structures
o Setting reporting structures (military / top-down, matrix reporting

#3 Portfolio Management

Portfolio management looks at the way business units complement each other, their
correlations, and decides where the firm will “play” (i.e. what businesses it will or won’t
enter).

Corporate Strategy related to portfolio management includes:

 Deciding what business to be in or to be out of

 Determining the extent of vertical integration the firm should have
 Managing risk through diversification and reducing the correlation of results across
businesses
 Creating strategic options by seeding new opportunities that could be heavily invested
in if appropriate
 Monitor the competitive landscape and ensure the portfolio is well balanced relative to
trends in the market

#4 Strategic Tradeoffs

One of the most challenging aspects of corporate strategy is balancing the tradeoffs between
risk and return across the firm.  It’s important to have a holistic view of all the businesses
combined and ensure that the desired levels are risk management and return generation are
being pursued.

Below are the main factors to consider for strategic tradeoffs:

 Managing risk
o Firm-wide risk is largely depending on the strategies it chooses to pursue
o True product differentiation, for example, is a very high-risk strategy that could
result in a market leadership position, or total ruin
o Many companies adopt a copycat strategy by looking at what other risk-takers
have done and modify it slightly
o It’s important to be fully aware of strategies and associated risks across the firm
o Some areas might require true differentiation (or cost leadership) but other areas
might be better suited to copycat strategies that rely on incremental
improvements
o The degree of autonomy business units have is important in managing this risk
 Generating returns
o Higher risk strategies create the possibility of higher rates of return. The
examples above of true product differentiation or cost leadership could provide
the most return in the long run if they are well executed
o Swinging for the fences will lead to more home runs and more strikeouts so it’s
important to have the appropriate number of options in the portfolio. These
options can later turn into big bets as the strategy develops
 Incentives
o Incentive structures will play a big role in how much risk and how much return
managers seek
o It may be necessary to separate the responsibilities of risk management and
return generation so that each can be pursued to the desired level
o It may further help to manage multiple overlapping timelines, ranging from
short-term risk/return to long-term risk/return and ensuring there is appropriate
dispersion

 
TATA MOTORS: COMPANY PROFILE

Tata Motors Ltd. is one part of the business conglomerate, Tata Group, and was formerly
known as TELCO (Tata Engineering and Locomotive Company). The other ventures of Tata
Group include Tata Steel, Tata Consultancy Services, Tata Technologies, Tata Tea, Titan
Industries, Tata Power, Taj Hotels, and so on. Headquartered in Mumbai, India, Tata Motors is
a multinational corporation accounting for 70% cumulative market share in the domestic
commercial vehicle segment. Today, the company is the world’s second largest manufacturer
of commercial vehicles, world’s fourth largest truck manufacturer and world’s second largest
bus manufacturer. It is a dual-listed company, which is traded on both the Bombay Stock
exchange as well as the New York Stock Exchange.

