Jaguar Land Rover And Tata Motors Management Essay
In present day, organizations are facing more and more challenges that ever before. The market place has become extremely consumer driven and competition is fiercer. The environments around organizations are constantly evolving due to both internal and external factors. This constant environmental change in organizations is happening because decisions and strategies adopted by an organisation are greatly dictated by these factors. In turn, these decisions affect the human resource within an organization. If an organisation wants to perform or even survive in today’s market place good human resource management is fundamental. ‘Building better quality products or services, competitive pricing, or incorporating technological innovation into research and manufacturing operations must today be supplemented by organizational capability – the firm’s ability to manage people to gain competitive advantage. Merely hiring the best people does not guarantee organizational capability. Hiring competent employees and developing those competencies through effective human resource practices, underpins organizational capability’ – Ulrich and Lake (1990). What follows in this report is an analysis of a strategic framework that can be adopted by an organization and how it can be used to effectively managed human resources. The framework takes into account external factors influencing an organization. The proposed framework that’s going to be use has been developed by Sparrow & Pettigrew. The said framework will be applied to Jaguar Land Rover (JLR) / Tata Motors.
Jaguar Land Rover (JLR) / Tata Motors
Jaguar Land Rover is a business built around two great British car brands that design, engineer and manufacture in the UK. Jaguar Land Rover is part of Tata Motors, India’s largest automobile company. Tata Motors bought JLR on the 26th of March 2008 from the US automotive giant Ford Motor Company. The main reason for selling JLR to Tata Motors was that the business was currently loss making and their new corporate strategy was to focus on their core US car business that they hope to turn around in the next two years following the deal. JLR has been a dog for Ford i.e. it has not been able to provide any profit for them because of the high manufacturing costs provided in the United Kingdom On the other hand Tata Motors wanted to acquire JLR in order to fulfill his long term strategic commitment to the automotive segment and also increase business diversity across markets and products. Tata also sees its acquisition has an opportunity to participate in two fast growing auto segments. Two Years later, the overall results from this purchase prove to be positive according to this report: “TATA Motors’ results for the March quarter and full financial year FY10 were ahead of market expectations, thanks to a strong performance by its UK subsidiary Jaguar Land Rover” – The Economic Time (May 2010).
Proposed Strategic Framework for JLR / Tata Motors
The following framework, as mentioned before is based on the one developed by Sparrow and Pettigrew. As shown below, the framework comprises of three parts: Business Pressures, Strategic Response and Human Resource Management. The three parts are interlinked. The Strategic responses are to the business pressures, in this case external and as a result linked to the human resource management. For the external business pressures, the PESTLE analysis is used i.e. Political, Economical, Social, Technological, Legal and Ecological pressures. PESTLE analysis is in effect an audit of organization environmental influences with the purpose of using this information to guide strategic decision-making. It goes without saying that the strategic responses of the organization will create changes in the internal environment and therefore have an impact on the human resource. The ability to deal with external pressures without having too many adverse consequences to the internal environment of the business is the key to success for any organization.
Figure Proposed Strategic Framework for JLR/Tata Motors
Current External Influences & Pressures facing JLR / Tata Motors
The global automotive industry today is facing more pressures than it use to do in the past. In the recent past years many automotive companies failed to generate profit and as a result were forced to sell or merge with other manufacturers. Even the well-established brands are constantly fighting to retain market shares or ‘scrap’ some more. The global automotive industry today is delivering unprecedented levels of customer value and service. Fierce global competition for consumers is the prime mover behind this increase in customer value and service.
Before Tata Motors bought JLR, the company was performing well below satisfactory level. Since it acquisition in 2008 until now JLR’s situation has improved but the company is still facing many challenges that it needs to address if the company is to become financially self-sufficient. It’s also to be noted that Tata Motors is currently in debt of Rs 18,800 crore at present compared to last year, Rs 23,750 crore. JLR contributed partly to this reduction in debt, thanks to its good performance in the previous financial year.
However, like many automotive manufacturers, JLR is still facing the very unfavorable economic condition. JLR is trying to reduce cost where possible but at the same time delivering excellent customer value and service. Cost reduction often means bad news for the HR in the company, as staff cut down is often part of the process. In turn this can have an overall negative impact on the business since the employees still working for the company can lose motivation and become highly unproductive. This behavior will subsequently trickle down to the customers. This domino effect is what companies dread and that’s where good resource management is required. Below are some of the pressures that JLR is currently facing. Some external business that the company may face in the future is also included.
