Case Study

Department of Business Administration

Course Code: (MGT 901)
Course Title: Strategic Management

SUBMITTED BY
Name: Samira Anjum Shorna
Roll Number: 3889
Registration Number: WUB 01/18/57/3889
Batch: 57/A
WUB email id: [email protected]

SUBMITTED TO

Md. Mobarak Karim

Sr. Lecturer
Department of Business Administration
WUB

WORLD UNIVERSITY OF BANGLADESH

Submission Date: 7th November, 2020.
Question: 1. How has the value of the Indian rupee changed compared to China’s Yuan and
the US dollar in the last six months? How does this impact Tata?

Answer: It was mentioned that “In 2014, TATA Motors was ranked the world’s 287th
biggest corporation in Fortune’s Global 500 list. Marketing its products through dealership,
sales, services, and spare parts network, the company produces well-known models like the
Nano, Safari, Aria, Zest, Bolt, and Venture brand names, as well as Xenon XT brand name.
For a fourth straight quarter, the decline in China sales of Jaguar Land Rover (JLR), a
subsidiary of Tata Motors, dragged down the company’s profits. Jaguar’s net income fell 49
percent to 27.7 billion rupees ($434 million) in the quarter ended in June, 2015. Its retail sales
plunged 33 percent in China that quarter, which lead to a 1 percent decline in worldwide
deliveries. The luxury unit has cut its sales targets and prices in China as all automakers brace
for a slowdown in the world’s biggest auto market. Tata Motors’ earnings for the second
quarter of 2015 were also hurt by a prolonged slump in sales of its light commercial vehicles
in India. Tata’s revenue fell 5.7 percent to 610.2 billion rupees. Sales at the luxury unit
declined 6.5 percent to 5 billion pounds. Shares of Tata Motors stock has slumped 29 percent
over the past six months making it the second-worst performer on the S&P BSE Sensex,
which has lost 1.7 percent in the period. Sales of the Tata’s Evoque sport utility vehicle were
also lower in China.
With Wall Street turning bearish on the Chinese yuan, it is bad news for the rupee, which
now appears to be heading to its record low against the dollar amid escalating trade tensions.
Traditionally, New Delhi's currency follows its rival in Beijing as both countries aim to
remain export competitive. Under similar circumstances last six months, the Renminbi lost
about 10% between May 11 & October 31, triggering a similar plunge in the rupee's value
against the greenback.
A sense of deja vu has crept in among investors betting on India. The rupee had hit record
low of 74.48 to a dollar on October 11 last year.
“Exports are the key linkage between yuan and the rupee," said KN Dey, founder at United
Financials. “The rupee cannot remain immune to yuan moves as Indian exporters would be
hit if the local unit does not fall against the dollar. I see the rupee heading to its record low
levels as long as the Renminbi extends its losses against the greenback”.
Importers should cover their offshore liabilities as swings in the exchange rate may be wild in
the next four to eight weeks,".
The rupee closed at 70.44 on Tuesday; a tad lower than its closing the previous day.
The rupee has fallen nearly 2% since the beginning of May during which period the
Renminbi too lost a little more than that quantum, show data from Bloomberg.
“India’s rupee is likely to be affected by China’s estimated economic slowdown leading to
competitive devaluation,”, head of Trading and ALM for India at Singapore's DBS Bank.
“This time too, like last year, the rupee may come under stress due to global factors unless we
have positive legal macro headwinds in addition to a stable government.”
The currency fell to its weakest against the dollar in four months on Monday, while the
offshore yuan breached the 6.9 level for the first time since December, Bloomberg reported
earlier on Monday.
Earlier this month, US President Donald Trump decided to raise duties on $200 billion
