Analysis of Tata's competitive advantage through its resources

Analysis of the competitive advantage of Tata
Contemporary Concern Study

Analysis of the competitive advantage of TATA
Guide:
Professor Raghunath
Submitted by:
Veyrat Aline - 05E5036
1
Acknowledgements
I would like to thank Dr Raghunath for guiding me all through

this project, giving me insightful feedback and providing valuable
contacts.
I also would like to thank Ms Vijaya Deepti (TCS), M. P.V.A.

Sharma (Tata Steel) and M. Bedekar (Tata Motors), who have
accepted an interview, and thus have provided valuable inputs and
insights on the topic. The interviews I had with them have formed
the basis of the empirical part of my study.
Finally, thanks a lot also to Professors D.V.R Seshadri, L.

Prasad, and P.N. Thirunarayana as well as M. Saligram for
providing me valuable contacts.
2
Table of contents
Acknowledgements 2
Table of contents 3
Introduction 4
1. Objectives of the CCS 6
a. Scope of the study 6
b. Issues that the study will not cover 7
c. Initial hypotheses 7
2. Theoretical background : survey of the literature on 8
competitive advantage and resource-based-view
a. Traditional ways of studying strengths and 8
weaknesses
b. Identification of a firms resources 9
c. Competitive advantage and Sustainable 10
Competitive Advantage
d. The resource-based view 10
e. The VRIO framework 11
3. Benefits of the RBV theory: choice of the methodology 12
4. Methodology of the empirical study 14
5. Case study # 1 : Tata Steel 16
6. Case study # 2 : Tata Consultancy Services 22
7. Case study # 3 : Tata Motors 31
8. Conclusion: Insights and limits of the work 41
Appendixes 43
Bibliography 51
3
1. INTRODUCTION
The Tata Group is the largest private group in India.
Founded in the middle of the XIX century (1868) by Jametsi Tata.
Born in a Parsee family, he joined its fathers business at the age
of 20, before creating its own trading company 9 years later. Then,
its first diversification took place only six years later in the textile
industry. He also laid the seeds for the future development of the
company, especially in the steel industry, which was one of his
major projects.
Nowadays, the group encompassed through more than 90

companies seven business sectors as diverse as information,
services and communication, engineering, materials, services,
energy, consumer products and chemicals. Its activities are
worldwide (more than 54 countries). Its revenues in 2005-06 were
Rs. 967,229 million ($ 21.9 billion).
Tata Steel was created in 1907, TELCO (now Tata Motors) in 1945
and Tata Consultancy Services in 1968 (Indias first software
services company).
Figure 1 : Data on Tata Group

Source: http://www.tata.com/0_investor_desk/group_financials.htm
2005-06 (US$ 2004-05 (US$ % change
billion) billion)
Total revenue 21.9 17.8 23.0
Sales 21.4 17.4 22.7
Profit before 3.0 2.6 13.8
tax
Profit after tax 2.1 1.8 18.6
Total assets 18.0 15.2 18.8
Total 2,302,446.0 2,766,903.0 -16.8
shareholders
Tata is a well-known brand in India, based on more than a

century of history. Its core values are deeply rooted in the group
culture : integrity, understanding, excellence, unity, responsibility.
These values, issued from the history, are still emphasized as the
legacy of the founder.
The Tata Group Chairman, M. Ratan Tata, has mentioned the
recent successes of the group in its message of January 1, 2006:
4
We should all feel proud of our achievements in 2005. It has been

the best year in the history of the Tata Group and this success
has been mainly due to your personal commitment. I feel confident
that in 2006 the Tata Group will see even greater growth and
scale even greater heights. 1
In fact, recent events have also shown the strength of Tata
Group, as for example the launch of the Indica in 1998 (the first
car entirely design and manufactured in India, without any
alliance with a foreign partner), the purchase of the English brand
Tetley by Tata Tea in 2000 or the acquisition by Tata Motors of the
heavy vehicles unit of Daewoo.
For these reasons, Tata is one of the most famous companies

in India, and it is highly interesting to study how this company has
achieved such an above-normal competitive position.
The study is organized as follows. The first part develops the
scope and limits of the analysis, as well as the initial hypothesis.
Then, the next section presents the theoretical aspects of the
resource based view and the benefits of this approach. The
empirical methodology design of the questionnaires- is in the
next part, followed by the results in three main case studies. The
final section includes the learning of the study and its limitations.
http://www.tata.com/0_about_us/management/chairmans_chamber/chairmans_
message.htm
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2. OBJECTIVES OF THE CCS

a.Scope of the study
The objective of this CCS is to explore the idea that the
above-normal performance of the Tata Group can be explained, at
least partially, under the perspective of the strengths and
weaknesses of the firm, and particularly of the Resource-Based-
View of the firm. Basically, that is to say the analysis will look at
the unique mix of strengths and weaknesses the firm possess to
explain the performance.
The study will be limited to some businesses in which Tata is

involved. These businesses have been selected according to the
profit they have contributed to generate in 2006. The three main
contributors to Tata profits are Tata Steel Ltd, Tata Consultancy
Services Ltd and Tata Motors Ltd. That is the reason why the
analysis will be focused on these three entities.
Figure 2: Profitability Analysis

Source : Database insight.asiancerc.com
Annual operating
profit Reported Net profit
2006 2006
Tata Advanced Materials / /
Tata Chemicals Ltd 590,14 353,03
Tata Coffee Ltd 32,54 22,32
Tata Construction and Projects Ltd / /
Tata Consultancy Services Ltd 3337,41 2716,87
Tata Elxsi Ltd 52,31 34,33
Tata Finance Ltd / /
Tata Hydro-Electric Power Supply
Company Ltd / /
Tata Incorporated / /
Tata Infotech Ltd / /
Tata International Ltd / /
Tata Investment Corporation Ltd 164,07 163,14
Tata Metaliks Ltd 75,90 45,91
Tata Motors Ltd 2146,36 1528,88
Tata Power Company Ltd 840,64 610,54
Tata Sponge Iron Ltd 30,56 22,14
Tata SSL Ltd / /
Tata Steel Ltd 5884,22 3506,38
Tata Tea Ltd 166,20 186,93
Tata Technologies Ltd / /
Tata Teleservices Ltd / /
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Tata Teleservices Maharashtra Ltd 123,05 -541,06

Tatanagar Bricks Ltd / /
This CCS aims at confronting what the theoretical literature

tells us about an above-normal performance and how the praxis
could be analyzed, through interviews with actors of the three
targeted companies.
b. Issues that the study will not

explore
This study will try to be as exhaustive as possible. However,
some issues will not be covered. According to the profitability
analysis, only three businesses will be studied, whereas the Tata
Group is involved in many other businesses. This initial choice to
focus on the three main profit contributors will limit the scope of
the analysis.
Another area will not be studied in this report. The analysis

will be made according to the strengths and weaknesses the firm
possess. On the contrary, the influence of the environment on the
performance of the firm will not be explored.
c.Initial hypotheses
The initial hypothesis of this work are :
- Tata enjoys an above-normal performance
- This performance can be at least partially
explored and explained with a resource-based
view analysis concerning especially three
companies (Tata Steel, TCS and Tata Motors).
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3. THEORETICAL BACKGROUND:
survey of the literature on
competitive advantage and
resource-based-view
As a first step, it is important to replace the study in its
theoretical background. Essentially based on Barneys work, a
first paragraph will briefly summarize the traditional ways of
studying the firm strengths and weaknesses. Then, two
paragraphs will respectively define resources and competitive
advantage. The next paragraph will define the main points
covered by the Resource-Based-View, before the presentation of a
framework in a last paragraph.
a.Traditional ways of studying

strengths and weaknesses
Based on Barneys survey, this paragraph will present three
traditional ways to study the firms strengths and weaknesses.
A first set of authors has studied what is called distinctive

competence.
Some theoreticians have emphasized the role of General
Managers as distinctive competencies. Based on researches
conducted at the Harvard Business School, this approach
underlines the fact general managers have a direct impact on the
firm performance (they are in charge of analyzing the
environment, understanding the strengths and weaknesses of
their firm and finally they choose the strategy, which will directly
influence the firm position. This approach suffers from two limits:
it is very difficult to define what makes a good manager and the
emphasis put on the role of managers can lead to ignore other
factors.
Other theoreticians of the distinctive competence,
essentially sociologists, have stressed the importance of
institutional leadership. According to these authors, the role of
institutional leaders goes beyond managerial activities, they also
8
have to define a mission/vision for the organization. The limitation

of this theory is also that it can lead to ignore other factors.
A second traditional way of analyzing the strengths and

weaknesses of the firm is based on Ricardos work on land
ownership. According to this approach, in a situation where the
factors of production are limited (inelastic), then it is possible for
the owner to enjoy an economic rent. The traditional example is
land ownership. If a firm has above-fertile land, it will earn above
normal profit. In a normal case, other firms would enter the
market but as the resource is inelastic, the firm enjoys a
sustainable competitive advantage. However, this analysis is
limited: the sustainable competitive advantage will disappear in
case of decrease in the demand or if other ways are found to
increase the available resource.
Finally, a third traditional way to analyze strengths and

weaknesses of a firm was developed by E. Penrose. According to
her, firms have to be seen as the combination of an administrative
framework and resources of production.
b. Identification of a firms
resources
In order to study the firm strengths and weaknesses, it is
necessary to clearly define the concepts that will be used in this
study.
According to the article Competing on resources: strategy
in the 1990s (1995), firms are made of a bundle of assets, which
determine its performance.
According to Barney, lots of attributes can be considered as
resources and his typology is very large (assets, capabilities,
organizational processes, firm attributes, information,
knowledge Barney, P.155). For him, resources can be divided in
4 categories: financial, physical, human and organizational capital.
Some authors establish a distinction between resources and
capabilities [Where do capabilities come from and how do they
matter ? A study in the software services industry (2005)]. For
them, resources are the know-how, the financial or physical assets,
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the human capital whereas capabilities are the capacity for a

firm to use its resources.
Barney, on the contrary, consider resources and capabilities
as synonyms. Competencies are for him only to be used in a
context of diversification. That is also the point of view adopted in
several articles (Capabilities, business processes and competitive
advantage: choosing the dependent variable in empirical tests of
the resource-based-view, 2004).
In this study, the latter point of view will be adopted.
To identify resources, a certain framework can be used: the

value chain. In this model, the production of goods or services is
divided into a series of vertical business activities. Resources are
associated to each of these business activities. And each firm can
focus on some these activities or choose a different approach. The
value-chain model have been designed by McKinsey (business
activities: technology development, product design,
manufacturing, marketing, distribution and service) and refined
by M. Porter (distinction between primary and support activities).
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c.Competitive advantage and

Sustainable Competitive
Advantage
In the literature, notions of competitive advantage and
sustainable competitive advantage are often used. It seems to be
important to clarify these notions before presenting the Resource-
Based-View.
According to the article Firm resources and Sustained

