Analysis of the competitive advantage of Tata
Contemporary Concern Study
Analysis of the competitive advantage of TATA
Guide:
Professor Raghunath
Submitted by:
Veyrat Aline - 05E5036
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Analysis of the competitive advantage of Tata
Acknowledgements
I would like to thank Dr Raghunath for guiding me all through this project, giving me
insightful feedback and providing valuable contacts.
I also would like to thank Ms Vijaya Deepti (TCS), M. P.V.A. Sharma (Tata Steel)
and M. Bedekar (Tata Motors), who have accepted an interview, and thus have
provided valuable inputs and insights on the topic. The interviews I had with them have
formed the basis of the empirical part of my study.
Finally, thanks a lot also to Professors D.V.R Seshadri, L. Prasad, and P.N.
Thirunarayana as well as M. Saligram for providing me valuable contacts.
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Analysis of the competitive advantage of Tata
Table of contents
Acknowledgements
Table of contents
Introduction
1. Objectives of the CCS
a. Scope of the study
b. Issues that the study will not cover
c. Initial hypotheses
2. Theoretical background : survey of the literature on competitive
advantage and resource-based-view
a. Traditional ways of studying strengths and weaknesses
b. Identification of a firm’s resources
c. Competitive advantage and Sustainable Competitive
Advantage
d. The resource-based view
e. The VRIO framework
3. Benefits of the RBV theory: choice of the methodology
4. Methodology of the empirical study
5. Case study # 1 : Tata Steel
6. Case study # 2 : Tata Consultancy Services
7. Case study # 3 : Tata Motors
8. Conclusion: Insights and limits of the work
Appendixes
Bibliography
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Analysis of the competitive advantage of Tata
1. INTRODUCTION
The Tata Group is the largest private group in India. Founded in the middle of
the XIX° century (1868) by Jametsi Tata. Born in a Parsee family, he joined its father’s
business at the age of 20, before creating its own trading company 9 years later. Then,
its first diversification took place only six years later in the textile industry. He also laid
the seeds for the future development of the company, especially in the steel industry,
which was one of his major projects.
Nowadays, the group encompassed through more than 90 companies seven
business sectors as diverse as information, services and communication, engineering,
materials, services, energy, consumer products and chemicals. Its activities are
worldwide (more than 54 countries). Its revenues in 2005-06 were Rs. 967,229 million
($ 21.9 billion).
Tata Steel was created in 1907, TELCO (now Tata Motors) in 1945 and Tata
Consultancy Services in 1968 (India’s first software services company).
Figure 1 : Data on Tata Group
Source: http://www.tata.com/0_investor_desk/group_financials.htm
Total revenue
Sales
Profit before tax
Profit after tax
Total assets
Total shareholders
2005-06 (US$
billion)
21.9
21.4
3.0
2.1
18.0
2,302,446.0
2004-05 (US$
billion)
17.8
17.4
2.6
1.8
15.2
2,766,903.0
% change
23.0
22.7
13.8
18.6
18.8
-16.8
Tata is a well-known brand in India, based on more than a century of history.
Its core values are deeply rooted in the group culture : integrity, understanding,
excellence, unity, responsibility. These values, issued from the history, are still
emphasized as the legacy of the founder.
The Tata Group Chairman, M. Ratan Tata, has mentioned the recent successes
of the group in its message of January 1, 2006: “We should all feel proud of our
achievements in 2005. It has been the best year in the history of the Tata Group — and
this success has been mainly due to your personal commitment. I feel confident that in
2006 the Tata Group will see even greater growth and scale even greater heights.” 1
In fact, recent events have also shown the strength of Tata Group, as for
example the launch of the Indica in 1998 (the first car entirely design and manufactured
in India, without any alliance with a foreign partner), the purchase of the English brand
1
http://www.tata.com/0_about_us/management/chairmans_chamber/chairmans_message.htm
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Analysis of the competitive advantage of Tata
Tetley by Tata Tea in 2000 or the acquisition by Tata Motors of the heavy vehicles unit
of Daewoo.
For these reasons, Tata is one of the most famous companies in India, and it is
highly interesting to study how this company has achieved such an above-normal
competitive position.
The study is organized as follows. The first part develops the scope and limits
of the analysis, as well as the initial hypothesis. Then, the next section presents the
theoretical aspects of the resource based view and the benefits of this approach. The
empirical methodology –design of the questionnaires- is in the next part, followed by
the results in three main case studies. The final section includes the learning of the
study and its limitations.
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Analysis of the competitive advantage of Tata
2. OBJECTIVES OF THE CCS
a. Scope of the study
The objective of this CCS is to explore the idea that the above-normal
performance of the Tata Group can be explained, at least partially, under the
perspective of the strengths and weaknesses of the firm, and particularly of the
Resource-Based-View of the firm. Basically, that is to say the analysis will look at the
unique mix of strengths and weaknesses the firm possess to explain the performance.
The study will be limited to some businesses in which Tata is involved. These
businesses have been selected according to the profit they have contributed to generate
in 2006. The three main contributors to Tata profits are Tata Steel Ltd, Tata
Consultancy Services Ltd and Tata Motors Ltd. That is the reason why the analysis will
be focused on these three entities.
Figure 2: Profitability Analysis
Source : Database insight.asiancerc.com
Annual operating profit
2006
Tata Advanced Materials
/
Tata Chemicals Ltd
590,14
Tata Coffee Ltd
32,54
Tata Construction and Projects Ltd
/
Tata Consultancy Services Ltd
3337,41
Tata Elxsi Ltd
52,31
Tata Finance Ltd
/
Tata Hydro-Electric Power Supply Company Ltd
/
Tata Incorporated
/
Tata Infotech Ltd
/
Tata International Ltd
/
Tata Investment Corporation Ltd
164,07
Tata Metaliks Ltd
75,90
Tata Motors Ltd
2146,36
Tata Power Company Ltd
840,64
Tata Sponge Iron Ltd
30,56
Tata SSL Ltd
/
Tata Steel Ltd
5884,22
Tata Tea Ltd
166,20
Tata Technologies Ltd
/
Tata Teleservices Ltd
/
Tata Teleservices Maharashtra Ltd
123,05
Tatanagar Bricks Ltd
/
6
Reported Net profit
2006
/
353,03
22,32
/
2716,87
34,33
/
/
/
/
/
163,14
45,91
1528,88
610,54
22,14
/
3506,38
186,93
/
/
-541,06
/
Analysis of the competitive advantage of Tata
This CCS aims at confronting what the theoretical literature tells us about an
above-normal performance and how the praxis could be analyzed, through interviews
with actors of the three targeted companies.
b. Issues that the study will not explore
This study will try to be as exhaustive as possible. However, some issues will
not be covered. According to the profitability analysis, only three businesses will be
studied, whereas the Tata Group is involved in many other businesses. This initial
choice to focus on the three main profit contributors will limit the scope of the analysis.
Another area will not be studied in this report. The analysis will be made
according to the strengths and weaknesses the firm possess. On the contrary, the
influence of the environment on the performance of the firm will not be explored.
c. Initial hypotheses
The initial hypothesis of this work are :
- Tata enjoys an above-normal performance
- This performance can be at least partially explored and
explained with a resource-based view analysis concerning
especially three companies (Tata Steel, TCS and Tata Motors).
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Analysis of the competitive advantage of Tata
3. THEORETICAL BACKGROUND: survey of
the literature on competitive advantage and
resource-based-view
As a first step, it is important to replace the study in its theoretical background.
Essentially based on Barney’s work, a first paragraph will briefly summarize the
traditional ways of studying the firm strengths and weaknesses. Then, two paragraphs
will respectively define resources and competitive advantage. The next paragraph will
define the main points covered by the Resource-Based-View, before the presentation of
a framework in a last paragraph.
a. Traditional ways of studying strengths and
weaknesses
Based on Barney’s survey, this paragraph will present three traditional ways to
study the firm’s strengths and weaknesses.
A first set of authors has studied what is called “distinctive competence”.
Some theoreticians have emphasized the role of General Managers as distinctive
competencies. Based on researches conducted at the Harvard Business School, this
approach underlines the fact general managers have a direct impact on the firm
performance (they are in charge of analyzing the environment, understanding the
strengths and weaknesses of their firm and finally they choose the strategy, which will
directly influence the firm position. This approach suffers from two limits: it is very
difficult to define what makes a good manager and the emphasis put on the role of
managers can lead to ignore other factors.
Other theoreticians of the distinctive competence, essentially sociologists, have
stressed the importance of institutional leadership. According to these authors, the role
of institutional leaders goes beyond managerial activities, they also have to define a
mission/vision for the organization. The limitation of this theory is also that it can lead
to ignore other factors.
A second traditional way of analyzing the strengths and weaknesses of the firm
is based on Ricardo’s work on land ownership. According to this approach, in a
situation where the factors of production are limited (inelastic), then it is possible for
the owner to enjoy an economic rent. The traditional example is land ownership. If a
firm has above-fertile land, it will earn above normal profit. In a normal case, other
firms would enter the market but as the resource is inelastic, the firm enjoys a
sustainable competitive advantage. However, this analysis is limited: the sustainable
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Analysis of the competitive advantage of Tata
competitive advantage will disappear in case of decrease in the demand or if other ways
are found to increase the available resource.
Finally, a third traditional way to analyze strengths and weaknesses of a firm was
developed by E. Penrose. According to her, firms have to be seen as the combination
of an administrative framework and resources of production.
b. Identification of a firm’s resources
In order to study the firm strengths and weaknesses, it is necessary to clearly
define the concepts that will be used in this study.
According to the article “Competing on resources: strategy in the 1990’s”
(1995), firms are made of a bundle of assets, which determine its performance.
According to Barney, lots of attributes can be considered as resources and his
typology is very large (“assets, capabilities, organizational processes, firm attributes,
information, knowledge…” Barney, P.155). For him, resources can be divided in 4
categories: financial, physical, human and organizational capital.
Some authors establish a distinction between resources and capabilities [“Where
do capabilities come from and how do they matter ? A study in the software services
industry” (2005)]. For them, resources are the know-how, the financial or physical
assets, the human capital… whereas capabilities are the capacity for a firm to use its
resources.
Barney, on the contrary, consider resources and capabilities as synonyms.
Competencies are for him only to be used in a context of diversification. That is also
the point of view adopted in several articles (“Capabilities, business processes and
competitive advantage: choosing the dependent variable in empirical tests of the
resource-based-view”, 2004).
In this study, the latter point of view will be adopted.
To identify resources, a certain framework can be used: the value chain. In this
model, the production of goods or services is divided into a series of vertical business
activities. Resources are associated to each of these business activities. And each firm
can focus on some these activities or choose a different approach. The value-chain
model have been designed by McKinsey (business activities: technology development,
product design, manufacturing, marketing, distribution and service) and refined by M.
Porter (distinction between primary and support activities).
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Analysis of the competitive advantage of Tata
c. Competitive advantage and Sustainable
Competitive Advantage
In the literature, notions of competitive advantage and sustainable competitive
advantage are often used. It seems to be important to clarify these notions before
presenting the Resource-Based-View.
