Executive Summary
This is an analytical report that compares Tata of India and Siemens (USA) as two great conglomerates. The analysis has entailed a detailed study into a number of parameters that have served as yardsticks to explain how these two have adapted themselves to both macro and micro-factors within their operation niches. Tata is the leading India’s automobile in both revenue and employee capacity.
Strategy is critical for the success of firms and as such, social corporate responsibility adopted by Tata has been influential on gaining internal and external efficiency. On the other side, Siemens (USA) has done exemplarily well as one of the leaders in electrical industry with great capacities both in Research and Development just like Tata.
This analysis reveals a great challenge facing the Indian market using the Porters Five Forces Analysis (P5F). India’s economic slowdown adds up the challenge for Tata with inefficient political transport structures. Cultural elements shape the economic values and capacity due to change in ideology and ability to consume.
Different cultures will impact differently on people and their way of doing things and as such, a country’s culture is essential in understanding how businesses should be organized. Estimations of Indian automotive industry reveal a turnover of approximately $18.3 billion between 2002 and 2003.
Further analysis has indicated a steady growth of about 14% by 2004. In US, there are five major industry players. Eaton Corporation, Rockwell Automation, lnc, Siemens AG and ABB Ltd. Key industry figures estimate that revenue grew by 5.6% by 2010 recording $37,800 million. In the recent past, the concept of corporate culture has attracted the attention many firms, executives, and other stakeholders due to its contribution towards shaping a firm’s policy and performance.
Tata’s culture values its people with its employees being the main driving force. According to 2008 employment status, Tata had approximately 24,000 permanently employed staff. Further, risk analysis has been conducted. Risks are generally those events that may cause losses in the event of occurrence.
Main Discussion
Indian Macro (environmental factors) analysis and trends
In this analysis, the Political, Economic, Social and Technology (PEST analysis) has been used as the model of analysis. It entails an analysis of the uncontrollable factors that lie outside the firm’s environment. They include demographics, political, cultural, and government factors.
Socio-cultural factors. Population of India has continued to grow, and is estimated to be 1.1 billion people (Kosfeld, and Ferdinand von Siemens 11). This trendy growth has been a motivation to many businesses since it offers market for the manufactured goods. An increase in its population’s average income level provides a business impetus for increased turnovers. India’s economy is voted as third largest in Asia after Japan and China, and as 12th largest in the world.
Political factors/Legal factors. Though a reform agenda has been moved in India, slow adoption coupled with the effects of centralized system has halted the much anticipated growth. Inefficiencies in justice systems together with constrained bureaucracies continue to impact negatively on the existing economic gains (RNCOS par 3).
Economical factors. economic situation of India has demonstrated a tremendous growth in the later period of 2008. This trend has facilitated an expanded market both locally and internationally. A steady inflation rate kept at roughly 5% has been an incentive to almost all sectors good in mainstreaming their operations through providing opportunity for potential growth.
Technological factors. The situation in India has been that of a growing innovation and as such, this trend has significantly contributed to the development of businesses especially technology based firms. This trend has been informed by the need for a more efficient technology across domestic and foreign markets.
Environmental factors. Strict government policies in India and global demand for an environmentally friendly technology pose a complex challenge on implementation due to extended expenditures.
Potential supplies. Supplies range from labor, service provision, and material supplies. An exploration into this concept showed that there are potential supplies of labor in India due to increasing population and also growth in literacy levels (RNCOS par 3). However, materials supply in the automobile industry remains a challenge due to increased prices. Increasing cost of input factors such as power supplies has constrained most operations with many designing alternate sources.
Micro (marketing environment) analysis and trends of India
Employment situation in India is promising since most companies have gotten the grasp of the need for a competent work force that delivers quality products. The increasing call for employee satisfaction has affected most companies in order to remain the most desirable firm of choice.
Suppliers are crucial in maintain business continuity. Since supplies continue to increase in price, businesses have been influenced to think about how to embrace suppliers.
Share holding and firm ownership is controllable and accompany has discretion to determine how its ownership and sourcing of funds should be (RNCOS par 3). Today most companies wish to associate with the public. This trend has facilitated listing of stocks through sale of shares with an aim to attract investors as well as raising funds for capital.
