Porter's Diamond Theory Analysis: A Case Study on TATA Motors' Market Strategy and Global Competitiveness
Question
Task: How has TATA Motors effectively utilized Porter's Diamond Theory to achieve market dominance in the Indian automobile industry while strategically planning for international expansion?
Answer
Introduction
The 21st century has seen the rise of globalization; the term globalization is commonly being used in business today. While many people associate globalization to expanding their operations across international boundaries, for most companies it involves many intricate operations and influenced by internal factors such as competition. For businesses considering international expansion, the utilizing porter’s diamond theory is critical towards the businesses international expansion plans and successful implementation.
The porter’s diamond theory involves achieving change, expansion, and growth after considering Factor Conditions, Demand Conditions, and Firm Strategy, Structure & rivalry and Related & Supporting Industries (Porter1 2011). Each of these factors must be closely analysed to assist businesses develop a strategic expansion plan and approach which can be used to build a sustainable expansion plan. To understand how these factors have been utilized effectively we shall evaluate TATA Motors which has achieved overwhelming success despite of maintained focus on the domestic Indian market This is especially critical due to an increase in the number of businesses within markets thus the porter’s diamond theory plays a fundamental role towards businesses research and expansion (Benbya 2016).
Market Analysis
TATA Motors is a large multinational company allowing the business to distribute its operation globally. This makes it important to evaluate international and domestic markets to determine to the most beneficial. For this report, TATA Motors market analysis shall be performed for its domestic market in India as compared to international markets like the UK. On this report, the analysis will demonstrate how the UK is less attractive for certain companies and factors which launce the businesses choices while selecting markets (Kumar 2015). India offers lower per captain come but they're going also offers huge volume which allows the TATA motors to benefit more from the use of value as compared to value. In addition to this several other points that influence the businesses performance shall be discussed thus delivering clarity on how market selection must be a performance to maximize business benefits.
Porters Diamond Theory
Factor Conditions
Factor conditions involve evaluation and gauging a business’s skills and specialization. This involves many factors and requires for the businesses to first map its own strengths, weaknesses, and areas for improvement. In addition to the above human resource management also plays an integrating towards factor conditions ensuring employees possess a wide array of skill sets which can be used for future expansion (Dong-sung & Hwy-chang 2013). Condition Factor Mapping is, therefore, a fundamental requirement for any businesses to undertake so as to determine underlying factors linked to its long-term success.
Strengths
As per the Porter's Diamond Theory the first and most common performance by most businesses is evaluating and pinpointing their strengths. This is a critical requirement for every business is it allows the business headers determine important areas the business perceivers. It is essential to list a business’s strengths which ensure the businesses remain ahead of the competition and towards boosting human resource confidence and focus towards their responsibilities.
Weaknesses
Every strength comes with a weakness thus the next step a business must perform during factor condition involves mapping its weaknesses. Again this is a critical requirement as it helps determine areas which require additional effort to improve and also allows the business to put countermeasures in place to prevent risk or loss. Unlike the strengths which TATA Motors shares among allowing businesses stakeholders, the weaknesses need to mapped and only shared with the top management and business heads to avoid competitor infiltration and capitalization of weaknesses.
Human resource Management
Human resource is the backbone of every business thus it’s critical to ensure the human resource is carefully selected and managed. This can achieve by providing favourable human resource and manpower policies which address employee needs. It’s also important for the businesses to hire professionals who have a wide verity of skillsets and knowledge which help reduce additional manpower needs and encourage multitasking to help resolve different issues a business may encounter (Aswathappa 2010). Staff must also be directly involved in the management of operations and acknowledgment given for contributions. This helps boost morale and encourages more participation towards overall organizational growth.
Areas of improvement
With strengths, weaknesses and human resource capability mapped the businesses that need to move on to map its areas of improvement. There is always an area for improvement and determine the area to be improved ensures brand competitiveness in the market. Every product or service must be improved so as to surpass customer expectations thus ensure customer retention. This is only achievable through mapping areas of improvement, customer expectations as well as competitor product or service specification.
Demand Conditions
Porter's Diamond Theory Demand has a direct effect on the among of production a business must set thus its critical for Tata motors to evaluate its customer demand based on regional demand to determine production capacity (Morschett, Schramm-Klein & Zentes 2011). Being an Indian company the businesses must perform a demand analysis of the domestic market and compare the results to international markets to determine the most suitable market to target.
Patriotism -Public Backing
Patriotism has played a major role towards Tata motors success in India but there is also another important factor which seems the company retains its operations in India. The Indian consumer remains patriotic towards domestic brands resulting in Tata motors achieving long-term success. Originally targeting the middle-income group consumer, the Business made a wise move investing in international luxury brands and rover and Jaguar which allows the business to also target the wealthy and high-income group earners in India
Population Density
With a population of 1.3 billion people, India is the second most populated nation with a growing number of medium income earners. This results in a high demand to purchase automobile thus resulting in a huge market to target. With a huge domestic market population, TATA motors marketing preference remains in the domestic market where it can reduce manufacturing costs and retain market monopoly (Clarke & Madden 2013).
Emerging Economy
India is the 2nd fastest emerging economy; making it a hotspot for international brands to set up their operation. The past 2 decades have seen most major international brands struggle to infiltrate the Indian market due to the increasing Per capita income. As more people grow financially stable TATA motor is likely to register more sales in the domestic market as compared to the international market thus making it more financially feasible for the businesses to focus on the domestic market.