According to the article “Firm resources and Sustained Competitive
Advantage” (1991), a competitive advantage is created when a firm implements a
strategy that increases its value (whereas the competitors do not implement this
strategy).
A sustainable competitive advantage is a competitive advantage when other firms are
not able to duplicate this strategy.
d. The Resource-Based-View
The article “Firm resources and Sustained Competitive Advantage” (1991)
presents the Resource-Based-View as a framework which learns that sustainable
competitive advantage result from “implementing strategies that exploit their internal
strengths, through responding to environmental opportunities, while neutralizing
external threats and avoiding internal weaknesses”.
Basically, whereas in the industrial economics approach (SCP Paradigm, Porter
5 forces), a firm obtains above normal performance because of its better competitive
position; in the Resource-Based-View approach, it is because of their superior resource
position that firms obtain above normal performance.
This analysis is based on two hypothesis: resource heterogeneity and
immobility. Resource heterogeneity implies that the source of sustainable competitive
advantage can be found in the resources controlled by the firm. On the contrary, if all
the firms have the same resources, then sustainable competitive advantage is not
possible. Considering these two assumptions of the resource-Based-View of the firm,
first mover advantage and barriers to entry and mobility are also possible (“Firm
resources and Sustained Competitive Advantage”, 1991).
The Resource-Based-View of the firm can also implies that business activities
can be a better scope to study competitive advantage. For example, a firm has not only
good or bad resources, it is always a mix, that is to say a firm can have simultaneously
competitive advantages and competitive disadvantages in different business processes.
The profits of the firm enjoying a competitive advantage can also be appropriated by
certain stakeholders and not influence the firm global performance. Or, the potential of
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Analysis of the competitive advantage of Tata
the resources may not being fully realized. For all these reasons, for some authors,
business processes is a better way of studying competitive advantage (“Capabilities,
business processes and competitive advantage: choosing the dependent variable in
empirical tests of the resource-based-view”, 2004).
e. The VRIO framework
To implement this RBV analysis, Barney has developed a framework which
allows to say if a resource can be a source of sustainable competitive advantage for a
firm. It is divided in four steps:
- Value: does the resource allow the firm to address the
environmental threats and opportunities, that is to say allows it
a cost reduction or an increase in revenues ? it is important to
analyze it in the long-run
- Rare: is the resource controlled by a limited number of firms ?
- Imitability: do other firms have costs to copy this resource ?
The costs can be explained by unique historical conditions,
causal ambiguity, social complexity, or patents.
- Organization: allows the firm’s organization to fully exploit
the potential of its resources ?
According to Barney, a firm can only benefit from a sustainable competitive
advantage if its resources reunite the four criteria.
The use of this framework is very helpful to analyze sustainable competitive
advantage. However, Barney himself has underlined some of its limitations. In case of
environmental change (or Schumpeterian revolutions), the repartition of the strengths
and weaknesses can change. Then, the managerial influence also constitutes a limitation
to the framework. Finally, as in the Resource-Based-View, the unit of analysis is the
firm, which means that it is difficult to collect data.
Despite these limitations, this framework represents a very useful tool to
analyze competitive advantage of the firms. That is the reason why it will be used in this
analysis. Others authors, as for example in an article “Competing on resources: strategy
in the 1990’s” (1995), have developed other frameworks based on 5 main questions:
imitability, durability, appropriability, substitutability, comparative superiority.
However, given the convenience and the applicability of the VRIO framework, this one
will be used to study the competitive advantage of the Tata Group.
The next section will explain the choice of a RBV methodology by presenting
the benefits of such an approach.
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Analysis of the competitive advantage of Tata
4. BENEFITS OF THE RESOURCE BASED
VIEW THEORY: choice of the methodology
The first analyses about competitive advantage have stressed the importance of
leadership. For example, according to Chandler, a firm enjoys a competitive advantage
when it chooses to implement a M-form before its competitors, that is to say the choice
of the managers (adopting or not the M organizational structure) is directly at the origin
of the competitive advantage.
Then, for theoreticians of the environmental model, and especially Porter, the
issue was to design tools to gain a better understanding of above-average profitability.
According to him, the profitability of the firm depends highly of the industry structure.
The limit of such an analysis is that, focusing on the environment, another issue is not
covered: the role of the managers.
For example, we can consider the case of Crown Cork and Seal, as it is studied
in the article “Untangling the origins of competitive advantage”. Operating in an
industry structure not favorable in the sense of Porter, where the profits of most of the
firms are not significant, this company enjoys a competitive advantage. The question is :
are the above-average returns due to a good manager or to a good choice of strategy ?
The analysis developed by Porter can be interpreted as follows : the choice of an
industry or the rebuilding of it will lead to competitive advantage (what the authors call
a prospectively approach). They underline the absence of evidence of this hypothesis.
In fact, the Resource-Based-View goes further and prolongs the environmental
analysis. The environmental theory is mainly descriptive of the link between
differentiation, barriers and above-normal returns. The Resource-Based-View goes
further, analyzing the deeper aspects. The hypothesis is that there is an heterogeneity in
the distribution of the resources and this is the cause of sustainable competitive
advantage. For example, the environmental approach says that the cause of a
competitive advantage is an asset. The Resource-Based-View goes one level further,
explaining the asset by a capability. The example taken in the article is particularly
relevant : when the environmental approach stresses the role of the brand (asset) in
gaining a competitive advantage, the RBV emphasizes understanding of customers
needs (capability).
Moreover, the explanation of causality developed by the RBV is also more
complete in so far as it is based on two key statements. It is the capabilities of the firms
that are at the origin of the environment “structural” features. There is an imperfection
of the resources markets and that may lead to above-average profits.
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Analysis of the competitive advantage of Tata
Furthermore, as the environmental approach does not cover how strategic
choices are made, the analysis of the RBV is insightful in this field. According to the
latter, the development of certain resources is the basis for strategic decisions. The
approach of the RBV theoreticians usefully prolongs the environmental perspective
here again.
Finally, another insight brought by the RBV concerns how resources are built.
This approach tells us that routines of the firms are at the origin of capabilities. As
these routines are not entirely explicit, it is not sufficient for these theoreticians to
identify the resources that create a competitive advantage, it is even more important to
understand which routine is the source of this advantage. That is another reason why
the RBV goes further than the environmental perspective.
To sum up, the main advantage of the RBV approach is to fill in the gap
between theoreticians who have emphasized the role of managers and the
environmental perspective. The managers, and that is crucial, have to take the good
decisions for the firm to achieve a competitive advantage. However, they also have to
compound with the environment they are involved in.
Because of the advantages and analytical insights provided by the RBV, this perspective
will be adopted in this study.
The previous sections have covered the scope and limits of the analysis, and the
initial hypothesis as well as a theoretical review of the literature on RBV which included
the advantages of choosing such an approach. The basis of the following sections will
be the empirical part of the study. The next section will deal with the methodology used
and how the questionnaires were designed, and will be followed by the results in the
cases studies. The final section will include the learning of the study and its limitations.
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Analysis of the competitive advantage of Tata
5. METHODOLOGY OF THE EMPIRICAL
STUDY
This study investigates the effect of a set of resources on the competitive
advantage of the Tata Group. According to the limited amount of time and given the
scope of the Tata Goup, it was necessary to focus the study on a few businesses. As
explained in the first section, the three main contributors to Tata Group profits have
been chosen as cases to be studied, that is to say Tata Steel, Tata Consultancy Services
and finally Tata Motors.
The first empirical study will concern Tata Steel. The study is based on a web
literature review, reading of press materials and of the annual report for the financial
and company data, a well as on an online financial database. Finally, the study has been
concluded by a face-to-face interview with a senior executive in Tata Steel, M.P.V.A.
Sharma, Customer Account Manager in the division Flat products. The output of this
interview have been analyzed at the light of the VRIO framework.
TCS is the second part of the empirical work. It has also been based on web
literature, press articles, annual report and online database. The conclusion of the study
was a phone interview with Ms Vijaya Deepti, senior executive in TCS. The outputs
have been studied according to the VRIO framework.
Tata Motors is the last empirical case that have been studied. Based on the same
sources as the two previous cases, it has been concluded by a phone interview with
M.Bedekar, senior executive in charge of raw materials procurement for the commercial
vehicle division. The outputs have been analyzed with the VRIO framework.
To conduct the interviews, questionnaires have been designed. The key issue of
the questionnaire was to test some specific capabilities to analyze if they were the basis
of a sustainable competitive advantage of Tata. The idea was to use the VRIO
framework developed by Jay B. Barney in his book because this framework appears to
be easily applicable and the output is also easy to analyze.
The first draft comprised two different questionnaires, one destined to TCS (IT
services), whereas the second one was for manufacturing activities (Steel and Motors).
The first question was about the value chain to identify indirectly where the interviewed
people thought the competitive advantage of their company was based, before asking
them specific resources. The specificity of the TCS questionnaire was to include some
resources taken from a paper called “IT and sustainable competitive advantage: a
resource-based analysis”.
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Analysis of the competitive advantage of Tata
This first draft was incomplete because the capabilities were not named, at the
exception of some in the IT questionnaires, and the interviewees were supposed to find
themselves the capabilities.
After refinement, the second draft was completed. Basically, it was composed of
an enumeration of capabilities and the interviewees were supposed to tick a grade
according to the importance of the capability for the competitive advantage and to give
a rationale for his choice.
However, this questionnaire had the main disadvantage not to use the VRIO
framework which allows to obtain very precise results and analysis (for example, this
framework gives the possibility to differentiate between competitive and sustainable
competitive advantage, which was not the case in the second draft).
The design of a third and final draft aimed at addressing these biases. It is compound of
three distinct parts.
The first part is a way to engage the discussion, mainly about the value chain,
the fulfillment of customers’ needs and the facilities. The first part of the questionnaires
is the fusion of two different frameworks developed by R.Venugopal in his book. The
first one is a list of crucial questions that have to be addressed to assess a firm’s
competitive advantage compared to its competitors (page 68). The second list of criteria
used (page 84) corresponds to the second approach underlined by R.Venugopal as it
takes into account customers needs and facilities.
The second part is the test of specific capabilities with the help of the VRIO
framework. To enrich the discussion as much as possible, and get as much insightful
output as possible, these capabilities are sometimes divided into sub criteria. The set of
resources which are to be tested depend on the industry and are derived from the
papers read on the various sectors.
Finally, the last part of the questionnaires is a broader question that aims at
taking into account other issues which have not been mentioned in the first
introductory discussion, and neither in the test of specific capabilities.
The limit of these final questionnaires was their length. It was obviously very
long for a 30 minutes interview. The goal was twofold:
- to cover as many resources as possible and at least to evoke all
the themes once during the interview to see if it provoked a
resonance in the interviewee;
- and secondly it has increased the flexibility. In fact, this
questionnaire has to be seen as an adaptable tool.
However, despite this limitation, these questionnaires were used as a basic
framework during the interviews to give at least certain guidelines to the discussion and
to analyze carefully the resources, using the VRIO framework.
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Analysis of the competitive advantage of Tata
6. CASE STUDY # 1 : TATA STEEL
a. The steel industry
According to a report of International Iron and Steel Institute quoted in Tata
Steel Annual Report 2005-06, the World Crude Steel output has increased by 5,9%
between 2004 and 2005, reaching 1129.4 last year.
