Link between strategy and management control system of Tata Motors - Free Essay Example

Introduction This essay addresses a very debatable yet imperative topic relating to the link between the strategy and management control system of an organization. The discussion in this essay roots from Andrew Campbells paper, Tailored, Not Benchmarked: A Fresh Look at Corporate Planning. This paper discusses the impact of benchmarking and the effect of efficient planning strategies on the value of an organisation. He suggests that in place of deploying standardized benchmarking and planning strategies based on another organisation, each organisation needs to evaluate its internal environment and devise strategies according to the needs of the individual organisation. Campbell describes the planning process very appropriately in his paper as, A good planning process is unique to its company () carefully tailored to the needs of the businesses as well as to the skills, insights, and experiences of senior corporate managers. Furthermore, Campbell lays stress on the fact that organisations need to constantly monitor and modify their planning strategies to match the needs of the organisation and the dynamic business environment. In this paper, Campbell has very modestly touched upon the fact that management control systems (MCS) and strategy essentially complement each other and should be coordinated to produce the desired firm value (Campbell, 1999). MCS are defined as any formal, information-base d procedures and statements used by managers to monitor and influence the behavior and activities in a firm (Simons, 1994). While, strategy is a continuing pattern of decision making for the future of an organization (Mintzberg, 1978) deliberate (formal) or unintended (informal), that emerges due to the opportunities that arise in the organization or market (Merchant Stede, 2007; Langfield-Smith, 1997) An earlier perspective on this topic was provided by Anthony (1965, 1988) suggesting that, strategy is the constant given element in the organisation and management control systems hold the job of monitoring, modifying and tracking the progress of their implementation. Lorange et al (1986) introduced another association of management control and strategy in the concept of strategic control. Strategic control is a system constantly examining an organisations strategy with respect to its goals, and modifying them whenever the need arose. The one limitation all these perspectives suf fered from was the fact that, management control systems identified with the task of monitoring and modifying strategy only (Simons, 1990). Robert Simons (1990) introduced a new perspective proposing that management control systems were responsible for not only monitoring or implementation, but also for formation of strategy; hence establishing a very important relationship between management control systems and strategic choices of an organisation. Building on these ideas, this essay aims to analyse the link between management control system and strategy of Tata Motors Limited (TTM), a multinational automobile corporation headquartered in Mumbai, India. During the course of this essay, we will first have a look at TTMs background strategy, control systems, performance measurement system, and the risks they are facing. Followed by this will be a discussion on TTMs case in the light of different perspective mentioned above to observe whether there exists a link between the strate gy, management control system and performance measurement measures of TTM. Finally, we will have a look at some suggestions with regard to their control systems that could help TTM improve their position. Tata Motors Limited Background and Strategy TTM is a part of the Tata Group, the largest private corporate group in India. Tata group has business ventures in steel, communications, tea, information technology, power and hospitality aside from automobiles. TTM is Indias largest automobile company, with consolidated revenues $20 billion in 2009-10. It is the leader in commercial vehicles in each segment, and among the top three in passenger vehicles along with being the worlds fourth largest truck manufacturer, and the worlds second largest bus manufacturer. In addition to domestic growth, TTMs important strategic move over time has been international expansion. TTM has acquired Daewoo Commercial Vehicle Company Limited, Hispano Carrocera S.p.A. Spain, has a joint venture with Marco Polo of Brazil for production of buses and most recently acquired the iconic British brands Jaguar and Land Rover (Just-Auto editorial team, 2010). Tata motors follow a straightforward rule for expansion; since they have limited technological avai lability to get a presence on the global industrial scene, they look for countries with access to technology and products, find a strategic partner in that market, and then sell Tata motors products in that