International Luxury Brand Acquisitions
One of the most influential investments made by TATA motors using the Porter's Diamond Theory and one has propelled the brand on the international market has been its acquisition of Luxury brands Land Rover and Jaguar. TATA motors have targeted both brands during a financial crisis allowing TATA motors to purchase both brands and relocate their luxury brand markets to India which is an emerging economy (SAXENA 2009).
TATA Motors luxury Brand Acquisition would automatically be embraced by the Indian consumer with overwhelming orders placed for both vehicle brands from within India. This helped TATA motors also propel its brand name on the international market and allowing the brand to also expand its market network across to developing and underdeveloped nations which demand budget vehicles. Having built its global portfolio TATA remains more focused towards promoting its products in the domestic market due to high demand and low-cost manufacturing which ensures the business remains competitive and delivers the affordable automobile to its consumers.
Firm Strategy, Structure & rivalry
TATA motors’ is part of the TATA group which has diversified into different fields thus allowing the brand gain stability as the different businesses help support. This has been an important factor linked to the brand's overall success as it has managed to diversify its operation and establish its positioning most FMCG industries. This has allowed the business to secure stability in the automobile industry thus allowing the business heads to turn their focus towards community empowerment as well as consumer expectations.
With more international automobile brands entering the Indian market, TATA has experienced some level of competition but the business has moved on to acquire its own luxury brands while also developing a budget automobile to be used by low-income group facility (Henry 2018). The business also maintains large government contrast and also focusing on commercial transport vehicle which is classified as the top rated brand in India. Commercial vehicles are also gaining popularity across the globe where more demand for economical TATA commercial vehicles is being registered across most developing and underdeveloped countries.
Budget Automobiles
TATA Motors would unveil the world’s cheapest cards in 2008 when the business unveiled the TATA Neno. This vehicle was specially designed for the low-income group earners and aimed at offering affordable automobiles to low income earning groups. This would be an initiative aimed at empowering the lower income groups and one which helps demonstrate the businesses dedication towards addressing corporate social responsibility (Tiwari & Herstatt 2013). By developing low budget vehicle the businesses has managed to develop an effective business strategy which delivers automobiles to all income earning groups thus tapping into large we population of Indian consumers.
Organisation Structure
Tata motors Porter's Diamond Theory can also accredit its success due to the businesses unique and friendly management and organization structure. Similar to the most successful organization, TATA Motor has also adopted a hierarchy management structure.
This allows for staff to be broken down into different levels each reporting to its higher level but at the same time, direct communication is maintained among all staff. Maintaining open communication lines has been identified as being among the most important factors linked to organization growth and performance (Price 2011). This is because it promotes communication among staff and the management at all levels thus encouraging transparency. In addition to transparency, this also helps boost staff morale as their contributions towards the system and process are acknowledgment and highlighted thus helping them focus on locating additional information
Industry Rivals
Porter's Diamond Theory Industry rivalry has been a major factor I linked to a business’s performance making it important for businesses to also map competitors and their performance so as to use the information to improve their operations. TATA Motors has been at the forefront of evaluating competitors and has been associated with large international automobile brands from an early stage thus allowing the business develop important strategic approaches’ to ensure industry success.
Industry rivalry is viewed by many organization as being a drawback but TATA Motors has managed to convert that rivalry from only market competitiveness to market research and product development thus allowing the business remain ahead of competitors and develop new products that surpass customer expectations (Maital & Seshadri 2012). Being able to achieve thus has allows TATA Motors to deliver above customer expectations thus ensuring customer retain their consumer confidence in the brand.
Related & Supporting Industries
TATA Motors is part of TATA group which is a consortium of businesses which specialize in different industries. This has allowed TATA as a brand to achieve overwhelming success in most of its ventures due to the brand having overwhelming backend support from sister companies. TATA group has also mainly focused on retaining its operation in the domestic market which has allowed the brand to build a monopoly in the market and win consumer confidence (Media 2015).
The brand has also managed to build strong relationships with both domestic and international stakeholders thus allowing the business secure important relations and apartment’s ships which ensure the organization's long-term growth and performance. With customer remaining faithful to TATA Motors and the brand remaining vigil to acquire other brands TATA Motors is expected to continue registering high gains in the domestic market but will now need to consider expanding to international markets which are also inviting the brand to establish and deliver low cost and budget automobiles.
Conclusion
A businesses global strategy and sources of competitive advantage are not only limited to international expansion and TATA Motors has helped prove that businesses can achieve great success if they develop effective strategic markets and focus on first satisfying consumers in their market before considering to expand abroad.
International expansion comes at high costs and willing many situations lands businesses in losses and debt simply due to the businesses incurring unnecessary expenses and adjustment issues. To prevent this from happening it’s critical to carefully perform Porter's diamond theory analysis which would allow the businesses secure important information and data related to the market, industry, consider and competitors based on which expansion plans can be developed.
TATA Motors is today ranked as being among the leading automobile manufacturers both in India as well as on the international market and continues to widen its target market. Unlike many businesses which focus on expanding to international markets before accommodating and saturating the domestic market, TATA Group focuses on first saturating its domestic market before considering international expansion. International expansion is treated as a secondary requirement and given less priority as compared to domestic markets expansion
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