The most important producers are China (349.4 million metric tones), Japan
(112.47 million metric tones) and USA (93.89 million metrics tones). India is the 8th
producer, with an output of 38.08 million metrics tones.
The outlooks of the IISI have confirmed the trend of an increasing steel use
(around 5% growth over the next two year period), and a faster growth in countries
such as India and China where the GDP is booming. For example, during the last 5
years, due to its current industrialization, the consumption of steel in China has grown
by over 20%. In fact, China represents in 2005 nearly one third of the global steel
demand, as well as one third of the crude steel production.
The Indian domestic steel market is also growing : in 2005, the Indian steel
production has increased by 5,1% and the Indian steel production has increased by
7,1%. This was due to the booming demand in automobiles, consumer durable…
According to the Chairman’s statement (Annual Report Tata Steel 2005-06,
Pages 2-3), the low per capita consumption of steel (around 32 kg) is emphasized, as
well as its future growth due to large infrastructure projects that have been launched.
International prices of steel follow a declining trend, notably because of the role
played by China. The Indian steel prices have followed the same trend.
Tata Steel is not only involved in the Steel industry. One of it business units is
active in chrome and manganese (Ferro Alloys and Minerals Division). In this industry,
the demand was globally stable in 2005 notably because of the driving role played by
China. The average price has only undergone a slight increase between 2004 and 2005,
from 68 cents to 73 cents. Another business of Tata Steel deals with tubes (Tubes
Division). The commercial tube industry’s growth rate is about 3-4% for a market of
1.4 million tonnes, whereas the precision tube industry is highly dynamic (growth rate
of 13%) in a 0.4 million tonnes market.
The outlook for the industry are as follows. On the one hand, the industry has
to deal with costs of raw materials and energy. On the other hand, as growth in India is
expected to remain strong, as the rise in oil prices have been absorbed by consuming
nations, and as inflation remains low, the International Iron and Steel Institutes has
delivered positive forecasts: the use of steel products will still increase.
For example, a global growth of 5,8% is predicted for 2007. In India, steel
demand is also predicted to grow of around 8% in the two following years.
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Analysis of the competitive advantage of Tata
b. The company
Created in 1907, Tata Steel is the result of one of the first diversification of the
Tata Group. Benefiting from easy access to raw material resources and state of the art
facilities, it manufactures products destined to automobile sector, construction industry
and wire sector.
Manufacturing plans are situated mainly in India but its expansion plans are in India as
well as in Iran or Bangladesh.
The Chairman of Tata Steel is M. R.N. Tata. With a turnover of Rs 22518.75
crores and a profit after tax of Rs 3734.62 crores, Tata Steel has benefited from an
increase between 2005-06 and 2004-05 (respectively: 27,97% for the turnover and
3,65% for the profit after tax). The profit after tax has been increasing during the last
five years, as it is shown in the next figure.
Figure 3: Profit after tax 2002-2006, Tata Steel
Source: Tata Steel Annual Report, page 6
These good results were due partly to restructuration policies as the one
followed in 2003, (See article “Telco and Tisco, the new and improved Tata twins”,
page 184), which was based on achieving internal efficiencies, reducing the costs,
following a global strategy, and focusing on value-added products.
Currently, Tata Steel has foreseen to increase its capacity to reach around 30
million tones per annum by 2015 (Annual Report 2005-06). In 2005, Tata Steel has
already began this move, expanding capacity in existing plants (Jamshedpur) or creating
new plants (Jharkhand, Orissa…). On the other hand, Tata Steel is also involved in
purchasing foreign steel companies (Singapore-based NatSteel, Millennium Steel in
Thailand) to reach global scale and to become an important regional actor by creating
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Analysis of the competitive advantage of Tata
an Asian steel manufacturing network. This trend was emphasized in the article “An
overseas buying spree”, page 109.
In order to strengthen its position, Tata Steel has launched innovative initiatives
such as a branding program (creating brands like Tata Shaktee, Tata Steelium, Tata
Tiscon, Tata Bearings, Tata Agrico, Tata Wiron, Tata Pipes or Tata Structura, each of
them corresponding to a specific business), a Customer Value Management initiative, a
Retail Value Management programme. According to articles like “Telco and Tisco, the
new and improved Tata twins” page 186 or “Tata Steel, burnish the brand” page 106,
the effort in branding was already valuable in 2003.
c. Its competitive advantage
According to its chairman, “Tata Steel has been recognized as one of the most
cost-efficient steel manufacturers world-wide and it is believed that achieving global
scale with the same production efficiency will further enhance the Company’s global
competitiveness.” (Annual Report Tata Steel 2005-06, page 3).
In fact, according to its corporate website, Tata Steel is the first private steel
manufacturer in India and even in Asia.
This good competitive position has been confirmed by the fact that Tata Steel
was ranked in 2006 World’s Best Steel Maker for the third time by the World Steel
Dynamics Inc, USA.2 This study, which was conducted among 22 world-wide steel
manufacturers was based on a set of 20 criteria such as cash operating costs,
profitability, strength of balance sheet, dominance in the country/region, threat from
nearby competitors, stock market price…
The company was also granted the India’s Trophy for best Integrated Steel Plant five
times and Asia’s Most Admired Knowledge Enterprise Award in 2003 and 04.
If we consider the financial data on the company, we can say that Tata Steel
really enjoys a competitive advantage. If the basic financial ratios are taken into
consideration, Tata Steel enjoys in 2006 the best Return on Assets (0,29), the second
best return on equity (with 6,04, it is just behind Jindal Stainless 6,17) and the best
return on sales (0,23) (See Appendix). Thus, we can really say that Tata Steel enjoys in
2006 a competitive advantage.
2
http://www.tata.com/tata_steel/media/20060401.htm
18
Analysis of the competitive advantage of Tata
Figure 4 : financial ratios Tata Steel, 2006
Source : http://www.capitaline.com/intranet/INDEST_consortium.htm
Tata Steel
MUSCO
SAIL
ROA
0,29
0,24
0,24
Ratnamani Metals Sujana Metal Prd
0,18
0,16
ROE
Jindal Stainless
6,17
Tata Steel
6,04
JSW Steel
4,03
Ratnamani Metals
3,72
Bhushan Steel
3,63
ROS
Tata Steel
0,23
SAIL
0,14
JSW Steel
0,11
Ratnamani Metals
0,11
ISMT Ltd
0,10
If we compare these data with the same ratios in the year 2002, we can clearly
say that the competitive position of Tata Steel has improved in each of these ratios:
Figure 5 : financial ratios Tata Steel, 2002
Source : http://www.capitaline.com/intranet/INDEST_consortium.htm
Ratnamani
Bhushan
Sujana
Metals Tata Steel
Steel
Metal Prd ISMT Ltd
ROA
0,05
0,04
0,03
0,00
0,00
MUSCO
-0,04
JSW Steel
-0,05
SAIL
-0,10
Bhushan
Ratnamani Sujana
Steel
Tata Steel Metals
Metal Prd
1,22
0,95
0,30
-0,06
MUSCO
-0,18
JSW Steel
-0,26
SAIL
-0,41
ISMT Ltd
-45,80
Bhushan Ratnamani Sujana
Steel
Metals
Metal Prd ISMT Ltd
0,04
0,03
0,00
-0,01
MUSCO
-0,03
SAIL
-0,13
ROE
ROS
Tata Steel
0,05
JSW
Steel
-0,20
So we can clearly consider that Tata Steel benefit from a sustainable competitive
advantage. The following section will investigate the sources of this competitive
advantage.
d. Sources of the competitive advantage
 Hypotheses
Some resources may be at the basis of Tata Steel competitive advantage. To
determine the impact of these capabilities on the competitive advantage, a senior
employee of the company has been addressed the questionnaire to test each of those
capabilities.
 Interview
The most salient aspect in the value chain is the sales and marketing aspect.
Two channels are used for the selling of the products : the direct one for the strategic
customers (for example the big car manufacturers) and another one through authorized
19
Analysis of the competitive advantage of Tata
distributors, which may appoint local dealers to get in deeper touch with the customers.
The feedback of these customers is either collected directly by sales representatives
either indirectly by the dealers. Surveys are also done annually and quarterly by the
marketing division.
Another aspect from the value chain which is significant for Tata Steel is the
route of production. An integrated route is the first option (controlled by the firm from
the mine extraction to the selling), whereas a refined route is the second one. Tata Steel
is working with the first option which allows a better control, because they can directly
control all the steps in the value chain.
Some precise resources that are at the basis of Tata Steel competitive advantage
according to both senior executive that I have met.
The first one is captive mines. In fact, mines used by Tata Steel are captive since
its inception, nearly one century ago. This is a valuable resource because they can have
access to the raw materials they need. This is also a rare resource according to the fact
that natural resources are limited. Then, the next issue is the imitability of the resource.
In fact, as the contracts are renewed every 40 years, some competitors have tried to
imitate it, contracting similar agreements. In fact, until now, none of them has achieved
it but we can consider it only as a first mover advantage because the question will be
renewed at the end of the contract.
Branding is the second resource that was underlined during the interview. This
resource is valuable because brand names are used by the customers (for example, Tata
Tiscon or Steelium) and they allow a better identification of the various divisions inside
Tata Steel. This is a rare resource because only some regional players have tried to
imitate it and they did not manage to reach the level of brand promotion of Tata Steel.
Moreover, this resource is also difficult to imitate, even for a national player because it
is largely based on Tata Steel brand and reputation, and even on the Tata Group brand
and reputation. That is the reason why this resource is not imitable. To reap the
maximum benefits of this resource, Tata Steel is organized in divisions, like for example
Flat Products, the one in which M.PVAS Sharma is working.
Then, the channel of distribution is also a source of competitive advantage
according to Tata Steel senior executives. This is a rare resource because no other
competitors is so well organized to reach its customers (directly or through the dealers
network). It is also very difficult to imitate because it takes time to build such a network
and relationships with the customers. Finally, the organization of Tata Steel distribution
network allows the company to take advantage of this resource.
20
Analysis of the competitive advantage of Tata
Customer contact is also an important resource for Tata Steel. This is a valuable
resource because the development of relationships with the customers tends to increase
their loyalty. This is rare in the steel industry to have marketing and sales manager, as
well as key account managers, and the support from a technical engineer on a regional
basis. However, this could be imitated by large national competitors like SAIL for
example. The senior executives from Tata Steel themselves consider that Tata Steel only
benefit from a first mover advantage in this field.
Product quality is also a resource that contribute to Tata Steel competitive
advantage. This is obviously valuable because it tends to enhance the reputation and the
brand image. This also rare in the industry according to customers feedbacks. It is also
quite difficult to imitate because it is a real process based on constant improvement and
constant relationships between the company and its customers. In the organization, this
resource is translated into an entire computerized system (SAP) and a huge R&D and
development centre.
Human resources are also a basis for competitive advantage. They emphasized
the vision from the top management level, which made it possible at the ground level.
