Expansion Challenges of the Enterprise

The Tata Group is a global enterprise operating in more than 80 countries. It is India’s largest employer with a staff of about 200 000 employees in India alone. Founded in 1868 by Jamsetji Tata, the enterprise owns a number of business ventures such as metallurgy, automobile and software development among others. The success of the company is enhanced with its large revenue stream. For the financial year 2014/2015, the corporation reported the profit of $ 103.27 billion. About 70% of the mentioned revenue came from business ventures outside India. The Tata Group is a conglomerate the subsidiaries of which engage in many different businesses. The enterprise is a unique corporation as the parent company is unlisted while its subsidiaries are listed.
The enterprise has developed a unique structure. It is highly diversified but it has managed to maintain control of its subsidiaries. The corporation’s individual businesses are in the form of separate companies with their own CEOs, Boards of Governors and management teams. This business structure can better be termed a federal structure. With the aim of making the subsidiaries of the enterprise more cohesive, the concept of group services was introduced. In an attempt to increase the companies under its control, the enterprise has been involved in various expansion plans. The unique organizational structure, culture, management style and control of the corporation enabled it to develop a corporate advantage over its competitors in the West.

The primary objective of this report is to analyze the challenges of expansion the enterprise is currently facing. The corporation’s expansion activities have been described as highly risky acquisition decisions made without consideration of the risks they pose to Tata’s financial stability. What has made the enterprise’s watchers worried is the fact that the acquisitions are being made using money taken on credit. For instance, companies like Tetley, Brunner Mond, Jaguar and Land Rover were all acquired by the Tata Group with borrowed money.

The approach adopted for the analysis will utilize various internationalization concepts, theories and models in order to develop a framework that will facilitate the rest of the research. The findings of the report will be essential in highlighting the various expansion challenges that enterprises face. The research will also provide solutions for the discussed challenges. Recommendations have been made for future consideration. They advise that enterprises should anticipate potential business changes, avoid taking loans for expansion and apply theories and models of internationalization in their expansion strategies. They can be adapted to help the Tata Group overcome its current expansion problems.

Chapter 1 – Introduction to the Case Study

International expansion is not an easy task. It is marked with a number of challenges. If the company does not overcome these hindrances they can deter its dream for entering the international market. In a bid to expand its subsidiaries and penetrate the international market, the Tata Group has put in place a number of expansion plans. According to Crabtree, the corporation set aside $35 billion for to achieve this goal. This was aimed at turning round the conglomerate’s current economic position and that of India as a whole. The key areas of focus for the expansion have been retail market and defense industry though the corporation has remained open-minded to other potential areas of expansion. In its efforts of expansion the enterprise has been affected by a number of challenges (Vora). Some of them have appeared due to the conglomerate’s poor expansion strategies which have been a result of poor decision making process while others were not connected with the enterprise’s operations. Nonetheless, it is important that the corporation seeks solutions that will enable it to overcome these obstacles. This report will investigate the challenges of expansion the Indian conglomerate is facing as it works towards developing a corporate advantage over its competitors and will provide solutions for overcoming them.

1.1 Statement of the Problem

Many companies expand their businesses with the aim of penetrating into new markets. It is a way for these firms to mark their position in the international market and grow beyond their current status. For the Tata Group, expansion has been a way for the company to expand its customer base in the international market since its Indian market contributes a very small percentage to its income. However, the enterprise’s goal for expansion has been met with a number of hardships that have hampered the process. Failure to find a solution to these problems can lead to losing business opportunities. This will affect the Indian corporations’ reputation of a business leader. To overcome these challenges of expansion, it is critical for the enterprise to re-evaluate its present expansion plans. This will enable it to make proper improvements and have consultations that will prevent the corporation from encountering any additional problems in its expansion plans and strategies.

1.2 Research Aims and Objectives

The aim of this research is to analyze the current challenges of expansion faced by the Tata Group with the following objectives in mind;

  • To critically review the Tata Group’s expansion strategies and plans. This will make it easier to identify the mistakes in these strategies and plans leading to the current expansion problems experienced by the company.
  • To develop possible solutions for the expansion challenges. This research will review the obstacles faced by the enterprise. By analyzing the challenges using appropriate models and theories solutions can be found.
  • To enable the conglomerate to realize its business potential in other markets.

