The world is changing fast. Globalisation of markets and corporations has revolutionised the way modern business is transacted. To achieve the economies of scale necessary to attain low costs and price competitiveness, companies are planning operations with the global market in view. Strategic management, thus, must incorporate the integrative concerns of business policy with higher strategic evolutionary emphasis on how the business environment is changing. This, while being prepared for fluctuations in market conditions.
The recent acquisition by Tata Motors of two British motoring marques, Jaguar and Land Rover, is being watched by businesses everywhere. Could it show the way forward to a new form of business globalisation? Tata Motors? business already spans the four-wheeler market from the innovative Nano at the lower end to the spiffy Jaguar at the upper end, and this range of price points could also encompass a diverse engagement of consumer/motoring sensibilities. That Tata Motors has been credited worldwide with the development of the world?s cheapest car, Nano, need not be a rigid ?image marker? in a market that is open to finer estimations of product value along a long sophistication curve. Over time, the company will find that it has scope for strategic flexibility because of this. Input costs on common materials, for example, can enjoy the economies of scale generated at the lower end, while value additions at the higher end can be concentrated in computer technology. With varied marketing approaches, cars could sell to the consumer who?s mind is occupied by cost-of-commute calculations, as also to the wealthy enthusiast who?s looking to get beyond what it seems. Tata Motors is now in a new league, with the likes of Mercedes and Lexus as competitors.
That the deal has been done at a time there is a global freeze in credit markets?with bridge loans from SBI, Bank of Tokyo and Standard Chartered?only goes to show that financial constraints are not a problem for companies that know what they?re doing. It has also helped that Tata Steel?s acquisition of Corus in 2007 and its smooth integration had already established the Tata group?s commitment to harmonious worker relations in the UK. The group is seen favourably by factory workers and not as a predatory force. The manufacturing bases will continue to be located in the UK and Tata is committed to Ford?s broad business plan till 2011.
It is also to Tata?s credit that Ford Motor Company has offered engineering and R&D support to assist Tata Motors? plans for Jaguar and Land Rover. As noted earlier, intellectual capital will clearly play a major role in this business, and the wider the resource set to which Tata has access, the better. In all, operational freedom will be the key determinant of success.
This is not lost on other Indian businesses, which are also adopting a multi-country and multi-product strategy to expand. The AV Birla group and ArcelorMittal, for example, are busy forging global strategies that will maximise opportunities arising from globalisation of markets, sourcing, supply chains and much else. Again, cost differentials across the globe offer multiple strategic windows, as Mittal has shown.
Business research reveals that organisations that engage in strategic management generally outperform those that do not. New business models are emerging with the revolutionary change in communications technology, and early movers have a distinct advantage. As much as the Internet is a tool, it is also reshaping markets. And as more industries acquire global status, strategic management will be used increasingly to keep track of international developments and position the company for long-term competitive advantage.
Multinationals of Indian origin now have all that it would take to run worldwide operations, interconnected in terms of information flows and decision making, and they must not miss the opportunity. Companies like Tata Motors are merely ahead on the learning curve, as they craft for themselves international strategies that leverage local advantages.
The author is with Krishna Securities. These are his personal views