Corporate strategy Tata Motors

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Corporate strategy Tata Motors

  1. 1. Group14|Section 4 Corporate Strategy –TATA Motors
  2. 2. Defining Corporate Strategy Corporate Strategy is the way a company creates value through the configuration and coordination of its multi-market activities The definition has three important aspects: Value Creation - the generation of superior financial performance (rents) from multi-market activities that create corporate advantages Configuration - the multi-market scope of the corporation (product/market diversification, geographic focus, and vertical boundaries) Coordination - the management of activities and businesses that lie within the corporate hierarchy
  3. 3. Goal of Corporate Strategy: Corporate Advantage The goal of corporate strategy is to build corporate advantage so as to earn above normal returns • analogous to a competitive advantage in a business unit Corporate-Level Strategy (companywide strategy) Corporate (or Company-wide) Strategy is the overall plan for a multi- business unit company. Corporate strategy is what makes the corporate whole add up to more than the sum of its business unit parts
  4. 4. TATA MOTORS-SBUs TATA Motors PCBU CVBU Corporate Team
  5. 5. TATA Motors-Scenario in 2001 Tata Motors was making a loss of $108.6 Million alone on CVBU during 2001. Mainly due to Market shrinkage. During 2001, there was an aggressive investment in passenger car business unit. How TATA motors made it turn around by aligning corporate strategy with the 2 SBUs????
  6. 6. Corporate strategy TML built Balanced scored card approach . TML forms a corporate team of 5 members across various functions to design strategic approach . The people are cross functional expertise from SBUs. Main Objective was to prioritize Vital Objectives of SBUs and initiatives & coordinate across SBUs for resources TML started central resourcing through e-sourcing to minimize the cost of shared inventory. TML made most of the parts communized. All the SBU leaders given autonomy in designing approaches inline with corporate strategic goals. The performance measured based on the performance of various parameters such as product quality, process quality, safety, cost measures etc.( Behavioral control).
  7. 7. Product Transformation curves After Corporate strategy Before corporate Strategy Commercial Vehicles(C) Passenger cars (P) The straight line - No gains or Losses of Joint production. The Curve – Economies of scope for both prodcuts.
  8. 8. Factors for Transformation Both products use joint capital (to an extent)- Machinery and Factories & labor. Shared management resources-Transfers of Tacit knowledge. Common utilization of inventory through communization. Corporate e-sourcing Cost Minimization across SBU unit processes and products. Over all The BSC way.
  9. 9. How Economies of scope helped? Approximation of Curve : P2+C2=a2 Line- P+C=a where “a” indicates The all factors mentioned in the previous slide. Let us assume a=6. Then, P+C=6 P2+C2= 36, If P=1, C=5 if P=1, C=5.9 Total=7 if P=2, C=4 if P=2, C=5.6 Total >7 If P =3, C=4 if P=3, C=5.2 Total>8 and so on If P=4, C=2, etc
  10. 10. Corporate Advantage The effective profit of aligning corporate strategy with SBUs with in 2 years of implementation is $106Million from a Loss of over $108 Million. Economies of scope was just one of the reasons for increase of profits.
  11. 11. Thank you References: Mckinsey Quarterly & BSR

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