CUEGIS for Tata Motors

(Recommended Word Count: 700-750 words (18-19 Marks- Bandai: 701, Go

Pro: 862, Nike: 914, IndoFood: 645, Tesla: 626 Toyota: 816)
Recommended Page count: 2.5 to 3 full size pages

Change refers to modifications in the way that business operations are

conducted, as a response to internal factors or external influences.

Culture refers to the beliefs and values of an organization that shapes its
business practices.

Ethics refer to the moral principles and values that increasingly determine
how business activities are conducted.

Globalisation refers to how ideas, products and technologies are increasingly

spread around the world, leading to greater integration between economies and
businesses around the world.

Innovation refers to modifications or improvements of a good or service so

that it better meets the needs and wants of its customers, in a profitable way.

Strategy refers to long-term planned actions designed to achieve

organizational aims and guide decision-making.

Introduction
Tata Motors Limited (TM), established in 1945, is a $42 billion, multinational
automobile company headquartered in India. It has grown by the principles of
external growth to create a network of 76 subsidiaries worldwide, such as Tata
Daewoo in South Korea and Jaguar Land Rover in UK, and become India’s
largest automobile company. TM produces a wide range of passenger
vehicles(PV), commercial vehicles(CV) and utility vehicles to Indian
customers, which it produces in 6 production facilities in India. Define and
relate concept 1. Define and relate concept 2. This essay will examine the
“repeat question”.

Vision: Deliver exciting innovations and be amongst top 3 PV manufacturers in

India
Mission: Innovate mobility solutions to enhance quality of life.
Innovative Product launches: Tata Tiago “Compact car of the year”, Tata
Hexa- a SUV, Tata Tigor- India’s first ‘styleback’ car, Magic Mantra

Change
Disadvantages and Advantages of external changes
External changes have increased competition within the Indian automotive
industry. Rising per capita income, increasing population and the
implementation of GST. This has made TM’s Passenger Car portfolio’s
increasingly obsolete as competitors manufacture higher quality passenger
vehicles at more affordable prices, leading to a decline in market share for TM
from 13.1% of 5.2% in the past 3-5 years. TM must consistently innovate and
offer different versions of their products to keep its customers satisfied, which
incurs significant R&D costs. However, this is advantageous too as it will
increase productive and marketing efficiency in the organization. TML plans to
adopt a product development strategy, where they will launch 2 new passenger
cars every year.

Advantage
The rising population and number of engineers has made Human Resource
Planning ever so convenient. With the average working population age being
just 25 in India, there is an abundance of automobile engineers. Furthermore,
Tata Motors “Skill Development” program equips employees with the requisite
skills to produce high quality vehicles. This is how TM gains competitiveness in
the Indian automotive industry. As of the 2017 FY Report, TM has 79558
employees.

Disadvantages and Advantages of Management changes

Internal Changes have occurred in TM in human resources as a result of poor
recruitment and workforce planning. Frequent management changes and a hire-
and-fire approach have led to instability, low motivation and low staff morale,
according to TM’s new CEO, Guenter Bustchek. Absence of job security means
that security needs in Maslow’s Hierarchy of Needs are not met, reducing
intrinsic motivation to work as workers simply work due to extrinsic movement
(“they are supposed to work”). This has been portrayed as an unethical issue by
the media, increasing pressures on TM to increase job security for its
employees.

However, the high labour turnover is advantageous for the innovative corporate
culture of TM as it increases inflows of new ideas and new blood in the
company.

Culture
Corporate Culture is to innovate.

Ethics

Effects of Ethics on Operations Management Strategy

Green Technologies
In response to the growing social and ethical awareness regarding air
pollution, TML makes innovations in low emission engine technologies to
maintain a positive corporate image to customers. Tata Cummins Engines
promotes durability and eco-friendliness. Lighter due to aluminium.
Investing heavily in petrol and diesel efficient engines.
They down-sized their engine size by 30%.