Chinese products to 25% from 10%. Last six months too, it had increased the tariff rates,
sparking trade tensions.
“We are going to see a turbulent currency market amid US-China trade war,” currency
analyst at Kotak Securities. “The local unit is slowly inching towards the record low levels.
The election uncertainties too are weighing on with foreign investors exiting domestic
investments.”
Foreign portfolio investors have collectively sold a net of Rs 2,555 crore worth of domestic
securities this month compared with Rs 16,728 crore net bought a month earlier, show data
from the National Securities Depository.
Devaluation of Yuan was one of the steps to stimulate its economy. But it is not yielding the
expected results as it is going through other issues too. So I suppose one should take a
broader view than just looking at currency in China. A slowing down China not only affects
India but the global trade in general. The slowdown in China was postponed for several years
in a row by its Govt. and central bank’s efforts.
Similarly, it s central banks made its moves too. It devaluated its currency, reduced interest
rates, cash reserve ratio in its banks etc. to ensure money reached the markets at low capital
costs. In simple words, it employed larger capital to get lesser growth. Its private debt too
grew producing the physical capital which does not have many takers. Then what will happen
to corporate profits?
Economies or markets cannot go always in one direction. What can go up, can go down too.
Take a look at China’s stock market. What a volatility it had witnessed! Despite many
measures took by its Govt., investors just rushed to take their money somewhere else. Take a
look at other measures such as exports or PMI data. They are clearly pointing toward a
cooling down economy.
It is not end of the world. But if China tries some more stimulation, its debt will grow further.
If it stops stimulation, economy will suffer. If they (Govt. and central bank) stop interfering,
defaults will loom and put China in recession. So they will not let it happen by reducing
regulation. Accepting a slower growth seems to be a logical step than increasing incentives
which can be suicidal. While only China knows what its plans, be prepared to see around 5%
growth numbers for their GDP for many years to come.
A slowing down China will shrink global trade. Commodities are already hit badly as China
reduced its imports. Those natural resource selling countries will have to tighten their budgets
so will see a slowdown in their GDP growth. Apple will not be able to see the expected
growth in their sales of smartphones in China. When tech companies in US control their IT
spending, India will suffer. Weaker currencies in emerging countries will hit their import
spend. All this will lead to shrinking global trade and a slower global GDP growth.
Slowdown in China may not be the last one. US Fed, the biggest stimulator, is on its way to
increase rates. That would mean corporate profits in US will be in check and the ability of
Govt. to increase spending would not remain. This will act as a resistance to the recovering
economy of US. Though its central bank will act in a controlled measure, what lies ahead is,
US GDP may not see higher growth than now.
This year it is China. Next year it will be US and the following year it could be Europe
getting out of stimulation. Stimulated growth will come to an end all over the world putting
pressure on all economies all over the world before they return to a normal course.
Question: 2. In the About Us section of the company’s website, go to the corporate
governance section and click on the values and purpose link. Evaluate Tata’s vision and
mission statement mentioned in this section. Discuss the potential implications of Tata’s
vision and mission on the firm’s competitive advantages.