country whilst exporting their products and capacities regionally (Seshan Kumar, 2008). For example, In January 2006, Tata motors signed an agreement with Fiat Group to sell Fiat vehicles through the Tata Motors outlets in India. In May 2006, the joint venture of Tata Motors with Fiat grew into an industrial partnership for sharing Indian facilities to manufacture vehicles, engines and transmissions for Indian and overseas markets (Just-Auto editorial team, 2010). Along with Internationalisation of operations, TTM follows the strategy of product innovation, which provides TTM with its competitive edge reasonably priced products. It started with introducing the innovative 407 platform for trucks in the 1980s, designed especially to suit Indian road conditions, in consideratio n with rural areas. Moreover, even today towards the end of the third decade of its existence it dominates two-third of the market. In 1998, TTM launched the first indigenously designed passenger car in India, the Tata Indica sporting innovation by providing more space, contemporary features at a very competitive price. In 2005, TTM launched Indias first mini truck, a small sub one-tonne vehicle facilitating intra-city or shorter distances. This vehicle was designed to replace the three-wheeler carriages market in India by a more sophisticated four-wheeled mode of transport at almost the same price. It used a two-cylinder engine, provided only in Irish crà ¨me colour and had a rigid front axle and rear wheel drive for low cost. The most recent innovation TTM has come out with is the 632-cc Tata Nano, claimed to be the cheapest car in the world also called the Peoples car/ Rupees 1 lakh car ($2500). The target price itself became the source of innovation, as industry claims that it is impossible to make a car at that price. This car is developed based on a series of innovative ideas; engine was packaged on the rear side; two cylinder engine (conventionally there are three-four cylinder engines); identical handles and mechanisms for left and right side doors. Moreover, the speedometer and other instruments panel in the Nano are in the centre of the dashboard, rather than facing the driver, to make it easy and cheaper to switch the position of the steering wheel from the right to the left facilitating exports to other markets as well (Seshan Kumar, 2008). Furthermore the car has unconventional seats; maximising the interior space by pushing the wheels to the corners and power train to below the rear seat creating sufficient space to accommodate three-to-four people (BMA, 2010). Analysis Management control system and Performance Measurement System To sustain the innovation in products and expansion in markets TTM had to introduce changes in their MCS to complement their strategic moves.TTM has two main divisions based on the type of vehicles passenger cars and commercial vehicles (CVBU). With increasing operations TTM In the year 2000, TTMs CVBU suffered its first loss of $2.5 million that led the company to adopt the Tata Business Excellence Model (TBEM). TBEM, based on Malcolm Baldridge Award for business excellence and Balanced Scorecards as its performance measurement, which will be discussed in depth later (Tata Group| Corporate Governance| Busniess Excellence, 2010). TTM saw shift from a more hierarchical structure to a flatter organisational structure, facilitating easy communication between employees. The change in business model complimented the change in the information technology system too. TTM uses an integration of outsourced facilities some of which are Ariba for supplier negotiations; product lifecycle manag ement and advanced computer aided designs for the engineering and designs of their products; SAP enterprise software application and programmes for enterprise resource planning and increasing transaction effectiveness. Through this, the activities of all departments production, manufacturing, purchase, finance operations etc, were interlinked facilitating better control and coordination by means of an efficient supply-chain management system. Furthermore, TTM changed their product development process and introduced a more collaborative process utilizing the capabilities of different venture partners, suppliers, design houses, subsidiaries and associate companies specialising in different verticals. With the transition of the in-house production process TTM realised the importance of expanding into the international market and thus adopted the internationalisation philosophy mentioned above, to keep in line with their goals and objectives at the same time as gaining access to diffe rent markets (BMA, 2010). TTM has a strategic preview of their plans every 5 years where plans are altered whilst introducing new goals and objectives. A well-defined process for the preparation and monitoring of the annual budgets and long-term business plans is followed. There are meetings