Industry Competitiveness is another important micro-element. In India, almost every industry faces competitiveness both from within and without the country. Firms that have been enjoying dominance have been challenged by upcoming ones due to the changing market rubrics.
Macro (environmental factors) analysis and trends of USA
In analyzing the macro-economic situation of US, we do so in comparison with the India in order to determine similarities or differences. Recent studies have indicated an almost similar condition shared by India and US in terms of their macro-factors though differences are eminent. Using the PEST analysis, the following scenario is observed.
On social aspects, the US is witnessing a slow or stagnating growth in its population with high ageing rate. Its population is characterized by more aged people with little youthful population. From this analysis, the population structure has hugely impacted negatively on domestic market of USA. The strategies have been to design external linkages in order to provide ready market for its domestic products.
Political mood in the country has been sustainable since the terrorist attacks of 1998. Efficient policies, justice and corruption free culture has embraced progress. Creation of an enabling environment through focused regulations is one of the milestone steps boosting US businesses.
The recent struggle for environmental safety and protection has contributed to change in environmental concerns. Firms have been forced to think about environmental sustainability by establishing technologies that embrace this trendy need. This situation has been made possible via need to turn around the challenges of climate change.
An examination into the US technology reveals a greater realization for efficient machineries that would help in cutting on fuel costs while being environmentally friendly. USA is one of the leading industrialized countries with the highest emissions of green house gases. Reports on the Wall Street indicate the financial challenges facing most of US firms due to the recent financial crisis. Its shift towards exportation has received challenges of external trade.
Micro (marketing environment) analysis and trends in USA
Competitiveness in US has continued to stiffen with giant firms facing challenges from small companies for instance, the automobile industry in which major players such as General Motors continue have continued to face cut throat competition from other players in the industry.
The cost of raw materials (supplies) has risen in the recent past. This trend is expected to continue like this in the near foreseeable future. To enable firms match with this emerging challenge, strategic production have t be designed.
Customer satisfaction and changing market demands are critical in US market. These market dynamics have led to a shift from the traditional approaches to more informed decisions informed by market feedback in order to remain relevant participants.
National cultural characteristics and their influence on business sector USA
Culture refers to the way shared by people of a particular region, place, community or society. Culture entails beliefs, norms, values, ethics, and customs. The culture of USA is a form of western culture that was influenced by European culture during the colonial era. Culture is a constituent that plays a major part in the choice, preference and selection of decisions that affect almost all facets of life (Siemens 2).
Currently the US culture is a completely diverse culture that encompasses varied ethnic and racial groups mandated by the historical factors such as migration and slave trade. Some of USA cultural elements that define USA have been observed as being liberal as well as conservative, competitiveness of its scientific and military scopes, ability to take risks, free speech, materialistic sense, and moral elements.
Having enumerated some of the cultural elements, it is important to show how these factors have inevitably influenced business operations. For instance, the risk taking nature of US population plays a major role as an entrepreneurial characteristic.
Since values are learned, the level of schooling and how people perceive education greatly shapes its culture. The American society believes in the power of intellect. This belief holds a great impact on the general way of behavior of its people.
In business, the cultural traits of people have contributed enormously to the innovations in products and services. Take for instance the innate value placed on education. This element shapes the economic values and capacity due to change in ideology.
Different cultures will impact differently on people and their way of doing things and as such, a country’s culture is essential in understanding how to position your business for successful balance. In a nut shell, culture as a demographic element will determine what, when, and how to consume particular products. A company must hence align itself to the underlying cultural attributes in order to remain relevant on the market.
The National cultural characteristics of India
In India, religion, architecture, music, language, food and customs vary from one place to the other but to a greater extent, and they share common elements. Studies in cultural anthropology reveal that India is the only country that has relatively many beliefs and religions.
India’s culture is among some of the oldest cultures that date back to approximately 8000 BC. Its diverse culture has had a profound impact on numerous facets of the world. Such elements include Indian religion, Indian cuisine and yoga.
Automotive Industry Analysis- TATA
Market Overview
This analysis applies to all industry participants dealing in automobile and its associated products. A relational study will be used to show how industry components affect TATA in particular as a firm under study.
