Tata, one of India's largest companies, operates in more than a dozen different industries, including automobiles, chemicals, information technology, consumer products, engineering, and consulting. Altogether, Tata comprises more than 90 firms. The chairman of Tata Group until his retirement in 2017 was Ratan Tata, the charismatic descendant of the company founder. Now in his eighties, he emerged as a popular and respected corporate titan, known around the world.

As the group's chief visionary and dealmaker, Mr. Tata aggressively expanded the Tata Group into world markets. One of the group subsidiaries, Tata Steel, purchased the Dutch-British steel giant Corus Group, for $13 billion to establish a strong position in the global metal industry. The move boosted Tata's steel-making capacity fivefold. Tata Consultancy Services acquired France's Alta SA, aiming to become a major player in Europe's information technology services market. Another group subsidiary, Tata Motors, acquired Jaguar and Land Rover from Ford for $2.3 billion. Tata Motors launched the Nano, positioned as the world's cheapest car. The Nano addressed a longtime dream of Ratan Tata to develop reliable but super-cheap automobiles and revolutionize the global auto industry.

Background on the Tata Group

Founded in 1868 in Bombay as a textile trading company, Tata gradually expanded into hotels, power plants, chemicals, steel production, and several other industries. The government of India long discouraged international trade by imposing high trade barriers and bureaucracy. As these restrictions loosened in the 1990s, Tata's international operations flourished. Tata Motors began producing cars in joint ventures with Fiat and Daimler-Benz. Tata bought 30 percent of the coal subsidiaries of an Indonesian mining company to supply coal for Tata's power plant in India. Altogether, the Tata Group has factories in numerous emerging markets, including Kenya, South Korea, Malaysia, Russia, and Thailand.

As one of India's largest firms, Tata has many competitive advantages, including vast financial resources and access to capital on favorable terms; strong corporate image; connections with countless high-quality business partners; competitive cost structure, thanks to the huge, low-cost Indian labor pool; and long-standing relationships with national and state governments in India. In the auto industry, Tata Motors' reputation is growing. It counts on sister subsidiary Tata Steel to provide steelcontinuously to manufacture Nanos and other cars, a key advantage. The purchase of Corus Group, in addition to increasing steel capacity, also greatly expanded Tata's access to automakers across Europe and the United States.

Tata is one of the leading new global challenger firms charging out of big emerging markets such as China, Brazil, India, and Russia. The emerging giants tap abundant low-cost labor, tech talent, and mineral resources to target the world's biggest growth markets increasingly. Brimming with cash and confidence, they export innovative business models honed in some of the world's most challenging markets. Governments and state-owned enterprises influence the procurement activities of corporations. Tata capitalizes on its family conglomerate networks to enhance its position as government supplier in numerous business sectors.

Tata Motors

Tata Motors is India's largest automobile maker by sales. About one-quarter of all cars and trucks sold in India bear the Tata Motors brand. India's population of 1.3 billion people, most of whom do not own cars, represents an enormous untapped market. The firm presently generates most of its sales outside India. China and other emerging markets provide key growth opportunities. Management aims to transfer its vast experience in India to markets in Africa, Latin America, and the Middle East. Nations throughout Southeast Asia appear ripe for sales of inexpensive motor vehicles. Millions of low-income consumers worldwide would love to own a car but have had few alternatives.

Tata Motors has established manufacturing operations in Argentina, Brazil, Indonesia, South Korea, South Africa, and Thailand. In each of Africa, Southeast Asia, and the Middle East, the firm has a significant presence in 10 or more countries. The acquisition of Jaguar and Land Rover increased Tata Motor's visibility through globally recognized brands and provided an entree to Europe and the United States.

Challenges

In India, 70 percent of the population still lives in the countryside, and the transition of land from agrarian to industrial use often meets with angry protest. Tata Motors was forced to abandon construction of a factory in West Bengal, India, intended to manufacture the Nano. Protesters surrounded the new Nano plant and blocked roads to prevent workers or deliveries from reaching the facility. Violence and threats to worker safety ensued for months during plant construction. West Bengal politicos encouraged labor unrest, leading to capital flight and making the region unfriendly to business. Ultimately, despite being 80 percent complete and costing $350 million, Tata Motors had to abandon the plant.