Competitive Advantage (1991), a competitive advantage is
created when a firm implements a strategy that increases its value
(whereas the competitors do not implement this strategy).
A sustainable competitive advantage is a competitive advantage
when other firms are not able to duplicate this strategy.
d. The Resource-Based-View
The article Firm resources and Sustained Competitive
Advantage (1991) presents the Resource-Based-View as a
framework which learns that sustainable competitive advantage
result from implementing strategies that exploit their internal
strengths, through responding to environmental opportunities,
while neutralizing external threats and avoiding internal
weaknesses.
Basically, whereas in the industrial economics approach
(SCP Paradigm, Porter 5 forces), a firm obtains above normal
performance because of its better competitive position; in the
Resource-Based-View approach, it is because of their superior
resource position that firms obtain above normal performance.
This analysis is based on two hypothesis: resource

heterogeneity and immobility. Resource heterogeneity implies that
the source of sustainable competitive advantage can be found in
the resources controlled by the firm. On the contrary, if all the
firms have the same resources, then sustainable competitive
advantage is not possible. Considering these two assumptions of
the resource-Based-View of the firm, first mover advantage and
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barriers to entry and mobility are also possible (Firm resources

and Sustained Competitive Advantage, 1991).
The Resource-Based-View of the firm can also implies that

business activities can be a better scope to study competitive
advantage. For example, a firm has not only good or bad
resources, it is always a mix, that is to say a firm can have
simultaneously competitive advantages and competitive
disadvantages in different business processes. The profits of the
firm enjoying a competitive advantage can also be appropriated by
certain stakeholders and not influence the firm global
performance. Or, the potential of the resources may not being fully
realized. For all these reasons, for some authors, business
processes is a better way of studying competitive advantage
(Capabilities, business processes and competitive advantage:
choosing the dependent variable in empirical tests of the
resource-based-view, 2004).
e.The VRIO framework

To implement this RBV analysis, Barney has developed a
framework which allows to say if a resource can be a source of
sustainable competitive advantage for a firm. It is divided in four
steps:
- Value: does the resource allow the firm to
address the environmental threats and
opportunities, that is to say allows it a cost
reduction or an increase in revenues ? it is
important to analyze it in the long-run
- Rare: is the resource controlled by a limited
number of firms ?
- Imitability: do other firms have costs to copy
this resource ? The costs can be explained by
unique historical conditions, causal ambiguity,
social complexity, or patents.
- Organization: allows the firms organization
to fully exploit the potential of its resources ?
According to Barney, a firm can only benefit from a

sustainable competitive advantage if its resources reunite the four
criteria.
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The use of this framework is very helpful to analyze

sustainable competitive advantage. However, Barney himself has
underlined some of its limitations. In case of environmental
change (or Schumpeterian revolutions), the repartition of the
strengths and weaknesses can change. Then, the managerial
influence also constitutes a limitation to the framework. Finally, as
in the Resource-Based-View, the unit of analysis is the firm, which
means that it is difficult to collect data.
Despite these limitations, this framework represents a very

useful tool to analyze competitive advantage of the firms. That is
the reason why it will be used in this analysis. Others authors, as
for example in an article Competing on resources: strategy in the
1990s (1995), have developed other frameworks based on 5
main questions: imitability, durability, appropriability,
substitutability, comparative superiority.
However, given the convenience and the applicability of the VRIO
framework, this one will be used to study the competitive
advantage of the Tata Group.
The next section will explain the choice of a RBV

methodology by presenting the benefits of such an approach.
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4. BENEFITS OF THE RESOURCE

BASED VIEW THEORY: choice of the
methodology
The first analyses about competitive advantage have
stressed the importance of leadership. For example, according to
Chandler, a firm enjoys a competitive advantage when it chooses
to implement a M-form before its competitors, that is to say the
choice of the managers (adopting or not the M organizational
structure) is directly at the origin of the competitive advantage.
Then, for theoreticians of the environmental model, and
especially Porter, the issue was to design tools to gain a better
understanding of above-average profitability. According to him,
the profitability of the firm depends highly of the industry
structure. The limit of such an analysis is that, focusing on the
environment, another issue is not covered: the role of the
managers.
For example, we can consider the case of Crown Cork and
Seal, as it is studied in the article Untangling the origins of
competitive advantage. Operating in an industry structure not
favorable in the sense of Porter, where the profits of most of the
firms are not significant, this company enjoys a competitive
advantage. The question is : are the above-average returns due to
a good manager or to a good choice of strategy ?
The analysis developed by Porter can be interpreted as follows :
the choice of an industry or the rebuilding of it will lead to
competitive advantage (what the authors call a prospectively
approach). They underline the absence of evidence of this
hypothesis.
In fact, the Resource-Based-View goes further and prolongs

the environmental analysis. The environmental theory is mainly
descriptive of the link between differentiation, barriers and above-
normal returns. The Resource-Based-View goes further, analyzing
the deeper aspects. The hypothesis is that there is an
heterogeneity in the distribution of the resources and this is the
cause of sustainable competitive advantage. For example, the
environmental approach says that the cause of a competitive
advantage is an asset. The Resource-Based-View goes one level
14
further, explaining the asset by a capability. The example taken in

the article is particularly relevant : when the environmental
approach stresses the role of the brand (asset) in gaining a
competitive advantage, the RBV emphasizes understanding of
customers needs (capability).
Moreover, the explanation of causality developed by the RBV

is also more complete in so far as it is based on two key
statements. It is the capabilities of the firms that are at the origin
of the environment structural features. There is an imperfection
of the resources markets and that may lead to above-average
profits.
Furthermore, as the environmental approach does not cover

how strategic choices are made, the analysis of the RBV is
insightful in this field. According to the latter, the development of
certain resources is the basis for strategic decisions. The
approach of the RBV theoreticians usefully prolongs the
environmental perspective here again.
Finally, another insight brought by the RBV concerns how

resources are built. This approach tells us that routines of the
firms are at the origin of capabilities. As these routines are not
entirely explicit, it is not sufficient for these theoreticians to
identify the resources that create a competitive advantage, it is
even more important to understand which routine is the source of
this advantage. That is another reason why the RBV goes further
than the environmental perspective.
To sum up, the main advantage of the RBV approach is to fill

in the gap between theoreticians who have emphasized the role of
managers and the environmental perspective. The managers, and
that is crucial, have to take the good decisions for the firm to
achieve a competitive advantage. However, they also have to
compound with the environment they are involved in.
Because of the advantages and analytical insights provided by the
RBV, this perspective will be adopted in this study.
The previous sections have covered the scope and limits of

the analysis, and the initial hypothesis as well as a theoretical
review of the literature on RBV which included the advantages of
15
choosing such an approach. The basis of the following sections

will be the empirical part of the study. The next section will deal
with the methodology used and how the questionnaires were
designed, and will be followed by the results in the cases studies.
The final section will include the learning of the study and its
limitations.
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5. METHODOLOGY OF THE
EMPIRICAL STUDY
This study investigates the effect of a set of resources on the
competitive advantage of the Tata Group. According to the limited
amount of time and given the scope of the Tata Goup, it was
necessary to focus the study on a few businesses. As explained in
the first section, the three main contributors to Tata Group profits
have been chosen as cases to be studied, that is to say Tata Steel,
Tata Consultancy Services and finally Tata Motors.
The first empirical study will concern Tata Steel. The study
is based on a web literature review, reading of press materials and
of the annual report for the financial and company data, a well as
on an online financial database. Finally, the study has been
concluded by a face-to-face interview with a senior executive in
Tata Steel, M.P.V.A. Sharma, Customer Account Manager in the
division Flat products. The output of this interview have been
analyzed at the light of the VRIO framework.
TCS is the second part of the empirical work. It has also

been based on web literature, press articles, annual report and
online database. The conclusion of the study was a phone
interview with Ms Vijaya Deepti, senior executive in TCS. The
outputs have been studied according to the VRIO framework.
Tata Motors is the last empirical case that have been

studied. Based on the same sources as the two previous cases, it
has been concluded by a phone interview with M.Bedekar, senior
executive in charge of raw materials procurement for the
commercial vehicle division. The outputs have been analyzed with
the VRIO framework.
To conduct the interviews, questionnaires have been

designed. The key issue of the questionnaire was to test some
specific capabilities to analyze if they were the basis of a
sustainable competitive advantage of Tata. The idea was to use the
VRIO framework developed by Jay B. Barney in his book because
this framework appears to be easily applicable and the output is
also easy to analyze.
17
The first draft comprised two different questionnaires, one

destined to TCS (IT services), whereas the second one was for
manufacturing activities (Steel and Motors). The first question
was about the value chain to identify indirectly where the
interviewed people thought the competitive advantage of their
company was based, before asking them specific resources. The
specificity of the TCS questionnaire was to include some resources
taken from a paper called IT and sustainable competitive
advantage: a resource-based analysis.
This first draft was incomplete because the capabilities were
not named, at the exception of some in the IT questionnaires, and
the interviewees were supposed to find themselves the
capabilities.
After refinement, the second draft was completed. Basically,
it was composed of an enumeration of capabilities and the
interviewees were supposed to tick a grade according to the
importance of the capability for the competitive advantage and to
give a rationale for his choice.
However, this questionnaire had the main disadvantage not
to use the VRIO framework which allows to obtain very precise
results and analysis (for example, this framework gives the
possibility to differentiate between competitive and sustainable
competitive advantage, which was not the case in the second
draft).
The design of a third and final draft aimed at addressing these

biases. It is compound of three distinct parts.
The first part is a way to engage the discussion, mainly
about the value chain, the fulfillment of customers needs and the
facilities. The first part of the questionnaires is the fusion of two
different frameworks developed by R.Venugopal in his book. The
first one is a list of crucial questions that have to be addressed to
assess a firms competitive advantage compared to its competitors
(page 68). The second list of criteria used (page 84) corresponds
to the second approach underlined by R.Venugopal as it takes into
account customers needs and facilities.
The second part is the test of specific capabilities with the
help of the VRIO framework. To enrich the discussion as much as
possible, and get as much insightful output as possible, these
capabilities are sometimes divided into sub criteria. The set of
18
resources which are to be tested depend on the industry and are

derived from the papers read on the various sectors.
Finally, the last part of the questionnaires is a broader
question that aims at taking into account other issues which have
not been mentioned in the first introductory discussion, and
neither in the test of specific capabilities.
The limit of these final questionnaires was their length. It

was obviously very long for a 30 minutes interview. The goal was
twofold:
- to cover as many resources as possible and at
least to evoke all the themes once during the
interview to see if it provoked a resonance in
the interviewee;
- and secondly it has increased the flexibility. In
fact, this questionnaire has to be seen as an
adaptable tool.
However, despite this limitation, these questionnaires were

used as a basic framework during the interviews to give at least
certain guidelines to the discussion and to analyze carefully the
resources, using the VRIO framework.
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6. CASE STUDY # 1 : TATA STEEL

a.The steel industry
According to a report of International Iron and Steel
Institute quoted in Tata Steel Annual Report 2005-06, the World
Crude Steel output has increased by 5,9% between 2004 and
2005, reaching 1129.4 last year.
The most important producers are China (349.4 million
metric tones), Japan (112.47 million metric tones) and USA (93.89
million metrics tones). India is the 8 th producer, with an output of
38.08 million metrics tones.
The outlooks of the IISI have confirmed the trend of an
increasing steel use (around 5% growth over the next two year
period), and a faster growth in countries such as India and China
where the GDP is booming. For example, during the last 5 years,
due to its current industrialization, the consumption of steel in
China has grown by over 20%. In fact, China represents in 2005
nearly one third of the global steel demand, as well as one third of
the crude steel production.
The Indian domestic steel market is also growing : in 2005,
the Indian steel production has increased by 5,1% and the Indian
steel production has increased by 7,1%. This was due to the
booming demand in automobiles, consumer durable
According to the Chairmans statement (Annual Report Tata
Steel 2005-06, Pages 2-3), the low per capita consumption of steel
(around 32 kg) is emphasized, as well as its future growth due to
large infrastructure projects that have been launched.
International prices of steel follow a declining trend, notably
because of the role played by China. The Indian steel prices have
followed the same trend.
Tata Steel is not only involved in the Steel industry. One of it

business units is active in chrome and manganese (Ferro Alloys
and Minerals Division). In this industry, the demand was globally
stable in 2005 notably because of the driving role played by China.
The average price has only undergone a slight increase between
2004 and 2005, from 68 cents to 73 cents. Another business of
Tata Steel deals with tubes (Tubes Division). The commercial tube
industrys growth rate is about 3-4% for a market of 1.4 million
20
tonnes, whereas the precision tube industry is highly dynamic

