|✅ Paper Type: Free Essay||✅ Subject: Communications|
|✅ Wordcount: 3700 words||✅ Published: 1st Jan 2015|
Tata operates over 96 companies in 7 sectors which are: information technology, communications, engineering, material, service, consumer product and chemicals. This company was founded in late 18th century in India in British rule. It has been facing problems ever since, although it turn out to be India’s largest company with revenues equivalent to nations 3.2% nations GDP in 2007.
Tata International came into existence in 1962, and it has evolved into an international company with turnover more than 850 million$ in 2006-07. This company has taken over various other sectors of business adding more responsibility to the stake-holders.
Here we will discuss the problems faced by Tata in United Kingdom and there PESTEL and PORTAL analysis, issues relating to Marco-environment like Political, Economical, Social, Technological, Environment and Legal. “In dynamic environment where the external situation is continually changing this analysis would be carried out regularly” (Roger Lewis, 2005). The model of the Five Competitive Forces was developed by Michael E. Porter in his book “Competitive Strategy: Techniques for Analyzing Industries and Competitors” in 1980. The five forces as describe in his book are bargaining power suppliers, Bargaining power of customers, threat of new entrants, threat of substitute and competitive rivalry between existing players.
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When a company enters a new market they have set a certain goals and ambitions, they first segment the market on the basis of demography, political, environmental, socio cultural, economical and geographical. Whenever any company goes overseas it needs do proper research and see if the structural fit is possible. They should also consider the macro –environment and then decide what strategies they want to adopt and which will be the best to survive.
Tata has six sectors of business in United Kingdom, which are Engineering, Consumer products, Services, Information system and communications, Chemicals and Material. Tata has widely spread business, which went on acquiring many companies in United Kingdom. Under the guidance of Ratan Tata these companies have done exceedingly well, however due to financial crisis last year its profits fell from 10.1bn rupees ($214m; £133m) in the year to the end of March, down from 20.29bn rupees a year earlier. One of the recent achievements was to present the world’s cheapest car within 2000$ which Ratan had promised to world, although it’s having problems in setting up an industry for this car.
PESTEL analysis of Tata in U.K.
“Organisation’s performance and effectiveness will be dependent upon the successful management of the opportunities, challenges and risk presented by changes in the external environment” Management and organisational behaviour by Laurie J. Mullins.
Political problems faced by Tata in United Kingdom
The political environment in United Kingdom is quite stable and much more organised than any other countries. The only problem that the firm may face is the high tax rates in this country. Which makes it more expensive as the raw material increases the cost of productions also goes up automatically and this is the reason why many firms stay out of United Kingdom. There are also some policies by the labour contract to avoid exploitation of labour which makes this country much more expensive
The famous incident is Tata Nano project in west Bengal which had to be shifted due to the political pressure and there were riots and big problems. So this plant had to shift at different region finally it was decide to Gujarat. Ratan Tata had promised the world that it would be available next year for the common man. This was not happening because of this political problem. This car was also going to be exported to UK. As the production process didn’t start the other thing got to be delayed. This is how one country’s political problem affects the whole manufacturing as well as the sales of a company.
Today in financial crises every government is under tremendous pressure for the lack of investment and increasing unemployment. Jaguar Land Rover (JLR), Tata’s UK-based car maker beset by recession and falling sales, wants the Government to act as guarantor to underwrite a £340m loan on offer from the European Investment Bank, but the Government is stalling. It also wants Labour to encourage banks to advance it loans worth £400m
“Tata Motors executives will warn Business Secretary Lord Mendelssohn that they will scrap plans to build electric cars in the UK if it does not receive a 10 million pound loan soon”. After launching the project “low carbon industrial strategy” by Lord Mendelssohn Tata showed a great deal of interest and decided to build electric cars and applied for 10 million pounds loan. The firm secured 292 million pound loan from the European Investment Bank in April, but this needs to be guaranteed by the British Government and the two sides still cannot reach agreement on the conditions, the paper reports. (ANI)
Economical Problems faced by Tata in United Kingdom
Corus was really in big financial crisis before and it was in argument. UK government was ready to help this steel company and it would have followed the aluminium business which went to close for shut down. A rescue package was being prepared by the government for the bail out of the Corus. The attempt was made to bail out of this crisis as this government intervention comes there is added pressure on the managing director. Sir Brian Muffed stepped down of the post. So Corus had planned to raze 543£millon to get out of this crisis by selling the aluminium business in Dutch and this was ruled out by the court.