Other challenges in India include the quality of infrastructure. Underdeveloped roads, railroads, ports, airports, power grids, and telecommunications are significant obstacles to business. The problem has worsened due to ongoing urbanizationmore Indians prefer to live in cities, which strains local infrastructure. Another challenge is the continued presence of high tariffs and protectionist policies. Foreign exporters and investors face non-transparent and often unpredictable regulatory and tariff regimes. The World Bank survey on the ease of doing business ranked India 156th in terms of 'starting a business', 181st in 'getting construction permits', and 146th regarding ease of international trade out of 190 countries assessed worldwide.

Throughout India, Tata Group managers work continuously to satisfy government authorities. In addition to trade barriers, the country is awash in business regulations and administrative hurdles. Import tariffs on parts and components can be substantial, often exceeding 25 percent. Many commodities can be imported only after receiving government approval. Licensing fees, testing procedures, and other hurdles are expensive and time-consuming. India has a reputation for suffocating bureaucracy, and its civil servants are among the least efficient in Asia. The commercial environment in India is still evolving and poses numerous hurdles for firms that do business there.

Pollution and Overcrowding

Growing car ownership is severely straining India's already congested urban infrastructure. India's road network seems unable to absorb millions of new cars. Burgeoning car ownership in India and China are straining the world's already self-destructive carbon footprint. India suffers from severe pollution. Throughout southern Asia, a thick brown cloud of particulate blocks the sun, altering weather patterns and causing health problems. The cloud is a by-product of emissions from coal-fired power plants, cars and trucks, and wood-burning stoves. As India industrializes, the country's water, air, and soil are under increasing environmental pressure. Most Indians make their living from farming, and pollution has reduced growth yields of rice, wheat, maize, and sorghum.

Opportunities and Threats

In addition to Tata Motors, several automakers have entered the cheap car market in India. Nissan aims to make emerging markets a cornerstone of the its plans for global growth. Ford, Hyundai, Toyota, and General Motors are developing inexpensive, small cars for emerging markets. Several Chinese companies already manufacture various car models, both for export and domestic consumption, and a few firms are exploring ultra-cheap options. China's SAIC Motor aims to establish small-car manufacturing operations in India. Japan's Suzuki sells the Maruti 800 in India for about $4,000. India's Bajaj Motors launched the Qute, a small car that sells for approximately $2,500.

Just as automotive sales have flattened worldwide in recent years, many automakers have launched new models, which has boosted global competition. Tata Motors is well positioned to handle competitive threats. First, it enjoys low-cost production capacity, partly based on employing inexpensive labor in India. Second, the firm has significant experience in emerging markets, which are growing rapidly. By contrast, advanced-economy markets are largely saturated. Third, Tata Motors' global geographic presence is highly diversified around the world. The firm has more than 75 subsidiaries, most of them located abroad.

Corporate Social Responsibility and Sustainability

For decades Tata has promoted good works in India. Tata Steel spends millions every year on education, health, and agricultural development projects. It has developed irrigation systems that allow Indian farmers to grow cash crops. The firm has built schools, hospitals, and electrical plants and undertaken countless other socially responsible projects throughout India.

Similarly, Tata Motors undertakes various charitable activities in the communities where it operates. The firm has a major stakein Miljo Grenland/Innovasjon, a Norwegian electric car producer. Tata Motors leveraged Miljo's know-how to launch electric vehicles under the model name 'Indica'.

Another group company, Tata BP Solar, makes rooftop solar-electric systems for buildings. The firm offers low-cost, solar-powered water pumps, refrigerators, and lanterns for areas that normally lack electricity. It has fitted 50,000 homes with $300 systems that can power lights, hot plates, and TV sets.

Conclusion

In emerging markets and developing economies, family conglomerates are leveraging various advantages to dominate home-country markets. Today, the conglomerates are applying these same advantages to extend their reach to markets worldwide. Tata's numerous home country resources provide the firm with substantial competitive advantages and should allow it to perform well and capture market share from incumbent players in markets around the world.

AACSB and CKR Intangible Soft Skills to improve employability and success in the workplace:Written and Oral Communication, Ethical Understanding and Reasoning, Diverse and Multicultural Work Environments, Reflective Thinking

Case Questions

1. 8-5.What makes emerging markets attractive for international business? Discuss emerging markets as target markets, as platforms for manufacturing, and as sourcing destinations.
2. 8-7.Given growth rates and other characteristics of emerging markets, what markets should Tata Motors target for sales of small cars like the Nano? What country-level factors should the firm consider as it evaluates the potential of various emerging markets?