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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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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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Table of contents

Acknowledgements 2Table of contents 3Introduction 41. Objectives of the CCS 6

a. Scope of the study 6b. Issues that the study will not cover 7c. Initial hypotheses 7

2. Theoretical background : survey of the literature on competitive advantage and resource-based-view

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a. Traditional ways of studying strengths and weaknesses

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b. Identification of a firm’s resources 9c. Competitive advantage and Sustainable Competitive Advantage

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d. The resource-based view 10e. The VRIO framework 11

3. Benefits of the RBV theory: choice of the methodology 124. Methodology of the empirical study 145. Case study # 1 : Tata Steel 166. Case study # 2 : Tata Consultancy Services 227. Case study # 3 : Tata Motors 318. Conclusion: Insights and limits of the work 41Appendixes 43Bibliography 51

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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 GroupSource: http://www.tata.com/0_investor_desk/group_financials.htm

2005-06 (US$ billion)

2004-05 (US$ billion)

% change

Total revenue 21.9 17.8 23.0Sales 21.4 17.4 22.7Profit before tax

3.0 2.6 13.8

Profit after tax 2.1 1.8 18.6Total assets 18.0 15.2 18.8Total shareholders

2,302,446.0 2,766,903.0 -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,

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http://www.tata.com/0_investor_desk/group_financials.htm


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 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.

1 http://www.tata.com/0_about_us/management/chairmans_chamber/chairmans_message.htm

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http://www.tata.com/0_about_us/management/chairmans_chamber/chairmans_message.htm

http://www.tata.com/0_about_us/management/chairmans_chamber/chairmans_message.htm


2. OBJECTIVES OF THE CCS

a.Scope of the studyThe 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 AnalysisSource : Database insight.asiancerc.com

Annual operating profit2006

Reported Net profit2006

Tata Advanced Materials / /Tata Chemicals Ltd 590,14 353,03Tata Coffee Ltd 32,54 22,32Tata Construction and Projects Ltd / /Tata Consultancy Services Ltd 3337,41 2716,87Tata Elxsi Ltd 52,31 34,33Tata Finance Ltd / /Tata Hydro-Electric Power Supply Company Ltd / /Tata Incorporated / /Tata Infotech Ltd / /Tata International Ltd / /Tata Investment Corporation Ltd 164,07 163,14Tata Metaliks Ltd 75,90 45,91Tata Motors Ltd 2146,36 1528,88Tata Power Company Ltd 840,64 610,54Tata Sponge Iron Ltd 30,56 22,14Tata SSL Ltd / /Tata Steel Ltd 5884,22 3506,38Tata Tea Ltd 166,20 186,93Tata Technologies Ltd / /Tata Teleservices Ltd / /

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Tata Teleservices Maharashtra Ltd 123,05 -541,06Tatanagar Bricks Ltd / /

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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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

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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 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

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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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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

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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 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 ?

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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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4. BENEFITS OF THE RESOURCE BASED VIEW THEORY: choice of the methodologyThe 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

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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.

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

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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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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.

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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”.

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

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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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6. CASE STUDY # 1 : TATA STEEL

a.The steel industryAccording 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

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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.

b. The companyCreated 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 SteelSource: Tata Steel Annual Report, page 6

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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 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.

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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.htm23


Figure 4 : financial ratios Tata Steel, 2006Source : http://www.capitaline.com/intranet/INDEST_consortium.htm

Tata Steel MUSCO S A I LRatnamani

MetalsSujana Metal

PrdROA 0,29 0,24 0,24 0,18 0,16

Jindal

Stainless Tata Steel JSW SteelRatnamani

MetalsBhushan

SteelROE 6,17 6,04 4,03 3,72 3,63

Tata Steel S A I L JSW SteelRatnamani

Metals ISMT LtdROS 0,23 0,14 0,11 0,11 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, 2002Source : http://www.capitaline.com/intranet/INDEST_consortium.htm

Ratnamani

MetalsTata Steel

Bhushan Steel

Sujana Metal Prd

ISMT Ltd MUSCO

JSW Steel S A I L

ROA 0,05 0,04 0,03 0,00 0,00 -0,04 -0,05 -0,10

Bhushan Steel

Tata Steel

Ratnamani

Metals

Sujana Metal Prd MUSCO

JSW Steel S A I L

ISMT Ltd

ROE 1,22 0,95 0,30 -0,06 -0,18 -0,26 -0,41 -45,80

Tata Steel

Bhushan Steel

Ratnamani

Metals

Sujana Metal Prd

ISMT Ltd MUSCO S A I L

JSW Steel

ROS 0,05 0,04 0,03 0,00 -0,01 -0,03 -0,13 -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

HypothesesSome resources may be at the basis of Tata Steel

competitive advantage. To determine the impact of these 24


capabilities on the competitive advantage, a senior employee of the company has been addressed the questionnaire to test each of those capabilities.

InterviewThe 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 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

25


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.

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.

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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 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.

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Key learningIn 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.

