Ratan Tata: In Cross Cultural Management, Case Study Example

Answer 1

Tata group is one of India’s oldest and most prominent business empires. Traditionally the group has been lead by a generation of leaders from the Tata family who transformed it from a small family business into one of the country’s leading conglomerates. Each generation of Tata leaders have aimed to structure the business according to prevailing business environment. Ratan Tata the current head of the company took over the reins of the business when the country was undergoing a period of rapid transition in its business environment.  The Indian government had opened up its borders to global business and local companies were faced with competition from multinational giants. If Tata was not restructured it faced the threat of extinction in the new highly competitive business environment. Ratan Tata proved to be an exceptional business leader with the right blend of acumen, insight, strategic planning skills and the ability to take risks. Most of the credit for the Company’s recent explosive growth can be attributed to the change management policies adopted by Ratan Tata. In his impetus to achieve phenomenal business growth and exploit the changing business environment of the country the leader decided to take the company where no other Indian company has gone before. This very aggressive stance was significantly different to the conservative and risk averse policies that the company had followed under previous leaders. Ratan Tata believed that to grow the company had to take risks and do what had not been done before. In a pioneering and risky initiative the company decided to venture in passenger automobile manufacturing and create cars for the Indian consumer. This involved a considerable risk element because the Indian market was inundated with cars from foreign suppliers at this time and the company did not have significant experience in this market. However the risk paid off and the company’s first car the Indica was a huge success followed by others such as the Tata Safari which was one of the first locally produced SUV’s in the country. In another equally risky move Ratan Tata decided to take the company globally. Though this move was pioneered by his grandfather in the 19^th century successive family leaders had not been successful in making the company global. Through a series of mergers and acquisitions the Company gained control of various businesses in the UK, US and Asia. The strategy behind global growth was to seek foreign markets for the company’s products and also diversify in businesses with high growth potential  He laid down  a new business model(Tata Business Excellence Model) for each of the group’s companies and united all of them under a single Logo. He also planned and implemented strategies focused on innovation, cost effectiveness and new product development. He also re-shuffled most of the company’s organizational structure by retiring the old school managers who were averse to change and bought in fresh blood with new creative ideas.

It is not inaccurate to say that Ratan’s efforts over the past two decades have transformed the company into a diversified multinational Conglomerate which owns businesses and has operations throughout the world. The way a organization functions and works collectively towards the achievement of common objective despite the presence of obstacles is highly influenced by  the leadership abilities of the person heading the organization. .( Blanchard et al 2001).  Ratan’s Tata’s leadership style follows a principal of empowerment and is inspirational for future generations. He believes in giving his employees the means and opportunity to make their own decisions. (Cameron,& Green,2007) He does not enforce decisions but does ensure that he and his employees are working towards the achievement of similar objectives. This leads to the creation of a empowered and motivated workforce and  is one of the fundamental strategies deployed in ushering in change in an organization. (Black and Gergersen, 2003). His vision, initiative and change management capabilities have helped the company negotiate through some very tough transitions in the last two decades. The company is having difficulty in nominating a successor for this well loved and respected leader. It is not easy to fill the shoes of such a leader who has raised the bar at every level. Ratan’s absence at Tata’s helm will create a management vacuum which could be very difficult to fill.

Answer 2

The Tata group has traditionally followed a policy of business diversification. This involves simultaneously expanding operations n various business ventures to generate growth and spread the risk of business failure. One of the greatest risks associated with operating a single business venture is that if the venture is not successful in generating profits the entire business operation fails. In a proverbial bid to “avoid putting all its eggs in one basket” many companies diversify into varied and unrelated business operations. Therefore if one business in one industry fails the company can still on other ventures in different industries for sustenance and growth.(Fred, 1995)

Diversification was one of the main strategies adopted by Tata in its growth policies over the last 100 years. When Ratan Tata took over leadership of the company in 1991 he discovered that the company had spread itself into a large amount of unrelated business ventures This policy of diversification was part of the conservative risk averse policies that the company followed under its previous leaders. The policy sought to reduce reliance on one particular business and hence reduces the risk of failure associated with a single business venture.. Therefore even if one business venture failed the company could still sustain itself because it had diversified its risks by investing in other businesses. (Gibson,2003).One of the key business challenges that faced Ratan in 1991 was that due to its policy of diversification the focus of the organization had shifted from its core business. This loss of focus had led to inefficient practices which had begun to reflect on the quality of goods and services provided by the company.  Faced with increasing competition from global players Ratan knew that if he maintained status quo the company would not survive for long. Therefore he decided to streamline business practices by closing down many unrelated business operations that the company had diversified to. The advantage of this move was to re-emphasize the focus of its business activities in its core pore segments i.e steal and automobiles. The company was able to transfer physical and human resources and strengthen its core operations. (Gibson, 2003). Management could also now focus on planning strategies for a selected and interconnected business model rather than broad based unrelated ventures. The second advantage was that the company was able to get rid of underperforming and non lucrative business lines which were having a negative effect on its balance sheet. Most of the business lines sold were low performing which the company did not have the resources or technical capability to sustain further. The loss of these lines only helped to bolster profit margins and not reduce them. Further these companies did not sell innovative products with future profit potential hence getting rid of them did not have any impact on future profits. Third advantage is that selling these companies helped Tata get rid of surplus workforce without having to initiate massive layoff and restructuring plans. Hence the companies was able to reduce cost and also get rid of some staff which still subscribed to old school thought and were averse to the new dynamic and risk taking polices that Ratan sought to usher in. Fourth, advantage is that by reducing the number of companies Ratan could bring all of them under one unified platform and work towards a joint and cohesive policy structure which could accommodate his new strategic viewpoint. One disadvantage of selling diversified business ventures was that the company exposed itself to greater risk if one of its core businesses failed. (Gibson, 2003). If the new automobile venture had not worked out the company would have been in dire straits and close to bankruptcy. Another disadvantage is that some of the workers that left were loyal employees with a wealth of experience and knowledge about the company’s practices. (Gibson, 2003).These employees would have been an invaluable asset in the future expansion that Ratan Tata had envisaged for the company. The third disadvantage is that some of the businesses were sold for only a fraction of the price paid for them. This resulted in financial loss for the company in the long run.

