Ratan Tata's transformation of the Tata Group conglomerate

Management

International Management

Ratan Tata is widely recognized as the person responsible for transforming the Tata Group, a large India-based conglomerate, from an unwieldy collection of businesses into a relatively more nimble group of companies better prepared to take advantage of opportunities. This case discusses Ratan Tata's early days at the Tata Group and his attempts to change the processes, people and work culture at the Group companies. Tata took many steps in order to inject professionalism into the Group while implementing two directions of growth - innovation and globalization.

Ratan Tata took over the Tata Group in 1991. For years the company had operated in a protected environment which did not leave them in a good position to compete in the global market. When the India government began to initiate a series of reforms in order to open up the economy, the Tata Group found themselves lacking in many areas. Ratan Tata was responsible for prepare the company to face the pressures of globalization. He undertook many initiatives including: rightsizing, exiting some businesses, injecting fresh talent and changing the culture.

The key a successful company is successful leadership. If a company has poor leadership they are sure to make bad decisions and not find themselves in a position to grow and prosper. Ratan Tata is a good leader and thus was able to take a struggling company that was seen as being doomed and turn it into a very productive company that has the respect of many around the world.

Communication Issues

One of the first things that a company should think about when considering going global is any communication issues that might arise. The ability to communicate, and communicate well, is one of the biggest factors in business success. Learning how to communicate globally is the best approach to reaching out to more people across different areas. The first key is to be thoughtful of cultural dissimilarities. When communicating globally, it's significant for one to understand that cultures and beliefs vary across different countries. Even provinces and states within the same country have dissimilar ways of dealing with business or doing certain things. Companies will want to factor in cultural differences and learn to be more flexible in accepting these differences so that they can communicate effectively with their peers from other nations (Gundling, 1999).

The next key is to learn how ones associates deal with things in their countries. The best way to deal with cultural differences is to research ahead of time how different countries handle business meetings or any other type of discourse. "For instance, the Japanese prefer that you get straight to the point instead of making small talk" (Gundling, 1999).

The third key is to be conscious of language barriers. It is important to note that some countries do not automatically use their primary language when doing business. While one may sound smart with witty jargon among those who have been speaking the language for most of their lives, people from other countries may not understand what is trying to be said (Gundling, 1999).

The fourth key is to go over any type of written correspondence before one sends it out to their contacts. It is easy to unconsciously cause misunderstandings when one deals with people from different parts of the world. When reviewing correspondence, it is important to make sure that one is not using derogatory terms or even sentences that may be taken the wrong way (Gundling, 1999).

Staffing Policies and HR Challenges

There are many issues and challenges that can arise when doing business internationally. The one area in which companies feel that they can become more competitive is having the best people and having those people serve their customers in the best way. Consequently one of the key things for companies is to focus on the people in the company, and the customers they serve. This has led to Human Resource Management becoming a big issue for international business (Deresky, 2011).

There are three main staffing policies that companies must become familiar with when looking at doing business globally. These include:

Ethnocentric Staffing Policy -- this is when a company sends people from the nation of the home company, overseas and all senior managers are people who are parent-company nationals. The negatives are that this can lead to resentment among motivated and educated local managers and can affect high staff turnover among junior managers.

Polycentric Staffing Policy -- this is when a company allows local staff to rise to the executive level and be managers. The advantage in this is that host country managers are less likely to make mistakes arising from cultural understandings and is cheaper than using expatriate managers, but can create a gap between head office and regional offices.

Geocentric Staffing Policy -- this is when a company uses staff in foreign operations - no matter what country they come from. This model is expensive to implement because of the increased training and relocation costs (Deresky, 2011).

Leadership and Motivation

When doing business internationally corporate leaders must both coordinate and motivate individuals who are separated by time zones and cultures. Collaboration, at an individual and corporate level, has become a necessity. And in today's dynamic business environment, leaders must take more risks and execute with greater speed, briskly connecting talent and moving information and knowledge around the globe to fulfill organizational needs (Leadership in a Distributed World, 2007). It is within this emerging global world that leaders are required to adapt, culturally, to influence people toward a common goal. This requires getting to know the culture and the people that one is managing in order to know what techniques to use to motivate towards the common company goals.

Good team attributes in the global environment with multicultural teams are those that demonstrate spirit of belongingness. Because of the diversity of culture and opinion, good teams encourage other members to express their opinions freely; they do not stereotype or pre-judge their members. Each and every member is respected in a productive global business environment with multicultural or diverse teams. Positive thinking is the constant habit of good teams in the global market environment with multicultural teams. It will be impossible for a global multicultural organization to function properly without good team attributes because of the wide acceptance of teams as well as multicultural teams in the global business environment (Qualities of Leading Global Multicultural Teams, 2009).

Issues of Concern

In Ratan Tata's plan to go global he believed that the biggest challenge they faced was finding the right talent which retaining the Group's value systems as the company grew bigger and more diverse. He thought that in order to be successful they had to expand their managerial perspective while retaining the same moral and ethical standards that they had before.

Another issue seen by others was the fact that the Group still had a presence in a wide range of disparate businesses that included salt, jewellery, computer software, and tea, insurance and steel. In fact the company had actually added to its diversity by entering the new businesses of direct to home services and retail consumer electronics. There is something to be said for expanding but companies must watch and make sure that they are not spreading themselves so thin that they once again are only mediocre at everything they do and don't have the resources to excel at anything.

There were also many critics that wondered what would happen to the company once Ratan Tata was gone. They wondered if his departure would be the end of the Group or would it be able to thrive on. There was no doubt that under Ratan Tata the Tata group had prospered. He had in fact been instrumental in transforming the focus of the company from domestic to global. Ratan Tata had the conviction, belief and determination to convert his vision for the Group into reality, all while retaining the ethical values of his predecessors.

Organizational Structure and Plans for Expansion

Ratan Tata's perspective on going global was not just one increasing turnover. He also had a vision to creatively engage in the development of the countries in which the Group was doing business. Carrying out this philosophy, the Tata Group took up a number of projects that had a direct influence on the social environment in which they did business. Social investments are expected to yield longer-term benefits as engaged consumers step up their purchases, a broader investor base develops, or new talent flocks to a company's recruiters. Corporate responsibility acts as a conduit through which companies can demonstrate that they care about their stakeholders. A company should assess its initiatives regularly to ensure that they foster the desired unity between its own goals and those of stakeholders. Calibrating strategy frequently improves the odds that corporate responsibility will create value for all parties (Bhattacharya, Korschun, & Sen, 2012).

Conclusion

There is no question that Ratan Tata is a great leader. He knows how to set a vision and then get everyone involved on the same page in order to be successful in carrying out that vision. He took a company that was on the brink of collapsing and made it a globally respected company with potential. Like with every company that is in business, this one must make sure that they contain their expansion efforts so that they do not over expand themselves out of business.

Ratan Tata's growth by expansion theory is a good one on the surface but has many risks associated with it. Growth by expansion is a great way to build up a business. Ratan Tata basically used two different ways to expand -- globalization and acquisition. Globalization is often seen as a high risk strategy. The reasons for such a business strategy could be due to a rise in opportunity that the firm has identified, or feel the need to tap and rely on new sources of growth and so on. While it is considered as a more risky approach that the others, the firm must be able to carefully assess its abilities before plunging into a new area that it may or not have competencies in. Acquisition or acquiring refers to the act of taking control over another corporation. By taking control over another business entity, one would hope to gain access to certain key functions, skill or knowledge in a particular industry (Growing Your Business - Growth & Expansion Strategies, n.d.). No matter what the critics say Ratan Tata was successful at both of these strategies.