VALUABLE RARE IMITABLE ORGANIZATION

Production : integrated route and facilities

- Better control when integrated route- State of the art facilities

Best facilities in India, Thailand and Singapore

A constant evolution

- Expansion- Increasing the existing facilities- Creation of new production sites

Access to raw material : captive mines

Allows better access to raw materials

Limited number of mines

Only a first mover advantage because contracts are renewed every 40 years

Branding Allows a better identification of the various divisions

- The only national player which has made it - Based on product quality

- Level of brand promotion difficult to attain- Based on Tata brand and reputation

Reflects the organization in divisions

Customer relationship

- Reach level is very extensive- Tends to increase the loyalty

- Collection of the feedback directly and by dealers, also surveys - Support from a technical engineer regionally is rare

Based on long-term relationships : takes time to build such a network

Distribution channel direct and through network

Human resources

vision from the top management level

Tata Steel has the best managerial resources in the steel industry

Fruit of an history

- high level of loyalty - videoconference once a month from the managing director

Organizational culture

Shared among employees and recognized outside : valuable asset

Based on strong values

takes time to develop such a strong culture and it has to grow with you

Diffused among the company

Organizational reputation

creates respect and trust

Due to the belonging to Tata Group

Due to the belonging to Tata Group

Tata Steel is the flagship of the Tata Group

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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.

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6. CASE STUDY # 2 : TATA CONSULTANCY SERVICES

a.The IT services industryAccording 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 companyCreated in 1968, Tata Consultancy Services is involved in IT

consulting, services and business process outsourcing. It is now 30


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.

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 advantageAccording to TCS’s annual report 2005-2006, “the revenue

potential of the Indian IT industry is estimated to be $ 60 billion 31


by 2010 and our company is well-poised 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.

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, 2006Source : http://www.capitaline.com/intranet/INDEST_consortium.htm

TCSTech

Mahindra Infosys Tech. WiproSatyam

ComputerROA 2006 0,48 0,37 0,35 0,31 0,23

TCSHCL

Technologies Infosys Tech.Satyam

Computer WiproROE 2006 27,73 9,84 8,71 7,73 6,96

Infosys Tech. TCSSatyam

ComputerHCL

TechnologiesI-Flex

solutionsROS 2006 0,27 0,24 0,22 0,21 0,21

3 www.tcs.com4 www.businessweek.com/it100/2006/34.htm

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http://www.businessweek.com/it100/2006/34.htm

http://www.tcs.com/


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

HypothesesSome 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.

InterviewTCS 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 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.

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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 high-scale 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

34


competitors). She really insists on the fact that learning by doing is a very importance source of competitive advantage for TCS.

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

35


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 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.

36


Key learningThe 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.

37


Analysis of each capability :VALUABLE RARE IMITABLE ORGANIZATIO

Ndevelopment of client-specific capabilities

highly developed at TCS (ex: development of services especially for one customer)

Rare to be developed at this point

Flexibility and rapidity as key success factors, prevent imitation

- 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

project management capabilities

a project manager at TCS must have the ability to manage his own resources, and also to create additional capabilities.

According to her, this resource is critical for TCS success : developed to a rare level in the industry

Size of TCS, its leading position plus the scale and complexity of the projects prevent imitation

structured process to develop talents for project managers

learning by doing

Creation of value because of the number and scale of the projects they are working on.

Ability to adapt/drive changes has been underlined several times

Experience of TCS prevent imitation

Stress on flexibility and adaptation to changes

selection of human resources

depending on background. technical level of education required. an evaluation process

Not rare but TCS has a first mover advantage

- belonging to the Tata Group allows extended access to such programs and prevent imitation- screening tests and required level of education- Continuous education programs

managerial capabilities

TCS is able to attract and retain competent and well-trained managers (internally as well as on the market)

- first-mover advantage- early identification of leaders - use of management by objectives

- belonging to the Tata Group prevents imitation- use of a balance scorecard- programs of the Tata Group to make leadership

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grow internallyorganizational culture

- employees highly involved in the processes and their implementation- strong set of cultural values

- an “old group”, rare with values that have a direct impact in an Indian context

- importance of the culture for TCS prevent imitation- integrity deeply rooted in the culture: difficult to imitate

- attachment of the senior managers to the culture- structure that insists on flexibility, networking, incentives (ex: financial ones)

organizational reputation

TCS is credited with a very favorable reputation : it was elected best employer in India

want to imply all stakeholders (high market capitalization, as well as one of the highest customer retention rate)

Imitation is not impossible but can only achieved on the long-run because of the advance already taken by TCS

Organization allows it to benefit a maximum of this resource, through high retention rate.

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.

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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 companyCreated 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

40


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).

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.

41


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.