Off course taking over an in loss company would have been difficult and also get approval from all the stake holders. Tata was eager to become world’s 5th largest steel producing company. Tata steel borrowed 1billon $ form state bank of India, with this finance Tata injected 250 £ million into Corus much more than they anticipated. The real problem of Corus was about its finance so it had to merge with an external company.
There were many problems after Tata took over the Corus and many disagreed with this design of Ratan Tata but it said that “the need for steel in this world will never will be over and it will go on rising endlessly as more and more sky scrapers are being build more new constructions are being developed and new dams are being constructed the need for steel will rise and we need to produce”. Of course this is proving to be wrong as the finical crises raise the largest steel consumer China cut the down the consumption but it’s never know what may happen.
According to reports Tata is planning to raze 2£ billion pounds as it tries to cope up with the collapse of its core business and looks for the ways to salvage the acquisition such as 1.5 £ billion Ford Marques and Corus, the British steel maker bought for 6.7£ billion nearly 2 years ago. Tata faces tremendous pressure because of the money borrowed for foreign acquisitions thanks to economic turn down and fall for the demand of their product. Tata motors needs to repay 3£ billion bridge loan which they borrowed for JLV acquisition.
Sociological problems faced by Tata in United Kingdom
Every International company faces socio-cultural problems, proper research to overcome this problem is necessary. Geographically we are divided into different continents and every country has its own cultural, according to this the company’s has to adjust and make some changes to their approach.
In Corus there were mixed reactions like ,Paul Hoyt who works at defender line in land rover said that “the workers were told about this deal in three minutes just before the deal was about to be confirmed. There were only leaflets and CD’s distributed about the company about Tata Company but nothing about actual sales”. Mr. Hoyt was happy to retain his job but for how long. Johanna Nichols who works at assembly line said that, “I just hope we don’t get stitched up again”. Another worker who was working for 20 years in this company described this as “good move”.
Jaguar on other hand is planning to shut down a factory and stop the production for X-type cars. This move will cost 300 job cuts while trying to adjust with changing economy, where it reported a loss of 521.8$ million in 2008-2009. Tata motors have also announced to export Tata Nano in United Kingdom with some minor changes according to the rules and regulations of the country.
Tata in general has to look at the boarder view at the socio cultural changes from its home country as in India is a developing nation the labour laws are not so perfectly followed. There are lots of changes in cultural like Demographic, lifestyle patterns changes, attitude towards issues like education and corporate social responsibility and ethnic and religious matters. There also been reports of cultural clashes in Tata led Nextel in South Africa between South African Indian staff and those brought from India by Tata Communications. This was denied later on by Windily Zoë, Nextel executive head for corporate communications and branding
Technological problems faced by Tata in United Kingdom.
Tata has always looked positively towards technology and has invested billions of pounds for it. Tata’s led Corus and jaguar land rover are one of the most technical advance factories. Tata invests around 35% of its total profits in R&D which is by far more that its competitors. Tata consultancy service (TCL) has tied up with CISCO for technology labs in India. The lab will also allowCiscoandTCSto illustrate proofs of concepts, and IT and networking methodologies for client-specific business processes.
The Pune factory in India for Tata motors is more emphasised on human hand rather than robotic arms, Ratan Tata believes that the labour in India is cheap and investing more on robotic arms will push more individuals on unemployment scale. The brand new factory being set up for Tata nano in Gujarat is more technically advance to meet its demand.
