Creating a Corporate Advantage: The Case of the Tata Group Harvard Case Solution & Analysis

Introduction to the Case Study


Statement of Problem:

The problem which has been identified in the case and which might be the topic of debate in the future will be the structure of Tata Group. Different opinions have been passed on by the managers, where Muthuraman considers the current system as the most appropriate structure in which Tata Sons and the trusts form the root. Bigger or giant companies such as Tata Cement, Tata Chemicals, Voltas and Rallis India form the tree’s trunk as they are the bigger branches of the tree whereas smaller companies or subsidiaries are the smaller branches and leaves of the tree that is Tata Sons. The structure of the tree or the parent company is such that it provides nourishment to all the organizations whether large or small in the form of ethics, value and strategic guidance to the tree. While the most important leaves and branches of the tree that are small corporations receive better exposure to the sun and oxygen.

This structure of the company has been in  operation since the start of the company, where it looks after all the subsidiaries whether large or small and provides full support through financial, administrative and operational help. Unlike Western companies which do not follow the same practice for their entities. On the other hand, another group of managers at Tata Group are thinking to make structural changes as per the demand of the current era. Sudharkar, the Chief Human Resource Officer at Tata Chemicals has a different opinion; he questions why activities with obvious synergistic potential were not simply mandated across the group. Basically, a group of managers thought that businesses or activities that are similar or of same kind or synergies should be combined and blended so that they bring about better results and outcomes for the parent company. There should be some set criteria and decision that should be uniform and should be mandatory for the all companies to follow. Basically, managers have different opinions over the problem where some believe that Tata’s value-adding, non-intrusive approach ideally suits to manage different and unlike businesses in different companies. Whereas, some believe that this approach will result in leaving a lot of money on the table.


Research Question:

Hypothesis Ho: To identify and determine the possibility of retaining the current system where different businesses are operating as separate companies and are independent to take decisions.

Hypothesis Hi: To identify and determine the possibility of changing the structure where Tata can change the arrangement and synergize those business processes that are common across all companies.


Research Aims and Objectives:

The basic purpose of this report is to identify the best method or the most appropriate tool to develop the future strategy for Tata Services Limited where managers have different opinion over it. Some senior managers believe that it is the most appropriate tool which differentiates them from other Western World multinationals. Over here Tata lets all its different businesses work as independent companies. However, some managers believe this method is wasting a lot of money and Tata Group should standardize those synergistically activities that are common in business to be directed across all companies.


Structure of Report:

The report discusses the problem which has been identified in the case, where the future direction of the company has to be decided in which the new chairman will have to decide how to go with the business. Different opinions have been developed regarding the credibility and the strategic position of the current system. A group of top managers has proposed a different idea where activities that are similar and synergistically same should be directed across the group. The structure of the report includes four sections which are description of the situation, problem statement, analysis and solution. Situation explains the circumstances and background of the study and issues that have been addressed in the case. Under the problem statement, the detailed literature review has been identified with resources and techniques to analyze the case study. Over here all theories and models have been discussed regarding the case. In the analysis section, the current position of the case with context to models discussed in chapter 3 is explained. Finally, recommendation and solution have been proposed based on results generated with models. With the above four sections, the case study thoroughly explains relevant sources and material that will enhance the learning and the context of the case in detail.


Description of the Situation

The situation that has been described in the case is that the top management has different opinions regarding the future strategy of the company. A group of managers consider the option of keeping the business model the way it is, with different and unlike businesses are kept as spate entities and are owned by their respective managements according to their specific requirements. Whereas another group of managers feel that this method wastes a lot of money for Tata Group. They believe that activities are similar in all organizations, which should be standardized across all the organization. For example business or service activities that are mandatory for all organizations should be compulsory for every large and small organization under the tree of Tata Sons.

