Assignment: Corporate Strategy Submitted By : Avnish Kumar (X010-18)

1. Discuss the role of the corporate centre for the Tata Group. Illustrate briefly the
type of configuration model perspective that the Tata Group employs for getting the
parenting advantages?

Ans: The Group Corporate Centre (GCC) set up internally by the Tata group to take a
broader view of the group’s plans, will consist of all members of the Group Executive
Office (GEO), which is the executing arm.
The GEO is an extension of the chairman’s office at Tata Sons. It was set up to review
the business activities of the group as well as to redefine the group purpose. This
is being achieved by implementing programmes related to governance, HR, financial
reporting and so forth.
The GEO also aims to strengthen ties with the Tata companies, with the chief objective
of making the group more synergistic than it has been.
Tata Sons, which is the principal investment holding company of the group, has promoted
and established subsidiary companies abroad, such as Tata Ltd, London, and Tata
International AG. It is the proprietor of the Tata marks, which are registered as trademarks
in various classes for a variety of goods.

The support of Tata group centre is required not only for a Tata operating company but also for the
acquisition target.it made sure that the deal was important not only for the company but also for the entire
group. It formed integration committees to help combine entities and realize synergies. Tata group
launched global intranet for all group companies to help share information across group companies and
coordinate such common initiatives. However, the Group never forced any decisions down the throat
of any group companies against their own will. Hence, the decentralized nature of the Tata group was
a bit of a problem as there were some plans which the group might have felt it as good but if the
company didn’t feel it so it will not be accepted.

Configuration Model for Parenting Advantages :

These include nurturing of group companies by leveraging the parenting

advantage of the group centre; harnessing synergies to maximize the
performance of companies and optimizing its portfolio for sustained future
performance.
"The Tata group's Vision 2025 is: '25 per cent of the world's population will
experience the Tata commitment to improving the quality of life of customers
and communities. As a result, Tata will be amongst the 25 most admired
corporate and employer brands globally, with a market capitalization
comparable to the 25 most valuable companies in the world.
 As part of the strategy, the group will nurture its companies by "building the
reputation of the Tata brand globally, attracting and developing leaders of
tomorrow, and improving the Tata Business Excellence Model (TBEM) process
to strengthen performance discipline within the group".
This strategy will also include support to companies, if required, to restructure
their businesses which do not have the potential to meet performance and
strategic criteria in the long term or benefit from parenting advantages.
To maximize synergies, the group is creating a special focus on four new clusters
-- Defense & Aerospace, Retail, Infrastructure, Finance. The group centre will
also focus on companies which are world class and, where necessary, facilitate
creation of new companies.

2. Discuss the parenting fit matrix of the Tata-Group by plotting the major businesses.
Mention the reasons why you think so? (You can refer the first two articles in your
course pack.

Ans:

The essence of successful parenting is therefore to create a fit between the way the
parent operates – the parent’s characteristics – and significant improvement opportunities
that exist in its businesses. Parenting Fit Matrix summarizes the various judgements
regarding corporate/business unit fit for the corporation. This matrix emphasizes their fit
with the corporate parent Fit.

Parenting Fit Matrix composes of 2 dimensions: Positive contributions that the parent
can make and the negative effects the parent can make. The combination of these two
dimensions create 5 different positions:

1. Heartland Businesses
2. Edge-of-Heartland Businesses
3. Ballast Businesses
4. Alien Territory Businesses
5. Value Trap Businesses
The first feature of good corporate strategy is the company’s distinctive parenting value,
which is equivalent of a parent nurturing the child. For example, when Tata MotorsNSE -
3.17 %, as a parent, helped its fledgling automotive software business, Tata
Technologies, to go global through the acquisition of Incat; or when Tata Global
Beverages agreed to explore with PepsiCo their shared vision of an emerging segment
for healthy beverages.

The second feature is the parent’s value-creation insights to inspire the child. For
example, identifying opportunities that the business management has not perceived or
unlocking of value that can be beneficial. So when the parent encouraged Tata Steel to
unlock value by selling its power-generation assets to Tata Power, a mutual win-win
situation was created.

The third feature of corporate strategy is defining the heartland business. Unilever did it
by stating that it ‘seeks to ser .