1.3 Structure of the Rest of the Report

This report is divided into five parts in order to create and provide an elaborate picture of the intended research. The paper begins with a brief introduction to the challenges hampering the expansion plans of the Tata Group as it seeks to strengthen its positions in the business world. A better understanding of the issue is given in the statement of the problem with an aim to highlight the impact of these hindrances on the enterprise and the significance of finding ways of overcoming these obstacles. The section also highlights the objectives of the research which are meant to ensure that the research remains within the scope of the problems. The second part is a case brief describing the situation of the Tata Group’s expansion process. The third section is the literature review. This part states the problem and provides a scholarly understanding of the theories, models and planning tools that will be used to analyze the case. Section number four highlights the findings from the analysis. The assessment is derived from the concepts, models and approaches identified in the literature review. The final section is the proposed solution of the problem. This part is meant to generate alternatives how to overcome the current problem the Tata Group’s is facing. It also suggests a number of recommendations for future consideration.

Chapter 2 – Case Brief: Description of Situation

The Tata Group has established an expansion plan as it targets entering an international market. This process will allow it to be able to effectively compete with other enterprises at the same time streamlining the business. According to Milestones, the corporation identified eight countries which it considered to be the most important on its list of expansion. The enterprise also became involved in a number of mergers and acquisition. It targeted the international companies since their products were well received in the international market. This is confirmed by the fact that more than half of Tata’s revenue is generated by its international companies. Apart from mergers and acquisitions, the corporation has also used the expansion strategy of forming alliances to penetrate the international market. This strategy has been used for its steel business. Therefore, the company stopped focusing on exports alone and made its international expansion go beyond organic growth.

The company is yet to fully achieve its objective with regards to expansion; however, it is important to highlight some of the successes already achieved by the corporation. The enterprise has been able to expand into some of the 8 target markets. For instance, the Tata Group has a total of 18 offices in the United Kingdom and 16 in the United States (Milestones). In order to enter the African continent, the enterprise has also established business relations with South Africa.

Despite the above successes in expansion, the Indian enterprise’s expansion plans have been met with various challenges. Firstly, the corporation’s expansion goals have been hampered by its enthusiastic spirit for expansion (Emerging-market multinationals: the challengers). This has led the enterprise to making hasty expansion decisions without considering their implication. The most affected aspect of the business is its finances. The drive for expansion has threatened the financial stability of the Tata Group. Eager to expand its businesses internationally, the corporation has undertaken a number of corresponding activities. Some of these expansions were done rapidly without taking into consideration their financing. As a consequence, the enterprise had to take loans to achieve its objectives. In result, the enterprise has had to accumulate debts.

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Secondly, one more expansion challenge experienced by the conglomerate has been brought about by the tendency of expansion to bring pressure on the systems of business. This is especially common when there is no sufficient time to prepare. The result is business risk due to instability and ineffective management which brings about financial loss.

Thirdly, the enterprise is also currently struggling with the challenge of recruiting the best talents in the newly established markets. In line with this hindrance, there is also the issue of balancing capital while hiring such personnel. This is because the process of balancing the needs of employees with the enterprise’s cash flow has proven to be a problem. This will affect the overall wellbeing of the corporation since its personnel is the most significant resource it has. It is critical to overcome this expansion challenge as soon as possible in order for the company to be able to meet its expansion goals.

The expansion strategies have also been sabotaged by global recession and plunging consumer spending. These economic uncertainties have led to some of the enterprise’s international ventures falling into financial difficulty. For instance, in 2011, one of the corporation’s subsidiaries Corus had to ask for financial assistance from European governments. 3500 employees were facing the risk of being laid off as this company could not afford paying for their labor.

Finally, the Tata Group also faces an expansion challenge brought about by cultural differences. This is among the most common obstacles of international business. It appears in the form of cultural traditions and different workplace norms. Despite the enterprise’s subsidiaries being independent from the parent company, there are some business operations and activities requiring them to follow the corporation’s organizational culture. It is also significant to establish proper understanding in order for the newly established subsidiaries to meet the needs of the new markets.

The above presents the current situation of the conglomerate. The discussed challenges are a threat to the corporate advantage the enterprise has had over its competitors. Many of these competitors have used this period of weakness of the corporation to cut out a niche for themselves in the markets where the enterprise is failing.

Chapter 3 – Problem Statement, Plan of Analysis (Literature Review)

Various scholars have explored the issue of international business growth. Companies are always thinking of ways to grow. This is the main reason why they push for expansion. Business can grow in the domestic markets. However, many regard penetrating the international market as the ultimate growth plan. Sun use the theory of comparative advantage to explain international trade. This theory is useful in understanding the reasons of businesses expansion into the international market. Comparative advantage is what makes some companies succeed more than others in some areas of operations. This is because it allows them to specialize in that particular area of business in which the enterprise is most efficient.