In doing so, the analysis is a reflection of the situation in the entire industry and applies to all industries operating within it. Estimations of Indian automotive industry reveal a turnover of approximately $18.3 billion between 2002 and 2003. Further analysis has indicated a steady growth with an estimated 14% increase by 2004. Additionally, the growth in India’s external markets has been instrumental in expanding the industry’s turnovers through export trading.
Studies undertaken to examine the condition of automobile growth has further discovered a tremendous increase in the exports from India recording a whopping 50% growth in exports between 2002-2003 and 2003-2004 as compared to a similar period between 1998-1999 and 1999-2000.
Research has shown that by April 2005, the industry experienced a 34% growth while car vehicle segment witnessed a 72% growth in sales as compared to the previous year. The second most expanded in the industry was the two-wheeler segment. It is estimated to have grown by 38% from 2001 to 2005 through 2004 (Kosfeld, and Ferdinand von Siemens 15).
Performance of Indian Automotive Sub-sectors
Studies on the usage of automobile has found out that the current vehicle population has grown to hit over sixty million and that this trend is expected to continue in the near future. The rate at which vehicle population has been increasing has been estimated at 10% per annum by 2005 and that by 2009, the rate as since increased significantly. Of this 10% growth, two-wheeler vehicles have accounted for 80% (Mattias, and Cronqvist 12-16).
The following analysis tries to explore the market share contribution of various vehicle segments or types in relation to the following facets.
- Medium and Heavy Commercial vehicles
- Passenger Cars and Multi-Utility Vehicles
- Light Commercial Vehicles
- Two and Three wheeler automobiles
According to a study conducted by RNCOS between 2004 and 2005, the two wheeler automobiles out deed all other segments by a greater margin recording a 79% share of the market. The analyses indicate that many people purchase more of two wheeler vehicles than they did for other segment types.
This, according the studies, it has been accounted for by the increasing oil prices which have necessitated economical means to move from one place to another. The second segment has been passenger vehicles which recorded a 14 percent share of the total market.
Similarly, as fuel prices continues to rise globally, it is estimated that passenger vehicles are yet to witness even much growth due to general demand for public transport (Mattias, and Cronqvist 12-16). On the same breadth, two wheelers will continue to lead the rest of the segments due to their economical mode that give people efficiency together with affordability.
Three wheelers contribute approximately 4% of the total market share equaling commercial vehicles which also have a 4% market command in the entire industry. It is from these absolute figures that one can appreciate the impact of global fuel prices on the automobile industry. Analysts have forecasted that this trend may exceed these figures with heavy commercial vehicles being greatly affected (Mattias, and Cronqvist 12-16). Industry participants have reacted by shifting their production plans in order to fit into the market position currently being witnessed. Since this occurrences lie outside the control of industry players, facing it will be inevitable.
Opportunities
Government Initiatives- A realization of the role played by the automotive industry has generated motivation from the government to put up measures towards fostering competiveness of its automobile industry both locally and internationally (Kosfeld, and Ferdinand von Siemens 15). The following are some of the opportunities that have been presented by the Indian government with a view to boost its own auto industry.
- Huge reduction in customs duties as well as excise duties- this indicator has been motivated by new policy regulations that were formulated to support business exports and also attracting foreign investments. Programs such as foreign direct investments (FDIs) are examples of initiatives that gained support towards this goal.
- Lucrative plans of fully implementing the Bharat Stage IV norm which is an equivalent of Euro IV
- Government initiatives that have been announced aimed at facilitating research and development in the industry. As a preamble to this, the government set to offer a public investment of approximately Rs 1,700 core to country’s Automobile Testing and infrastructure project (ATRIP)
- Plans of creating auto clusters aimed at improving India’s domestic automobile competitiveness on international markets.
Inadequate Public transport Services: Utility such as roads is essential in the determination of industry form. The inadequacy of this transport infrastructure has been estimate to be vast across India except for Mumbai, Delhi, and Kolkata. According to population Census of 2001, 35 metropolitan cities have millions of population but none of them has a Mass Rapid Transit System (MRTS).
If this condition is improved, the general usage of public vehicles would increase hence lowering vehicle ownership. This will adversely affect the automobile industry since the population would not need to own cars in order to move themselves and goods from one point to the other. Therefore, the current poor condition of the infrastructure is a motivation that would be capitalized on by the industry participants by producing more and increasing on sales.