(growth rate of 13%) in a 0.4 million tonnes market.
The outlook for the industry are as follows. On the one hand,
the industry has to deal with costs of raw materials and energy.
On the other hand, as growth in India is expected to remain
strong, as the rise in oil prices have been absorbed by consuming
nations, and as inflation remains low, the International Iron and
Steel Institutes has delivered positive forecasts: the use of steel
products will still increase.
For example, a global growth of 5,8% is predicted for 2007.
In India, steel demand is also predicted to grow of around 8% in
the two following years.
b. The company
Created in 1907, Tata Steel is the result of one of the first
diversification of the Tata Group. Benefiting from easy access to
raw material resources and state of the art facilities, it
manufactures products destined to automobile sector,
construction industry and wire sector.
Manufacturing plans are situated mainly in India but its expansion
plans are in India as well as in Iran or Bangladesh.
The Chairman of Tata Steel is M. R.N. Tata. With a turnover

of Rs 22518.75 crores and a profit after tax of Rs 3734.62 crores,
Tata Steel has benefited from an increase between 2005-06 and
2004-05 (respectively: 27,97% for the turnover and 3,65% for the
profit after tax). The profit after tax has been increasing during
the last five years, as it is shown in the next figure.
Figure 3: Profit after tax 2002-2006, Tata Steel

Source: Tata Steel Annual Report, page 6
21
These good results were due partly to restructuration

policies as the one followed in 2003, (See article Telco and Tisco,
the new and improved Tata twins, page 184), which was based on
achieving internal efficiencies, reducing the costs, following a
global strategy, and focusing on value-added products.
Currently, Tata Steel has foreseen to increase its capacity to

reach around 30 million tones per annum by 2015 (Annual Report
2005-06). In 2005, Tata Steel has already began this move,
expanding capacity in existing plants (Jamshedpur) or creating
new plants (Jharkhand, Orissa). On the other hand, Tata Steel is
also involved in purchasing foreign steel companies (Singapore-
based NatSteel, Millennium Steel in Thailand) to reach global
scale and to become an important regional actor by creating an
Asian steel manufacturing network. This trend was emphasized in
the article An overseas buying spree, page 109.
In order to strengthen its position, Tata Steel has launched

innovative initiatives such as a branding program (creating brands
like Tata Shaktee, Tata Steelium, Tata Tiscon, Tata Bearings, Tata
Agrico, Tata Wiron, Tata Pipes or Tata Structura, each of them
corresponding to a specific business), a Customer Value
Management initiative, a Retail Value Management programme.
According to articles like Telco and Tisco, the new and improved
Tata twins page 186 or Tata Steel, burnish the brand page 106,
the effort in branding was already valuable in 2003.
22
c.Its competitive advantage

According to its chairman, Tata Steel has been recognized
as one of the most cost-efficient steel manufacturers world-wide
and it is believed that achieving global scale with the same
production efficiency will further enhance the Companys global
competitiveness. (Annual Report Tata Steel 2005-06, page 3).
In fact, according to its corporate website, Tata Steel is the
first private steel manufacturer in India and even in Asia.
This good competitive position has been confirmed by the

fact that Tata Steel was ranked in 2006 Worlds Best Steel Maker
for the third time by the World Steel Dynamics Inc, USA.2 This
study, which was conducted among 22 world-wide steel
manufacturers was based on a set of 20 criteria such as cash
operating costs, profitability, strength of balance sheet, dominance
in the country/region, threat from nearby competitors, stock
market price
The company was also granted the Indias Trophy for best
Integrated Steel Plant five times and Asias Most Admired
Knowledge Enterprise Award in 2003 and 04.
If we consider the financial data on the company, we can say

that Tata Steel really enjoys a competitive advantage. If the basic
financial ratios are taken into consideration, Tata Steel enjoys in
2006 the best Return on Assets (0,29), the second best return on
equity (with 6,04, it is just behind Jindal Stainless 6,17) and the
best return on sales (0,23) (See Appendix). Thus, we can really say
that Tata Steel enjoys in 2006 a competitive advantage.
2
http://www.tata.com/tata_steel/media/20060401.htm
23
Figure 4 : financial ratios Tata Steel, 2006

Source : http://www.capitaline.com/intranet/INDEST_consortium.htm
Ratnamani Sujana Metal
Tata Steel MUSCO SAIL Metals Prd
ROA 0,29 0,24 0,24 0,18 0,16
Jindal Ratnamani Bhushan

Stainless Tata Steel JSW Steel Metals Steel
ROE 6,17 6,04 4,03 3,72 3,63
Ratnamani
Tata Steel SAIL JSW Steel Metals ISMT Ltd
ROS 0,23 0,14 0,11 0,11 0,10
If we compare these data with the same ratios in the year

2002, we can clearly say that the competitive position of Tata
Steel has improved in each of these ratios:
Figure 5 : financial ratios Tata Steel, 2002

Ratnama Sujana
ni Tata Bhushan Metal ISMT JSW
Metals Steel Steel Prd Ltd MUSCO Steel SAIL
ROA 0,05 0,04 0,03 0,00 0,00 -0,04 -0,05 -0,10
Ratnama Sujana
Bhushan Tata ni Metal JSW ISMT
Steel Steel Metals Prd MUSCO Steel SAIL Ltd
ROE 1,22 0,95 0,30 -0,06 -0,18 -0,26 -0,41 -45,80
Ratnama Sujana
Tata Bhushan ni Metal ISMT JSW
Steel Steel Metals Prd Ltd MUSCO S A I L Steel
ROS 0,05 0,04 0,03 0,00 -0,01 -0,03 -0,13 -0,20
So we can clearly consider that Tata Steel benefit from a

sustainable competitive advantage. The following section will
investigate the sources of this competitive advantage.
d. Sources of the competitive

advantage
Hypotheses
Some resources may be at the basis of Tata Steel
competitive advantage. To determine the impact of these
24
capabilities on the competitive advantage, a senior employee of

the company has been addressed the questionnaire to test each of
those capabilities.
Interview
The most salient aspect in the value chain is the sales and
marketing aspect. Two channels are used for the selling of the
products : the direct one for the strategic customers (for example
the big car manufacturers) and another one through authorized
distributors, which may appoint local dealers to get in deeper
touch with the customers. The feedback of these customers is
either collected directly by sales representatives either indirectly
by the dealers. Surveys are also done annually and quarterly by
the marketing division.
Another aspect from the value chain which is significant for

Tata Steel is the route of production. An integrated route is the
first option (controlled by the firm from the mine extraction to the
selling), whereas a refined route is the second one. Tata Steel is
working with the first option which allows a better control,
because they can directly control all the steps in the value chain.
Some precise resources that are at the basis of Tata Steel

competitive advantage according to both senior executive that I
have met.
The first one is captive mines. In fact, mines used by Tata
Steel are captive since its inception, nearly one century ago. This
is a valuable resource because they can have access to the raw
materials they need. This is also a rare resource according to the
fact that natural resources are limited. Then, the next issue is the
imitability of the resource. In fact, as the contracts are renewed
every 40 years, some competitors have tried to imitate it,
contracting similar agreements. In fact, until now, none of them
has achieved it but we can consider it only as a first mover
advantage because the question will be renewed at the end of the
contract.
Branding is the second resource that was underlined during

the interview. This resource is valuable because brand names are
used by the customers (for example, Tata Tiscon or Steelium) and
they allow a better identification of the various divisions inside
25
Tata Steel. This is a rare resource because only some regional

players have tried to imitate it and they did not manage to reach
the level of brand promotion of Tata Steel. Moreover, this resource
is also difficult to imitate, even for a national player because it is
largely based on Tata Steel brand and reputation, and even on the
Tata Group brand and reputation. That is the reason why this
resource is not imitable. To reap the maximum benefits of this
resource, Tata Steel is organized in divisions, like for example Flat
Products, the one in which M.PVAS Sharma is working.
Then, the channel of distribution is also a source of

competitive advantage according to Tata Steel senior executives.
This is a rare resource because no other competitors is so well
organized to reach its customers (directly or through the dealers
network). It is also very difficult to imitate because it takes time to
build such a network and relationships with the customers.
Finally, the organization of Tata Steel distribution network allows
the company to take advantage of this resource.
Customer contact is also an important resource for Tata

Steel. This is a valuable resource because the development of
relationships with the customers tends to increase their loyalty.
This is rare in the steel industry to have marketing and sales
manager, as well as key account managers, and the support from a
technical engineer on a regional basis. However, this could be
imitated by large national competitors like SAIL for example. The
senior executives from Tata Steel themselves consider that Tata
Steel only benefit from a first mover advantage in this field.
Product quality is also a resource that contribute to Tata