Closing Down of 1 of 3 Jaguar Factories in the UK
Recently, the main highlights concerning JLR has been the possibility of the company closing down one of their three-production plant in the UK. The former owner of JLR, Ford Motor Company attributed one reason for their failure with JLR to be the high manufacturing cost of the vehicles in the UK. Whilst Ford didn’t have any response to that, Tata’s strategic response was outsourcing.
The reason for doing so is pretty obvious, cost reduction. The production will be moved to a new manufacturing plant in China, benefiting from the lower production costs. The decision has not been finalise yet and is actually being reviewed since JLR had had a recent revival in sales coupled with the arrival of a new management team. A final decision may rest on talks with the British Government as well about financial assistance for new models.
What if the decision is made? From a business financial point of view, that might be a good strategic response. However shutting down a factory will certainly have disastrous impact in terms of human resource. JLR is currently employing 14,000 people in the UK. The closing down of one of its factories will obviously lead to many people losing their jobs. In these cases, relocation is rarely an option. Most of the employees are locals and it would be totally unfeasible for them to relocate. Also, if the company’s decision is to close down the factory and go for cheaper labor in China it is unlikely that they’ll want to keep the current ones.
The Economic Crisis: Recession
The current economic crisis has affected the automotive sector very badly. Many manufacturers suffered from it to the point where they had to stop their production resulting in temporarily closing down of their factories due a pluming in sales. Many companies had to go through drastic cost cutting measures meaning that employees’ salaries were reviewed and in most cases jobs were terminated. A large number of car manufacturers started showing losses. JLR is no exception. The company has been loss making for quite a while and the situation was not improving due to the recession. In order to keep the company a float, the strategic response from Tata Motors was capital cash injection. To secure funds, the company talked to the UK government about the possibility of some form of financial assistance. The motion fell through because Tata could not agree commercial terms. Tata eventually secured the finance to continue trading and maintain investment from banks independently. This strategic response definitely paid off as Tata has announced pre-tax profits for JLR for the year up to March of £32m compared with a loss for the preceding 10 months of £281m.
Company Image & Brand Loyalty
Both Jaguar and Land Rover are well-respected brands in the luxury car market. These brands are synonym of marquee, exclusivity, smallish volumes globally, quality and heritage. These are the real driving forces in this segment. The location of the finish product highly contributes to the brand image as well. It also requires a unique supply chain of craftsmen to support the manufacturer. At the end, the product has to be able to match the perception in terms of quality, exclusivity and brand heritage. The luxury car market is a niche one and JLR’s best bet would be to focus more on producing high profit quality low volume cars rather than adopting their current high volume strategy. Tata must play the â€•country-of-origin card. Jaguar is an English brand, not a British one. The cars should be sold as Made In England. Hence producing their cars in a low economy country wouldn’t be beneficial to the brand image. So, Tata must continue improving the efficiency at the JLR plants in UK and continue manufacturing the cars there itself. In terms of HR, it will save thousands of jobs and keep the loyalty of the workforce. To acquire further higher levels of quality and craftsmanship in the car manufacturing process, training programs can be performed at all levels and at a regular basis. JLR’s brand image has suffered a lot during the past ten years. This was largely due to reliability issues. Having the right people in the work force can help to alleviate this problem.
Competition From Other Luxury Car Makers
The market segment in which JLR is fighting is very competitive; its main rivals currently are BMW and Mercedes. The former is currently a sworn ‘enemy’; their sales are about 6 times more compared to JLR. The competition is currently so fierce that both companies try to demean each other through advertising. A good strategic response to that from JLR would be to make an in-depth customer analysis. So far JLR has been associated to the market of retiring directors car. Whilst there is nothing wrong about it, from a business point of view it’s making the market segment even smaller. They really need to know what the customers want and fulfil the demand. Customer service plays a crucial role in the automobile sector. BMW is well known for their very high level of service. If JLR wants to have an edge other BMW they will have to ‘go the extra mile’. This can be achieved by creating specialized units in the company dedicated to customer service. If these units are already present, the customer service department can be improved in terms of staff and competency. The key to good customer service is knowledgeable and well trained staff. There are many other services that can be implemented or improved, for instance: hotlines, online assistance and so on. JLR will have to take the necessary measures if they want to have a fighting chance against BMW.