Tata Services Limited plays a key role in the organizations which has specialized departments of Group Human Resource (HR), Group Corporate Affairs, (GCA), Department of Economics and Statistics (DES), Tata Management Training Centre (TMTC), Public Affair Department (DPA), Tata Strategic Management Group (TSMG) and the Financial Group which provides help , all the basic support and consultation to every Tata owned company.The services offered by Tata Services Limited have most of the time played key role in the success of different organizations whether small or large. For example, Muthuraman, Vice Chairman of Tata Steel felt that the services of Tata Services Limited played key role in acquiring Corus, a European based steel manufacturer. He felt that although some aspects of the business can be carried by companies themselves but some decisions can be taken by the Tata Services that will add significant value to the overall Tata Group. Muthuraman felt that the free and open organization structures have actually helped him perform in a better way where decisions have been taken by him and the team members. He believed that he is free to take decisions regarding the business but whenever he needs help, Tata Services Limited is available. According to him, this structure where services were only taken as per the request of the particular organization was seen as a success factor with Tata Group.

However, the experience of Tata Steel and its Human Resource Officer presented a different view to the overall structure and process of Tata Services Limited. He believed that there should be certain things and decisions that should be directed to all the Tata companies based on the advantages they possess. Basically, Sudharkar believed that the process of Tata Services Limited took extra time in solving issues and coming up with solutions. However, he believed that a standard structure where similar synergies should be mandatory for all Tata companies rather than getting the help. Another example of Tata Services Limited as presented in the case discusses the situation where Voltas benefitted from services offered by the Tata Services Limited where it helped Voltas in dealing with legal complexities. As discussed in the case Voltas, a subsidiary of Tata Group already had its own legal team, but it got help of Tata Services Limited for complex legal matters. According to the management of Voltas, the support provided by Tata Services has been of great support to the company.

In the situation of Rallis India, which was an independent listed company with its own management, board of directors and an independent management team was a subsidiary of Tata Chemicals. When Rallis faced financial crisis in 2002-03, Tata Services Limited provided the company with financial aid to help regain its position in the market seeing the growth. Rallis even used services of TMTC, Group Legal and TQMS to improve upon the final product offered. The services of Tata Services Limited proved worthy enough to help a business or a company to move out of the financial debt and crisis. Therefore, the experience of most of companies has been good and positive with the TSL.

The above discussed situations with different companies regarding services offered by Tata Services Limited has been explained where most of companies and businesses have actually liked using services offered by Tata Services Limited because it provided stability and benefits to different subsidiaries and companies of Tata Group. However, different group of senior managers have different opinions regarding the future strategy of Tata Group under the new leadership of DG. A group of managers at Tata considered this approach as the main reason or the driving force for the Tata Group because of the free flowing approach at Tata Services which delivered required expertise in every department where the subsidiary or the large company was lacking ranging from financial aid, legal support, human resource, brand equity, rules and regulations etc. Another group who was also convinced with the overall structure was only concerned with the fact that some of activities that are standard and similar for all businesses should become mandatory for all the organizations under the umbrella of Tata Group. A decision has to be taken in respect of the future of Tata Group and the services it has been offering as per the needs of companies. The new leadership has to decide whether to follow the same pattern or some kind of basic structure should be developed which becomes an assigned objective across the group.


Problem Statement/Plan of Analysis


Organizational Structure:

The hierarchical structure where all the authority, rules, rights, communication, duties, and lines of authority of an organization are standardized is basically called its organizational structure. Organizational structure basically controls the roles, responsibilities and powers that are assigned, coordinated and controlled by all levels within the organization. The structure which helped the company to work along explicit lines of action and to decide the direction of business comes under the organizational structure (Robbins, 2007).


Decentralized Structure:

Basically, there are two types of organizational structure: the centralized structure and the de-centralized structure. Under de-centralized structure, the decision-making power lies with the smaller units that are directly linked to the overall decision of the organization or the parent company. A de-centralized organizational structure is a system of administration whereby the organization is split into smaller independent units. The units can conduct their administrative activities independently and may only consult the headquarters on major issues. It is the most effective organizational structure used by big firms. In case of Tata Group which is basically a huge group of companies that all come under the umbrella of Tata Sons. The organizational structure that is being followed over there is that  the decision making process is done by all the companies themselves. All companies have their own board of directors, personalized legal teams, HR teams, administrative and decision-making teams that are all specific and as per the requirement of different organization (Lumpkin, 2004).


Centralized Structure:

A management structure where decision-making is done at higher level by those with a broader perspective that includes.........

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