Corporate Social Responsibility

TM builds sustainable relationships with its community stakeholders. It portrays
an ethical brand image through effective promotion of its CSR actions. For
example- it publishes a section on its CSR activities in its Annual Report, which
can be downloaded from its official website. Examples of such activities are:
sponsored education for 90,000 students in FY 2017, planted 100,000 saplings
to raise environmental awareness.

Innovative green technologies and active participation in CSR helps TM

satisfy external stakeholders such as pressure groups and environmentally-
sensitive customers. TM won the 2017 Annual Greentech Award.

However, the disadvantage is that developing green technologies requires

significant expenditure in R&D and production. Hence, TM’s production costs
increase significantly, but increasing the price of its vehicles to recoup them
would lead to a fall in sales.

Globalization
The India Brand Equity Foundation reports that globalization has led to
shortened product life cycles for passenger vehicles. Firms must consistently
innovate and offer different versions of their products to maintain customer
loyalty. This increases costs of Research & Development for Tata Motors. Tata
Motors’ product development strategy has exceeded expectations, as their
recent launch of Tata Tiago increased their passenger vehicle sales by 25.2%
and was named the ‘Compact car of the year’. However, their net profit margin
fell from 0.97% to 0.67%, highlighting the high production costs due to the
shortened product lifecycles. TM adopted an innovative product development
strategy to remain competitive, which is beneficial for its customers as they are
offered higher value for their money. Yet, the high production costs are a major
disadvantage.
Globalization has allowed TM to take advantages of external growth, as it has
acquired 76 subsidiaries worldwide including big companies such as Tata
Daewoo in South Korea and Jaguar Land Rover in UK. This provides another
advantage that TM has greater access to new engineering and automotive
technologies in foreign countries due to integration with its subsidiaries, which
it can adopt in its production facilities in India and offer more innovative and
efficient mobility solutions.

Innovation
Mission: Delivering exciting innovations and be among the top 3 Passenger
Vehicles firms in India by 2020.

Engine Technologies like the Tata Cummins Engine which is 30% smaller

Product development strategy of Guenter Bustchek and a market-oriented

approach help produce innovative mobility solutions for customers.

Strategy

Product development strategy(Increased competition from globalization) to

launch 2 innovative passenger vehicles every year. This is due to the increasing
competition in the industry as the market is more attractive to foreign
competitors. Also, to shift PV production locations from 6 to 2 facilities in
India. (Change and Globalization)
It has planned to spend 400 billion rupees on product development and
launches.

Customer focus is also a priority. Listening to customer experience and

implementing connections to innovate existing products.
TM will set up Virtual Reality systems in exhibitions to enhance customer
experience before buying.

Organization Efficiency and Cost Management (Globalization-Increased

competition-Strategy) is implemented by delayering company to 5 hierarchal
levels. Delayering promotes effective communication and empowerment for
employees.

Individuals and Societies

The legacy product portfolio, poor human workforce planning and poor after-
sales services are yet to improve under Guenter Bustchek’s leadership as CEO.
His remuneration package of 150 million Rupees per annum is often a cause of
conflict between him and the dividend hungry shareholders. The share price
has depreciated over 40% due to low profits in last 3 years under his leadership,
but Guenter Bustchek believes that TM’s product development transformation
is the biggest priority at the moment, not the shareholders. Hence, all profits
are retained and reinvested, as mentioned in the profit and loss accounts.
Guenter is neglecting employees’ job security interests and shareholders’
demand for dividends, and is focused on the providing the highest quality
passenger vehicles and after-sale services to TML’s customers, who are
increasingly satisfied with new launches such as the Tata Tiago and Tata Hexa.