Answer: Evaluation of Tata’s vision and mission statement:

Vision
To become a world number one in passenger car selling Brand. TATA Motors will produce
new product with new features for their potential customers which will help them to achieve
their target that has been fall down. Their vision is very ambitious and they will reach to this
goal. Because TATA Motors are always dynamic and care about their service, reputation and
their clients, so they give their statement which mentioned below.
“To be globally significant in each of our chosen businesses by 2025. The company’s vision
statement, posted on the corporate website, states that by 2025, the company’s commitment
to delivering improved quality of life will be available to 25 percent of the global population,
making Tata one of the 25 most admired global brands and one of the most valuable
companies in the world”.

Mission
To be the most reliable global network for customers and suppliers, that delivers value
through products and services. To be a responsible value creator for all our stakeholders. Its
mission is to use its leadership experience, long-term value creation, and the trust it has built
to improve the quality of life of its consumers around the world.
Tata Motors mission and value is related with the each other and company for the achieving
their vision and mission through the customer value and stakeholder value. Even they are
very much strong on the customer value and their satisfaction they are also increasing the
shareholders wealth through innovation and going into globalization.

The potential implications of Tata’s vision and mission on the firm’s competitive
advantages:
TATA Motors, the name does not need any introduction. The company has always focused
on capitalizing their core competencies or competitive advantages for enhancing their market
share according to their strategy.
TATA, The Name Speaks:
Being the part of such a large TATA group is itself a competitive advantage. This affiliation
provides the company with the needed knowledge and technology resources for taking their
business to various parts of the world.

Geographic Location:
Being active and dynamic, TATA motors has competitive advantage for being located in
India for the low cost labor base. The company fully understands not only the Indian market
but many emerging markets as well. The products are manufactured at lower costs and sold to
the new markets earning huge profits. India is known for least expensive automobile parts
which gives TATA a direct access. Moreover the policies and regulations in India are very
favorable for TATA for business expansion.

Innovation and R&D:

The excellent innovation and research and development at TATA motors have created
examples for the rivals. The company has come up with the least expensive car model NANO
which is one of its own kinds and no other car manufacturer has ever created such. This
automobile has astonished the industry for its low cost and material and technology. The
main competitive advantage came from their remarkable innovation and development.
TATA has various research centers throughout the India working on the improvement of the
engine efficiency, design, style and instrumentation of vehicles.

Mergers and Acquisitions:

Continuous growth and expansion is the company goal. TATA has successfully acquired
various companies for breaking into the foreign markets. While the company has delivered
amazing results in domestic market, its subsidiary Jaguar land rover has broken all the
records of competitors as a top luxury automobile manufacturer. This mega expansion mode
calls for major product development, capacity capitalization and various national and
international mergers.

Effective HR Management:
The people strategy is lean and strong since ever. TATA has a very strong workforce base
however it has cut off the surplus staff recently in June 2017 as a part of organization
restructuring and gaining a competitive advantage. The organization is refreshed by changing
the functions and locations of various employees. The staff is also provided necessary
training and skill development courses. The company gives utmost importance to dealer
training as well to improve their productivity. Few outsourcing activities like logistics and
facilities management has also called up for downsizing of the workforce at TATA.

Product Development:
TATA aims to fulfill the emerging needs of the automobile industry by coming up with new
range of products. These products are manufactured with purpose of providing comfort,
reliability, safety, capacity and value to the end customers. In order to stay ahead of the
competition, the company is going for huge investments in the area of product development.
TATA Ace is being introduced in commercial vehicle market for snatching the market share
of its rivals. Another sporty vehicle Nexon with both diesel and petrol engine is also
attracting customers already.

Conclusion:
Since Tata Motors is a part of a large conglomerate company it needs to have a strong
corporate governance to ensure that its employees act ethically and the business continues to
run smoothly especially during the ever changing and dynamic global economy. “Tata
Group’s corporate governance is founded upon a rich legacy of fair, ethical, and transparent
governance practices” (tatacarsworldwide.com). One of the more important parts of this is the
transparency of the company people have a right to know what the company is doing not only
to ensure ethical practices, but for the insurance of their many shareholders whom have a
right to know the inner workings of the company.
Tata Motors has already opened the doors for many new and innovative ideas, but not only
for their company, but their competitors as well which could turn into a threat. One of the
major opportunities that Tata Motor faces is that as of right now 90 percent of China and
India’s adult population do not own cars, partly because cars are costly and require more
expenses after purchased. So the market for a low-priced car is huge which benefits Tata
Motors perfectly since they produce the lowest priced car on the market. This is a huge
opportunity for Tata Motors because if they can get their feet into that market of people that
do not have cars because they cannot afford them, then they will make large profits down the
road. China’s total car sales are estimated at over 8 million dollars annually and they were the
world’s second largest car market in 2006. China’s government forecasts that demand for
cars will top 20 million by 2020. With Tata Motors in the market with the cheapest car,
China’s demand for cars will probably increase even more significantly which will in turn
increase sales for Tata Motors.