This is translated into the organization by a high level of loyalty and a videoconference
once a month from the managing director to share the achievements of the company
and enhance the communication from top to below levels. This is rare for them (they
consider having the best managerial resources in the steel industry) and not really
imitable. This is the fruit of a constant evolution for 100 years.
Tata Steel culture is based on strong values (ethics, less opportunism, value on
the individual, adaptation to changes). Such a strong culture represents a valuable asset
for Tata Steel. This is rare among steel manufacturers, and can hardly be imitated: it
takes time to develop such a strong culture and it has to grow with you. Some
competitors tried to imitate it but they did not manage to copy it.
Reputation also helped a lot. It procures respect and trust in the case of Tata
Steel. This is obviously a valuable resource. Moreover, this is rare in the steel industry
because no other competitor benefit from such a positive brand image, derived from
the Tata Group. The belonging to the Tata Group makes it hard for a competitor to
imitate this resource. The organization of Tata Steel helps reaping the best results from
this advantage in reputation: Tata Sons holds around 25% of the shares, stressing
clearly the fact that Tata Steel is a member of the Tata Group.
Facilities also play a role. Tata Steel has the best facilities in the Indian Steel
industry, and is even number one in Thailand and Singapore. Furthermore, company’s
facilities are still increasing as they expand the existing plants and plan to develop new
21
Analysis of the competitive advantage of Tata
production sites. This is a valuable resource, which is also rare as Tata Steel was
awarded world best steel plant in the last two years by World Steel Dynamics. The
competition has increased since the lift of the controls in the steel industry in 1992 but
for the moment no competitor has achieved to imitate it. However, as facilities are the
fruit of a constant evolution, the turning point is now.
 Key learning
In the case of Tata Steel, some resources seem to play a role in the creation of a
competitive advantage : production capabilities, access to raw material, branding,
customer relationship, human resources, organizational culture and organizational
reputation.
Production :
integrated route
and facilities
VALUABLE
- Better control when
integrated route
- State of the art
facilities
RARE
Best facilities in India,
Thailand and
Singapore
IMITABLE
A constant evolution
Access to raw
Allows better access to Limited number of
material : captive raw materials
mines
mines
Branding
Customer
relationship
Human
resources
Organizational
culture
Organizational
reputation
Only a first mover
advantage because
contracts are renewed
every 40 years
Allows a better
- The only national
- Level of brand
identification of the
player which has made promotion difficult to
various divisions
it
attain
- Based on product
- Based on Tata brand
quality
and reputation
- Reach level is very
- Collection of the
Based on long-term
extensive
feedback directly and relationships : takes
- Tends to increase the by dealers, also surveys time to build such a
loyalty
- Support from a
network
technical engineer
regionally is rare
vision from the top
Tata Steel has the best Fruit of an history
management level
managerial resources
in the steel industry
ORGANIZATION
- Expansion
- Increasing the
existing facilities
- Creation of new
production sites
Shared among
employees and
recognized outside :
valuable asset
creates respect and
trust
Reflects the
organization in
divisions
Distribution channel
direct and through
network
- high level of loyalty
- videoconference
once a month from
the managing
director
Diffused among the
company
Based on strong values takes time to develop
such a strong culture
and it has to grow with
you
Due to the belonging Due to the belonging Tata Steel is the
to Tata Group
to Tata Group
flagship of the Tata
Group
To sum up, in the case of Tata Steel, privileged access to raw materials because
of captive mines is the source of a competitive advantage. Other resources like
production capabilities, branding, customer relationships, human resources,
organizational culture and reputation are the basis of sustainable competitive advantage.
22
Analysis of the competitive advantage of Tata
6. CASE STUDY # 2 : TATA CONSULTANCY
SERVICES
a. The IT services industry
According to the NASSCOM Strategic Review 2006, the revenues of the Indian
IT services sector are estimated to US$ 36.3 billion in 2005-2006. The growth of this
sector is 5 times higher as the global IT industry.
In India, the domestic IT market has been evaluated at US$ 10,2 billion and the
IT services sector to US$ 4,5 billion in 2005-2006.
The total amount of exports of the Indian IT services industry has reached US$
17.7 billion in 2004-2005. The first destination is Americas with 68,5% (among which
66,5% for the USA), then 23% for Europe (among which 14% for the UK).
According to the NASSCOM McKinsey Report of December 2005, quoted in
TCS annual report 2005-2006, India has a leading position in the global outsourcing
industry and this will continue in the next five years as only 10% of the market size has
been addressed so far. By 2010, relocation to low-cost destinations is expected to take
place in more than 30% of this potential market. The dynamism of the industry will
also be accentuated by innovations of the firms.
The growth will be driven by sectors like hardware and software maintenance,
network administration, and help desk services.
India is still the most attractive offshore destination, according to the
NASSCOM Strategic Review 2006.
The forecasts of Gartner Dataquest Market Databook (cited in TCS annual
report 2005-2006) shows that the IT industry will continue its growth. The total
worldwide IT spending will reach 3203.2 in 2009, compared to 2479.9 in 2004.
b. The company
Created in 1968, Tata Consultancy Services is involved in IT consulting,
services and business process outsourcing. It is now present in 34 countries and diverse
industries. The Chairman is Mr Ratan N. Tata and the CEO Mr S. Ramadorai. The
company is structured in groups according to 11 business practices (banking, financial
services, insurance, telecom, manufacturing, media and entertainment, retail and
consumer goods, transportation, healthcare and life sciences, energy and utilities,
governance) as well as in business units corresponding to the services offered :
consulting, IT services, Business Process Outsourcing, IT infrastructure services,
engineering and industrial services, product based solutions.
23
Analysis of the competitive advantage of Tata
The key values of the company are : integrity, leading change, excellence,
respect for the individual, learning and sharing.
Furthermore, other aspects are also emphasized: collaboration with the
academic world, professionalism, internal formation, continuous learning policy, quality
and research and development.
Among its strategic partners, TCS counts IBM, HP, Microsoft, SAP, Oracle…
According to TCS annual report 2005-2006, the opportunities for TCS are the
development of outsourcing among new customers as well as the renewal of existing
contracts. This opportunity was already stressed at the end of the 90’s (for example;
R.Tata has evoked it in its interview “Remaking Tata”, page 19).
The strengths of TCS are its presence in the market since its beginning, its
global scale and integrated capabilities.
The threats are the competition of other low-cost offshore destination
(especially Eastern Europe for the European deals), the increasing implantation of
global IT players in India, then high competitive pressures.
Among the main risks faced by TCS, there are : the lack of skilled workforce,
the pressure on the margins, the investments in new technologies and business models,
and finally the risk of foreign currencies exchange rates losses.
c. Its competitive advantage
According to TCS’s annual report 2005-2006, “the revenue potential of the
Indian IT industry is estimated to be $ 60 billion by 2010 and our company is wellpoised to take advantage of this opportunity (page 7). This suggests that TCS enjoys a
competitive advantage in its sector.
With an Income from Sales and Services of Rs 11214.86 crores, and a net Profit
of Rs 2716.87 crores for the year 2005-2006 (Annual Report), Tata Consultancy
Services is in fact the biggest player in the Indian IT industry: largest company “in
terms of revenues, profits, number of employees and market capitalization” (annual
report, page 35).
This was confirmed by the fact that TCS was ranked 7 of Fortune Top 10
companies among their valued customers3
The company was also granted a series of award : best IT employer in 2004
according to Hewitt Associates, best place to work award by Dataquest and finally
TCS’s CEO was elected businessman of the Year 2004 by Business India.
TCS was also ranked 34/100 IT firms by Business Week in 20064 which placed
it as the second Indian IT player.
3
4
www.tcs.com
www.businessweek.com/it100/2006/34.htm
24
Analysis of the competitive advantage of Tata
If we consider the financial data on the company, we can say that TCS really
enjoys a competitive advantage. If the basic financial ratios are taken into consideration,
TCS enjoys in 2006 the best Return on Assets in its industry (0,28), the best return on
equity (27,73) and the second best return on sales (0,24, just behind Infosys with 0,27.
Thus, we can really say that TCS enjoys in 2006 a competitive advantage.
Figure 6 : financial ratios TCS, 2006
Source : http://www.capitaline.com/intranet/INDEST_consortium.htm
TCS
Tech Mahindra
Infosys Tech.
ROA 2006
0,48
0,37
0,35
ROE 2006
TCS
27,73
HCL Technologies
9,84
ROS 2006
Infosys Tech.
0,27
TCS
0,24
Infosys Tech.
8,71
Wipro
0,31
Satyam Computer
0,23
Satyam Computer
7,73
Wipro
6,96
Satyam Computer HCL Technologies
0,22
0,21
I-Flex solutions
0,21
As the Indian economic press presents TCS as the leading player in this industry
for years, we can say that TCS enjoys a sustainable competitive advantage. The next
section will investigate its sustainable competitive advantage.
d. Sources of the competitive advantage
 Hypotheses
Some resources may be at the basis of TCS competitive advantage
(development of client-specific capabilities, project management capabilities…). To
determine the impact of these capabilities on TCS competitive advantage, a senior
employee of the company has been addressed the questionnaire to test each of those
capabilities.
 Interview
TCS Value chain is composed of several aspects. The most salient are marketing
and sales, business practices, strategic practices and alliances. According to Ms Deepti,
the core of the value creation comes before all from the true combination of these
activities and also from delivery excellence and operational excellence. The ability to
develop technologies also plays a very important role in the value creation of TCS.
Organizational attributes have an impact on competitive advantage of TCS, and
especially the internal structure, through the ability to respond and even drive the
changes in the market.
For all the strategic customers, there is a special organizational structure to
fulfill their needs. Firstly, a dedicated team is in charge of their needs. As a relationship
25
Analysis of the competitive advantage of Tata
is built, TCS can develop a better knowledge and insights of the customers’ needs.
Secondly, the organizational structure tries to better know and address customers’
needs through a dedicated support working in a particular geographic area.
Furthermore, the person working with a customer knows the sector (for example, if the
client is a bank, somebody who has already worked for a bank will be in charge of this
client). This also allows to better respond to the customers’ needs.
What is to stress is that TCS is a service organization and they don’t compare
themselves with companies working on the same industry but product oriented, like for
example IBM.
TCS has developed a lot of client-specific capabilities. In fact some initiatives
are made to better meet specific needs of clients. For example, they have developed
specially for certain customers different services that they normally do not provide
because it was what customers needed. This creates value for TCS. According to her,
this is a rare capability in the industry to develop client-specific capabilities at such a
point. The real strengths of TCS are its flexibility and rapidity in responding to the
customers’ needs. For her, this capability, because of these unique strengths, is hard to
imitate and could be imitated only on the very long term. Currently, it is not imitable.
This resource is traduced in the organizational structure of TCS through the creation of
“competency centers”, or “centers of excellence” which are based on the way the
clients is working.
A second resource that creates value for TCS is the project management
capability developed by TCS. A project manager at TCS must have the ability to
manage his own resources, and also to create additional capabilities. This resource is
critical for TCS success, so TCS has emphasized it and developed it to a level which is
rare in the industry. The imitation is not really possible because of the size of TCS and
its leading position on the Indian market. The scale and complexity of the projects also
prevent imitation from the competitors. The organization of TCS is made to reap the
full benefit of this capability. For example, they have a fairly structured process to
develop talents for project managers.