Steel competitive advantage. This is obviously valuable because it
tends to enhance the reputation and the brand image. This also
rare in the industry according to customers feedbacks. It is also
quite difficult to imitate because it is a real process based on
constant improvement and constant relationships between the
company and its customers. In the organization, this resource is
translated into an entire computerized system (SAP) and a huge
R&D and development centre.
Human resources are also a basis for competitive

advantage. They emphasized the vision from the top management
26
level, which made it possible at the ground level. This is translated

into the organization by a high level of loyalty and a
videoconference once a month from the managing director to
share the achievements of the company and enhance the
communication from top to below levels. This is rare for them
(they consider having the best managerial resources in the steel
industry) and not really imitable. This is the fruit of a constant
evolution for 100 years.
Tata Steel culture is based on strong values (ethics, less

opportunism, value on the individual, adaptation to changes).
Such a strong culture represents a valuable asset for Tata Steel.
This is rare among steel manufacturers, and can hardly be
imitated: it takes time to develop such a strong culture and it has
to grow with you. Some competitors tried to imitate it but they did
not manage to copy it.
Reputation also helped a lot. It procures respect and trust in

the case of Tata Steel. This is obviously a valuable resource.
Moreover, this is rare in the steel industry because no other
competitor benefit from such a positive brand image, derived from
the Tata Group. The belonging to the Tata Group makes it hard for
a competitor to imitate this resource. The organization of Tata
Steel helps reaping the best results from this advantage in
reputation: Tata Sons holds around 25% of the shares, stressing
clearly the fact that Tata Steel is a member of the Tata Group.
Facilities also play a role. Tata Steel has the best facilities in
the Indian Steel industry, and is even number one in Thailand and
Singapore. Furthermore, companys facilities are still increasing
as they expand the existing plants and plan to develop new
production sites. This is a valuable resource, which is also rare as
Tata Steel was awarded world best steel plant in the last two years
by World Steel Dynamics. The competition has increased since the
lift of the controls in the steel industry in 1992 but for the moment
no competitor has achieved to imitate it. However, as facilities are
the fruit of a constant evolution, the turning point is now.
Key learning
In the case of Tata Steel, some resources seem to play a role
in the creation of a competitive advantage : production
27
capabilities, access to raw material, branding, customer

relationship, human resources, organizational culture and
organizational reputation.
VALUABLE RARE IMITABLE ORGANIZATIO

N
Production : - Better control Best facilities in A constant - Expansion
integrated when integrated India, Thailand evolution - Increasing the
route and route and Singapore existing
facilities - State of the art facilities
facilities - Creation of
new production
sites
Access to Allows better Limited number Only a first
raw material access to raw of mines mover advantage
: captive materials because
mines contracts are
renewed every
40 years
Branding Allows a better - The only - Level of brand Reflects the
identification of national player promotion organization in
the various which has made difficult to attain divisions
divisions it - Based on Tata
- Based on brand and
product quality reputation
Customer - Reach level is - Collection of Based on long- Distribution
relationship very extensive the feedback term channel direct
- Tends to directly and by relationships : and through
increase the dealers, also takes time to network
loyalty surveys - Support build such a
from a technical network
engineer
regionally is rare
Human vision from the Tata Steel has Fruit of an - high level of
resources top management the best history loyalty
level managerial -
resources in the videoconferenc
steel industry e once a month
from the
managing
director
Organization Shared among Based on strong takes time to Diffused among
al culture employees and values develop such a the company
recognized strong culture
outside : valuable and it has to
asset grow with you
Organization creates respect Due to the Due to the Tata Steel is the
al reputation and trust belonging to Tata belonging to Tata flagship of the
Group Group Tata Group
To sum up, in the case of Tata Steel, privileged access to raw

materials because of captive mines is the source of a competitive
advantage. Other resources like production capabilities, branding,
28
customer relationships, human resources, organizational culture

and reputation are the basis of sustainable competitive advantage.
29
6. CASE STUDY # 2 : TATA

CONSULTANCY SERVICES
a.The IT services industry
According to the NASSCOM Strategic Review 2006, the
revenues of the Indian IT services sector are estimated to US$
36.3 billion in 2005-2006. The growth of this sector is 5 times
higher as the global IT industry.
In India, the domestic IT market has been evaluated at US$
10,2 billion and the IT services sector to US$ 4,5 billion in 2005-
2006.
The total amount of exports of the Indian IT services
industry has reached US$ 17.7 billion in 2004-2005. The first
destination is Americas with 68,5% (among which 66,5% for the
USA), then 23% for Europe (among which 14% for the UK).
According to the NASSCOM McKinsey Report of December

2005, quoted in TCS annual report 2005-2006, India has a leading
position in the global outsourcing industry and this will continue
in the next five years as only 10% of the market size has been
addressed so far. By 2010, relocation to low-cost destinations is
expected to take place in more than 30% of this potential market.
The dynamism of the industry will also be accentuated by
innovations of the firms.
The growth will be driven by sectors like hardware and
software maintenance, network administration, and help desk
services.
India is still the most attractive offshore destination,
according to the NASSCOM Strategic Review 2006.
The forecasts of Gartner Dataquest Market Databook (cited

in TCS annual report 2005-2006) shows that the IT industry will
continue its growth. The total worldwide IT spending will reach
3203.2 in 2009, compared to 2479.9 in 2004.
b. The company
Created in 1968, Tata Consultancy Services is involved in IT
consulting, services and business process outsourcing. It is now
30
present in 34 countries and diverse industries. The Chairman is

Mr Ratan N. Tata and the CEO Mr S. Ramadorai. The company is
structured in groups according to 11 business practices (banking,
financial services, insurance, telecom, manufacturing, media and
entertainment, retail and consumer goods, transportation,
healthcare and life sciences, energy and utilities, governance) as
well as in business units corresponding to the services offered :
consulting, IT services, Business Process Outsourcing, IT
infrastructure services, engineering and industrial services,
product based solutions.
The key values of the company are : integrity, leading
change, excellence, respect for the individual, learning and
sharing.
Furthermore, other aspects are also emphasized:
collaboration with the academic world, professionalism, internal
formation, continuous learning policy, quality and research and
development.
Among its strategic partners, TCS counts IBM, HP,
Microsoft, SAP, Oracle
According to TCS annual report 2005-2006, the

opportunities for TCS are the development of outsourcing among
new customers as well as the renewal of existing contracts. This
opportunity was already stressed at the end of the 90s (for
example; R.Tata has evoked it in its interview Remaking Tata,
page 19).
The strengths of TCS are its presence in the market since its
beginning, its global scale and integrated capabilities.
The threats are the competition of other low-cost offshore
destination (especially Eastern Europe for the European deals),
the increasing implantation of global IT players in India, then high
competitive pressures.
Among the main risks faced by TCS, there are : the lack of
skilled workforce, the pressure on the margins, the investments in
new technologies and business models, and finally the risk of
foreign currencies exchange rates losses.

According to TCSs annual report 2005-2006, the revenue
potential of the Indian IT industry is estimated to be $ 60 billion
31
by 2010 and our company is well-poised to take advantage of this

opportunity (page 7). This suggests that TCS enjoys a competitive
advantage in its sector.
With an Income from Sales and Services of Rs 11214.86
crores, and a net Profit of Rs 2716.87 crores for the year 2005-
2006 (Annual Report), Tata Consultancy Services is in fact the
biggest player in the Indian IT industry: largest company in
terms of revenues, profits, number of employees and market
capitalization (annual report, page 35).
This was confirmed by the fact that TCS was ranked 7 of

Fortune Top 10 companies among their valued customers3
The company was also granted a series of award : best IT
employer in 2004 according to Hewitt Associates, best place to
work award by Dataquest and finally TCSs CEO was elected
businessman of the Year 2004 by Business India.
TCS was also ranked 34/100 IT firms by Business Week in
4
2006 which placed it as the second Indian IT player.
If we consider the financial data on the company, we can say

that TCS really enjoys a competitive advantage. If the basic
financial ratios are taken into consideration, TCS enjoys in 2006
the best Return on Assets in its industry (0,28), the best return on
equity (27,73) and the second best return on sales (0,24, just
behind Infosys with 0,27. Thus, we can really say that TCS enjoys
in 2006 a competitive advantage.
Figure 6 : financial ratios TCS, 2006

Satyam
TCS Tech Mahindra Infosys Tech. Wipro Computer
ROA 2006 0,48 0,37 0,35 0,31 0,23
HCL Satyam
TCS Technologies Infosys Tech. Computer Wipro
ROE 2006 27,73 9,84 8,71 7,73 6,96
Satyam HCL I-Flex

Infosys Tech. TCS Computer Technologies solutions
ROS 2006 0,27 0,24 0,22 0,21 0,21
3
www.tcs.com
4
www.businessweek.com/it100/2006/34.htm
32
As the Indian economic press presents TCS as the leading

player in this industry for years, we can say that TCS enjoys a
sustainable competitive advantage. The next section will
investigate its sustainable competitive advantage.
d. Sources of the competitive

advantage
Hypotheses
Some resources may be at the basis of TCS competitive
advantage (development of client-specific capabilities, project
management capabilities). To determine the impact of these
capabilities on TCS competitive advantage, a senior employee of
the company has been addressed the questionnaire to test each of
those capabilities.
Interview
TCS Value chain is composed of several aspects. The most
salient are marketing and sales, business practices, strategic
practices and alliances. According to Ms Deepti, the core of the
value creation comes before all from the true combination of these
activities and also from delivery excellence and operational
excellence. The ability to develop technologies also plays a very
important role in the value creation of TCS.
Organizational attributes have an impact on competitive
advantage of TCS, and especially the internal structure, through
the ability to respond and even drive the changes in the market.
For all the strategic customers, there is a special

organizational structure to fulfill their needs. Firstly, a dedicated
team is in charge of their needs. As a relationship is built, TCS can
develop a better knowledge and insights of the customers needs.
Secondly, the organizational structure tries to better know and
address customers needs through a dedicated support working in
a particular geographic area. Furthermore, the person working
with a customer knows the sector (for example, if the client is a
bank, somebody who has already worked for a bank will be in
charge of this client). This also allows to better respond to the
customers needs.
33
What is to stress is that TCS is a service organization and

they dont compare themselves with companies working on the
same industry but product oriented, like for example IBM.
TCS has developed a lot of client-specific capabilities. In fact

some initiatives are made to better meet specific needs of clients.
For example, they have developed specially for certain customers
different services that they normally do not provide because it was
what customers needed. This creates value for TCS. According to
her, this is a rare capability in the industry to develop client-
specific capabilities at such a point. The real strengths of TCS are
its flexibility and rapidity in responding to the customers needs.
For her, this capability, because of these unique strengths, is hard
to imitate and could be imitated only on the very long term.
Currently, it is not imitable. This resource is traduced in the
organizational structure of TCS through the creation of
competency centers, or centers of excellence which are based
on the way the clients is working.
A second resource that creates value for TCS is the project

management capability developed by TCS. A project manager at
TCS must have the ability to manage his own resources, and also
to create additional capabilities. This resource is critical for TCS
success, so TCS has emphasized it and developed it to a level
which is rare in the industry. The imitation is not really possible
because of the size of TCS and its leading position on the Indian
market. The scale and complexity of the projects also prevent
imitation from the competitors. The organization of TCS is made
to reap the full benefit of this capability. For example, they have a
fairly structured process to develop talents for project managers.
TCS has also a valuable capability: learning by doing. The

company benefits from a big advantage compared to the
competitors because of the number and the scale of the projects
they are working on. For this reason, such a capability does not
only create value for TCS but it is also rare on the industry
because TCS is working on high-scale projects. This advantage is
not easily imitable according to her because of the experience
TCS has on in sector (the company was created very early and it
had dealt with many projects since then, compared to its
34
competitors). She really insists on the fact that learning by doing

is a very importance source of competitive advantage for TCS.
Then, the selection of human resource plays also a role in