twice a month of the management committee at operational levels to review the operations and plans of key business areas. TTM has a set of corporate policies, the Tata Code of Conduct, covering the integrity of financial reporting, ethical conducts, regulatory compliance, conflict of interests review and reporting of concerns. All employees have regular exposure to this through fast flowing information between the management and the employees by means of articles, magazines and newsletters (Jamble, Sukate, Guha, Mhasade, Sumeet, Tonk, 2010). TTM has an intact performance measurement system keeping in line with their strategy of offering innovation at a competitive price, as mentioned abov e the Balanced Scorecard. After suffering their first loss in more than fifty years in 2000, TTM had to resort to stringent cost cutting across all business units, which poised a challenge. TATA Motors Commercial Vehicle Business Unit then employed the balanced scorecard. With the process in progress, the genuine problem revealed itself. It turned out that the manual nature of the review procedures of such a huge structure was getting extremely difficult to implement and consuming valuable amount of time. To address this, the Balanced Scorecard Automation Tool was implemented that would centralise, assimilate and collate the data, providing rapid review and analytical functionality and a comprehensive single picture of organisational performance. Within two years of this, CVBU registered a profit of $ 2.3 Million from the loss of $ 2.5 Million, leading to 60% of TTMs inventory turnover. Initially, CVBU had started the balanced scorecard with only corporate level scorecard; but with its success, now it has expanded to six hierarchical levels with three hundred and thirty one scorecards, additionally looking forward to proliferate it to the lowest level of organisational structure (Huda, 2009). Risks Fetching the advantage of low cost of labour in India, and cheaper resources, TTM places itself as a firm providing innovation at a lower cost, but they do not necessarily produce differentiated products. Their innovation only lies in the fact that they offer a multitude of features suitable for Indian conditions at a lower price, that no other Indian company does (lower competition in domestic market). The threat that TTM faces is the managing of two different segments of vehicles at the same time, the higher priced premium segment (Jaguar and Land Rover) and the very low priced segment (Tata Nano); the low cost manufacturing would not be as advantageous its premium segments car (Seshan Kumar, 2008). Moreover, other Indian manufacturers teaming up internationally like Renault Logan (joint venture between Mahindra and Renault) will intensify the competition for TTM. Further, by entering into the premium cars and sports utility vehicles segment, TTM now faces competition from vario us other brands like Audi, BMW, Daimler, and Volkswagen (Wentz, 2008). Moreover, Through TTMs core strategy of internationalisation, they depend on exports for revenues. But, as the position of the Indian Rupee has now strengthened, it is posing a challenge resulting in a lesser than expected export realisation (Kurup Toms, 2008). Aside from that, TTMs low cost products rely on low quality and its international competitors like Hyundai and Maruti Suzuki have internationally approved quality. Therefore, TTM needs to address its critical quality issue to be an international player (editorial team, 2010) From the discussion about TTM, it can be observed that there is a very evident alignment of its strategy with its performance measurement system and management control systems. The corporate strategy of a company helps in the decision of the company regarding the type of businesses to operate in (Johnson Scholes, 1989), how to structure and finance the company, how to acquire and utilize the resources to convert distinct competencies into competitive advantages (Andrews, 1980 cited in; Langfield-Smith, 1997). TTMs MCS boasts a much-organised structure comprising of formal control standard operating procedures, budgetary controls; informal controls regular interaction with employees, interactive communication system (also facilitating personnel control); administrative and social controls plying ethical codes of conduct; which exemplifies that TTMs MCS has a well-defined structure complementing its precise strategic perspective (Langfield-Smith, 1997). By changing the organisational structure and introducing a new performance measurement system (the balanced scorecard), it can be noticed that TTM reviews its MCS has a frequent strategic preview and initiate changes as and when the need arises. Furthermore, it is noticeable that TTM is a follower of the contingency school of thought, which advocates that organisational effectiveness results from deploying a dministrative practices (like performance