Question

Compose an essay on the following subject: The world witnessed rapid changing in technology, trade position, political relations, etc., besides there are also occasionally unexpected disturbance in business. Firms are in urgent need to analyze their international business environment to flexibly react and make certain strategic adjustment. Pick up a firm and analyze those critical factors in its international business environment and suggest how the firm should be responsive to those factors and what could be done to react to the rapid changes.

Answer 1

Tata Motors

International Business Environment Factors and Response of Tata Motors

1.Political Factors

When it entered in the UK, the options of entering USA and Russia were also available. But Tata Motors preferred UK over USA and Russia due to favourable political factors such as India being a preferred economic agent, UK car market, less tarriff and non tarriff barriers and language similarity. USA market requires high quality and there are several non-tariff barriers which make it difficult for a new company to enter the market. The reason Russia was declined is because they lack a well-developed dealership network, there were high entry barriers, Language problem and finally there was always the uncertainty of future economy. So they prefer UK market.

2.Economic Factors

It includes market growth potential, pricing strategies, return on investment and various such monetary aspects. They made expansion through acquisitions and joint ventures.For example, if there is a hike in price of aluminium in Kenya, Tata Motors has the option of falling back on suppliers in Europe or Asia. They also have to keep a close eye on the fluctuation in the currency rates.It is related to capital investment which is challenging.

3.Social Factors

The trait of demographic trends (life style,income etc.) allows a company to make plans and strategise on the kind of products to be marketed. The influence of fashion and luxury is so strong that consumers neglect the increase in price of fuel. Catering to this Tata Motors launched Tata Safari and Tata Sumo Grande, India’s premier SUVs which is not affordable to all. Bringing this into perspective Tata Motors has continued to manufacture and market Tata Indica, a low budget passenger car. A lot of motorcycle accidents taking place in India, Ratan Tata, the Chairman of Tata Group had a vision of launching the worlds cheapest car -Tata Nano.

4.Technology

Tata Motors has currently employed more than 1000 Scientists and Engineers in their Research and Development Team. Today technology has been advancing at a very rapidily There have been foreign automobile companies like Hyundai, Toyota etc. setting up operations in India. Their cars were technologically far too advanced than Indian cars. They had power steering and windows, central locking, automatic transmission on gears etc. Tata also adapted and manufactute cars with this technology and maintained their position as a leader in the automobile sector.

Reaction to rapid changes

1. Market Decline

In 2001,the commercial vehicle market faces sharp decline in sales, which also affect Tata Motors. They respond to this problem in following three ways. In Phase one ,costs had to be reduced which is achallenge for company that was not only the market leader but had been used to operating in a seller’s market and employing a cost-plus approach to pricing. Phase two was to be about consolidating their position in India. Phase three was to involve going outside India and expanding their operations internationally.

2.Threat of substitute

Tata Nano faces a threat from electric cars as a substitute. Reva electronic car is already present in the Indian market Ajanta Group, producer of Reva car is planning on pricing its electric car at Rs 85000 which is even cheaper than the Tata Nano. Reacting to this threat Tata Motors has aleady considered making an electric car and named it the E-Nano.