Tata in UK did not face any technical problems as such but there are plenty of threats that may cause these problems. As this is a more technically developed country the infrastructure available is much more advance and stable then India. As Tata telecom is ready to invest 500$ US dollars it future technology of WiMax, 4G, Wireless broadband in India. It recently formed joint venture with Boeing with investment of over 500$ million for defence-related aerospace component work in India for export to Boeing and its international customers. Tata motors European technical centre (TMETC) brought up for R&D a purpose which is steadily taking Tata motors towards achieving global standards.
Legal obligations faced by Tata in United Kingdom
The political environment of United Kingdom is very stable and well structured. The laws and trading policies are well developed which give minimum exploitation to labours and customers. Tata comes from India where the legal environment is not so stable and the regulatory bodies are incapable to enforce laws. The British health and safety laws for the better conditions of workers are the most strong and predominant
On June 30th 2009 Gordan Brown meet chairmen of Corus about the 2000 job cuts as the steel industry faces a major economic turn down. He agreed that government has already offered £5 million pounds to help with training support across Corus sites.
Buying over Land Rover and Jaguar for 2.3$ billions Tata was under tremendous pressure as there were mixed reactions from all Britain. Plenty feared about devaluation by Indian brand and suggested government to take control of Jaguar brand, as it symbolises best of British. There were no real legal or political problems faced by this company in United Kingdom. There were some MPs who did not like an Indian brand taking over British Companies. India has the second largest investment from Asia with 75 projects in 2007-07. The future changes to be expected in the legislation are mostly based on the environment effect and the green house effect on our earth.
Environmental problems faced by Tata in United Kingdom
Today in the ever changing environment there is lot of pressure on every industry to cut down there green house gases and cut the pollution to minimum. As the climate change is a major problem in front of humans, the changes in the basic system of industrialization is necessary. The Tata group has a set of explicit guidelines on environmental and ecological issues, and a broad range of policies aimed at helping Tata companies protect, conserve and restore our natural resources. Tata group is facing up to the challenge of climate change and making it integral to its processes. Coordinating and directing the climate change efforts of the group’s companies are some of the senior-most Tata leaders.
It is quite clear that the major pollution is caused by automobile industry and other commodities. Tata has its share of problems in this sector as it launched the new product Tata nano the low price car which is also to be sold in the European market by nano europa. Professor Lucas Reinders, Amsterdam University’s ‘professor of the environment’, is very concerned: “This car will offer an attractive alternative to people who rely on India’s poor public transport or who ride cycles or motorbikes on its dangerous roads. Therefore, I think there’s a good chance a huge number of the cars will be sold.” Professor Reinders however has different views about this car and says that even though nano is clean then motor bikes, it still drinks more fuel than motor bikes.
Jaguar and land rover in UK have a different story, which is asking for more investment to meet the fuel-economy regulation in EU. LandRoverdoesn’t have a single model that comes near the EU’s proposed 120g/km CO2 fleet average emissions rating, let alone an entire fleet averaging this, while Jaguar’s emissions levels are only marginally better.
Corus Consulting offers a comprehensive range of environmental services which are applicable to many heavy and light industries through a number of Environmental Groups established by Corus in both the Netherlands and the UK. In all, Corus Consulting can call upon the expertise of around 120 environmental specialists within the Corus Group. Additionally The Corus Group of companies has developed numerous unique and innovative techniques used in the field of environmental practices which are used to enhance and benefit the services offered.
Portal’s Five Forces for Tata
Bargaining power of suppliers
Bargaining power is the ability to set the prices according to changing conditions. The more concentrated and controlled the supply is the more monopolistic it is. In a truly competitive market, no one supplier can set the prices. The choice of supplier may affect every department of company directly and indirectly
The fear that the production of jaguar and Land Rover can leave Midland, it is estimated that up to 90% of the suppliers in Midland employing around 15,000 people, make parts directly or indirectly for Jaguar’s Castle Bromwich Plant in Birmingham and Land Rover in Solihull.