measurement) in a way that fits the contingencies the organisation functions within. Rather it is noticeable that, while adapting to these contingencies, TTM is finding new practices that match their organisation than relying on the ones other organisations use (Chenhall, 2006). Scope for Improvement Robert Simons (1995) suggested that for managers of modern organisations, it is a difficult task to manage employees and organisation efficiently while giving them enough space to come up with new and innovative ideas at the same time controlling them enough so that they do not misuse this freedom. He suggested four levers of control, the belief system; boundary systems; diagnostic control systems and interactive control systems (Simons, 1995). While the belief systems inculcate core values of the organisation, the boundary systems specify what needs avoidance. On the other hand, diagnostic control systems determine critical performance variables and the interactive control systems help resolve strategic uncertainties (Triantafylli, 2010). For successful implementation of lever of controls, the organisations has to make sure that all the four levers are complementarily in place to produce the desired organisational performance keeping in line with the strategy. For TTM while the ap propriate belief and boundary systems are in place, there seems to be a lack of diagnostic and interactive control systems. A number of key issues that require attention have been pointed out in the earlier section relating to their strategy with respect to competition, quality and exports. If TTM had the diagnostic and interactive control systems in place then these critical areas would have been resolved with an appropriate solution leading to effective organisational performance. Alongside, TTMs strategy would have accounted for these shortcomings if intact levers of controls were in place. Conclusion TTM is one of the strong contenders in the Indian automobile market heading towards a more international sphere. If it continues with innovation and the cost advantage, the organisation would be able to make successful headway. To achieve that, TTM needs to look into some areas that require attention, bring the required changes to its organisational processes, strategy, and control systems. Although, there is a strong link between the MCS and strategy for TTM, but it could be put to a more valuable use by employing the appropriate changes. Reverting to Campbells statement mentioned earlier, it is clearly noticeable that TTM does not benchmark, but focus on its external and internal advantages and utilizes the resources appropriately. This is evident from the fact that they use the availability of cheaper resources and labour to obtain their cost advantage and that TTM introduced new performance measurement system with the change in their strategy to complement it. Furthermore, TTM has utilized the availability of technical expertise to manufacture innovative products, gain a competitive edge in the market, and carve a niche for itself. Therefore, TTM has its unique strategy and competitive edge gained by virtue of its effective management control system that has been responsible for TTMs success.

A Critique On Human Development Research - 870 Words

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Fabian Strategy Wearing Down the Enemy

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Difference Between Modern And Modern Society - 1581 Words

In this modern society, the rate at which changes in the society is growing is moving faster than ever before. Weber saw that the rationalisation of life is what is causing the difference between pre-modern and modern life in our society today. He was unhappy with the division but, on the other hand, it brought about an equal and efficient society. This is why weber said that we are living within â€Å"an iron cage of rationality† as days pass by. In inclusion with that, the essay will explain what bureaucracy is and how it links to modernity, the different types of rationality, Webers understanding of modernity, disenchantment and the reasons why we obey modern laws. Weber acquainted the idea of rationalisation, which clarifies how Western culture has moved from a spiritualist, or conventional introduction to a more level headed introduction. Rationalisation is the procedure of supplanting customary and enthusiastic thought with reason and common sense. 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Otisline - 795 Words