TCS has also a valuable capability: learning by doing. The company benefits
from a big advantage compared to the competitors because of the number and the scale
of the projects they are working on. For this reason, such a capability does not only
create value for TCS but it is also rare on the industry because TCS is working on highscale projects. This advantage is not easily imitable according to her because of the
experience TCS has on in sector (the company was created very early and it had dealt
with many projects since then, compared to its competitors). She really insists on the
fact that learning by doing is a very importance source of competitive advantage for
TCS.
26
Analysis of the competitive advantage of Tata
Then, the selection of human resource plays also a role in TCS competitive
advantage according to her. The selection is different depending on the background.
For the technical staff, a technical level of education is required. More generally, all are
selected through an evaluation process (screening and continuous evaluation programs).
Continuous education programs also exist to help people acquiring knowledge or
developing competencies based on their carriers plans. For her, this resource is not
particularly rare in so far as each company goes through such processes to select its
workforce. The strength of TCS in this field is that it benefit from a first mover
advantage and that its belonging to the Tata Group allows TCS to have access to all the
groups programs. For her, that is why this capability is rare and hard to imitate. TCS
organization also allows to get the maximum benefits of this capability: access to all the
Tata Group programs is possible and these programs are sponsored by the company
(for example, partnerships with IIM Bangalore or Calcutta to get certifications or
diplomas).
Managerial capabilities also plays a role in TCS competitive advantage. It creates
value in so far as TCS is able to attract and retain competent and well-trained managers.
For example, TCS managers are recruited internally as well as on the market. Then, they
also use programs of the Tata Group to make leadership grow internally. Here again,
for her, it is the fact that TCS benefit from a first-mover advantage, the early
identification of the leaders and the use of management by objectives that has created
the rareness and the inimitability of this TCS resource. To fully benefit from this
capability, TCS uses a balance scorecard developed at the Tata Group scale for its
managers. It is also interesting to notice that TCS has helped customers to develop their
own balance scorecard (this move reflects the client-specific capabilities developed by
TCS).
Then, organizational culture is also a source of value creation for TCS. For her,
employees are highly involved in the processes and their implementation. For example,
the departure point of most of the programs in TCS was a need identified by
employees. Moreover, there is a strong set of cultural values for a long time. She
identifies the most important values as: respect for individuals, learning and sharing;
then integrity and excellence. She also emphasized once again the capacity to adapt to
changes as a key value for TCS. For her, this is a very critical asset in TCS industry. This
is a rare resource in the industry because in TCS it is really part of the organization and
as TCS is part of a very old group, values like excellence and integrity have played a very
important role. For example, she stressed the fact that integrity was a critical value in
the Indian context, for a company involved in a business which requires that they work
intensively with the Government. The culture has for example a direct impact on
practices like bribery. For her, the importance of the culture and the fact that integrity is
27
Analysis of the competitive advantage of Tata
deeply rooted in TCS make this resource impossible to imitate for a competitor. The
organization of the company tries to get all the benefits of the culture, through a senior
management very attached to this culture and a very particular structure that insists on
flexibility, networking, incentives (for example, financial incentives).
Finally, the perceived organizational reputation also plays a role in the creation
of TCS’s competitive advantage. TCS is credited with a very favorable reputation : it
was elected best employer in India and that constitutes a good achievement for the
company. TCS also want to imply all stakeholders and its good reputation is reflected
by a high market capitalization from a market perspective, as well as one of the highest
customer retention rate (89.4) from a marketing point of view. For her, what is rare in
this resource, is the balance which is made by TCS. Competitors are often focused on
one aspect (generally the market capitalization). What is rare is that all stakeholders are
taken into account. Imitation of this resource may be possible but she evaluates the
necessary time to 3 to 5 years because of the advance already taken by TCS. TCS is
organized in a way that allows it to benefit a maximum of this resource, through high
retention rate.
According to her, two other factors can explain the competitive advantage
enjoyed by TCS : the types of services proposed and the wide culture of R&D
innovation.
 Key learning
The resources that seem to play a very important role in creating a sustainable
competitive advantage for TCS are : development of client-specific capabilities, project
management capabilities, learning by doing, selection of human resources, managerial
capabilities, organizational culture, organizational reputation, types of services provided,
and culture of R&D innovation.
What was particularly interesting in this interview was that she insisted that
some resource may not be rare in the industry on themselves but that the extent to
which TCS has developed them or the way it has applied them that has made them
valuable, rare, and difficult to imitate.
28
Analysis of the competitive advantage of Tata
Analysis of each capability :
VALUABLE
highly developed at
TCS (ex: development
of services especially
for one customer)
RARE
Rare to be developed
at this point
a project manager at
TCS must have the
ability to manage his
own resources, and
also to create
additional capabilities.
learning by
Creation of value
doing
because of the number
and scale of the
projects they are
working on.
selection of
depending on
human resources background. technical
level of education
required. an evaluation
process
According to her, this
resource is critical for
TCS success :
developed to a rare
level in the industry
development of
client-specific
capabilities
project
management
capabilities
managerial
capabilities
organizational
culture
organizational
reputation
Ability to adapt/drive
changes has been
underlined several
times
IMITABLE
Flexibility and rapidity
as key success factors,
prevent imitation
ORGANIZATION
- dedicated team,
doubled with a
geographical support
- the support has a
knowledge of the
sector
- existence of
“competency
centers”
- extension of use of
balance scorecard to
clients
Size of TCS, its leading structured process to
position plus the scale develop talents for
and complexity of the project managers
projects prevent
imitation
Experience of TCS
prevent imitation
- belonging to the Tata
Group allows
extended access to
such programs and
prevent imitation
- screening tests and
required level of
education
- Continuous
education programs
TCS is able to attract
- first-mover
- belonging to the Tata
and retain competent advantage
Group prevents
and well-trained
- early identification of imitation
managers (internally as leaders
- use of a balance
well as on the market) - use of management
scorecard
by objectives
- programs of the Tata
Group to make
leadership grow
internally
- employees highly
- an “old group”, rare - importance of the
involved in the
with values that have a culture for TCS
processes and their
direct impact in an
prevent imitation
implementation
Indian context
- integrity deeply
- strong set of cultural
rooted in the culture:
values
difficult to imitate
TCS is credited with a
very favorable
reputation : it was
elected best employer
in India
Stress on flexibility
and adaptation to
changes
Not rare but TCS has
a first mover
advantage
want to imply all
stakeholders (high
market capitalization,
as well as one of the
highest customer
retention rate)
29
Imitation is not
impossible but can
only achieved on the
long-run because of
the advance already
taken by TCS
- attachment of the
senior managers to
the culture
- structure that
insists on flexibility,
networking,
incentives (ex:
financial ones)
Organization allows
it to benefit a
maximum of this
resource, through
high retention rate.
Analysis of the competitive advantage of Tata
Finally, as the learning of this interview, after the stress on certain capabilities, and the
mention of new ones (the types of services provided, and the culture of R&D
innovation), the application of the VRIO framework drives to several conclusions :
- the development of client specific capabilities is critical
- flexibility to adapt/drive the changes is also critical
- the belonging to the Tata Group also seems to play a huge
role in the competitive advantage of TCS
- on the other hand, managerial capabilities and human
resources selection are only the basis of a competitive
advantage and not of a sustainable competitive advantage.
30
Analysis of the competitive advantage of Tata
7. CASE STUDY # 3 : TATA MOTORS
a. The automotive industry
According to the Society of Indian Automobile Manufacturer’s Report quoted
in Tata Motors’ Annual Report 2005-06, the industry sales in 2005-06 have reached
1,710,099 vehicles; among which 391,166 were commercial vehicles and 1,318,933 were
passenger vehicles.
In fact, the year 2005-06 has been difficult for the Indian automobile industry
(growth rate of domestic four-wheeler sales of 8,5%, compared to double digit growth
rate in 2004-05 (18,6%). This decrease is due to emission legislation and to fewer new
models introductions. However, there was a change in this trend at the end of the year
with the announce of duty reductions on small cars. In the Indian market, the sales of
passenger vehicles have also strongly decreased (from 17,8% in 2004-05 to 7,7%).
The opportunities in the Indian automotive industry are the development of the
roads network infrastructure, the increasing car penetration in India (partly due to the
announce of the duty decrease on small cars, the increasing income, and the existence
of financial solutions), and the international growth sales.
On the other hand, threats are the global competition (an increased number of
global players are entering the Indian passenger car market, as well as in commercial
vehicle segment), the booming fuel prices, the input costs, the interest rate hardening
and Government regulations (especially in the fields of safety and emission).
b. The company
Created in 1945, Tata Motors is historically a locomotive and, after the
Independence, a commercial vehicle manufacturer. More recently, the company has
also developed activities in the passenger cars market in a first step in light commercial
vehicles (Tata 407, 608, and 709), then in multi-utility vehicles (Tatamobile) and finally
in passenger cars (Sierra, Estate, Sumo).
Tata Motors has also developed the first indigenously designed and
manufactured small-size car, the Indica, which was launched in 1998 without technical
or financial collaboration with any foreign car manufacturer.
This project has been made possible because of the strong R&D developed by
Tata Motors, in some R&D centers on the model of its Engineering Research Center
(ERC) in Pune. Equipped very early with state of the art facilities (for example in 1994,
its CAD facility was rated among the bests in the world), it also employs a huge number
of engineers (today 1400 engineers and scientists).
31
Analysis of the competitive advantage of Tata
At the end of the 90’s, Tata Motors has been transformed to target the new
sector (passenger cars), to become more centered on its competencies, its strategy, its
global orientation… (See article “The car that changed the corporation”, page 61).
According to this article, among the resources leveraged for this transformation were
the conclusion of alliances, the cost competence, the outsourcing strategy, and the value
chain management strategy. These resources seem thus to play an important role in
Tata Motors competitive position. The empirical study will investigate these capabilities.
In 2003 also, the company has gone through another restructuration phase (See
article “Telco and Tisco, the new and improved Tata twins”, page 184), which was
based on achieving internal efficiencies, reducing the costs, following a global strategy,
and adopting a platform approach.
Thanks to all these corporate policies, in 2005-06, Tata Motors had revenues of
$ 5,5 billion. Leader in commercial vehicles and second largest in passenger cars, it is
globally the largest company in the Indian automobile market.
Tata Motors is also active in the global market through its introduction in the
New York Stock Exchange in 2004 (the first Indian engineering company) and the
purchase of the heavy vehicles unit of Daewoo, as well as several alliance (the more
recent is the memorandum of understanding which was signed between Tata Motors
and Fiat).
Exports also represent an increasing part of Tata Motors’ revenues: 7,35% in 2004-05
and 9,86% in 2005-2006.
The Chairman of Tata Motors is Mr Ratan N. Tata himself and he has always
shown a very strong commitment in the automobile company. For example, he set
himself the objectives of the Indica in a very mediatical announcement : “ we will offer
the Indian customer a car which has the size of the Zen, the internal dimensions of an
Ambassador, and the price of a Maruti 800 with the running cost of diesel” (Concepts,
frameworks and checklists on the resource-based view of the firm with cases, page
183).