The Environmental Issue
The global society is evolving towards a progressive decarbonization of the economy and better fuel efficiency, inducing important changes in the car sector. In the EU, many new technologies have been invented to substitute fuel in order to better protect the environment, but none of them is yet a priority: bio-fuel, hydrogen, electrical, pure electrical, hybrid electrical, electrical with plugging or with battery. These technologies are still rather in the research and development stage but some companies have already successfully launched their ‘eco-friendly’ vehicles. Sooner or later, all car manufacturers will have to follow as the trend right now is vehicles having low carbon footprints and in the future possibly it will be zero emission. If JLR wants to be at the forefront when the shift starts happening, the company will have to invest more in R&D in this sector. This will obviously require more HR to run the said departments. JLR will have to have a team of very qualified engineers and researchers who will be ready to take the challenge.
The Importance of Good Human Resource
It is undeniable that the success of a company is greatly contributed by its personnel. Good company performance is directly related to the people working for the company. This formula is obviously not an absolute one but none will argue that having competent people aboard usually guarantees good results. However, as we will se below, having the good mix of employees is not enough to achieve good results. Human beings can be considered as the most emotionally complex animal on this planet. Having people from different background, ethnicity, cultures and values working together in an efficient manner can be a challenging. There is bound to be conflicts at some point. Some problems can be solved relatively easily but others are more complex since every individual reacts differently. The working place can be visualised as an ecosystem where the balance can be easily upset. The result can sometimes have little effect on the overall performance of the company but in some cases it can be disastrous. A typical example would be a frustrated salesman going out to take orders for the company. No good performance is to be expected here. The question that one might ask at this point is, did the boss know that the salesman is frustrated? Why is he frustrated? Depending on the type of organisation i.e. the working culture within the organisation, he might never notice it. That’s one of the many examples why Human Resource Management is essential for a company.
Right People for the Right Job
“Who’s on the bus?” Management guru and best selling Author John Collins thinks is the question that business owners need to ask themselves. This is an imagery where the bus represents the company and the employees are the people getting onboard. Getting the right people ‘on the bus’ is crucial to success – more important, even, to the company’s strategy.
Sadly this is only the first step of the recruitment process. Once you get the right people onboard it all comes down to getting the best out of them. However most of the time it’s not as straightforward as one might think. There are different possible scenarios where it can go wrong. For instance, a topflight salesperson who gets promoted to be head of sales might be a lousy manager. A jack-of-all-trades could get restless if asked to focus on one area. And employees who thrive in a start-up environment may chafe when asked to follow the rules and procedures of a larger company. These issues need to be tackled from the beginning. The company needs to decide on how much they want to keep his employee and if his/her performance problem can be fixed. If is not uncommon to see that some employees are extremely willing to work for the company and it’s just a question of getting them on the right tasks. This is usually the role of the HR department in an organisation.
Culture & Values in an Organisation
Culture and values can be defined as the implicit and explicit value framework that is shared by a people, which, to a great extent, governs their behaviour patterns, perceptions and manner of interpreting the world around them (Lecture Notes, 2010).
In cross-border M&A, many dimensions must be taken into account on the part of the acquirer. Cross-border M&A face problems of both a cultural and an environmental nature. The acquiring firm should understand the national culture as it is incorporated in the firm’s needs and motives (Olie 1990).
An acquired foreign company may be more difficult to manage if there are great cultural distances between the two countries, since it is difficult to affect or change an existing corporate culture and the national culture and macro-variables differ (Very et al. 1993). Differences in national cultures result in different organizational and administrative practices and employee expectations’. Furthermore, the more culturally distant two countries are, the more distant their organizational characteristics are on average (Kogut & Singh 1988).
Difference in Working Culture of JLR & Tata Motors
On acquiring JLR, Tata Motors already knew that the difference in working culture would be quite significant. In order to illustrate the differences in working culture between UK and India, Geert Hofstede research will be used.
Geert Hofstede proposes five dimensions in which national working cultures can be placed.
The five dimensions are:
Power Distance Index (PDI)
Uncertainty Avoidance Index (UAI)
Long Term Orientation (LTO)
The dimensions between UK & India are illustrated in the charts below.
Figure Working Cultural Differences
As it can be seen in the charts above, the working cultural differences are quite significant between the two countries especially in the Power Distance index & Individualism index.
Power Distance Index (PDI)
This index indicates the inequality in the working culture. The difference between the two cultures is quite significant. In India the workers accept and expect that power is distributed unequally. The company leader will have absolute power and their decisions are generally undisputed. Interaction between the field workers and the managers are generally inexistent.
Individualism in the UK working culture is very high compared to India. In the UK the employees are expected to look after themselves whereas in India the employees have a collectivism attitude.
Masculinity refers to the distribution of roles between the genders in the work place. The UK and India have about the same masculinity figure.