Industry Analysis-Siemens (USA)
Overview
The US domestic demand for electric products has greatly declined. This trend has been motivated by a shift towards imports due to affordability. The industry has about five major industry players: Eaton Corporation, Rockwell Automation, lnc, Siemens AG and ABB Ltd. Fundamental figures have revealed a total of $37,800 million in revenue with revenue growth of 5.6% by 2010.
New entries into the market have totaled to about 58 firms making (Siemens 2). The industry has contributed to employment opportunities estimated as 121,600 in total. Exports and imports contributed to industry’s revenue of $13,444 and $18, 300 million respectively by end of 2010 analysis. This absolute figure justifies the eminent difference that has been witnessed between imports and exports with imports outweighing exports by close to 38%.Total wages amounted to $60,000 million by close of 2010.
Concept of Corporate Structure
Corporate culture has for many years been the subject of focus for many firms, executives, and other stakeholders citing it role in shaping a firm’s policy and performance (Kosfeld, and Ferdinand von Siemens 1-15). Though there are many definitions that try to explain corporate culture, the common approach enumerates the following: set of believes, norms, preferences, and values shared by both workers and managers.
Since it directs the general way of behavior, it becomes crucial in determining how staff and executives react to events as contingent occurrences. This behavior guide by set norms, values and preferences hence plays a magnificent role in how policies will be formulated, chosen by firms (Kosfeld, and Ferdinand von Siemens 1-15).
In this analysis, the research explores a comparative analysis of the corporate cultures of Tata and Siemens and how they have influenced their overall performance as well as endearing positive public image (Cronqvist and Nilsson 2).
Corporate Social Responsibility of Siemens
Siemens boasts of being a company that thrives in nurturing employee opportunity in order to help model the future of its business in the USA. To accomplish this, the firm fosters a sense of ownership by employees through programs internally generated (Siemens 2). As an organization that values people, it ensures this through the following:
- Providing a constant learning environment that promotes capacity building so as to remain relevant in as so far is its workforce is concerned.
- Affording advanced communication e-tools for sharing information within its work portfolio
- Availing schemes for performance and career advancement and management
- Offering industry competitive and comprehensive remuneration and other employee compensation schemes
- A recognition schema for experience and long service of its employees to foster high retention rate while minimizing employee turnover
- A highly committed plan for global research and development
- A global commitment towards environmental safety and protection
In the recent past, Siemens has restructured its culture by modeling three core values: Responsibility, Excellence and innovation. This redefinition of the culture has been founded on the need for diverse strategy. Better performance that has been recorded consecutively confirms their investment in right and efficient programs.
According to its officials, this has served to demonstrate just how its employees have continually endorsed their programs. This has indicated an exclusive and comprehensive approach that matters to all as stakeholders of a prosperous (Kosfeld, and Ferdinand von Siemens 1-15).
According to Walkinshaw, one of Siemens executives, the war on talent has continued to even become fiercer than the call during the earlier moments of financial and economic prosperity. Just as many firms arise from the challenges of financial and economic crisis, Siemens has set its bar high enough upon realization of the great essence of people as the fundamental enablers of firm’s success. As a result, Siemens has hugely invested both funds and time in its past five years in listening and reacting to its employees in the best way possible based on feedback analysis.
Siemens Corporate Strategy
Siemens as one of the eminent companies and largest in Europe has over 430,000 employees with approximately $77 billion in revenue. Through its operations, the company has a great role in emission of green house gases with research estimating an average of 4.5 billion tons of CO2e. This contribution in a climatic change has led to a realization of the significance of climate change and dangers posed to humanity.
Its operations have further strengthened the need for poverty reduction as well individual access to proper sanitation as well as energy. According to research conducted, its approach to these enormous challenges has led to a reduction in emissions by about 15 times of its earlier emissions (Kosfeld, and Ferdinand von Siemens 5- 9).
The above analysis brings us to the strategy gained by Siemens in becoming the world’s leader of environmental safety. According to Stanat (2007), has adopted the strategy of corporate sustainability through building a more habitable, friendly environment that s free of green gases as a fundamental tool.
Its strategy has been to become a leader in this struggle that has since been neglected for the last set of decades (1). It hopes to do this through establishing its technology as the most efficient in producing products that are environmentally friendly, efficient, and affordable while meeting its financial mandate.