TCS competitive advantage according to her. The selection is
different depending on the background. For the technical staff, a
technical level of education is required. More generally, all are
selected through an evaluation process (screening and continuous
evaluation programs). Continuous education programs also exist
to help people acquiring knowledge or developing competencies
based on their carriers plans. For her, this resource is not
particularly rare in so far as each company goes through such
processes to select its workforce. The strength of TCS in this field
is that it benefit from a first mover advantage and that its
belonging to the Tata Group allows TCS to have access to all the
groups programs. For her, that is why this capability is rare and
hard to imitate. TCS organization also allows to get the maximum
benefits of this capability: access to all the Tata Group programs is
possible and these programs are sponsored by the company (for
example, partnerships with IIM Bangalore or Calcutta to get
certifications or diplomas).
Managerial capabilities also plays a role in TCS competitive

advantage. It creates value in so far as TCS is able to attract and
retain competent and well-trained managers. For example, TCS
managers are recruited internally as well as on the market. Then,
they also use programs of the Tata Group to make leadership grow
internally. Here again, for her, it is the fact that TCS benefit from a
first-mover advantage, the early identification of the leaders and
the use of management by objectives that has created the
rareness and the inimitability of this TCS resource. To fully benefit
from this capability, TCS uses a balance scorecard developed at
the Tata Group scale for its managers. It is also interesting to
notice that TCS has helped customers to develop their own
balance scorecard (this move reflects the client-specific
capabilities developed by TCS).
Then, organizational culture is also a source of value

creation for TCS. For her, employees are highly involved in the
processes and their implementation. For example, the departure
point of most of the programs in TCS was a need identified by
35
employees. Moreover, there is a strong set of cultural values for a

long time. She identifies the most important values as: respect for
individuals, learning and sharing; then integrity and excellence.
She also emphasized once again the capacity to adapt to changes
as a key value for TCS. For her, this is a very critical asset in TCS
industry. This is a rare resource in the industry because in TCS it
is really part of the organization and as TCS is part of a very old
group, values like excellence and integrity have played a very
important role. For example, she stressed the fact that integrity
was a critical value in the Indian context, for a company involved
in a business which requires that they work intensively with the
Government. The culture has for example a direct impact on
practices like bribery. For her, the importance of the culture and
the fact that integrity is deeply rooted in TCS make this resource
impossible to imitate for a competitor. The organization of the
company tries to get all the benefits of the culture, through a
senior management very attached to this culture and a very
particular structure that insists on flexibility, networking,
incentives (for example, financial incentives).
Finally, the perceived organizational reputation also plays a

role in the creation of TCSs competitive advantage. TCS is
credited with a very favorable reputation : it was elected best
employer in India and that constitutes a good achievement for the
company. TCS also want to imply all stakeholders and its good
reputation is reflected by a high market capitalization from a
market perspective, as well as one of the highest customer
retention rate (89.4) from a marketing point of view. For her, what
is rare in this resource, is the balance which is made by TCS.
Competitors are often focused on one aspect (generally the
market capitalization). What is rare is that all stakeholders are
taken into account. Imitation of this resource may be possible but
she evaluates the necessary time to 3 to 5 years because of the
advance already taken by TCS. TCS is organized in a way that
allows it to benefit a maximum of this resource, through high
retention rate.
According to her, two other factors can explain the

competitive advantage enjoyed by TCS : the types of services
proposed and the wide culture of R&D innovation.
36
Key learning
The resources that seem to play a very important role in
creating a sustainable competitive advantage for TCS are :
development of client-specific capabilities, project management
capabilities, learning by doing, selection of human resources,
managerial capabilities, organizational culture, organizational
reputation, types of services provided, and culture of R&D
innovation.
What was particularly interesting in this interview was that

she insisted that some resource may not be rare in the industry on
themselves but that the extent to which TCS has developed them
or the way it has applied them that has made them valuable, rare,
and difficult to imitate.
37
Analysis of each capability :

VALUABLE RARE IMITABLE ORGANIZATIO
N
development highly developed Rare to be Flexibility and - dedicated
of client- at TCS (ex: developed at this rapidity as key team, doubled
specific development of point success factors, with a
capabilities services prevent imitation geographical
especially for one support
customer) - the support
has a
knowledge of
the sector
- existence of
competency
centers
- extension of
use of balance
scorecard to
clients
project a project According to her, Size of TCS, its structured
management manager at TCS this resource is leading position process to
capabilities must have the critical for TCS plus the scale develop talents
ability to manage success : and complexity for project
his own developed to a of the projects managers
resources, and rare level in the prevent imitation
also to create industry
additional
capabilities.
learning by Creation of value Ability to Experience of Stress on
doing because of the adapt/drive TCS prevent flexibility and
number and changes has imitation adaptation to
scale of the been underlined changes
projects they are several times
working on.
selection of depending on Not rare but TCS - belonging to the
human background. has a first mover Tata Group
resources technical level of advantage allows extended
education access to such
required. an programs and
evaluation prevent imitation
process - screening tests
and required
level of
education
- Continuous
education
programs
managerial TCS is able to - first-mover - belonging to the
capabilities attract and advantage Tata Group
retain competent - early prevents
and well-trained identification of imitation
managers leaders - use of a balance
(internally as - use of scorecard
well as on the management by - programs of the
market) objectives Tata Group to
make leadership
38
grow internally
organization - employees - an old group, - importance of
- attachment of
al culture highly involved rare with values the culture for
the senior
in the processes that have a TCS prevent
managers to the
and their direct impact in imitation culture
implementation an Indian context - integrity deeply
- structure that
- strong set of rooted in the
insists on
cultural values culture: difficult
flexibility,
to imitatenetworking,
incentives (ex:
financial ones)
organization TCS is credited want to imply all Imitation is not Organization
al reputation with a very stakeholders impossible but allows it to
favorable (high market can only benefit a
reputation : it capitalization, as achieved on the maximum of
was elected best well as one of the long-run because this resource,
employer in India highest customer of the advance through high
retention rate) already taken by retention rate.
TCS
Finally, as the learning of this interview, after the stress on certain

capabilities, and the mention of new ones (the types of services
provided, and the culture of R&D innovation), the application of
the VRIO framework drives to several conclusions :
- the development of client specific capabilities
is critical
- flexibility to adapt/drive the changes is also
critical
- the belonging to the Tata Group also seems to
play a huge role in the competitive advantage
of TCS
- on the other hand, managerial capabilities and
human resources selection are only the basis of
a competitive advantage and not of a
sustainable competitive advantage.
39
7. CASE STUDY # 3 : TATA MOTORS

a.The automotive industry
According to the Society of Indian Automobile
Manufacturers Report quoted in Tata Motors Annual Report
2005-06, the industry sales in 2005-06 have reached 1,710,099
vehicles; among which 391,166 were commercial vehicles and
1,318,933 were passenger vehicles.
In fact, the year 2005-06 has been difficult for the Indian
automobile industry (growth rate of domestic four-wheeler sales of
8,5%, compared to double digit growth rate in 2004-05 (18,6%).
This decrease is due to emission legislation and to fewer new
models introductions. However, there was a change in this trend
at the end of the year with the announce of duty reductions on
small cars. In the Indian market, the sales of passenger vehicles
have also strongly decreased (from 17,8% in 2004-05 to 7,7%).
The opportunities in the Indian automotive industry are the

development of the roads network infrastructure, the increasing
car penetration in India (partly due to the announce of the duty
decrease on small cars, the increasing income, and the existence
of financial solutions), and the international growth sales.
On the other hand, threats are the global competition (an
increased number of global players are entering the Indian
passenger car market, as well as in commercial vehicle segment),
the booming fuel prices, the input costs, the interest rate
hardening and Government regulations (especially in the fields of
safety and emission).
b. The company
Created in 1945, Tata Motors is historically a locomotive
and, after the Independence, a commercial vehicle manufacturer.
More recently, the company has also developed activities in the
passenger cars market in a first step in light commercial vehicles
(Tata 407, 608, and 709), then in multi-utility vehicles
(Tatamobile) and finally in passenger cars (Sierra, Estate, Sumo).
Tata Motors has also developed the first indigenously
designed and manufactured small-size car, the Indica, which was
40
launched in 1998 without technical or financial collaboration with

any foreign car manufacturer.
This project has been made possible because of the strong
R&D developed by Tata Motors, in some R&D centers on the
model of its Engineering Research Center (ERC) in Pune.
Equipped very early with state of the art facilities (for example in
1994, its CAD facility was rated among the bests in the world), it
also employs a huge number of engineers (today 1400 engineers
and scientists).
At the end of the 90s, Tata Motors has been transformed to

target the new sector (passenger cars), to become more centered
on its competencies, its strategy, its global orientation (See
article The car that changed the corporation, page 61).
According to this article, among the resources leveraged for this
transformation were the conclusion of alliances, the cost
competence, the outsourcing strategy, and the value chain
management strategy. These resources seem thus to play an
important role in Tata Motors competitive position. The empirical
study will investigate these capabilities.
In 2003 also, the company has gone through another

restructuration phase (See article Telco and Tisco, the new and
improved Tata twins, page 184), which was based on achieving
internal efficiencies, reducing the costs, following a global
strategy, and adopting a platform approach.
Thanks to all these corporate policies, in 2005-06, Tata

Motors had revenues of $ 5,5 billion. Leader in commercial
vehicles and second largest in passenger cars, it is globally the
largest company in the Indian automobile market.
Tata Motors is also active in the global market through its

introduction in the New York Stock Exchange in 2004 (the first
Indian engineering company) and the purchase of the heavy
vehicles unit of Daewoo, as well as several alliance (the more
recent is the memorandum of understanding which was signed
between Tata Motors and Fiat).
Exports also represent an increasing part of Tata Motors
revenues: 7,35% in 2004-05 and 9,86% in 2005-2006.
41
The Chairman of Tata Motors is Mr Ratan N. Tata himself

and he has always shown a very strong commitment in the
automobile company. For example, he set himself the objectives of
the Indica in a very mediatical announcement : we will offer the
Indian customer a car which has the size of the Zen, the internal
dimensions of an Ambassador, and the price of a Maruti 800 with
the running cost of diesel (Concepts, frameworks and checklists
on the resource-based view of the firm with cases, page 183).
According to the Chairmans statement (Annual Report

2005-06, pages 4-5), Tata Motors has focused its efforts on costs,
cash management, quality and reduction of time to market.
42
Figure 7 : Volume and market share in commercial and passenger vehicles

Source: Tata Motors Annual Report 2005-2006, page 16
The outlook of the industry is on the one hand favourable to

Tata Motors due to these opportunities. However, on the second
hand, several concerns constitutes risks for Tata Motors. Firstly,
exchange and freight rates fluctuation may impact the
competitiveness of the company. Then, the railways has launched
attractive offers both for passengers and freight, which could have
an impact. The cyclicality of commercial vehicle market could also
impact its business. The company has also to face an increasing
competition, especially from global players (with a more
developed product portfolio, larger financial capabilities, and
strong brands) and foreign regulations in terms of emission,
safety, noise As the manufacturing facilities are in several
locations, the supply chain could face difficulties. Finally, as the
company is working on new projects, this increases the risks faced
by Tata Motors.
Although the current market situation is challenging, Tata

has enjoyed particularly good results and had outperformed the
industry on many ways, as we will see in the next paragraph.