According to the Chairman’s statement (Annual Report 2005-06, pages 4-5),
Tata Motors has focused its efforts on costs, cash management, quality and reduction
of time to market.
32
Analysis of the competitive advantage of Tata
Figure 7 : Volume and market share in commercial and passenger vehicles
Source: Tata Motors Annual Report 2005-2006, page 16
The outlook of the industry is on the one hand favourable to Tata Motors due
to these opportunities. However, on the second hand, several concerns constitutes risks
for Tata Motors. Firstly, exchange and freight rates fluctuation may impact the
competitiveness of the company. Then, the railways has launched attractive offers both
for passengers and freight, which could have an impact. The cyclicality of commercial
vehicle market could also impact its business. The company has also to face an
increasing competition, especially from global players (with a more developed product
portfolio, larger financial capabilities, and strong brands) and foreign regulations in
terms of emission, safety, noise… As the manufacturing facilities are in several
locations, the supply chain could face difficulties. Finally, as the company is working on
new projects, this increases the risks faced by Tata Motors.
Although the current market situation is challenging, Tata has enjoyed
particularly good results and had outperformed the industry on many ways, as we will
see in the next paragraph.
c. Its competitive advantage
According to its Chairman’s statement, “Tata Motors has had another
outstanding year. It out-performed the industry with record revenues and sales
volumes. The Company improved its market share in commercial vehicles, bolstered by
the highly successful introduction of Ace, its new small truck. Also, the Company
achieved its highest-ever sales volumes of passenger cars and utility vehicles during the
year. » (Annual Report Tata Motors 2005-2006, page 2).
The financial data confirms this assumption because, as shown in the next table,
the sales of Tata Motors are clearly superior to those of the industry (respectively 13,6%
33
Analysis of the competitive advantage of Tata
and 8,6%). In the passenger cars segment, the company even outperforms the industry
(10% growth for Tata, compared to 7,5% for the industry average). Even the stock
price of Tata Motors outperforms the industry average.
Figure 8: Sales in commercial and passenger vehicles, 2004-2006
Source : Tata Motors Annual Report, p.27
Figure 9 : Stock price and market capitalization vis-à-vis the industry
Source : Tata Motors Annual Report 2005-2006, p.44
Finally, if we take the financial ratios into consideration as follows, we can say
that Tata motors really benefits from a competitive advantage in the commercial vehicle
segment as the company enjoys the best ROA, ROE and ROS in its industry:
Figure 10 : financial ratios Tata Motors, LVC-HCV sector, 2006
Source : http://www.capitaline.com/intranet/INDEST_consortium.htm
LVC-HCV
Tata Motors Ashok Leyland Swaraj Mazda
ROA
0,16
0,14
0,09
Eicher Motors
0,08
Force Motors
0,07
ROE
Tata Motors
3,62
Force Motors
2,29
Ashok Leyland
2,29
Eicher Motors
1,74
Swaraj Mazda
1,60
ROS
Tata Motors
0,07
Ashok Leyland
0,06
Force Motors
0,03
Eicher Motors
0,03
Swaraj Mazda
0,03
In the passenger cars industry, the competitive advantage of Tata Motors is not
so evident but we can say that the company enjoys however at least a competitive parity
with the five major competitors:
34
Analysis of the competitive advantage of Tata
Figure 11 : financial ratios Tata Motors Passenger cars sector, 2006
Source : http://www.capitaline.com/intranet/INDEST_consortium.htm
Passenger cars Honda Siel Cars
ROA
0,23
Maruti Udyog Hyundai Motors
0,22
0,20
ROE
Maruti Udyog
8,29
Tata Motors
3,62
ROS
Maruti Udyog Hyundai Motors
0,10
0,07
Tata Motors
0,16
Hyundai Motors Honda Siel Cars
0,65
0,43
Tata Motors
0,07
Honda Siel Cars
0,06
Hindustan
Motors Ltd
-0,20
Hindustan
Motors Ltd
-0,32
Hindustan
Motors Ltd
-0,11
If we consider the same ratios in 2002, then we can say that Tata Motors’
situation has clearly improved since then (all the ratios were negative in both industry at
that point of time).
Figure 12 : financial ratios Tata Motors, LVC-HCV and passenger cars sector, 2002
Source : http://www.capitaline.com/intranet/INDEST_consortium.htm
LVC-HCV
Eicher Motors Swaraj Mazda Ashok Leyland Force Motors
ROA
0,08
0,04
0,03
0,01
Tata Motors
-0,01
ROE
Eicher Motors
0,92
Ashok Leyland
0,78
Swaraj Mazda
0,65
Force Motors
0,12
Tata Motors
-0,17
ROS
Ashok Leyland
0,04
Eicher Motors
0,04
Swaraj Mazda
0,02
Force Motors
0,00
Tata Motors
-0,01
Passenger cars Hyundai Motors Honda Siel Cars Maruti Udyog
ROA
0,12
0,06
0,03
Tata Motors
-0,01
Hindustan
Motors Ltd
-0,04
Tata Motors
-0,17
Hindustan
Motors Ltd
-0,21
Tata Motors
-0,01
Hindustan
Motors Ltd
-0,03
ROE
ROS
Maruti Udyog Hyundai Motors Honda Siel Cars
0,79
0,34
0,07
Hyundai Motors Honda Siel Cars Maruti Udyog
0,11
0,04
0,01
Even if the financial ratios are not so positive in the passenger cars industry, we
can say that Telco also enjoys a competitive advantage in this sector. This is illustrated
by the following quote extracted from the article “Return of the Indica”, page 18 : “The
Indica has emerged as the biggest seller in its category, with sales of 5,405 cars in
September 2001, a 51% increase over its September 2000 sales figure. It has overtaken
zippy rivals like the Hyundai Santro (4,953) and the Maruti Zen (4,008).”
35
Analysis of the competitive advantage of Tata
According to these elements, we can say that Tata Motors is enjoying a
sustainable competitive advantage in the commercial vehicle sector because its
domination nowadays is salient. Its competitive position in the passenger cars segment
is not so positive but Tata Motors still remains in the first players in the Indian
automobile industry. That is the reason why the following section will investigate the
sources of this competitive advantage.
d. Sources of the competitive advantage
 Hypotheses
Some resources may be at the basis of Tata Motors competitive advantage. To
determine the impact of these capabilities on competitive advantage, a senior employee
of the company has been addressed the questionnaire to test each capability.
 Interview
Tata Motors is involved in the automobile sector, and enjoys a leading position.
The company is producing commercial vehicles (it is the largest commercial vehicles
producer worldwide), MUVs and passenger cars. It is a multi location company with 3
sites for commercial vehicles. The main site is in Pune.
The value chain is rather complicated. In fact, as it is a very old company, one
of the oldest in the country, they have always done everything by themselves. At the
beginning, it was for historical reasons, because there was no supplier able to fulfill their
needs and it became part of the organizational culture since then. The level of vertical
integration is thus very high. Nowadays, the supply chain is organized in 13 steps
processes and scheduled in agreement with the production. Several central agencies are
in charge of the purchase of common components and the price is also centrally
planned.
The first resource which plays a role in creating Tata Motors competitive
advantage is the development of customers relationships. This is obviously a valuable
resource in so far as a better knowledge of the customers and strong relationships
increase the loyalty of these customers. This is rare in this industry because two
complementary ways are employed to understand better the customers needs. This is
quite difficult to imitate because this is based on the long-term. Tata Motors is
organized to reap the maximal benefits of this resource : two ways are employed to
understand better the customers’ needs. For the existing products, there is a continuous
process (based on warranty analysis, market expectations reports…). This process is
followed very regularly by Tata Motors because the company tries to catch up the
competitors worldwide and the expectations of the customers are increasing. For the
36
Analysis of the competitive advantage of Tata
development of new products, a team is formed under the direction of a New Product
Manufacturer, and this team integrates engineers, people from marketing…
Efficient sourcing is the second resource which was mentioned as a source of
competitive advantage. Tata Motors is the world most competitive manufacturer of
commercial vehicles. This is obviously a valuable resource because it increases directly
the profit of the company. This resource is also rare because it is not only due to cheap
labor but also to a continuous trend to integrate cost reduction. This is difficult to
imitate because Tata Motors benefits from a first mover advantage and is also . For
example, to face the increasing prices of the last few years, Tata Motors have
emphasized it global sourcing, with for example raw materials from countries like
China, Thailand, Brazil… This resource is translated in the organization by the rule :
obtaining always the most interesting buying rates, that is to say the new product must
be at least equivalent or even better than the existing sourcing solution. This is also
reinforced by the existence of a material sourcing group, which is a cross-functional
team, in which there is a champion (to organize the sourcing) and a sponsor (senior
executive which helps with support activities).
Human resources policies also helps creating a competitive advantage, by
adding value. The use of systematic training, of the Kaizen technique, of a group
specific balance scorecard and the practice with the vendors contribute to this resource.
This is not so rare in the industry because the configuration of the Indian industry has
spread these techniques. According to M.Bedekar, Tata Motors do not really care about
imitation because thus it tends to increase the global level of quality in the industry.
Then, organizational culture was also evoked as a basis of Tata Motors’
competitive advantage. Tata as one of the oldest Indian company is very well-known
and reputed for its ethical values (refusal of corruption, of favors even within the
Group…) and social work (in education, health, access to drinking water…) before the
invention of the concept of Corporate and Social Responsibility. This culture is valuable
in the case of the Tata Group but it is not rare. Some competitors, like for example
Infosys, conduct similar programs on the model of what existed in the Tata Group.
What is not imitable is how deeply this culture is diffused among the employees. The
organizational translation of this resource is a written document : the Code of Conduct
which is the foundation of any action of the company. This document summarizes all
the values and principles of the Tata Group’s organizational culture.
Finally, the organizational reputation is very important in creating the
competitive advantage. This is valuable because the Tata Group benefits from a very
respected image and this also rare because not all the players in the automobile industry
can benefit from the solid reputation of a group. This intangible asset is also difficult to
37
Analysis of the competitive advantage of Tata
imitate because it is correlated with the history of the Tata Group. The existence for
example of a Code of Conduct aims at reaping the maximal benefits from this resource.
Finally, the R&D policy is also of primary importance in the creation of a
competitive advantage. This is valuable because Tata Motors is recognized as a strong
R&D player. This is also rare because in India, it is the only Indian company which
owns its R&D center. This is difficult to imitate because of the costs required and also
because Tata Motors has now a first mover advantage. The structure of the company is
organized to achieve gaining better results from this resource with an historical R&D
center in Pune, the ERC.
 Key learning
The resources that seem to play a very important role in creating a sustainable
competitive advantage for Tata Motors are : the level of vertical integration, the
development of customers relationships, the efficient sourcing, the human resources
policies, the organizational culture and reputation, as well as the culture of R&D
innovation.