It is true that after twenty years of leadership under Ratan, Tata the company does still possess a diversified business base. So has the company come back to where it started with a large number of diversified and unrelated business. Does it face a similar situation that it did in 1991 or is the scenario a changed one. I would say affirmative to the second option. The reason behind diversified business activity is not spreading risks but gaining access to global markets. The companies that Tata group has acquired exist in different geographical markets and represent industrial segments which have the potential for huge future demand.  Thus though the group does house a large number of diversified business ventures it employs a focused and integrative business strategy which is focused on generating growth in the long run.

Answer 3

Defined as the integration of political economic and social culture the concept of globalization removes boundaries and brings nations together to share resources for further economic progress and development. Tata has attempted to globalise it foreign operation through a series of planned global acquisition in different industrial segments in different markets. These acquisition have accorded Tata with the following benefits

1) The prospect of capturing new and larger markets on foreign ground. (Griffin, and Pustay,  2006). The markets in India are over saturated at the moment with lots of competitors vying for a chunk of the market. However foreign markets on the other hand still exhibit a huge volume of demand and Tata seeks to earn a lot of profit by catering to this demand.

2). Entry into a specific markets also gives the company a vantage point to enter other  regional markets where demand for the company’s products may be equally high. (Griffin, and Pustay,  2006). For example entry into Hong Kong markets could give the company an opportunity venture Far Eastern Markets of Singapore, Taiwan and even China. In order to function efficiently in global markets it is essential that the Tata group alter its strategy to reduce the risks posed by the following elements:

1.Culture: Each country has its own unique cultural composition and it is essential that the multinational understand this before venturing into that the particular market. It is imperative that Tata conducts a detailed cultural analysis in order to understand and adapt to the country’s cultural complexities. This analysis should take into account the religious practices, traditions, social values and culturally specific business practices that may prevail in the country. (Korbin, 1997)

1. Communication: To give its product wider acceptability and understanding Tata will also have to promote its product in both English and the native language of that country All kinds of promotional campaigns which appear in print, television, and outdoor media will have to be bilingual. To facilitate smooth business practice it is advisable to translate all formal written business documents into the local language To ensure that business partners and clients do not misunderstand the objectives of the company it is also wise to hire a translator. This is particularly necessary to facilitate communication in the local market (Griffin, and Pustay, 2006).
2. Staffing: The company would have to hire personal with experience in the local market that are familiar with local trends and market conditions. This will enable the company to gain knowledge about the local conditions which it can use to negotiate in a new and foreign marketplace. (Below, Morrissey & Acomb, 1990)
3. Training: The Company would have to train new recruits on the technical aspects of selling products in a new market. They would require people who probably have previous experience in selling products to the local market and have a prior base of clients that they can start by selling to. Similarly the company would have to train a bilingual support team to address customer’s queries.(Griffin, and Pustay, 2006).
4. Understanding the Consumer Segment Tata must make an effort to understand its target market. The company should undertake market surveys to gauge how customers feel about their products. Consumer’s preferences and needs must be taken into account to alter the product or strategy used to promote the company’s products

Works Cited

Blanchard, K: Zigarmi, P et al 2001. Situational Leadership 2. Participant workbook. The Ken Blanchard companies. P 1-21,

Black Stewart J and Gergersen B  Hal 2003. Leading Strategic Change: Breaking through the Brain Barrier. FT Press

Below, Morrissey & Acomb, 1990. The Executive Guide to Strategic Planning, Jossey-Bass, San Francisco.

Cameron, Esther & Green, Mike. 2007. Making Sense of Change Management. London, UK.: Kogan Page Limited

De Wit, Bob & Meyer, Ron, 1998. Strategy: Process, Content, Context, Thomson Publishing Company, London.

David Fred, 1995, Concepts of Strategic Management, (5th Edition) Prentice-Hall. New Jersey.

Gibson, J, 2003. Organizations. Boston: McGraw-Hill.

Griffin, R. W. and Pustay, M. W, 2006. International Business: A Managerial Perspective. London: Prentice Hall.

Kobrin, S. 1997. Foreign Direct Investment, Industrialization and Social change. MA: Jai Press