Managing a Conglomerate in an Emerging Market
In 1991 the Indian government introduced a series of drastic reforms, liberalizing its government owned and controlled economy. Product expansion and new market entry became easier for companies in virtually every sector of the economy. This presented Tata with many opportunities to leverage its strong brand equity and financial resources to enter new markets and industries. The strong brand image gave it a tremendous advantage over competitors in a variety of industries. However, the government reforms also lowered barriers to entry and increased competition in all of Tata’s industries. Foreign companies flooded into India, threatening to take market share from Tata companies. The world was globalizing and India was liberalizing its economy. Tata was forced to consider its strengths and weakness, analyze its many businesses and their industries, and evaluate the threats and opportunities presented by this changing global economy.
Resources and capabilities we identified as providing competencies for Tata are its skilled workforce, brand equity, the entrepreneurial spirit and strong corporate culture, the capability to create synergies between units, and Ratan Tata’s strong relationship with the Indian Prime Minister. The following table analyzes Tata’s resources and capabilities and their implications on the company’s competitiveness and economic performance.
VIRO Analysis of the House of Tata
Resources/ capabilitiesValuable?Rare?Costly to imitate?Exploited by Org.Competitive implicationEconomic performance TAS/Skilled WorkforceYesYesYesYesTemporary competitive advantageAbove normal Brand EquityYesYesYesYesSustained competitive advantageAbove normal Corporate Culture/
Entrepreneurial SpiritYesNoNoYesTemporary competitive advantageNormal Synergies between unitsYesNoYesNoTemporary competitive advantageNormal Relationship with governmentYesYesYesYesTemporary competitive advantageAbove normal
TAS/Skilled Work Force
TAS had a successful average retention rate of 67% compared to the standard of 10-25% in other Indian organizations. This retention of human capital translates into experienced management well versed in the operations of the various Tata companies.
Brand Equity will allow the company to maintain long-term recognition. This will enable the group’s companies to sustain a competitive advantage and explore new industries. Immediate recognition will facilitate adoption of new products by customers.
Corporate Culture/Entrepreneurial spirit
The entrepreneurial corporate culture that was established by J.R.D is valuable and essential for growth and success. The main risk in the process of creating a single brand is the possibility of hindering the entrepreneurial nature of the company. Management of the different units will need to retain some level of entrepreneurial freedom. The competitive advantages provided by this resource will be only temporary as it is easily duplicated as other companies learn and eventually copy best practices.
Synergies between units
Tata can leverage its world class capabilities in high-tech industries to in R&D while also gaining financial capital advantages. Capital can easily be raised from contributions from participating group companies.
Strong Relationship with Indian Government
The personal relationship between Ratan Tata and the Indian prime minister was valuable, rare, and hard to imitate. It was successfully exploited by the organization, as they were able to gain licenses for several new projects because of the relationship. Though the Prime Minister’s tenure is limited, their close relationship creates a temporary competitive advantage and provides above normal economic...