38
Analysis of the competitive advantage of Tata
level of
vertical
integration
development
of strategic
customers
relationships
efficient
sourcing
policies
human
resources
policies
VALUABLE
Integration of many
activities
RARE
Due to historical
reasons
better knowledge of
the customers and
strong relationships
Very complete process
increases directly the
profit of the company
not only due to cheap
labor but also to a
continuous trend to
integrate cost
reduction
use of global sourcing
spread of these
techniques in the
Indian automobile
industry
systematic training, of
the Kaizen technique,
of a group specific
balance scorecard and
the practice with the
vendors
organizational ethical values (refusal
culture
of corruption, of
favors even within the
Group…) and social
work (in education,
health, access to
drinking water…)
organizational very respected image
reputation
R&D
recognized as a strong
innovation
R&D knowledgeable
IMITABLE
Diffused in the culture
because it is the result
of history
ORGANIZATION
Organization of the
supply chain
Common components
supply through central
agencies with a
common price
Based on the long run Two processes, one for
thus difficult to imitate the existing products
and another for the
new ones
first mover advantage existence of a material
continuous process
sourcing group
(obtaining the most
interesting buying
rates)
similar programs of
competitors but very
deeply rooted in Tata
very diffused culture
among the employees
Code of Conduct
Belonging to the Tata
Group
the only Indian
company which owns
its R&D center in the
automobile sector
Intangible : correlated
with history
Costly to imitate
First mover advantage
Code of Conduct
historical R&D centers
on the model of the
ERC in Pune
Finally, as the learning of this interview, the application of the VRIO framework drives
to several conclusions :
- The vertical integration strategy is the source of a sustainable
competitive advantage for Tata Motors
- The development of customers strategic relationships is also a
important factor
- Efficient sourcing policies also plays a role
- Finally, the three remaining resources that play a role in Tata
Motors’ competitive advantage are organizational culture,
organizational reputation, and R&D innovation
- On the other hand, human resources policies are not the basis
of a competitive advantage.
39
Analysis of the competitive advantage of Tata
The fact that the interviewee also evoked the fact that Tata Motors gives more product
for the money is something that was also mentioned in the article “It’s terrific, but is it
profitable ?” (page 44) about the Indica in 1999.
40
Analysis of the competitive advantage of Tata
8. CONCLUSION: Insights and limits of the work
We adopt the argument that the resource-based view can serve as a useful paradigm for
the analysis of the Tata Group’s competitive advantage. This study is based on the
assumption that the three main contributors to the Tata Group profits are
representative and can be analyzed individually.
The empirical application of the RBV has driven us to the following insights:
-
In the case of Tata Steel, some resources like production
capabilities, branding, customer relationships, human
resources, organizational culture and reputation are the basis
of the firm’s sustainable competitive advantage. However,
privileged access to raw materials (captive mines) is the source
of a competitive advantage.
-
In the case of TCS, some resources like the development of
client-specific capabilities, the project management
capabilities, learning by doing, the organizational culture and
the organizational reputation are the basis of TCS competitive
advantage. On the other hand, managerial capabilities and
human resources selection are only the basis of a competitive
advantage.
-
In the case of Tata Motors, vertical integration strategy,
development of customers strategic relationships, efficient
sourcing policies, organizational culture, organizational
reputation, and R&D innovation are the sources of Tata
Motors sustainable competitive advantage. On the other hand,
human resources policies are not the basis of a competitive
advantage.
More generally, what was learnt from these interview was the fact that in each
case, the belonging to the Tata Group, in terms of organization culture and
organizational reputation, seems to play a prominent role in the creation of a
competitive advantage.
In this article we have made an attempt to apply the RBV theory to the Tata
Group and to be as exhaustive as possible. However, this study faces some limitations
that reduce the scope of the analysis. Firstly, only three businesses have been studied,
whereas the Tata Group is involved in many others. Then, the analysis is focused on a
RBV analysis and the influence of the environment on the performance of the firm will
41
Analysis of the competitive advantage of Tata
not be explored. Moreover, the empirical application of the RBV is based on only a
single interview with one senior executive from each company.
What could be done in further studies could be to interview one people in each
sector of the value chain to eliminate the biases and to produce an analysis as complete
as possible because the risk with a unique interviewee is that the interview focuses on a
resource not because of its criticality but because of it is his domain of activity.
Furthermore, one-shot interviews can also influence the results and it could be
interesting to realize at least two interviews per people to go deeper in the analysis of
the resources.
42
Analysis of the competitive advantage of Tata
Appendixes :
1. Tata Group, revenue per sector (2005-2006)
2. Tata Group structure, 2006
3. Questionnaires (final draft)
4. Bibliography
43
Analysis of the competitive advantage of Tata
Appendix 1 : Tata Group, revenue per sector (2005-2006):
Source: http://www.tata.com/0_investor_desk/group_financials.htm
Appendix 2: Tata Group structure (Organigram)
Source : http://www.tata.com/0_about_us/business/promoter_companies.htm
44
Analysis of the competitive advantage of Tata
Appendix 3: Questionnaires (final draft)
TATA STEEL, TATA MOTORS
Context questions :
Value chain configuration
- what are the benefits that the value chain activities create for the customer ? Are they more
or less than those created by the rivals ?
- how many activities are there in the value chain vis-à-vis those of the competitors? Are
competitors providing the same value to the customers with a reduced number of activities
? Does this lead to a cost advantage ?
- How well are the activities configured in comparison with the value chain of the
competitors ?
- How is the value chain aligned with the value chain of the buyers ? is the rival’s value chain
aligned in a better or worse way ?
- Are the skills, tangible assets and intangible assets that have contributed to the Strategic
Management Capability associated with value creation ? How does the firm fare with
respect to this Strategic Management Capability vis-à-vis its rivals ?
Individual Value Chain Analysis
- What are the assets and skills associated with the activity ?
- How does the firm compare with its rivals with regard to these assets and skills ?
- What are the assets and skills that contribute to a cost advantage / disadvantage ?
- What are the assets and skills that contribute to advantage / disadvantage with respect to
product attributes ?
Organizing capability
- what are the organizational attributes that have a bearing on competitive advantage?
Facilities
- What are the products that the existing facilities are designed to manufacture ?
- Can other products be manufactured from the existing facilities ?
- Can the facilities be made to produce other products after modification ?
- Can the facilities be made more flexible by retro-fitting? If so what additional facilities need
be installed ?
Customers
- who are the customers being served and what is your knowledge about their needs?
- what are their unfulfilled needs ? Can these be met through new products ?
- what knowledge do you possess about your suppliers ?
- Can this knowledge be utilised to identify potential suppliers for new products ?
- What technical knowledge underlies the products that you manufacture ?
- What are the potential products that can be manufactured utilising this knowledge?
Resources analysis
- are the resources that are being leveraged likely to be rare in the product-market under
consideration ?
- can they be imitated ?
- if the leveraged resource per se is not likely to be strategic, can we build it into a strategic
resource ?
- Do we possess other required resources ? Can we acquire these resources ?
Test of some specific capabilities :
o Learning by doing ?
valuable ? rare ? imitable ? organisation ?
o Human resource selection?
valuable ? rare ? imitable ? organisation ?
- do you have technical education required ?
- do you use screening tests ?
o Human resource development ?
valuable ? rare ? imitable ? organisation ?
- do you have statistical process control training ?
-
45
Analysis of the competitive advantage of Tata
- do you have vendor training ?
- do you have multiple machine qualification ?
o Human resource deployment ?
valuable ? rare ? imitable ? organisation ?
- do you have team involvement ?
- do you have troubleshooting ?
o inimitability ?
valuable ? rare ? imitable ? organisation ?
- is a prior experience required ?
- do you calculate turnover ?
o Managerial capabilities ?
1. Attracting and retaining well-trained and competent top managers.
2. Achieving a better overall control of general organization performance.
3. Perceiving new organizational opportunities and potential threats.
4. Developing and communicating a unified sense of direction and a sense of common purpose to which
all members of the organization can relate.
5. Unifying conflicting opinions, improve coordination and enhance effective collaboration between key
executives, generate enthusiasm and motivate sufficient managerial drive for better performance.
6. Developing a more effective organizationwide strategic planning system for planned overall
organizational development.
7. Generating advanced developmental and training programs for our organizational members.
8. Increased use of management by objective.
9. Increased use of ‘financial accountability.’
10. Increased participative decision making at senior and middle management levels.
11. An extensive and effective use of quantitative techniques in decision making.
12. An extensive use of cost-effective analyses.
valuable ? rare ? imitable ? organisation ?
o Human capital
1. Employees have suitable education to fulfil their jobs.
2. Employees are well trained.
3. Employees hold suitable work experience for accomplishing their job successfully.
4. Employees are well-skilled professionally to accomplish their job successfully.
5. No one knows this job better than our employees.
6. Problems here are easy to solve once the employees understand the various consequences of their
actions, a skill they have acquired.
7. Employees do not know why, but sometimes when they are supposed to be in control they feel they
are being manipulated (reversescored item).
8. If anyone here can find the answer, it is our employees.
9. Employees go home the same way they arrived in the morning, feeling they have not accomplished
much (reverse-scored item).
10. Considering the time spent on the job, employees feel thoroughly familiar with their tasks.
11. Doing this job well is a reward in itself.
12. Mastering their jobs meant a lot to our employees.
valuable ? rare ? imitable ? organisation ?
o Internal auditing
1. The internal auditing helps to a better functioning of the organizational members.
2. The internal auditing clarifies aspects of working processes.
3. The internal auditing is perceived as a threat to the position and status of the employees’ (reversescored item).
4. Organizational members are not afraid of the results revealed by the internal auditing.
5. The internal auditing prevents inappropriate actions which may harm the organization.
6. The internal auditing helps achieve the organizational goals.
valuable ? rare ? imitable ? organisation ?
o Labor relations
1. There is complete trust between management and employees.
2. There is complete satisfaction of the relationships between management and employees.
3. There is a clear and accepted managerial policy on all parts (management and employees) regarding
labor relations system.
46
Analysis of the competitive advantage of Tata
4. There is a constant consultation between management and employees.
5. There are mutual respect and good intentions between management and employees.
6. The principle of security, namely caring for the employee’s health, safety, livelihood, and her future
employment, is a common one among both management and employees.
7. The principle of fairness, namely caring that the employee is getting fair compensation for her effort
and contribution, is a common one among both management and employees.
8. The principle of individualism, namely caring that the employee is making meaningful work
independently, on the basis of her planning and reasonable performance, is a common one among both
management and employees.
9. The principle of democracy, namely caring that the employee participates actively in the decision
making, is a common one among both management and employees.
valuable ? rare ? imitable ? organisation ?
o Organizational culture
1. There is a high involvement of the employees in the processes, decisions, and their implementation.
2. The employees are committed and hold a high sense of responsibility to the organization.
3. All have a common set of values, creeds, and symbols.
4. There is a high coordination and agreement among the employees.
5. The organization knows the external environment and provides appropriate responses.
6. The organization adapts its structure and the way it functions to changes in the external environment.
7. The organizational goals are clear and agreeable to all members.
8. The organization strives hard to achieve its goals.
valuable ? rare ? imitable ? organisation ?
o Perceived organizational reputation
1. The quality of management of my local authority is credited with a very favourable reputation.
2. The ability of my local authority to attract, develop, and keep talented people is credited with a very
favorable reputation.
