INTRODUCTION TO INTERNATIONAL BUSINESS

2022 – 2023

Assignment: Case 2

Group number: 31 Team number: 7

Tutorial lecturer: Dr. Juliette de Wit

Student: Salman Rafiwardhana S. Student number: S5287367

Student: Yudhistira Surya Student number: S5301343

Date: 04-10-2022
 Tata Group: A Global Giant with Great Subsidiary Powers

From the perspective of a student, understanding how an organization develops

through a wide range of time is very intriguing. In this case analysis, it is shown Tata Group
has been through a tough journey in order to build a successful multinational enterprise that
is accepted all around the world. Starting small by providing the needs in their home country,
moving on to provide the needs to some countries abroad by manufacturing products such
as otomotifs, chemicals, steels, and many others, and finally constructing a suitable and
effective enterprise which focuses on satisfying the needs of customers internationally with
their services. To dive in deeper, in the following paragraphs there will be our answer from
our perspective.

Nowadays, many MNEs are developing and trying their best to survive in the market
of each and every country that they desire. There are surely many obstacles for an enterprise
to overcome such a challenge in expanding their company to different countries that have
different variables that they have to consider. The four types of multinational enterprise that
are introduced by Verbeke show different applications of how an enterprise runs in different
environments all around the world. Each type has their own characteristics that simply
describe how it works. Firstly, a Centralized Exporter is an enterprise that mostly runs in their
home country, manufactures a product at their home country and exports it internationally.
Secondly, International Projector is an enterprise that transfers its proprietary knowledge
developed in the home country similarly to other countries abroad. Thirdly, the International
Coordinator manages their international operations through a complex logistics function. Its
operations specialized for the host country hence generates value across borders, and
linking the logistics operations efficiently. Lastly, Multicentered MNE sets up entrepreneurial
subsidiaries abroad, which are capable of managing their own in the host country.

From those characteristics, it shows that Tata Group adopted the Multicentered MNE
for each and every enterprise they built in the 20th century. Both the Tata Strategic
Management Group which offers consulting services to Tata and non-Tata companies and
Tata Interactive Systems provides e-learning solutions for project management, design, and
others are using the International Coordinator based on the fact that they manage their
operations from their home country to further develop and transfer their services
internationally. Previously, Tata Group used different types of multinational enterprise for their
subsidiary companies such as Centralized Exporter with their Otomotif Company, Tata Steel,
Tata Technology, and Tata Chemicals.

In conclusion, Tata Group started from just a home country enterprise which focuses
more on the development in their initial environment. From there on, they started to grow and
develop a multinational enterprise which mainly operated in exporting their goods
internationally. Furthermore, in the process of maturation of the company Tata Group built a
more suitable product for a larger market to consume which are the Tata Strategic
Management Group and Tata Interactive System which are demanded in the modern era.

Prior to becoming a leading global player in the world as we know today, Tata started
as a local trading company back in 1868. Tata Group ventured into various verticals of
business early on, including hotel, steel, electricity, education, consumer goods, and aviation.
In the cases of many Multinational companies with various subsidiaries, two major situation
often occurs, i.e. Homogenization and Headquarter-hierarchy syndrome. Homogenization,
according to Merriam-Webster, is the property or state of being homogenized, or being
homogeneous in structure or content. Homogenization in international business means that
all subsidiaries are treated identically in terms of conformance. This was most likely owing to
convenience or a lack of resources. Unfortunately, this will inevitably become an opportunity
cost in the long term, as the firm will fail to identify its subsidiaries' potential to create
distinctive strengths in their own right, supplementing the company's current Firm Specific
Advantages in the relevant subsidiary countries.

Meanwhile, the Headquarter-hierarchy syndrome suggests that organizations with

branches frequently conduct business by making strategic choices at the company's
headquarters (centralized decision-making). This allows the corporation to become isolated
and blind to changes in major foreign markets. This may result in limited rationale and
dependability since the organization is constrained to being an implementer position with no
additional value. In the long term, this is going to become an opportunity cost, as
decentralizing decision making may improve the deployment and exploitation of Firm Specific
Advantages.

In the context of the Tata Group, which developed from 13 companies in 1938 to 300
companies in 1991, Tata has pursued several commercial possibilities. Prior to 1991, these
subsidiaries were run separately, resulting in unstructured organizations with overlapping
operations. Although operating autonomously challenged the Headquarter-hierarchy
concepts at the time, Tata Group was unable to avoid the homogeneity phenomena. Tata
Group's overseas efforts were restricted to organic expansion with export-focused business
procedures. Ratan Tata, who took over the corporation in 1991, transformed it into a portfolio
of seven sectors.