Corus Purchases include iron ore and coal, alloys, refractories, rolls, and paint, as well as a whole range of other goods and services. Corus expects their suppliers to be comply with law and regulation standards, appropriate health and safety standards, appropriate quality, appropriate environmental standards, financial safety, reliable supply and competitive prices. These are not unusual demands and in fact every company expects the same and demands the similar choices.
Bargaining power of customer
Similarly, the bargaining power of customers determines how much customers can impose pressure on margins and volumes. Customers bargaining power is likely to be high when customers buy large volume of sales; the supplying industry comprises a large number of small operations, supply industry operates with high cost.
Sales for jaguar and land rover have decreased over the year and past few months it has registered loss due to decrement in sales. The table below shows us the sales of past few years and how it has decreased over the years.
Jaguar Sales Land Rover Sales
Threat of new entrant
It’s not only the existing players in an industry pose threat to each other; a new entrant can also affect the competition. The easier it is for a new firm to enter in a business, the more cut-throat competition there will be. Factors like Government Restrictions and legislations, Patents, High Entry Cost, Existing loyalty to major brands.
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Tata does not hold such risk but it may have risk against new high prices and also government restrictions. As the raw material prices rise so does the cost of production, this may affect the sales and the profit margin of the company. Tata’s Taj hotels may have a threat for new hotels, although they have enough competitions already. The dream project Nano is also going to face a competition as Nissan- Renault are developing a new product similar to Nano with Bajaj the biggest two wheeler company in India
Threat of substitute of Product
Substitute refers to the change of taste of customers, the threat that customer will switch to a new of a substitute product for e.g. If Tata tea (Tetley) increase their price it is quite possible that their customer might switch to coffee or a cheaper brand.
“The international steel shortage and subsequent price increases have led to the manufacture of fibreglass gratings as an alternative to steel grating” says Fibreglass Grating Company MDJay Behrmann. Steel needs high costs of steel installations and maintenance, frequent replacement and steel’s susceptibility to corrosion and rust, alternatives to steel are being sought.
Tata motors also face a major threat as the fuel crises rise and demand goes on rising, the quest to search for new or alternative source of fuel goes up. The new hybrid cars and electric cars seem to be solution for time being. There are major research labs set up by competitors to overcome this problem Tata somewhere seems to be left behind.
Competitors with Industry
This is the competition between the existing firms in the same sector of industry the most common example is coca cola and PepsiCo. Tata has big set of rivals in each sector of its business and it adds to change in strategies, prices, structure and finance.
The competitors for Tata steel (Corus) is Arcelor Mittal, Nippon Steel (Japan), JFE (Japan), POSCO (China), these are some of the major steel producing companies in world and they stand before Corus in production bases and impose a major threat to Corus.
Tata motors on other hands has major problems because in this financial crisis it has imposed a major loss of around 383$ millions. Companies like BMW, Mercedes, Toyota and Honda are major threat to Jaguar as we have seen the sales has decreased over the years and after Tata took over the company there was a big decline. The competitors impose a huge pressure on the pricing on the product and denser the competition more price effective the customer is.
Tata one of the leading company’s of India is facing some major problems due to credit crunch. Although it is in FTSE 100 it has done excellent in taking over some of the major companies and can look forward to get long term benefits. After doing the PESTEL analysis i suggest considering the economic problem which could be the major problem for the company. After analysing the Portal’s 5 forces i see a major threat from the rivalry with in Industry. Tata has a long way to go before if finally achieves its ambitions and the external factors or Macro Environment factors won’t make it easier.
Global shift: mapping the changing contours of the world economy / Peter Dicken, 2007 (page no. 57-58).
Management and organisational behaviour By Laurie J. Mullins (page no 256-259)
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