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Initiative Objective/Benefits Objectives Benefits Otis wanted to centralize service delivery, response time and product issues. †¢ With OTISLINE, 160 people together worked 24 hours a day †¢ Drastically reduced response time of 1 second or less/customer †¢ Aggregated information from multiple data sources Impart Knowledge of the problem to senior management before it became critical. †¢ ImprovedRead MoreOtis Elevators Case Study Essay examples640 Words   |  3 Pagesresolve them. In the past, we may not have had cross organizational communication; our employees now, however, need to be knowledgeable about our entire process to be effective. One advantage we have is the familiarity of past IT systems such as SIP, OTISLINE, REM, and SIMBA on which the e*Logistics program will be based. I also recommend that we educate employees, suppliers and customers about the benefits realized by the implementation of the e*Logistics program to ensure a smooth transition. The

Explain Why Market Prices are Useful to a Financial Manager free essay sample

Explain why market prices are useful to a financial manager. A market price is the current price at which an asset or service can be bought or sold. (investopedia. com). Market prices are very useful to a financial manager. It helps with financial planning and it reflects the value of the assets based on GAAP (which refers to the Generally Accepted Accounting Principles). GAAP is just a set of guidelines that must be followed when it comes to any type of financial practice. Market price is also a crucial component of the balance sheet and can impact the financial statements. Market values reflect the amount someone is willing to pay today for an asset. Market values also reflect its historical costs. A financial manager has potential to maximize the company’s profits while utilizing this. Market value is equal to present value plus net cash flow. Discuss how the Valuation Principle helps a financial manager make decisions. We will write a custom essay sample on Explain Why Market Prices are Useful to a Financial Manager or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page The valuation principle is an analysis between the value of the benefits and the value of its costs. It is the foundation of financial decision making and it provides a basis for making decisions within a company. Understanding the valuation principle is very useful in assisting a financial manager in the company’s overall well being. The valuation principle also utilizes the market prices as well. â€Å"The value of a commodity or an asset to the firm or its investors is determined by its competitive market price. The benefits and costs of a decision should be evaluated using those market prices. When the value of the benefits exceeds the value of the costs, the decision will increase the market value of the firm. † (SU3finance) Describe how the Net Present Value is related to cost-benefit analysis. Net present value is the sum of discounted net cash flows over the period. It is also defined as the difference between the present value of a project or investment’s benefits and the present value of its costs. (SU3finance) When properly calculated, the NPV is a relatively objective method of determining the improvement in national wealth resulting from a proposal. Cost-benefit analysis is the wider process of proposal selection. NPV analysis is just one tool which may be applied in Cost Benefit Analysis. Slack states, â€Å"Cost-benefit analysis (CBA or COBA) is a major tool employed to evaluate projects. It provides the researcher or the planner with a set of values that are useful to determine the feasibility of a project from an economic standpoint. † (Cost/Benefit Analysis) It produces easy results which are easy to comprehend. The end product is a â€Å"benefit-cost ratio that compares the total expected benefits to the total predicted costs. † (Slack) NPV is usually obtained from the cost-benefit analysis. It is obtained by subtracting the discounted costs and negative effects from the discounted benefits. A negative NPV should be rejected because society would be worse off. Explain how an interest rate is just a price. An interest rate is a rate which is charged or paid for using money. Price is the amount of money that is expected or required for something. That is basically what an interest rate is. Whenever you take out a loan, you are charged an interest rate. They expect you pay this certain amount in order to borrow their money. Also, the price of investment quality bonds is usually linked to interest rates. When interest rates rise, the price of a bond will decline. When interest rates fall, the price of a bond will rise. The interest rate is referred to the coupon rate of a bond. The coupon rate is the price that will be paid for the bond. Also, the fixed rate of interest will be the amount that will be paid when a bond is first issued, until the interest rate matures. Describe how a bond is like a loan. A bond is basically a debt security that is sold by a corporation or the government. Whenever the public wishes to borrow from the bank (including corporations), the bank issues out loans. You pay interest regularly on a bond and then on the principal amount sometime in the future like you would a loan.