Tata motors heavy and light commercial vehicle products were placed under Heartland
Business, where these products have high market share but low growth due to increased
competition. To avoid these problems, the company should concentrate on customer
retention. Meanwhile passenger light vehicle were the stars for Tata motors in which they
are the leading company in domestic market. In their financial analysis it is clearly visible
that Tata motors generate high revenue for their low priced passenger vehicle products.
Tata motors new innovative and interesting product is Tata Nano and it is placed under
question mark in BCG matrix along with Jaguar and Land Rover products. It is because
they have low market share but still expected to perform well in market and reach high
market growth. Tata motors need to invest more money in these products to make them
as stars. In addition to that Tata motors don’t have a mentionable product that is doing
really bad for them. Their strong market analysing team analyse and recover the under
performing product as soon as possible so that they wont face a drastic loss in market .

3.How does the Tatas enable value creation and value capture in its underlying
businesses? Mention some of the businesses by which value creation and value capture
were done?

Ans: In Tata’s, Value creation means value addition. Value is created anytime an action
is taken for which the benefits exceed the costs, or anytime an action is “prevented” for
which the costs exceed the benefits. This applies to several aspects of production:
quantity, quality, entry, innovation, method of production. Also applies to relationships
between the firm and its employees, e.g., job safety.

The concept of value creation says nothing about profit. The benefits are measured to
the consumer; the costs to the firm—you can’t determine profit just from that. The selling
price determines the amount of value that is “captured” by the firm—that contributes to
the firm’s profits. The other value isn’t lost. It is retained by the consumer. It is the
difference between what the consumer would have been willing to pay and the price.
(Consumer Surplus)

Tatas are embarking on a process of simplifying, synergising and scaling (3S) to create
an agile, powerful platform. Across the group, we made significant headway this year in
strengthening balance sheets and building healthy cash flows.for future growth. At the
same time, Tatas collective market capitalisation crossed ₹10 trillion.

Some clusters are focused on simplification, while others are building on scale. In some
areas like aerospace and defence vertical, the group is consolidating its businesses into
a single unified entity.

In Tata Steel, there are many process modification has been done to reduce the
operational cost and increase the productivity and quality of products. So, these are the
value addition and by increasing prices and customer satisfaction, value capturing is
being done by realizing high NR.

Tata Motors Limited is adding value through moving into massive customization to
provide ‘Vehicle of Choice’ to its customers. The Modularization and Super APP
Framework, which has been developed in-house, enables TML to capture the
customers’ requirements and configure accordingly for both the CV a nd PV
segments.

4. Mention the key strategic challenges facing the Tata Group Leadership as they move
towards a Truly Global Tata Group?

Ans: Strategic challenges facing the Tata Group Leadership as they move towards a Truly
Global Tata Group:
1.Synerigies do not really exist.
2.Difficult to integrate companies.
3.Become highly leveraged.
4.Overpaying for acquired form.
5. Talent crunch – Companies need strong talent pool which can take leadership position
both in global market as well as in India, as and when required.
6. Cultural Impact – McKinsey in their study found that managing a global business is a
major challenge as it makes different set of people with different cultural orientations to
work together, and orienting them for a common goal with standard process is very
difficult. To achieve global success a company needs to localize while pushing for the
common goal.
7. Liquidity Shortage: Leading Indian researcher CRISIL has opined in their study that
Indian companies like Tata faced depressed credit profiles over the coming months due
to weaker demand for their products and liquidity problems.

5. What is your opinion in terms of the acquisitions that have gone right and that have
gone wrong for the Tata group? Mention the reasons for the same?

Ans.: To gain scale, reduce their exposure to the cyclicality of India ‘s economy survives
and achieve a sustainable competitive position in industries that are globalizing, most
Tata companies then looked overseas. But, most of the acquisitions have not gone right
in terms of strategic decision but some of the decision also beneficial for Tata Group:

1. The accumulation of acquisition opportunities risks derailing the focus on the core
business.
2. Integration issues are responsible for the relatively high failure rate of international
M&As.

Corus had been facing tough times and had reported a substantial decline in profit after
tax in the year 2006. Analysts asked whether the deal would really bring any substantial
benefits to Tata Steel. Moreover, since the acquisition was done through an all cash deal,
analysts said that the acquisition would be a financial burden for Tata Steel.
There were many likely synergies between Tata Steel, the lowest-cost producer of steel
in the world, and Corus, a large player with a significant presence in value-added steel
segment and a strong distribution network in Europe. Among the benefits to Tata Steel
was the fact that it would be able to supply semi-finished steel to Corus for finishing at its
plants, which were located closer to the high-value markets…

The Pitfalls

Though the potential benefits of the Corus deal were widely appreciated, some analysts
had doubts about the outcome and effects on Tata Steel’s performance. They pointed out
that Corus’ EBITDA (earnings before interest, tax, depreciation and amortization) at 8
percent was much lower than that of Tata Steel which was at 30 percent in the financial
year 2006-07.