Tata Motors was first established in 1935 as a locomotive manufacturing unit. The first
commercial vehicle was manufactured in 1954, in collaboration with Daimler-Benz AG of
Germany. In 1960, the first truck, quite similar to a Daimler truck, rolled out from the Tata
factory in Pune. Ever since its launch, the truck became highly successful. However, the
success of the commercial vehicles was just the beginning of the flourishing and booming
future of Tata Motors. The company went ahead diversifying itself and took up other products
as well. Apart from exporting heavy-duty trucks, the company decided to come up with lighter
versions for the local market. Thus, began the production of the first LCV (Light Commercial
Vehicle) model, Tata 407 in 1986. In the early 1990s, the company began its expansion into the
car market. Its first passenger vehicle was Tata Sierra, a multi utility vehicle that was launched
in 1991. Tata came up with three other automobiles, namely, Tata Estate in 1992 (a station
wagon based on the earlier ‘Tata Mobile’ in 1989), Tata Sumo in 1994 (LCV) and Tata Safari
in 1998 (India’s first SUV). After thoroughly analysing the demand of the consumers, Ratan
Tata, the current chairman of Tata Group, decided to build a small car, which was practically a
new venture. Thus, in 1998, India’s first fully indigenous passenger car, Tata Indica was
launched. It received an immediate success, since it was inexpensive and relatively easy to
build maintain. The car was exported to Europe, to UK and Italy. The second generation of
Indica, V2 was even more successful. Indica’s high success gave Tata Motors the financial
power to take over Daewoo Motors in 2004. This gave the company an opportunity to give
their brand international exposure. Today, Daewoo’s trucks are sold as Tata Daewoo
Commercial Vehicle in South Korea. In 2005, the company acquired 21% share in Hispano
Carrocera SA, earning the controlling rights of the company. In January 2008, the global
automobile sector showcased the world’s cheapest car in the form of Tata Nano. Launched by
Tata Motors, the car cost only Rs.1, 00,000 (US $2,500). In the March of that year, Tata
Motors also acquired the Jaguar Land Rover (JLR) business from the Ford Motor Company,
which included the Daimler and Lanchester brands. Tata Motors formed 51:49 joint venture
with Marcopolo of Brazil and came up with manufacturing and assembling fully-built buses
and coaches targeting the developing mass rapid transportation systems. Tata and Marcopolo
jointly have launched low-floor city buses that are widely used by Delhi, Mumbai, Lucknow
and Bangalore transport corporations. Tata Motors has been continuously acquiring foreign
brands to increase its global presence. The company operates in the UK, South Korea, Thailand
 and Spain. Today, Tata Motors has its auto manufacturing and assembly plants in Jamshedpur,
Pantnagar, Lucknow, Ahmedabad and Pune in India, and in Argentina, South Africa, South
Korea and Thailand. It is further planning to set up more plants in Turkey, Indonesia and
Eastern Europe.

MISSION

We innovate mobility solutions with passion to enhance quality of life

VISION

As a high-Performance Organization, we are, by FY2019

 Among the Top 3 Global CV and Domestic PV

 Achieving Sustainable Financial Performance

 Delivering Exciting Innovation

VALUES

 Integrity

 Teamwork

 Accountability

 Customer Focus

 Excellence

 Speed
GOAL OF CORPORATE STRATEGY of:
The goal of corporate strategy is to build corporate advantage so as to earn above normal
returns• analogous to a competitive advantage in a business unit.
 Corporate-Level Strategy (companywide strategy)
1. Corporate (or Company-wide) Strategy is the overall plan for a multi business
unit company.
2. Corporate strategy is what makes the corporate whole add up to more than the
sum of its business unit parts

CORPORATE STRATEGY OF TATA MOTORS:

 TML built Balanced scored card approach.

 TML forms a corporate team of 5 members across various functions to design strategic
approach. The people are cross functional expertise from SBUs.
 Main Objective was to prioritize Vital Objectives of SBUs and initiatives & coordinate
across SBUs for resources
 TML started central resourcing through e-sourcing to minimize the cost of shared
inventory.
 TML made most of the parts communized.
  All the SBU leaders given autonomy in designing approaches in line with corporate
strategic goals.
 The performance measured based on the performance of various parameter such as
product quality, process quality, safety, cost measures etc. (Behavioural control).
Corporate Advantage
The effective profit of aligning corporate strategy with SBUs within 2 years of
implementation is $106Million from aLossofover$108Million.

Economies of scope was just one of the reasons for increase of profits.

Conclusions
The study shows a brighter future for the automobile industry in India. However,
vigorous scope for the development of this market has attracted many players.
Availability of numerous alternatives and substitutes has further increased customer’s
expectations. Also, the growing youth market comprises of the experimenters, who
desire up gradations and new innovations in their possessions. All these analyses
provide Tata Motors to become more sensitive to the needs of the buyers and ensure
is execution much before the rivals. The company must constantly explore new
markets and ensure new innovations because the risk takers are the profit makers.
Over and above the company can segment the market and have something for
everyone in order to capture a major proportion of the market.

Understanding the immense competition where every automobile company is fighting

to become the best, Tata Motors is required to build additional competencies. The
brand must stabilise its position as a leader in the commercial vehicle market and set
new trends in the passenger. The recommended differentiation strategy will give the
company a leading edge through its careful implementation and execution.