Information Systems Analysis and Design

Question: Describe about the Report for Information Systems Analysis and Design. Answer: Introduction The basis is on the concentration of the analysis and the identification process in the industry of healthcare. There have been reflections which are adopted for the increase of the services along with adapting the services for the healthcare. The implementation is based on the OO design concepts for the services in the healthcare organization. There have been connections of the objects for the different system domain with the use of the UML domain model. The association of the healthcare is based on handling the web based tools and the individualized coaching methods. (George et al., 2015). The identification of services is important to be adapted for the increase of the healthcare development. The modifications of the business pattern are set through a globalization process which makes changes in the society with certain challenges and the opportunities. There have been effects which relates to the overall healthcare concerns in a healthy life. The connections between the globaliza tion and their impact has a major focus on the sustainability, enhancement of technology with the market development. In the health care industry, the processes have been set to define the interaction of the industry with the customers in order to redefine the events which are ruled under the globalized factors, with certain options. OO design solution for the service There have been different sets of the object model which describe the hierarchical structure of the objects along with identifying the relationships, attributes and the operations being conducted by them. The dynamic model work on the representation of the different sequence of operations which include the time for the collection of the state diagrams for the object classes. The functional representation is the analysis of the data flow diagrams which have a proper association, attribute and the operators to handle the different behavioral scenarios. (Stamatakis et al., 2013). The approach of the top-down design is based on allowing the use, reuse and the cloning of the different standardized components. The OO designs have been for the development of a streamlines approach with the analysis of the different facilities of the services which affect the business failure or the success. These are the diagnostic facilities, pharmaceutical distributors and retailers, clinical training ins titutes and the medical information etc. Recommended COTS (Commercial Off-The-Shelf) software packages The Microsoft office is the packaged software solution for a proper business approach in the healthcare. This has been defined and designed to be implemented without any particular need for the customization. The products related to it are ready for sale. Another example is the antivirus software which helps in handling the non development sold of the items in the market place. The products have been resigned readability and are completely user friendly. The COTS package has been for the identification of the user roles and the personas which direct to the utilization of different packages in order to achieve the goals of the business. (DePasse et al., 2013). The use of the features, events and the processes of the business are mainly to define the functionality where the events are not temporarily. The name of the business policies is for identifying the different standards, guidelines and the regulations to meet the implementation with the conceptual data model. There have been certain quality attributes which hold to the performance, reliability, security and the usability of the system. In healthcare, COTS software packages have been used for the effectively rolling of the business community. The models help in targeting about how to minimize the different negative byproducts of the change with the role of the people. The models have been set on the basis of development and job aids process. Self-Assessment The computer aided process planning is based on handling the different technology process with the parts of manufacturing. This includes the planning of the different processes along with determining the sequence of the manufacturing operations which will be important for the documentation of the operating sequence. This is known as the process sheet method which contains the lists of the business operations along with the other production process tools. For the self-assessment in the business industry, there is a need to focus on the personal information and the work related information of the doctors and the nurses. (Ghorbanian et al., 2015). This will help in the health information management. The patient service and the support will lead to the procurement and the settlement of the available medicine stores and products. The business intelligence methods are to control the knowledge management process with the monitoring and the control of the different methods of the technology used in the hospitals. With the change in the healthcare services, there is improvement of the technology to design the organizational knowledge mapping through the recognition of the business process. With the changing processes, there have been Healthcare Quality Association with the enhanced services for the satisfaction of the patient. This focus on calculating the different number of the products along with the amount for the waste management treatment. The research is based on the systems which hold the time for the doctors at the time of emergency. The system is set to handle the DFD with the ERD assistance to analyze the different entity features of the system. The patients are able to experience an enhancement in the services with proper analysis of the data. The process planning tool helps in analyzing the different activities and the functions with the detailed plans to work on the specifications, operations, work standards and the tooling process. The process plans are through the step-by-step work which includes the individual operations with set-up of instructions and the quality assurance of the checkpoints. This will lead to the variant process of the planning and t he generative type of the computer aided process planning. A proper planning and the task building requires to set the defined capabilities with the establishment of the system specific features along with optimizing plans in the linear manner. This will help in satisfying the combinations of the different dynamic systems and processes as per the availability of the machining resources. The designed approaches are for the self-assessment where there have been interactive computer assistant health risks assessments. The research is based on the perspectives of the concept mapping which includes the brain storming sessions and the face-to-face analysis of the online storing sessions. Reference George, J., Kumar, V., Kumar, S. (2015). Data Warehouse Design Considerations for a Healthcare Business Intelligence System, InWorld Congress on Engineering. Stamatakis, E., Weiler, R., Ioannidis, J. (2013).Undue industry influences that distort healthcare research, strategy, expenditure and practice: a review.European journal of clinical investigation,43(5), 469-475. DePasse, J. W., Lee, P. T. (2013) A model for reverse innovationin health care,Globalization and health,9(1), 1. Ghorbanian, A., Ostadi, B., Chaharsooghi, S. K. (2015) Developing a Hybrid Business Process Model Based on Simulation-Knowledge Management,Management and Administrative Sciences Review,4(2), 306-324.