3. The quality of services my local authority supplies is credited with a very favourable reputation.
4. The financial soundness of my local authority is credited with a very favorable reputation.
5. In my local authority, the education system is credited with a very favorable reputation.
6. In my local authority, the municipal facilities are credited with a very favorable reputation.
7. In my local authority, the tax system is credited with a very favorable reputation.
8. In my local authority, the transportation system is credited with a very favorable reputation.
9. The quality of life in my local authority’s jurisdiction is credited with a very favourable reputation.’
valuable ? rare ? imitable ? organisation ?
Conclusion
- how do explain the above-average performance of your company ?
47
Analysis of the competitive advantage of Tata
TATA CONSULTANCY SERVICES
Context questions :
Value chain configuration
- what are the benefits that the value chain activities create for the customer ? Are they more
or less than those created by the rivals ?
- how many activities are there in the value chain vis-à-vis those of the competitors? Are
competitors providing the same value to the customers with a reduced number of activities
? Does this lead to a cost advantage ?
- How well are the activities configured in comparison with the value chain of the
competitors ?
- How is the value chain aligned with the value chain of the buyers ? is the rival’s value chain
aligned in a better or worse way ?
- Are the skills, tangible assets and intangible assets that have contributed to the Strategic
Management Capability associated with value creation ? How does the firm fare with
respect to this Strategic Management Capability vis-à-vis its rivals ?
Individual Value Chain Analysis
- What are the assets and skills associated with the activity ?
- How does the firm compare with its rivals with regard to these assets and skills ?
- What are the assets and skills that contribute to a cost advantage / disadvantage ?
- What are the assets and skills that contribute to advantage / disadvantage with respect to
product attributes ?
Organizing capability
- what are the organizational attributes that have a bearing on competitive advantage?
Customers
- who are the customers being served and what is your knowledge about their needs?
- what are their unfulfilled needs ? Can these be met through new products ?
- what knowledge do you possess about your suppliers ?
- Can this knowledge be utilised to identify potential suppliers for new products ?
- What technical knowledge underlies the products that you manufacture ?
- What are the potential products that can be manufactured utilising this knowledge?
Analysis of the resources
- are the resources that are being leveraged likely to be rare in the product-market under
consideration ?
- can they be imitated ?
- if the leveraged resource per se is not likely to be strategic, can you build it into a strategic
resource ?
- Do you possess other required resources ? Can you acquire these resources ?
- Test of some specific capabilities :
o client-specific capabilities ?
valuable ? rare ? imitable ? organisation ?
o project management capabilities ?
valuable ? rare ? imitable ? organization ?
o labour costs and contractual penalties ?
valuable ? rare ? imitable ? organisation ?
o effort estimation ?
valuable ? rare ? imitable ? organisation ?
o Learning by doing ?
valuable ? rare ? imitable ? organisation ?
o Human resource selection?
valuable ? rare ? imitable ? organisation ?
- do you have technical education required ?
- do you use screening tests ?
o Human resource development ?
valuable ? rare ? imitable ? organisation ?
- do you have statistical process control training ?
- do you have vendor training ?
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Analysis of the competitive advantage of Tata
- do you have multiple machine qualification ?
o Human resource deployment ?
valuable ? rare ? imitable ? organisation ?
- do you have team involvement ?
- do you have troubleshooting ?
o inimitability ?
valuable ? rare ? imitable ? organisation ?
- is a prior experience required ?
- do you calculate turnover ?
o Managerial capabilities ?
1. Attracting and retaining well-trained and competent top managers.
2. Achieving a better overall control of general organization performance.
3. Perceiving new organizational opportunities and potential threats.
4. Developing and communicating a unified sense of direction and a sense of common purpose to which
all members of the organization can relate.
5. Unifying conflicting opinions, improve coordination and enhance effective collaboration between key
executives, generate enthusiasm and motivate sufficient managerial drive for better performance.
6. Developing a more effective organizationwide strategic planning system for planned overall
organizational development.
7. Generating advanced developmental and training programs for our organizational members.
8. Increased use of management by objective.
9. Increased use of ‘financial accountability.’
10. Increased participative decision making at senior and middle management levels.
11. An extensive and effective use of quantitative techniques in decision making.
12. An extensive use of cost-effective analyses.
valuable ? rare ? imitable ? organisation ?
o Human capital
1. Employees have suitable education to fulfil their jobs.
2. Employees are well trained.
3. Employees hold suitable work experience for accomplishing their job successfully.
4. Employees are well-skilled professionally to accomplish their job successfully.
5. No one knows this job better than our employees.
6. Problems here are easy to solve once the employees understand the various consequences of their
actions, a skill they have acquired.
7. Employees do not know why, but sometimes when they are supposed to be in control they feel they
are being manipulated (reversescored item).
8. If anyone here can find the answer, it is our employees.
9. Employees go home the same way they arrived in the morning, feeling they have not accomplished
much (reverse-scored item).
10. Considering the time spent on the job, employees feel thoroughly familiar with their tasks.
11. Doing this job well is a reward in itself.
12. Mastering their jobs meant a lot to our employees.
valuable ? rare ? imitable ? organisation ?
o Internal auditing
1. The internal auditing helps to a better functioning of the organizational members.
2. The internal auditing clarifies aspects of working processes.
3. The internal auditing is perceived as a threat to the position and status of the employees’ (reversescored item).
4. Organizational members are not afraid of the results revealed by the internal auditing.
5. The internal auditing prevents inappropriate actions which may harm the organization.
6. The internal auditing helps achieve the organizational goals.
valuable ? rare ? imitable ? organisation ?
o Labor relations
1. There is complete trust between management and employees.
2. There is complete satisfaction of the relationships between management and employees.
3. There is a clear and accepted managerial policy on all parts (management and employees) regarding
labor relations system.
4. There is a constant consultation between management and employees.
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Analysis of the competitive advantage of Tata
5. There are mutual respect and good intentions between management and employees.
6. The principle of security, namely caring for the employee’s health, safety, livelihood, and her future
employment, is a common one among both management and employees.
7. The principle of fairness, namely caring that the employee is getting fair compensation for her effort
and contribution, is a common one among both management and employees.
8. The principle of individualism, namely caring that the employee is making meaningful work
independently, on the basis of her planning and reasonable performance, is a common one among both
management and employees.
9. The principle of democracy, namely caring that the employee participates actively in the decision
making, is a common one among both management and employees.
valuable ? rare ? imitable ? organisation ?
o Organizational culture
1. There is a high involvement of the employees in the processes, decisions, and their implementation.
2. The employees are committed and hold a high sense of responsibility to the organization.
3. All have a common set of values, creeds, and symbols.
4. There is a high coordination and agreement among the employees.
5. The organization knows the external environment and provides appropriate responses.
6. The organization adapts its structure and the way it functions to changes in the external environment.
7. The organizational goals are clear and agreeable to all members.
8. The organization strives hard to achieve its goals.
valuable ? rare ? imitable ? organisation ?
o Perceived organizational reputation
1. The quality of management of my local authority is credited with a very favourable reputation.
2. The ability of my local authority to attract, develop, and keep talented people is credited with a very
favorable reputation.
3. The quality of services my local authority supplies is credited with a very favourable reputation.
4. The financial soundness of my local authority is credited with a very favorable reputation.
5. In my local authority, the education system is credited with a very favorable reputation.
6. In my local authority, the municipal facilities are credited with a very favorable reputation.
7. In my local authority, the tax system is credited with a very favorable reputation.
8. In my local authority, the transportation system is credited with a very favorable reputation.
9. The quality of life in my local authority’s jurisdiction is credited with a very favourable reputation.’
valuable ? rare ? imitable ? organisation ?
Conclusion:
- how do explain the above-average performance of your company ?
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Analysis of the competitive advantage of Tata
Appendix 4: Bibliography
-
BARNEY J.B. (2002). “Gaining and Sustaining Competitive Advantage”, 2nd
edition, Chap. 5, pp.149-192
-
COLLIS D.J., MONTGOMERY C.A. (1995) “Competing on resources:
strategy in the 1990’s”, Harvard Business Review, pp.118-128
-
RAY G., BARNEY J.B., MUHANNA W.A (2004). “Capabilities, business
processes and competitive advantage: choosing the dependent variable in
empirical tests of the resource-based-view” Strategic Management Journal, 25, pp.
23-37
-
ETHIRAJ S.K., KALE P., KRISHNAN M.S., SINGH J.V. (2005). “Where do
capabilities come from and how do they matter ? A study in the software
services industry” Strategic Management Journal, 26, pp. 25-45
-
BARNEY J. (1991). “Firm resources and Sustained Competitive Advantage”
Journal of Management, 17(1), pp. 99-120
-
VENUGOPAL R. (2005) “Resource-based new product development: insights
from the small car project on the Indian car company TELCO” International
Journal Automotive technology and Management, 5(1), pp.71-82
-
MATA F.J., FUERST W.L., BARNEY J.B. (1995) “Information technology
and Sustained Competitive Advantage: a Resource-Based analysis”, MIS
Quarterly, pp.487-505
-
VENUGOPAL R. (1999) “Contemporary strategic management: concepts,
frameworks and checklists on the resource-based-view of the firm with cases”,
Chap.1, pp. 1-17, and Case 4, pp.175-192
-
COCKBURN I.M., HENDRSON R.M., STERN S. (2000) “Untangling the
origins of competitive advantage”, Strategic Management Journal, 21, pp. 1123-1145
-
CARMELI A and TISHLER A (2004) “The relationships between intangible
organizational elements and organizational performance”, Strategic Management
Journal, 25, pp. 1257-1278
-
HATCH N.W and DYER J.H (2004) “Human capital and learning as a source
of sustainable competitive advantage”, Strategic Management Journal, 25, pp. 11551178
-
DUSSAUGE P, GARRETTE B, MITCHELL W (2004) “Asymmetric
performance: the market share impact of scale and link alliances in the global
auto industry”, Strategic Management Journal, 25 (7), pp.701-720
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Analysis of the competitive advantage of Tata
-
Annual Report Tata Steel, 2005-2006
-
Annual Report Tata Consultancy Services 2005-2006
-
Annual Report Tata Motors 2005-2006-11-21
-
http://www.insight.asiancerc.com
-
http://www.capitaline.com/intranet/INDEST_consortium.htm
-
http://www.ibid.informindia.co.in
-
http://www.tata.com
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http://www.tatasteel.com
-
http://www.tcs.com
-
http://www.tatamotors.com
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CHATTERJEE D, Tata Steel: burnishing the brand, Business Today, July 20
2003, pp.104-107
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SURENDAR T and SARKAR R, Return of the Indica, Business World, 5
November 2001, pp.18-19
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KUNDALKAR A, An overseas buying spree, Business India, December 18 2005,
page 109
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DHAWAN R, A positive attitude, Business World, December 29 2003, page 24
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JAYAKAR R, TELCO and TISCO the new improved Tata twins, Business
Today, November 9 2003, pp. 184-186
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JOSEPH T, Remaking Tata, Business World, September 13 1999, pp.17-25
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SRIDHARAN R, The car that changed the corporation, Business Today,
February 7 1999, pp.60-71
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NARAYAN S, It’s terrific but is it profitable ?, Business World, January 7-21
1999, pp.42-44
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