Spirig highlights the various modes of expansion and growth into the international market. They are known as market entry modes. They may be divided into equity and non-equity modes. Export and contractual agreements are the examples of the latter ones while joint ventures belong to the former ones. It is significant that the business seeking for entry into an international market reviews the entry modes in order to be able to develop the best strategy to apply in its expansion. The best form of market entry mode is one which offers the lowest risk. When considering selecting a mode of entry into an international market in order for achieving expansion, there should be proper timing of entry. Depending on it, a firm can be considered to be an early or a late entrant into a market. Both timings have their advantages and disadvantages. Therefore, an enterprise should shape its entrance into a market in such a way that its timing becomes advantageous to it.

Twarowska and Kąkol reiterate the importance of taking into considerations certain factors before embarking on any expansion activities. For instance, the firm should consider which market to enter. One way of doing this is to evaluate the amount of profit which is likely to be made in the potential market. Income can be determined using such elements as market size and purchasing power of consumers.

Market segmentation has been proven to be an efficient business expansion strategy when effectively implemented. It allows businesses to focus their sales efforts on a subset of larger markets (Contractor). Through market segmentation a company is able to concentrate on the part of the market that will bring in sales preventing wastage of resources on those segments that are not essential. Additionally, when an enterprise establishes a segment of its customers, it is able to retain most of them. When developing expansion strategies, it is essential for business to take into consideration this concept.

Another significant concept in expansion is market knowledge. According to Majava, expansion into the international market will require an enterprise to have market knowledge in relation to supply and demand, competition, conditions of payments and channels of distribution. The Uppsala model can be used to gather this information. It is critical to note that this model provides experimental knowledge for running an international business (Tykesson & Alserud). According to the Uppsala model, the commitment of an enterprise to its customers is determined by its size of investment.

Experimental knowledge is also significant when running activities that are based on individual relationship (Wiklund). Such operations include management and marketing which are two essential elements in the expansion of a business. Experimental knowledge is the one that enables managers to recognize opportunities. This kind of knowledge is gained through experience. As a consequence, enterprises are usually advised to hire only experienced managers when formulating expansion strategies.

Li and Frydrychowska argue that international business has two types of distance; psychic and cultural distance. They differ in their methods of measurements. What remains important is that they both have an effect on the process of internationalization. Cultural distance can be measured using Hofstede’s dimensions of culture while psychic distance is determined by the differences in language, business practices, legal systems, education and marketing structure and industry. An enterprise seeking to expand depends on all these factors to succeed.

The process of expansion of firms can be conducted through the network model. According to it, markets are networks of relations between participants. It is claimed that this expansion theory is superior to the Uppsala model. Martin, Swaminathan, and Tihanyi assert that the model shows that long term relationship between customers and suppliers on the market is significant for the success of internationalization. Through this approach, enterprises become dependent on each other as they develop bonds with other businesses. These connections appear in the form of technical, planning, knowledge and legal bonds. They play a major role in the success of an enterprise’s expansion plan.

3.1 Proposed Plan of Analysis

The problem will be analyzed using concepts related to the researches from the literature review. This will be used to develop a conceptual framework that will facilitate the rest of the research.

Chapter 4 – Analysis and Findings

The case brief discussing the challenges that the Tata Group is currently facing in its expansion strategies presented a number of findings which will be analyzed in this section using some of the concepts and theories discussed in the literature review.

The Tata Group has engaged itself in a number of expansion practices with a bid of capitalizing on international business (Crabtree ). The theory of comparative advantage provides a good explanation for the decision of the enterprise to try and engage in a number of industries in other parts of the world. The corporation being a conglomerate is able to engage in various business activities. Since the principle of comparative advantage enables companies to focus on the areas in which they are most efficient, the enterprise does not suffer a setback as each of its subsidiaries can focus on producing one single product (Sun). The challenge the enterprise is facing as a result of this concept implies that the theory is not well implemented in its expansion strategies. As a result, the strategies should be re-evaluated in an attempt to bring about improvements.

The existence of various entry modes into the international business implies that the enterprise has various methods of implementing its expansion strategies. Consequently, the reason behind some of the expansion challenges it is currently facing may be its failure to select entry modes that will propel it into the new successful market (Baena & Cervino 260-267). Additionally, it is imperative that the enterprise notes that the best entry mode is that which poses fever risks to the business. Therefore, the corporation’s style of getting into expansion process without prior planning is dangerous as it denies it the opportunity to analyze the modes of entry. This results into poor entry modes which lead to debts since the company will finance the venture with loans. It can also be suggested that these expansion strategies may not be the best as they are based on whims of management. In summary, the enterprise should have full information on the entry strategies available to it and make proper planning before implementing any of them.