 Shareholders VS CEO Guenter Bustchek. High remuneration, no

dividends and falling share price (due to low profits).
 CEO Guenter Bustchek prioritizes customer needs.
 Employees have low job security and are dissatisfied and demotivated.
Low wages at lower level in hierarchy, but high management salaries,
creating a “them and us” culture for employees.
M2017: With reference to an organization of your choice, examine the
impact globalization on innovation. (30-31 minutes to handwrite)

Tata Motors Limited (TM) is a multinational $42 billion dollar automobile

company headquartered in India. It has a network of 76 subsidiaries worldwide
and 6 production facilities in India. TM produces a wide range of passenger
vehicles, commercial vehicles and utility vehicles, and is India biggest
automobile company, established in 1945. Globalization refers to the way ideas
and products are increasingly spread around the world, leading to greater
understandings and integration between economies & region. Globalization
provides various external growth opportunities for TM, while also provides
threats due to increasing competition. Innovation refers to improvements in a
product or service so that it better meets the needs & wants of its customers.
TM’s vision to “passionately provide innovative mobility solution to enhance
quality of life” has been bolstered by globalization, and this is discussed in this
essay.

TM has a network of 76 subsidiaries, including Tata Daewoo in South Korea

and Jaguar Land Rover in the UK. This is an impact of globalization that TM is
able to acquire firms worldwide to grow externally. Effective integration with
its subsidiaries allows TM to discover innovative and efficient technologies and
products, that can provide a competitive advantage if integrated within its
product portfolios in India. Hence, TM’s research & development is enhanced
as a consequence of globalization and this has helped it move towards its vision
to offer “innovative mobility solutions”. Innovative passenger vehicles such as
the Tata Tiago & Tata Hexa are well received by customers, who are looking
for affordable and stylish passenger vehicles. However, globalization also
means that there are higher similarities between products in different regions,
reducing choices for customers worldwide.

The Indian Automotive Industry is growing at a rate of 10% per year. The
implementation of GST, increasing population & rising per capital income
contribute to this growth. Foreign competitors are increasingly entering the
Indian automobile market as a result of globalization, and are offering more
affordable and innovative vehicles to the Indian public. As a result, TM’s
market share in passenger vehicles has declined from 13.1% to 5.2% in the last
5 years as there “legacy” products become increasingly obsolete and
uncompetitive against the rival products. Hence, globalization has forced TM’s
CEO, Guenter Bustchek, to adopt an innovative product development strategy,
where TM will launch 2 passenger vehicles every year. TM has developed a
mission to be among the top 3 passenger vehicle suppliers in India by 2020. TM
has increased expenditure on product development, such as developing Engine
Technologies such as the Tata Cummins Engine, which weighs 30% less than
an average car engine. This innovative approach is essential for TM’s survival
in an ever growing and competitive Indian automobile industry. However, there
is a significant increase in production costs due to this innovative product
development strategy, which means that TM’s customers must pay higher prices
for its products. This is a major disadvantage. Hence, globalization significantly
increases competition for TM, which impacts innovation as highlighted above.

Guenter Bustchek, TM’s CEO, is increasingly focusing on market oriented

production as he wants TM to meet the needs & wants to of customers. There
are better after sales services and TM’s customers are increasingly satisfied with
their passenger vehicles and commercial vehicles. However, Guenter
Bustchek’s remuneration of 150 million rupees, at a time where production
costs are very high and many production inefficiencies exist, are a major source
of conflict between him and TM’s shareholders. Shareholder have not received
dividends in 3 years as Guenter retains all profits for reinvestments into
developing innovative products to compete with its foreign competitors. Yet, he
believes he deserves his remuneration, while shareholders are increasingly
dissatisfied with his ignorance towards TM’s share price, which has decline by
40% in the past 3 years due to declining profits and market share.

In conclusion, globalization significantly impacts innovation at TM, India’s

largest automobile company. Its 76 subsidiaries worldwide provide access to
new technologies & innovative products which it can offer to its Indian
customers to satisfy their needs and wants. While the increasing competition
due to globalization forces TM to be innovative and develop new mobility
solutions, it is significantly reduced its market share (13.1% to 5.2%), which
means there are lower profits that can be invested into R&D and lesser
dividends to satisfy stakeholders.

WORD COUNT: 697

Marks Criterion Marks

(out of 4)
A: Knowledge 4
B: Application 3
C: Reasoning 3
D: Structure 4
E: Individuals & Societies 4
Total 18/20