Ratan Tata widened their operational platforms and began to source, produce, and
sell worldwide through different techniques of inorganic expansion, including acquisition, after
developing a solid basic organizational structure. These acquisitions, collaborations with local
corporations, and mergers were a manifestation of what Verbeke (2009) would consider a
shift from being a black hole; a subsidiary with limited resources in a desirable market; to
becoming a contributor; a subsidiary with ample resources in a desirable market.This would
not have been achievable for Tata unless it had purchased the Tetley Tea trademark, formed
a joint venture with AIG, acquired Daewoo commercial vehicle firm, and merged one of its
companies with Corus Group. These subsidiaries are no longer handled equally as they were
previously, and as a result, they are no longer homogenized.

By enabling the subsidiaries to operate freely, the Tata Group was able to increase its
position in multiple areas. Although this has always been the case, they are now more
structured and managed, without the chance of another unstructured and overlapping
business, as the Tata Group has created a management entity, Tata Industries and Tata
Sons, with the assistance of the Group Corporate Center. Although Tata Group today has
varying ownership holdings in each business based on the urgency and features of each, it
retains control and veto authority.

Due to its competitive edge, Tata Group was able to improve its position in the
worldwide market. The competitive advantage of Tata Group may be explained using the
Porter Diamond model, which stresses the competitive advantage of an industry or firm that
allows it to perform better than other rivals in an area or nation. The model defines the
characteristics that determine an entity's relative strength, motivating it to outperform the
competition. Aside from some of the characteristics that are available and identifiable in the
environment, companies have the freedom to develop their own strengths in order to
strengthen their presence and become an entity of significance. The porter diamond model
costs of Factor conditions, demand conditions, related and supporting industries, as well as
firm strategy, industry structure, and rivalry. The porter diamond model also shows that
external forces such as government and chances can also be relevant in strengthening
competitive advantages.

A company's factor conditions include its natural, capital, and people resources.
However, certain other factor conditions are established as well as actual resources. This
involves a skilled workforce, state-of-the-art infrastructure, and a scientific knowledge base.
Tata profited from the fact that it had a strong management and leadership team that was
able to drive a team that permitted development into diverse sectors.

Demand Conditions are the conditions of the market that demands the product. This
covers the form of buyer wants, the amount and rate of expansion of house demand, and the
possibility of domestic demand to be transferred into overseas markets. Tata's goods and
services were in high demand, both inside and externally. Externally, there is a need for
diverse Tata goods worldwide, beginning with a demand for software services by the Detroit
police department and progressing to an operating presence in more than 85 nations.
Internal demand also occurs, as in the case of the establishment of Tata Consultancy
Services (TCS). Its inception was closely connected to the Tata Group's requirement for
information-related technology and in-house consulting.

Parts and service providers, as well as distributors in the supply chain, are examples
of Related and Supporting Industries. While this component is critical, particularly in the case
of a global automotive behemoth like Tata, it was not well articulated in the case. The author
believes that the industry creates good pressure and pushes industry participants to flourish
and develop through innovation and globalization. The presence of strong worldwide
suppliers is also one of the most significant and fundamental sources of building a
competitive advantage for international markets, as well as assuring product availability
across various consumer markets.

Firm Strategy, Structure, and Rivalry examines the framework in which enterprises
are formed, managed, and operated in light of domestic demand, factor circumstances, and
supporting industry dynamics. The Tata Group's goal is to focus on consumers and supply
them with high-quality products that are consistently consistent in quality and flavor. Another
component of this model is the structure, which allows individual enterprises to flourish and
analyses prospective future market entrances and product diversification through the Group
Corporate Center and the presence of management entities.

The government is in charge of developing policies and regulations for any industrial
operations that may have an impact on economic and political stability. And chances refer to
external occurrences that may affect or benefit a country or sector but are completely outside
of enterprises' control. There was little discussion of this element in the case of Tata Group,
but it was specified in the case of TCS, which has few rivals in India. Because the
government limits foreign investors to a minority share, IBM, Tata's competitor, has exited the
Indian market. Tata then gambled on developing TCS and making it the market leader in the
category.

Bibliography

Verbeke, Alain. 2009. International Business Strategy: Rethinking the foundations of

global corporate success. New York: Cambridge University Press.

Christopher May (2017) Multinational Corporations in World Development: 40 years

on, Third World Quarterly.