Such expansion concepts like market segmentation and knowledge are two important pieces of information for any enterprise interested in expansion. On the one hand, market knowledge provides information to a business about the potential markets to expand into (Goyat). On the other hand, market segmentation allows the firm to concentrate on a specific section of the market. This way, the business does not waste its resources on ventures that will not thrive. Despite economic challenges such as recession, the enterprise can be assured that its area of the market will continue doing business. The other significance of market information is that it will provide information on the needs of the customers while market segmentation will be useful in narrowing down the needs to the specific customer base. If the Tata Group uses these two concepts effectively, it will achieve some level of success during expansion. Properly used knowledge will enhance the enterprise’s power in adapting to the various challenges thrown on its way as a result of expansion into new markets (Masanell & Ricart).

Enterprises should remember that expanding a business will entail moving it away from the parent company. In many cases it is about moving the operations of the business to another country. This creates distance between the newly established firms and the parent company. What is significant about this change is the type of distance created. Organizations should be aware of psychic and cultural distance. Cultural distance is the difference in culture between the domestic country of the business and the country of location of the new firm (Kilsgård). This phenomenon has proven to be among the expansion problems currently faced by the Tata Group. It is essential to implement the proper means of overcoming the various cultural challenges to eliminate them on the list of expansion obstacles and enable the business to succeed. Psychic distance encompasses some of the most important elements of business operations. They include language, business practices, legal systems, education and marketing structure and industry which are all significant elements necessary for the success of expansion ventures.

Two of the most useful models of internationalization are Uppsala and Network model. It is imperative for the Tata Group to acquire knowledge on some of the models of expansion. This will be helpful in preventing some of the challenges it is currently facing. One of the principles of the Uppsala model says that enterprises must obtain experience on their domestic markets before venturing into the foreign ones (Tykesson & Alserud). This will provide a firm with basic business skills that it can apply in the international market. Another principle asserts that when it comes to expanding, enterprises must first begin with geographically close countries. This brings in the aspect of distance. It will be much easier to establish a new business in a relatively closer state than in one that is thousands miles away. Additionally, cultural integration is easier as countries which are close to each other tend to share some cultural concepts. In the views of Behrman and Grosse (1992), this model is useful in analyzing the present cultural problem the Tata Group is facing. The Uppsala model also encourages enterprises to enter new markets gradually. Companies should not rush into intensive operations when expanding into a new market. This is a cautionary measure because if the new business fails, the damage will be relatively low. This can, however, be criticized since it can deny an enterprise the opportunity for business success since there is no definite way of telling what will be the result of intensive business activities.

On the other hand, the network model shows that markets are interconnections of relations between participants. It is this relationship that will play a role in guaranteeing the success of expansion into new international markets. As a result, enterprises are encouraged to establish strong relations with all participants in their business environment. They can do this by joining a foreign business network. The specific benefits of doing this is that the enterprise can be able to start up a business without having to go through some internationalization level as necessary machinery will already be in place. This model is useful in analyzing the expansion problems of the Tata Group. Thanks to this approach a business can be able to get market information and knowledge which, as it was mentioned earlier, are significant concepts in the process of internationalizing. For the Tata Group, applying this model to its expansion strategies will ensure that it will be able to overcome aggressive competition on the market it wants to venture into (Martin, Swaminathan & Tihanyi).

It is important to note that the use of these theories, models and concepts depends on the current status of the enterprise. In some instances, it may require a combination of a few of them to achieve success while in other situations one theory or concept should be used. Therefore, for an enterprise like the Tata Group, the management should analyze the enterprise’s current status in order to define what matters in its current circumstances (Behrman & Grosse 1992).

Chapter 5 – Proposed Solutions

The first step in overcoming the current problems experienced by the Tata Group in its expansion is revaluation of its present expansion strategies. According to Yannopoulos, the significance of revaluation of the approaches is it to enable an enterprise to respond to its expansion problems. This is because it will increase the corporation’s ability to become independent in the complex international environment. Additionally, the enterprise will become flexible and, therefore, able to adapt to the changing environmental conditions.