According to its Chairmans statement, Tata Motors has
had another outstanding year. It out-performed the industry with
record revenues and sales volumes. The Company improved its
market share in commercial vehicles, bolstered by the highly
43
successful introduction of Ace, its new small truck. Also, the

Company achieved its highest-ever sales volumes of passenger
cars and utility vehicles during the year. (Annual Report Tata
Motors 2005-2006, page 2).
The financial data confirms this assumption because, as

shown in the next table, the sales of Tata Motors are clearly
superior to those of the industry (respectively 13,6% and 8,6%). In
the passenger cars segment, the company even outperforms the
industry (10% growth for Tata, compared to 7,5% for the industry
average). Even the stock price of Tata Motors outperforms the
industry average.
Figure 8: Sales in commercial and passenger vehicles, 2004-2006

Source : Tata Motors Annual Report, p.27
Figure 9 : Stock price and market capitalization vis--vis the industry

Source : Tata Motors Annual Report 2005-2006, p.44
Finally, if we take the financial ratios into consideration as

follows, we can say that Tata motors really benefits from a
competitive advantage in the commercial vehicle segment as the
company enjoys the best ROA, ROE and ROS in its industry:
Figure 10 : financial ratios Tata Motors, LVC-HCV sector, 2006

Tata Ashok Swaraj Eicher Force
LVC-HCV Motors Leyland Mazda Motors Motors
ROA 0,16 0,14 0,09 0,08 0,07
Tata Force Ashok Eicher Swaraj

44
Motors Motors Leyland Motors Mazda

ROE 3,62 2,29 2,29 1,74 1,60
Tata Ashok Force Eicher Swaraj

Motors Leyland Motors Motors Mazda
ROS 0,07 0,06 0,03 0,03 0,03
In the passenger cars industry, the competitive advantage of

Tata Motors is not so evident but we can say that the company
enjoys however at least a competitive parity with the five major
competitors:
45
Figure 11 : financial ratios Tata Motors Passenger cars sector, 2006

Passenger Honda Siel Maruti Hyundai Tata Hindustan
cars Cars Udyog Motors Motors Motors Ltd
ROA 0,23 0,22 0,20 0,16 -0,20
Maruti Tata Hyundai Honda Siel Hindustan

Udyog Motors Motors Cars Motors Ltd
ROE 8,29 3,62 0,65 0,43 -0,32
Maruti Hyundai Tata Honda Siel Hindustan

Udyog Motors Motors Cars Motors Ltd
ROS 0,10 0,07 0,07 0,06 -0,11
If we consider the same ratios in 2002, then we can say that

Tata Motors situation has clearly improved since then (all the
ratios were negative in both industry at that point of time).
Figure 12 : financial ratios Tata Motors, LVC-HCV and passenger cars sector,
2002
Eicher Swaraj Ashok Force Tata
LVC-HCV Motors Mazda Leyland Motors Motors
ROA 0,08 0,04 0,03 0,01 -0,01
Eicher Ashok Swaraj Force Tata

Motors Leyland Mazda Motors Motors
ROE 0,92 0,78 0,65 0,12 -0,17
Ashok Eicher Swaraj Force Tata

Leyland Motors Mazda Motors Motors
ROS 0,04 0,04 0,02 0,00 -0,01
Passenger Hyundai Honda Siel Maruti Tata Hindustan

cars Motors Cars Udyog Motors Motors Ltd
ROA 0,12 0,06 0,03 -0,01 -0,04
Maruti Hyundai Honda Siel Tata Hindustan

Udyog Motors Cars Motors Motors Ltd
ROE 0,79 0,34 0,07 -0,17 -0,21
Hyundai Honda Siel Maruti Tata Hindustan

Motors Cars Udyog Motors Motors Ltd
ROS 0,11 0,04 0,01 -0,01 -0,03
Even if the financial ratios are not so positive in the

passenger cars industry, we can say that Telco also enjoys a
competitive advantage in this sector. This is illustrated by the
following quote extracted from the article Return of the Indica,
46
page 18 : The Indica has emerged as the biggest seller in its

category, with sales of 5,405 cars in September 2001, a 51%
increase over its September 2000 sales figure. It has overtaken
zippy rivals like the Hyundai Santro (4,953) and the Maruti Zen
(4,008).
According to these elements, we can say that Tata Motors is

enjoying a sustainable competitive advantage in the commercial
vehicle sector because its domination nowadays is salient. Its
competitive position in the passenger cars segment is not so
positive but Tata Motors still remains in the first players in the
Indian automobile industry. That is the reason why the following
section will investigate the sources of this competitive advantage.
d. Sources of the
competitive advantage
Hypotheses
Some resources may be at the basis of Tata Motors
competitive advantage. To determine the impact of these
capabilities on competitive advantage, a senior employee of the
company has been addressed the questionnaire to test each
capability.
Interview
Tata Motors is involved in the automobile sector, and enjoys
a leading position. The company is producing commercial vehicles
(it is the largest commercial vehicles producer worldwide), MUVs
and passenger cars. It is a multi location company with 3 sites for
commercial vehicles. The main site is in Pune.
The value chain is rather complicated. In fact, as it is a very

old company, one of the oldest in the country, they have always
done everything by themselves. At the beginning, it was for
historical reasons, because there was no supplier able to fulfill
their needs and it became part of the organizational culture since
then. The level of vertical integration is thus very high. Nowadays,
the supply chain is organized in 13 steps processes and scheduled
in agreement with the production. Several central agencies are in
47
charge of the purchase of common components and the price is

also centrally planned.
The first resource which plays a role in creating Tata Motors

competitive advantage is the development of customers
relationships. This is obviously a valuable resource in so far as a
better knowledge of the customers and strong relationships
increase the loyalty of these customers. This is rare in this
industry because two complementary ways are employed to
understand better the customers needs. This is quite difficult to
imitate because this is based on the long-term. Tata Motors is
organized to reap the maximal benefits of this resource : two ways
are employed to understand better the customers needs. For the
existing products, there is a continuous process (based on
warranty analysis, market expectations reports). This process is
followed very regularly by Tata Motors because the company tries
to catch up the competitors worldwide and the expectations of the
customers are increasing. For the development of new products, a
team is formed under the direction of a New Product
Manufacturer, and this team integrates engineers, people from
marketing
Efficient sourcing is the second resource which was

mentioned as a source of competitive advantage. Tata Motors is
the world most competitive manufacturer of commercial vehicles.
This is obviously a valuable resource because it increases directly
the profit of the company. This resource is also rare because it is
not only due to cheap labor but also to a continuous trend to
integrate cost reduction. This is difficult to imitate because Tata
Motors benefits from a first mover advantage and is also . For
example, to face the increasing prices of the last few years, Tata
Motors have emphasized it global sourcing, with for example raw
materials from countries like China, Thailand, Brazil This
resource is translated in the organization by the rule : obtaining
always the most interesting buying rates, that is to say the new
product must be at least equivalent or even better than the
existing sourcing solution. This is also reinforced by the existence
of a material sourcing group, which is a cross-functional team, in
which there is a champion (to organize the sourcing) and a
sponsor (senior executive which helps with support activities).
48
Human resources policies also helps creating a competitive

advantage, by adding value. The use of systematic training, of the
Kaizen technique, of a group specific balance scorecard and the
practice with the vendors contribute to this resource. This is not
so rare in the industry because the configuration of the Indian
industry has spread these techniques. According to M.Bedekar,
Tata Motors do not really care about imitation because thus it
tends to increase the global level of quality in the industry.
Then, organizational culture was also evoked as a basis of

Tata Motors competitive advantage. Tata as one of the oldest
Indian company is very well-known and reputed for its ethical
values (refusal of corruption, of favors even within the Group)
and social work (in education, health, access to drinking water)
before the invention of the concept of Corporate and Social
Responsibility. This culture is valuable in the case of the Tata
Group but it is not rare. Some competitors, like for example
Infosys, conduct similar programs on the model of what existed in
the Tata Group. What is not imitable is how deeply this culture is
diffused among the employees. The organizational translation of
this resource is a written document : the Code of Conduct which is
the foundation of any action of the company. This document
summarizes all the values and principles of the Tata Groups
organizational culture.
Finally, the organizational reputation is very important in

creating the competitive advantage. This is valuable because the
Tata Group benefits from a very respected image and this also
rare because not all the players in the automobile industry can
benefit from the solid reputation of a group. This intangible asset
is also difficult to imitate because it is correlated with the history
of the Tata Group. The existence for example of a Code of Conduct
aims at reaping the maximal benefits from this resource.
Finally, the R&D policy is also of primary importance in the

creation of a competitive advantage. This is valuable because Tata
Motors is recognized as a strong R&D player. This is also rare
because in India, it is the only Indian company which owns its
R&D center. This is difficult to imitate because of the costs
required and also because Tata Motors has now a first mover
advantage. The structure of the company is organized to achieve
49
gaining better results from this resource with an historical R&D

center in Pune, the ERC.
Key learning
The resources that seem to play a very important role in
creating a sustainable competitive advantage for Tata Motors are :
the level of vertical integration, the development of customers
relationships, the efficient sourcing, the human resources policies,
the organizational culture and reputation, as well as the culture of
R&D innovation.
50
VALUABLE RARE IMITABLE ORGANIZATION

level of Integration of Due to historical Diffused in the Organization of
vertical many activities reasons culture because the supply chain
integratio it is the result of Common
n history components
supply through
central agencies
with a common
price
developm better knowledge Very complete Based on the Two processes,
ent of of the customers process long run thus one for the
strategic and strong difficult to existing products
customers relationships imitate and another for
relationshi the new ones
ps
efficient increases directly not only due to first mover existence of a
sourcing the profit of the cheap labor but advantage material sourcing
policies company also to a continuous group
continuous trend process
to integrate cost (obtaining the
reduction most interesting
use of global buying rates)
sourcing
human systematic spread of these
resources training, of the techniques in the
policies Kaizen technique, Indian
of a group automobile
specific balance industry
scorecard and
the practice with
the vendors
organizati ethical values similar programs very diffused Code of Conduct
onal (refusal of of competitors culture among
culture corruption, of but very deeply the employees
favors even rooted in Tata
within the
Group) and
social work (in
education,
health, access to
drinking water)
organizati very respected Belonging to the Intangible : Code of Conduct
onal image Tata Group correlated with
reputation history
R&D recognized as a the only Indian Costly to imitate historical R&D
innovation strong R&D company which First mover centers on the
knowledgeable owns its R&D advantage model of the ERC
center in the in Pune
automobile
sector
Finally, as the learning of this interview, the application of the