Uncertainty Avoidance Index (UAI)
As the name implies, it means that if a society have a high UAI the individuals will have a low tolerance for uncertainty and ambiguity. For example, in a working culture with a high UAE, the employees have difficulties to accept different opinions since they already have their own believe. Just like the MAS, UAI number for UK and India are almost the same.
Long Term Orientation (LTO)
LTO deals with the virtue regardless of the truth. Values associated with Long Term Orientation are thrift and perseverance; values associated with Short Term Orientation are respect for tradition, fulfilling social obligations, and protecting one’s ‘face’. Indian employees are driven by quite high LTO whereas in the UK LTO is very low.
Cultural Problems Within Jaguar Land Rover
What has been mentioned so far are the cultural differences related to the difference of nationality of the two companies. However there is some other working cultural differences directly associated to the company itself.
Jaguar and Land Rover was under Ford Motor Company for more than a decade before Tata Motors acquired it. It is also important to mention that before Tata’s acquisition Ford was already facing lots of problems with the culture and values the company’s management had permeated in the company. Jaguar and Land Rover would have acquired its parent company’s cultural problems due to the long association.
Ford Company for a long time had a deeply ingrained hierarchical culture, which resulted in more than required people working in the company. This problem was also present in Jaguar and Land Rover during the acquisition. It had a bureaucratic role culture where influence and power was largely by role and position. Jobs were tightly defined so there were little room for showing own talents and abilities and it had an environment where it was difficult to get approval for changes (David Kiley, 2007).
All this lead to in having a lot of complex futile operations, which resulted in the car company having 30 engineering platform worldwide which is very high even for a big company like Ford.
Promotion was more dependent upon ties with the Ford family rather than genuine performance by employees. The culture had promoted an environment of competition of employees for promotion and top position and it had led to managers focusing more on their career rather than their customers. It had resulted in hiding valuable information among different department in the company such as financial figures. It had also caused managers to seek refuge in the company’s structure rather than bringing out innovative ideas.
The culture had promoted people to make everything look good rather than showing what was relevant. Problems were not discussed openly and was rather hidden which had inculcated a tendency in employees to rationalize their mistakes rather than put effort in correcting them.
All these problems were also present in Jaguar and Land Rover during acquisition.
Working Culture Within Tata Motors
The working culture and values within Tata group is quite distinctive to many multinational companies. What follows is a small brief outlining the culture and values of the company.
The group started at as a local trading company in 1868 and grew to be today’s largest private corporate group in India. The company is now a global conglomerate operating in various sectors such as steel, IT, automobile, power, communication and hospitality.
Tata since its foundation itself has infused ethics in the work place. All companies talk about following ethics in their daily operation but few companies follow ethics as well as they do. The company has a Tata code of conduct (TCOC), which every employee has to follow. This TCOC has to be signed by every employee while joining any company, which is headed by Tata. TCOC is a comprehensive document that serves as the ethical road map for Tata employees and companies, and provides the guidelines by which the group conducts its businesses. TCOC has 25 clauses regarding what an employee and companies should follow regarding issues about national interest, financial reporting, competition, equal opportunities etc.
Other than this all Tata companies have officers to ensure that employees of the company follow TCOC. The company also conducts awareness programs to make sure that TCOC is fully appreciated.
Tata is also one of the companies that put lot of emphasis on their employees’ well being. The company favour job security rather than high salary. Different people would have a different perception on that matter but Tata has been operating in this manner for a long time and this formula seems to work for everyone. Employees at Tata also benefit from good pension schemes and other benefits such as welfare etc.
One of the driving mot for Tata is, customer satisfaction at all times. The company is well known to offer unprecedented customer value and satisfaction.
As it can be seen, the working cultures in both companies are very different. The participation of Tata in the management of JLR so far has not created any major issue. There is no evidence that JLR is suffering from Tata’s working culture. On the acquisition of JLR, Tata assured that the operations of the company would remain unchanged in the sense that the current managing staffs in the UK will retain their positions. The big change that the company had recently was at management level: newly appointed CEO who was a former BMW and Ford executive. The new CEO Ralf Speth had no affiliation or whatsoever with Tata before. One could have suspected a Tata manager to take over operations in UK but as demonstrated that was not the case. This, in a way sets the tone. Tata seems to be letting JLR running as it was in the past with the difference of an all-new corporate strategy. However it is assumed that the existing problem within JLR has certainly been addressed. To what extend will Tata management affect JLR on the long run is quite uncertain and only the future will tell us. After all, JLR has been for Tata for only two years now.