The other strategy as gained from the overview is to become an employer of choice. To move through this eminent strategy, Siemens has devoted its self to ensuring such programs that afford its employees a better opportunity in a myriad of ways.
This is because of the recognition of the concept of people as an asset to the overall wellbeing of a firm’s performance. People management has become one of the most items of focus by many organizations and as such, Siemens strategy is claimed to have realized a huge development in terms of embracing technology, profitability and impact on environmental safety.
Siemens Industry Rivalry
As noted in the previous analyses, Siemens remains a conglomerate that boasts of being one of the largest, profitable, and prominent companies around the world. These facets have continued to place it on a platform of advantage that cannot be easily outweighed by many other companies in the industry.
Corporate Culture and Structure of Tata
Just like the case of Siemens in US, culture of Tata is that which values its people beginning with its employees as its driving force. According to 2008 employment status, it was found that Tata had approximately 24,000 permanently employed staff.
Its recognition of the role played by employees made it to design programs that facilitated extensive skill through on-job training. Its cordial relationship with both the society and the government has continued to be good and by 2008, it was rated as the best managed company in India according to study carried out by Ernst and Young.
Corporate social responsibility (CSR) is one of the bases of takeoff adopted by Tata manufacturing. This strategic structure is managed by both employees and the management. The objective of this CSR has been “to improve quality of people’s life”.
This has been undertaken by a two-pillar management approach via donations and CSR committee in order to adequately institutionalize its CSR. It vests a lot of focus on this aspect due to its realization on the very purpose served by people (RNCOS 5-7).
Tata has been operating on a CSR based on four pillars for the last 140 years. These pillars include Emergency Response, Quality Management Practices, Philanthropy, and Specific Community Initiatives. However according Ashley, O’Brien, Richards, and Reiter (2010), its rapid and robust growth has since challenged these pillars in a view to gaining the fruits of its objectives (2).
They suggest a redefinition of the concept of CSR since eminent changes have necessitated a change in the definition of the underlying notion. A completely distinct subsidiary should then be designed to carry out monitoring of these activities yet under its exclusive management.
In the same breadth, Tata has awoken to the fact that environmental safety and climate change are important facets in maintaining a more habitable and friendly business environment. Studies in Tata’s spending show an estimated expenditure of Rs. 169 millions in a two year environmental safety plan.
Industry Rivalry: the case of Tata
Though Tata has recorded huge milestones in the automotive industry in India, it continues to face real challenges from its rival firms. Its recognition for this significant challenge or threat has been crucial in redefining its strategic position as the industry leader (RNCOS 5). The threat has been attributed by entry of new players as well as rapid restructuring and expansions that have been undertaken by existing competitors.
Using the Porters Five Forces Analysis (P5F), the rivalry situation in the Indian automotive industry stands high though not in a shaky condition yet. The situation according to this form of analysis, anticipates a future shake-up by the industry followers in a struggle to topple leaders.
It is unfavorable for any one company with no strategic competitive plan to venture into this industry bearing in mind its competitive nature by equally efficient companies with duplicate technologies, schemes and focus. While employing this mode of analysis, P5F assumes the massive future prospects which could render such analysis limited and irrelevant.
It is worth noting that this rivalry has not only been domestic but also internationally. The company faces competition from companies such as Toyota, Hyundai, Honda, and Nissan whose production has mainly remained to be light automobile.
Since the trend has shifted towards application of efficiency in technology and economic sustainability, most firms have tightened their belts in ensuring that they emerge as the most efficient technologies that will match both domestic and foreign vehicle norms. Such regulations have included noise reduction, fuel consumption, emissions, and safety.
Operational risk analysis of Siemens (USA)
Risky conditions have a great impact on the operations of Siemens. The market risks presented to the industry players pose much challenge to its players. According to IBISWorld (2011), the following are some of the risks that Siemens face in its quest for progress as one of the giant conglomerates in US and globally (Par.1-4).
Environmental and governmental regulations: Siemens operations continue to face the challenges of foreign market in the US with increasing demands for environmental conservation. This will, according to studies, continue to shoot in future given the current trends. Government regulations aimed at improving environmental safety and while meeting tax requirements are exclusive risks to Siemens.