VRIO framework drives to several conclusions :
51
- The vertical integration strategy is the source

of a sustainable competitive advantage for Tata
Motors
- The development of customers strategic
relationships is also a important factor
- Efficient sourcing policies also plays a role
- Finally, the three remaining resources that play
a role in Tata Motors competitive advantage
are organizational culture, organizational
reputation, and R&D innovation
- On the other hand, human resources policies
are not the basis of a competitive advantage.
The fact that the interviewee also evoked the fact that Tata Motors
gives more product for the money is something that was also
mentioned in the article Its terrific, but is it profitable ? (page
44) about the Indica in 1999.
52
8. CONCLUSION: Insights and limits

of the work
We adopt the argument that the resource-based view can serve as

a useful paradigm for the analysis of the Tata Groups competitive
advantage. This study is based on the assumption that the three
main contributors to the Tata Group profits are representative and
can be analyzed individually.
The empirical application of the RBV has driven us to the

following insights:
- In the case of Tata Steel, some resources like
production capabilities, branding, customer
relationships, human resources, organizational
culture and reputation are the basis of the
firms sustainable competitive advantage.
However, privileged access to raw materials
(captive mines) is the source of a competitive
advantage.
- In the case of TCS, some resources like the
development of client-specific capabilities, the
project management capabilities, learning by
doing, the organizational culture and the
organizational reputation are the basis of TCS
competitive advantage. On the other hand,
managerial capabilities and human resources
selection are only the basis of a competitive
advantage.
- In the case of Tata Motors, vertical integration
strategy, development of customers strategic
relationships, efficient sourcing policies,
organizational culture, organizational
reputation, and R&D innovation are the
sources of Tata Motors sustainable competitive
advantage. On the other hand, human
resources policies are not the basis of a
competitive advantage.
53
More generally, what was learnt from these interview was

the fact that in each case, the belonging to the Tata Group, in
terms of organization culture and organizational reputation,
seems to play a prominent role in the creation of a competitive
advantage.
In this article we have made an attempt to apply the RBV

theory to the Tata Group and to be as exhaustive as possible.
However, this study faces some limitations that reduce the scope
of the analysis. Firstly, only three businesses have been studied,
whereas the Tata Group is involved in many others. Then, the
analysis is focused on a RBV analysis and the influence of the
environment on the performance of the firm will not be explored.
Moreover, the empirical application of the RBV is based on only a
single interview with one senior executive from each company.
What could be done in further studies could be to interview

one people in each sector of the value chain to eliminate the
biases and to produce an analysis as complete as possible because
the risk with a unique interviewee is that the interview focuses on
a resource not because of its criticality but because of it is his
domain of activity. Furthermore, one-shot interviews can also
influence the results and it could be interesting to realize at least
two interviews per people to go deeper in the analysis of the
resources.
54
Appendixes :
1. Tata Group, revenue per sector (2005-2006)
2. Tata Group structure, 2006
3. Questionnaires (final draft)
4. Bibliography
55
Appendix 1 : Tata Group, revenue per sector (2005-2006):

Source: http://www.tata.com/0_investor_desk/group_financials.htm
Appendix 2: Tata Group structure (Organigram)

Source :
http://www.tata.com/0_about_us/business/promoter_companies.ht
m
56
Appendix 3: Questionnaires (final draft)
TATA STEEL, TATA MOTORS

Context questions :
Value chain configuration
- what are the benefits that the value chain activities create for the
customer ? Are they more or less than those created by the rivals ?
- how many activities are there in the value chain vis--vis those of the
competitors? Are competitors providing the same value to the
customers with a reduced number of activities ? Does this lead to a
cost advantage ?
- How well are the activities configured in comparison with the value
chain of the competitors ?
- How is the value chain aligned with the value chain of the buyers ? is
the rivals value chain aligned in a better or worse way ?
- Are the skills, tangible assets and intangible assets that have
contributed to the Strategic Management Capability associated with
value creation ? How does the firm fare with respect to this Strategic
Management Capability vis--vis its rivals ?
Individual Value Chain Analysis
- What are the assets and skills associated with the activity ?
- How does the firm compare with its rivals with regard to these assets
and skills ?
- What are the assets and skills that contribute to a cost advantage /
disadvantage ?
- What are the assets and skills that contribute to advantage /
disadvantage with respect to product attributes ?
Organizing capability
- what are the organizational attributes that have a bearing on
competitive advantage?
Facilities
- What are the products that the existing facilities are designed to
manufacture ?
- Can other products be manufactured from the existing facilities ?
- Can the facilities be made to produce other products after
modification ?
- Can the facilities be made more flexible by retro-fitting? If so what
additional facilities need be installed ?
Customers
- who are the customers being served and what is your knowledge
about their needs?
- what are their unfulfilled needs ? Can these be met through new
products ?
- what knowledge do you possess about your suppliers ?
- Can this knowledge be utilised to identify potential suppliers for new
products ?
- What technical knowledge underlies the products that you
manufacture ?
- What are the potential products that can be manufactured utilising
this knowledge?
Resources analysis
- are the resources that are being leveraged likely to be rare in the
product-market under consideration ?
- can they be imitated ?
- if the leveraged resource per se is not likely to be strategic, can we
build it into a strategic resource ?
57
- Do we possess other required resources ? Can we acquire these

resources ?
- Test of some specific capabilities :

o Learning by doing ?
valuable ? rare ? imitable ? organisation ?
o Human resource selection?
- do you have technical education required ?
- do you use screening tests ?
o Human resource development ?
- do you have statistical process control training ?
- do you have vendor training ?
- do you have multiple machine qualification ?
o Human resource deployment ?
- do you have team involvement ?
- do you have troubleshooting ?
o inimitability ?
- is a prior experience required ?
- do you calculate turnover ?
o Managerial capabilities ?
1. Attracting and retaining well-trained and competent top managers.
2. Achieving a better overall control of general organization performance.
3. Perceiving new organizational opportunities and potential threats.
4. Developing and communicating a unified sense of direction and a sense of
common purpose to which all members of the organization can relate.
5. Unifying conflicting opinions, improve coordination and enhance effective
collaboration between key executives, generate enthusiasm and motivate
sufficient managerial drive for better performance.
6. Developing a more effective organizationwide strategic planning system for
planned overall organizational development.
7. Generating advanced developmental and training programs for our
organizational members.
8. Increased use of management by objective.
9. Increased use of financial accountability.
10. Increased participative decision making at senior and middle management
levels.
11. An extensive and effective use of quantitative techniques in decision
making.
12. An extensive use of cost-effective analyses.
o Human capital
1. Employees have suitable education to fulfil their jobs.
2. Employees are well trained.
3. Employees hold suitable work experience for accomplishing their job
successfully.
4. Employees are well-skilled professionally to accomplish their job successfully.
5. No one knows this job better than our employees.
6. Problems here are easy to solve once the employees understand the various
consequences of their actions, a skill they have acquired.
7. Employees do not know why, but sometimes when they are supposed to be in
control they feel they are being manipulated (reversescored item).
8. If anyone here can find the answer, it is our employees.
58
9. Employees go home the same way they arrived in the morning, feeling they
have not accomplished much (reverse-scored item).
10. Considering the time spent on the job, employees feel thoroughly familiar
with their tasks.
11. Doing this job well is a reward in itself.
12. Mastering their jobs meant a lot to our employees.
o Internal auditing
1. The internal auditing helps to a better functioning of the organizational
members.
2. The internal auditing clarifies aspects of working processes.
3. The internal auditing is perceived as a threat to the position and status of the
employees (reverse-scored item).
4. Organizational members are not afraid of the results revealed by the internal
auditing.
5. The internal auditing prevents inappropriate actions which may harm the
organization.
6. The internal auditing helps achieve the organizational goals.
o Labor relations
1. There is complete trust between management and employees.
2. There is complete satisfaction of the relationships between management and
employees.
3. There is a clear and accepted managerial policy on all parts (management
and employees) regarding labor relations system.
4. There is a constant consultation between management and employees.
5. There are mutual respect and good intentions between management and
employees.
6. The principle of security, namely caring for the employees health, safety,
livelihood, and her future employment, is a common one among both
management and employees.
7. The principle of fairness, namely caring that the employee is getting fair
compensation for her effort and contribution, is a common one among both
8. The principle of individualism, namely caring that the employee is making
meaningful work independently, on the basis of her planning and reasonable
performance, is a common one among both management and employees.
9. The principle of democracy, namely caring that the employee participates
actively in the decision making, is a common one among both management and
employees.
o Organizational culture
1. There is a high involvement of the employees in the processes, decisions, and
their implementation.
2. The employees are committed and hold a high sense of responsibility to the
organization.
3. All have a common set of values, creeds, and symbols.
4. There is a high coordination and agreement among the employees.
5. The organization knows the external environment and provides appropriate
responses.
6. The organization adapts its structure and the way it functions to changes in
the external environment.
7. The organizational goals are clear and agreeable to all members.
8. The organization strives hard to achieve its goals.
59
o Perceived organizational reputation

1. The quality of management of my local authority is credited with a very
favourable reputation.
2. The ability of my local authority to attract, develop, and keep talented people
is credited with a very favorable reputation.
3. The quality of services my local authority supplies is credited with a very
4. The financial soundness of my local authority is credited with a very
favorable reputation.
5. In my local authority, the education system is credited with a very favorable
reputation.
6. In my local authority, the municipal facilities are credited with a very
7. In my local authority, the tax system is credited with a very favorable
reputation.
8. In my local authority, the transportation system is credited with a very
9. The quality of life in my local authoritys jurisdiction is credited with a very
Conclusion
- how do explain the above-average performance of your company ?
60
TATA CONSULTANCY SERVICES