42


Figure 7 : Volume and market share in commercial and passenger vehiclesSource: 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 advantageAccording 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

43


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% 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 industrySource : 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, 2006Source : http://www.capitaline.com/intranet/INDEST_consortium.htm

LVC-HCVTata

MotorsAshok

LeylandSwaraj Mazda

Eicher Motors

Force Motors

ROA 0,16 0,14 0,09 0,08 0,07

Tata Force Ashok Eicher Swaraj 44


Motors Motors Leyland Motors MazdaROE 3,62 2,29 2,29 1,74 1,60

Tata Motors

Ashok Leyland

Force Motors

Eicher Motors

Swaraj Mazda

ROS 0,07 0,06 0,03 0,03 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:

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Figure 11 : financial ratios Tata Motors Passenger cars sector, 2006Source : http://www.capitaline.com/intranet/INDEST_consortium.htmPassenger

carsHonda Siel

CarsMaruti Udyog

Hyundai Motors

Tata Motors

Hindustan Motors Ltd

ROA 0,23 0,22 0,20 0,16 -0,20

Maruti Udyog

Tata Motors

Hyundai Motors

Honda Siel Cars


ROE 8,29 3,62 0,65 0,43 -0,32

Maruti Udyog

Hyundai Motors

Tata Motors

Honda Siel Cars


ROS 0,10 0,07 0,07 0,06 -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, 2002Source : http://www.capitaline.com/intranet/INDEST_consortium.htm

LVC-HCVEicher Motors

Swaraj Mazda

Ashok Leyland

Force Motors

Tata Motors

ROA 0,08 0,04 0,03 0,01 -0,01

Eicher Motors

Ashok Leyland

Swaraj Mazda

Force Motors

Tata Motors

ROE 0,92 0,78 0,65 0,12 -0,17

Ashok Leyland

Eicher Motors

Swaraj Mazda

Force Motors

Tata Motors

ROS 0,04 0,04 0,02 0,00 -0,01

Passenger cars

Hyundai Motors

Honda Siel Cars

Maruti Udyog

Tata Motors


ROA 0,12 0,06 0,03 -0,01 -0,04

Maruti Udyog

Hyundai Motors

Honda Siel Cars

Tata Motors


ROE 0,79 0,34 0,07 -0,17 -0,21

Hyundai Motors

Honda Siel Cars

Maruti Udyog

Tata Motors


ROS 0,11 0,04 0,01 -0,01 -0,03

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”,

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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).”

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.

InterviewTata 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

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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 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).

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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 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

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gaining better results from this resource with an historical R&D center in Pune, the ERC.

Key learningThe 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.

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VALUABLE RARE IMITABLE ORGANIZATIONlevel of vertical integration

Integration of many activities

Due to historical reasons

Diffused in the culture because it is the result of history

Organization of the supply chainCommon components supply through central agencies with a common price

development of strategic customers relationships

better knowledge of the customers and strong relationships

Very complete process

Based on the long run thus difficult to imitate

Two processes, one for the existing products and another for the new ones

efficient sourcing policies

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

first mover advantagecontinuous process (obtaining the most interesting buying rates)

existence of a material sourcing group

human resources policies

systematic training, of the Kaizen technique, of a group specific balance scorecard and the practice with the vendors

spread of these techniques in the Indian automobile industry

organizational culture

ethical values (refusal of corruption, of favors even within the Group…) and social work (in education, health, access to drinking water…)

similar programs of competitors but very deeply rooted in Tata

very diffused culture among the employees

Code of Conduct

organizational reputation

very respected image

Belonging to the Tata Group

Intangible : correlated with history

Code of Conduct

R&D innovation

recognized as a strong R&D knowledgeable

the only Indian company which owns its R&D center in the automobile sector

Costly to imitateFirst mover advantage

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 :

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- 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.

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.

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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.

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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 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.

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Appendixes :

1. Tata Group, revenue per sector (2005-2006)

2. Tata Group structure, 2006

3. Questionnaires (final draft)

4. Bibliography

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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

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Appendix 3: Questionnaires (final draft)

TATA STEEL, TATA MOTORSContext 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 ?

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- 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 ?- 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 capital1. 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.

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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 auditing1. 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’ (reverse-scored 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 relations1. 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.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 culture1. 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.

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8. The organization strives hard to achieve its goals.valuable ? rare ? imitable ? organisation ?

o Perceived organizational reputation1. 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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TATA CONSULTANCY SERVICESContext 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 ?

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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 ?- 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 capital1. 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.

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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 auditing1. 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’ (reverse-scored 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 relations1. 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.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 culture1. 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 ?

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o Perceived organizational reputation1. 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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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

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- HATCH N.W and DYER J.H (2004) “Human capital and learning as a source of sustainable competitive advantage”, Strategic Management Journal, 25, pp. 1155-1178

- 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

- 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

- http://www.tatasteel.com

- http://www.tcs.com

- http://www.tatamotors.com

- CHATTERJEE D, Tata Steel: burnishing the brand, Business Today, July 20 2003, pp.104-107

- SURENDAR T and SARKAR R, Return of the Indica, Business World, 5 November 2001, pp.18-19

- KUNDALKAR A, An overseas buying spree, Business India, December 18 2005, page 109

- DHAWAN R, A positive attitude, Business World, December 29 2003, page 24

- JAYAKAR R, TELCO and TISCO the new improved Tata twins, Business Today, November 9 2003, pp. 184-186

- 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

- NARAYAN S, It’s terrific but is it profitable ?, Business World, January 7-21 1999, pp.42-44

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