This proposed solution focuses on the practices of the enterprise in its expansion processes and decisions. The conglomerate should set in place procedures to be followed during expansion. Expansion decisions should not be made to fulfill the whims of top management (Li & Frydrychowska). This means that proper research should be done first to prevent hasty expansion plans being implemented. This will also be essential in preventing the enterprise from falling into debt as in the case of the Tata Group. When expansion plans are made on an impromptu basis, it is likely that the business will not be able to raise the finances it needs to meet its expansion goals. As a consequence, the enterprise will have to turn to borrowing to finance the process.
Another potential solution for the expansion problems experienced by the Tata Group is training of employees to adapt to cultural differences and overcome language barrier. This will ensure that marketing messages are not lost. According to Meyer and Tran, when there is cultural understanding, it is easier to identify the needs of customers and their sentiments. Consequently, the enterprise will be able to create products that will meet these needs and therefore succeed in its expansion strategies. It will also have a higher chance of retaining its customer base. Further, in order to adapt to the local business environment, it is essential for the enterprise to combine local relevance with the global scale of business. This will involve a necessity to reconsider talent search. The enterprise should therefore revise its current recruitment policies to accommodate this.

In order to overcome the challenges of expansion, another effective solution is to develop an effective global distribution model. The significance of this approach is that it allows the enterprise to evaluate its investment level (Spirig). The levels are low, medium and high. This enables the enterprise to review how many risks are involved in the investment. As a result, it will be in a better position to choose expansion strategies that are safe.

Expansion problems can also be solved by integrating technology into the strategies. Before thinking about any international growth plan, it is essential for the enterprise to gauge its ability to incorporate technology into its strategies. One of the areas that greatly rely on technology is finance (Li & Frydrychowska). The financial system in place should be engineered in such a way that it is able to support various forms of global business transaction. Another significant areas relying on technology are supply and distribution. Therefore, the enterprise will have more chances for success if it adapts technology that will support its global expansion.

It is also critical for the enterprise to make careful consideration of its scale of entry. This way the corporations will have the option of entering the market slowly or on large scale basis. To be able to determine which entry scale is best, the enterprise can carry out an analysis of the impact of each scale. This will be essential in preventing the firm from being the first on a market but risky and inflexible.


The Tata Group has been a leader in various spheres of business for a long time. The secret of its success has been its conglomerate structure that has allowed it to engage in diverse industries and spheres. Consequently, the enterprise has been able to expand into new markets through its numerous subsidiaries. As a result, it has been able to maintain a competitive advantage. It has sought to further expand its business empire and therefore developed expansion strategies to enter new markets.

The enterprise has experienced some challenges which have greatly hampered its efforts. These expansion obstacles have included impromptu expansion which has led to debt, pressure of the expansion on the system of business, cultural difficulties, lack of sufficient talents and global economic hardships such as recession. By analyzing all these problems, it can be concluded that poor planning and development of expansion strategies have been the main reasons behind the challenges currently experienced by Indian enterprise.

Conducting a research such as this can help the enterprise detect these challenges and define the possible solutions that can be used to overcome them. The corporation can utilize the suggested solutions from this research to overcome the expansion challenges it is currently undergoing. They include the following; revaluation of current expansion strategies, elimination of unplanned expansion activities, training of employees to manage cultural differences, integration of technology in expansion strategies and careful consideration of scales of entry to be implemented. There are several concepts and models advanced by scholars to assist organizations in formulation of the best expansion plans. Some of them include comparative advantage theory, the Uppsala and network models and other market penetration strategies like market segmentation.


From the conclusions regarding the Tata Group and its current expansion practices and strategies some recommendations are made to ensure that the enterprise does not suffer from these problems in the future.

The first recommendation is that the enterprise should anticipate market changes in the areas it wants to venture into. This will ensure that it enters the market when it is fully prepared for these changes. This can be achieved if the corporation’s management team consists of leaders who are proactive.
Another recommendation is that the enterprise should avoid borrowing money to finance its expansion plans. This just adds a debt burden to the corporation. It also affirms that the enterprise is not ready to expand. The company should set aside finances to pursue its expansion plans.
It is also recommended for the enterprise to apply the theories of internationalization brought by various scholars. These theories have been proven to bring about the success of different enterprises.

Limitation of the Study

The research was focused on analyzing the challenges of expansion for the Tata Group which is a conglomerate enterprise. Different models and theories of expansion were applied to analyze the challenges. The results of the research provide new insights into processes of expansion of enterprises into new markets. However, the research was limited by insufficient data provision. While the Tata Group is a conglomerate, it was not possible to acquire data from all its subsidiaries for analysis. The information collected for the research was insufficient due to the limitation of restricted information. The enterprise has set in place a number of limitations that deny researchers some information on the operations of some aspects of its businesses.

Scope for Further Research

Further study can be conducted within this same area of research while incorporating other conglomerate enterprises. This will provide a much more integrated solution to the problem and hence better ways of solving the issue will be identified.

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