Context questions :
Value chain configuration
- what are the benefits that the value chain activities create for the
customer ? Are they more or less than those created by the rivals ?
- how many activities are there in the value chain vis--vis those of the
competitors? Are competitors providing the same value to the
customers with a reduced number of activities ? Does this lead to a
cost advantage ?
- How well are the activities configured in comparison with the value
chain of the competitors ?
- How is the value chain aligned with the value chain of the buyers ? is
the rivals value chain aligned in a better or worse way ?
- Are the skills, tangible assets and intangible assets that have
contributed to the Strategic Management Capability associated with
value creation ? How does the firm fare with respect to this Strategic
Management Capability vis--vis its rivals ?
Individual Value Chain Analysis
- What are the assets and skills associated with the activity ?
- How does the firm compare with its rivals with regard to these assets
and skills ?
- What are the assets and skills that contribute to a cost advantage /
disadvantage ?
- What are the assets and skills that contribute to advantage /
disadvantage with respect to product attributes ?
Organizing capability
- what are the organizational attributes that have a bearing on
competitive advantage?
Customers
- who are the customers being served and what is your knowledge
about their needs?
- what are their unfulfilled needs ? Can these be met through new
products ?
- what knowledge do you possess about your suppliers ?
- Can this knowledge be utilised to identify potential suppliers for new
products ?
- What technical knowledge underlies the products that you
manufacture ?
- What are the potential products that can be manufactured utilising
this knowledge?
Analysis of the resources
- are the resources that are being leveraged likely to be rare in the
product-market under consideration ?
- can they be imitated ?
- if the leveraged resource per se is not likely to be strategic, can you
build it into a strategic resource ?
- Do you possess other required resources ? Can you acquire these
resources ?
- Test of some specific capabilities :
o client-specific capabilities ?
o project management capabilities ?
valuable ? rare ? imitable ? organization ?
o labour costs and contractual penalties ?
61
o effort estimation ?
o Learning by doing ?
o Human resource selection?
- do you have technical education required ?
- do you use screening tests ?
o Human resource development ?
- do you have statistical process control training ?
- do you have vendor training ?
- do you have multiple machine qualification ?
o Human resource deployment ?
- do you have team involvement ?
- do you have troubleshooting ?
o inimitability ?
- is a prior experience required ?
- do you calculate turnover ?
o Managerial capabilities ?
1. Attracting and retaining well-trained and competent top managers.
2. Achieving a better overall control of general organization performance.
3. Perceiving new organizational opportunities and potential threats.
4. Developing and communicating a unified sense of direction and a sense of
common purpose to which all members of the organization can relate.
5. Unifying conflicting opinions, improve coordination and enhance effective
collaboration between key executives, generate enthusiasm and motivate
sufficient managerial drive for better performance.
6. Developing a more effective organizationwide strategic planning system for
planned overall organizational development.
7. Generating advanced developmental and training programs for our
organizational members.
8. Increased use of management by objective.
9. Increased use of financial accountability.
10. Increased participative decision making at senior and middle management
levels.
11. An extensive and effective use of quantitative techniques in decision
making.
12. An extensive use of cost-effective analyses.
o Human capital
1. Employees have suitable education to fulfil their jobs.
2. Employees are well trained.
3. Employees hold suitable work experience for accomplishing their job
successfully.
4. Employees are well-skilled professionally to accomplish their job successfully.
5. No one knows this job better than our employees.
6. Problems here are easy to solve once the employees understand the various
consequences of their actions, a skill they have acquired.
7. Employees do not know why, but sometimes when they are supposed to be in
control they feel they are being manipulated (reversescored item).
8. If anyone here can find the answer, it is our employees.
9. Employees go home the same way they arrived in the morning, feeling they
have not accomplished much (reverse-scored item).
62
10. Considering the time spent on the job, employees feel thoroughly familiar
with their tasks.
11. Doing this job well is a reward in itself.
12. Mastering their jobs meant a lot to our employees.
o Internal auditing
1. The internal auditing helps to a better functioning of the organizational
members.
2. The internal auditing clarifies aspects of working processes.
3. The internal auditing is perceived as a threat to the position and status of the
employees (reverse-scored item).
4. Organizational members are not afraid of the results revealed by the internal
auditing.
5. The internal auditing prevents inappropriate actions which may harm the
organization.
6. The internal auditing helps achieve the organizational goals.
o Labor relations
1. There is complete trust between management and employees.
2. There is complete satisfaction of the relationships between management and
employees.
3. There is a clear and accepted managerial policy on all parts (management
and employees) regarding labor relations system.
4. There is a constant consultation between management and employees.
5. There are mutual respect and good intentions between management and
employees.
6. The principle of security, namely caring for the employees health, safety,
livelihood, and her future employment, is a common one among both
7. The principle of fairness, namely caring that the employee is getting fair
compensation for her effort and contribution, is a common one among both
8. The principle of individualism, namely caring that the employee is making
meaningful work independently, on the basis of her planning and reasonable
performance, is a common one among both management and employees.
9. The principle of democracy, namely caring that the employee participates
actively in the decision making, is a common one among both management and
employees.
o Organizational culture
1. There is a high involvement of the employees in the processes, decisions, and
their implementation.
2. The employees are committed and hold a high sense of responsibility to the
organization.
3. All have a common set of values, creeds, and symbols.
4. There is a high coordination and agreement among the employees.
5. The organization knows the external environment and provides appropriate
responses.
6. The organization adapts its structure and the way it functions to changes in
the external environment.
7. The organizational goals are clear and agreeable to all members.
8. The organization strives hard to achieve its goals.
o Perceived organizational reputation
1. The quality of management of my local authority is credited with a very
63
2. The ability of my local authority to attract, develop, and keep talented people
is credited with a very favorable reputation.
3. The quality of services my local authority supplies is credited with a very
4. The financial soundness of my local authority is credited with a very
5. In my local authority, the education system is credited with a very favorable
reputation.
6. In my local authority, the municipal facilities are credited with a very
7. In my local authority, the tax system is credited with a very favorable
reputation.
8. In my local authority, the transportation system is credited with a very
9. The quality of life in my local authoritys jurisdiction is credited with a very
Conclusion:
- how do explain the above-average performance of your company ?
64
Appendix 4: Bibliography
- BARNEY J.B. (2002). Gaining and Sustaining Competitive

Advantage, 2nd edition, Chap. 5, pp.149-192
- COLLIS D.J., MONTGOMERY C.A. (1995) Competing on

resources: strategy in the 1990s, Harvard Business
Review, pp.118-128
- RAY G., BARNEY J.B., MUHANNA W.A (2004). Capabilities,

business processes and competitive advantage: choosing the
dependent variable in empirical tests of the resource-based-
view Strategic Management Journal, 25, pp. 23-37
- ETHIRAJ S.K., KALE P., KRISHNAN M.S., SINGH J.V. (2005).

Where do capabilities come from and how do they matter ?
A study in the software services industry Strategic
Management Journal, 26, pp. 25-45
- BARNEY J. (1991). Firm resources and Sustained

Competitive Advantage Journal of Management, 17(1), pp.
99-120
- VENUGOPAL R. (2005) Resource-based new product

development: insights from the small car project on the
Indian car company TELCO International Journal
Automotive technology and Management, 5(1), pp.71-82
- MATA F.J., FUERST W.L., BARNEY J.B. (1995) Information

technology and Sustained Competitive Advantage: a
Resource-Based analysis, MIS Quarterly, pp.487-505
- VENUGOPAL R. (1999) Contemporary strategic

management: concepts, frameworks and checklists on the
resource-based-view of the firm with cases, Chap.1, pp. 1-
17, and Case 4, pp.175-192
- COCKBURN I.M., HENDRSON R.M., STERN S. (2000)

Untangling the origins of competitive advantage, Strategic
Management Journal, 21, pp. 1123-1145
- CARMELI A and TISHLER A (2004) The relationships

between intangible organizational elements and
organizational performance, Strategic Management
Journal, 25, pp. 1257-1278
65
- HATCH N.W and DYER J.H (2004) Human capital and

learning as a source of sustainable competitive advantage,
Strategic Management Journal, 25, pp. 1155-1178
- DUSSAUGE P, GARRETTE B, MITCHELL W (2004)

Asymmetric performance: the market share impact of scale
and link alliances in the global auto industry, Strategic
Management Journal, 25 (7), pp.701-720
- Annual Report Tata Steel, 2005-2006
- Annual Report Tata Consultancy Services 2005-2006
- Annual Report Tata Motors 2005-2006-11-21
- http://www.insight.asiancerc.com
- http://www.capitaline.com/intranet/INDEST_consortium.htm
- http://www.ibid.informindia.co.in
- http://www.tata.com
- http://www.tatasteel.com
- http://www.tcs.com
- http://www.tatamotors.com
- CHATTERJEE D, Tata Steel: burnishing the brand, Business

Today, July 20 2003, pp.104-107
- SURENDAR T and SARKAR R, Return of the Indica,

Business World, 5 November 2001, pp.18-19
- KUNDALKAR A, An overseas buying spree, Business India,

December 18 2005, page 109
- DHAWAN R, A positive attitude, Business World, December

29 2003, page 24
- JAYAKAR R, TELCO and TISCO the new improved Tata

twins, Business Today, November 9 2003, pp. 184-186
- JOSEPH T, Remaking Tata, Business World, September 13

1999, pp.17-25
66
- SRIDHARAN R, The car that changed the corporation,

Business Today, February 7 1999, pp.60-71
- NARAYAN S, Its terrific but is it profitable ?, Business

World, January 7-21 1999, pp.42-44
67

Analysis of Tata's competitive advantage through its resources

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Analysis of the competitive advantage of Tata

Contemporary Concern Study

I would like to thank Dr Raghunath for guiding me all through

I also would like to thank Ms Vijaya Deepti (TCS), M. P.V.A.

Finally, thanks a lot also to Professors D.V.R Seshadri, L.

Nowadays, the group encompassed through more than 90

Figure 1 : Data on Tata Group

Tata is a well-known brand in India, based on more than a

We should all feel proud of our achievements in 2005. It has been

For these reasons, Tata is one of the most famous companies

2. OBJECTIVES OF THE CCS

The study will be limited to some businesses in which Tata is

Figure 2: Profitability Analysis

Tata Teleservices Maharashtra Ltd 123,05 -541,06

This CCS aims at confronting what the theoretical literature

b. Issues that the study will not

Another area will not be studied in this report. The analysis

a.Traditional ways of studying

A first set of authors has studied what is called distinctive

have to define a mission/vision for the organization. The limitation

A second traditional way of analyzing the strengths and

Finally, a third traditional way to analyze strengths and

the human capital whereas capabilities are the capacity for a

To identify resources, a certain framework can be used: the

c.Competitive advantage and

According to the article Firm resources and Sustained

This analysis is based on two hypothesis: resource

barriers to entry and mobility are also possible (Firm resources

The Resource-Based-View of the firm can also implies that

e.The VRIO framework

According to Barney, a firm can only benefit from a

The use of this framework is very helpful to analyze

Despite these limitations, this framework represents a very

The next section will explain the choice of a RBV

4. BENEFITS OF THE RESOURCE

In fact, the Resource-Based-View goes further and prolongs

further, explaining the asset by a capability. The example taken in

Moreover, the explanation of causality developed by the RBV

Furthermore, as the environmental approach does not cover

Finally, another insight brought by the RBV concerns how

To sum up, the main advantage of the RBV approach is to fill

The previous sections have covered the scope and limits of

choosing such an approach. The basis of the following sections

TCS is the second part of the empirical work. It has also

Tata Motors is the last empirical case that have been

To conduct the interviews, questionnaires have been

The first draft comprised two different questionnaires, one

The design of a third and final draft aimed at addressing these

resources which are to be tested depend on the industry and are

The limit of these final questionnaires was their length. It

However, despite this limitation, these questionnaires were

6. CASE STUDY # 1 : TATA STEEL

Tata Steel is not only involved in the Steel industry. One of it

tonnes, whereas the precision tube industry is highly dynamic

The Chairman of Tata Steel is M. R.N. Tata. With a turnover

Figure 3: Profit after tax 2002-2006, Tata Steel

These good results were due partly to restructuration

Currently, Tata Steel has foreseen to increase its capacity to

In order to strengthen its position, Tata Steel has launched

c.Its competitive advantage

This good competitive position has been confirmed by the

If we consider the financial data on the company, we can say

Figure 4 : financial ratios Tata Steel, 2006