Competition is inevitable risk. Emerging technologies operating in the industry have embraced industry demands and pose numerous challenges to Siemens as a giant operator. Its weakness of highly depending on third party providers of services is eminently a risky operational activity. This is because any slight change in supplier circumstance will affect the overall operations of the business (IBISWorld n.p)
However, the industry and Siemens inherently posses strengths and opportunities that will help steer the industry to another level. They include a great emphasis on diversification in other segments, strong Research and Development capacities as well as diversified customer share.
Operational risk analysis- Tata
Risks are generally those events or factors that may cause losses in the event of occurrence. Tata as affirm operating in an environment vulnerable of risks may not obviously avoid these risks simply because of its huge capacity. An analysis of risk is necessary in ensuring that contingent measures are established to cushion firms from adverse effects of emergencies.
Dun & Bradstreet Inc (D& B) is a corporate that conducts country risk assessment to establish a cross border risk that is inherent in a given countries and which may affect the nature of business operations (par.3).This analysis is critical since it determines the risks that are posed to predictability of payments due to exportation of products. The analysis entails a four-tire risk category analysis discussed below.
Political Risks- It refers to the external and internal security conditions, competency in policy formulations and other related factors that determine an enabling operational environment. According to analysts, Indian political situation has been worsening as time passes.
An overview of the country’s economy reveals that India’s population is slightly over 1.1 billion people making it the world’s most populous country. This huge population though advantageous in enabling ready market, poses a major security challenge (Dun, and Bradstreet par 5).
Though the government has moved from a centralized system of economy to liberal economy, research shows that it has only sustained a 7% economic growth on annual basis. Endemic poverty, constrained infrastructure, and an inefficient bureaucracy remains some of the challenges that face the business environment today (Dun, and Bradstreet par 5).
Political unrest witnessed through occasional violence and left-wing insurgencies have played role in challenging smooth business operations in India. Using this analysis, we can say that Tata is faced with risks arising from political segment of the country which may render its operations inefficient and unprofitable.
Commercial risks-Prudent policy regulations, bureaucratic systems and judicial jurisprudence are such factors that establish whether an environment supports commercial transactions. Taking the Indian case, looming corruption cases, inefficient systems that delay settlement of payments for both export and import goods has been a major business risk for the past years.
External risks- Such factors as capital inflows, foreign reserves, and the nature of external debt determine whether or not a country is in a position to generate adequate FX in meeting its trade. Observations show that by mid 2008, India grew its exports substantially by a record 31 % on Year-On-Year (YOY) terms. The total turnovers were close to $95 billion (RNCOS 5-7).
However, the weakening exportation has since been witnessed in the preceding years. According to D& B, records revealed a growth of only 10% while imports grew by 43%. This condition has been facilitated by the weakening value of Indian rupee coupled with stringent FX and money market conditions. Because of this, letters of credit (LC’s) have become expensive and restrictive (RNCOS 5-7).
Macroeconomic risks- They include such factors that determine if or not a government is able to offer sustainable growth of the economy to enable further opportunities for businesses. An economic analysis shows that India is one of the fastest growing economies and is ranked third in Asia after Japan and China. Major prospects in growth have sufficed as major instrument of facilitating growth of businesses in the Indian market.
Works Cited
Ashley, Mathew, Bill O’Brien Rachel. and Reiter, Richards. “Tata Group Sustainability Strategy”. (2010): 1-19.Print.
Dun & Bradstreet Inc., 2008. Country Risk Indicator. Web.
IBISWorld. Electrical Equipment Manufacturing in US: US Industry Report. Web.
Kosfeld, Michael, and Ferdinand von Siemens. “Competition, Cooperation, and Corporate Culture”. Working Paper Series 38. (2011).1-36. Print.
Nilsson, Mattias and Henrik Cronqvist. “Does Corporate Culture Matter for Firm Policies?” (2007):1-49.Print.
RNCOS. “India Automobile Industry- Analysis (2005-2010)”, Online Business Research (2011): 1-15. Print.
Siemens lnc. “Siemens and Smart Grid: Critical infrastructure for economic growth and stability 8th Annual North Carolina Sustainable Energy Conference Raleigh. (2011): 1-9.