Answer

1. Introduction to Business and General Business Environment

               Tata Motors Ltd. is synonymous with India and its presence around the world has been felt for decades in the car-manufacturing sector. In fact, the manufacturing business is the largest automobile firm in the country, and globally it is regarded as a leader in commercial vehicles in various segments. In India, the manufacturing firm is a prominent player in passenger vehicles market even though around the planet the business is synonymous with large truck as well as bus manufacturing, which has seen it ranked fourth globally. The firm’s pedigree around the world is signified by its presence in such markets as the United Kingdom, Thailand, Spain, South Korea, as well as other markets (Tata Motors, 2014). In India alone, the firm has up to 7.5 million automobiles plying and the brands under its wings include Fiat, Indigo, Sumo, Land Rover, Nano, as well as Indica. J. N. Tata in 1868 founded the manufacturing business, and it is headquartered in Mumbai, India. Formally, it was referred to as Tata Engineering and Locomotive Company (TELCO) and the firm manufacturers automobiles in its manufacturing facilities in Indian towns on Pune, Jamshedpur, and Lucknow. This has seen its portfolio widen and it has interests in other areas including power, tea, information communication technology, and steel. Yet, the manufacturing firm is renowned for its competence in the auto business.

    

   The main clients of the firm include governments, other organizations, as well as individuals all of which is signified through product portfolio. In fact, the company manufacturers buses, trucks, and small vehicles targeting various market needs across the world. For instance, the business has increasingly targeted individuals in recent years by developing such models as Indica and Nano in its effort to satisfy this segment of the main customer base. The models are targeted towards satisfying low-income households looking to purchase automobile for the first time. Nonetheless, the manufacturing business has several main clients across the world. Seeing that the business by far and large targets low-income markets, most of its clients are located in India and other neighboring Asian markets. The manufacturing company may have experienced significant drops in Indian market share, but the local market still forms a sizeable customer base. Indeed, such towns as Mumbai and Jakarta as well as Chinese and South Korean cities represent sizable client base for the manufacturing business. Indian automobile industry is highly competitive and coupled with the fact that Tata Motors operates globally the business faces serious competition. Locally in India, stiff competition is from Maruti Suzuki as well as Hyundai Motors (Saiwan, 2011). These two competitors have grown tremendously in India in the last few decades, and have largely focused on the passenger car segment. This means that potent competitors are not only producing similar products, but also targeting the same client base. The outcome is that Tata Motors has continued to lose its traditionally huge market share in the country. Outside India, the automobile market is similarly competitive and such global brands as Toyota continue making tremendous inroads even in the Indian market.

   The Japanese manufacturer, Toyota, is globally known for its aggressive nature that has seen it emerge as a pioneer in the automobile market. As evidenced, the competitors are found both within the local Indian market and globally. In fact, this is probably a key reason why the Tata Motors opted to join hands with other automobile manufacturers across the world including Ford and Daewoo. The goal is to strategically place itself in different markets to gain a foothold in the highly competitive automobile market. In Daewoo’s case, for instance, Tata Motors made the acquisition of the South Korean firm in 2004 to ensure that it gained a foothold in the South African truck-manufacturing segment. The passenger car segment reveals that Maruti occupies the largest market share locally with approximately 45.4 percent, which is followed by Hyundai at 14 percent. The next competitors are Tata Motors at approximately 12.3 percent, Mahindra with 6.8 percent, GM (General Motors) at 3.9 percent, Toyota with 3.1 percent, and Honda at 2.7 percent. The rest of competitors in the market share include Ford at 3.9 percent, Volkswagen at 2.5 percent, and others occupy approximately 5.5 percent (Thomas White International, 2010).

   This information reveals that Tata Motors has a long way to go prior catching up with such competitors Maruti-Suzuki. In fact, the Indian automobile market seems closer to a monopoly as Maruti-Suzuki occupies over half of the market share in the key passenger vehicle segment. Maruti-Suzuki has weathered competition over the years and seems only to get stronger as years pass by.

   Suzuki Motor Corporation owns the company and its strength lies in a wide variety of small vehicle models that constitute the largest part of the Indian automobile market including 3-wheelers. Maruti-Suzuki near monopoly is evidenced in the firms massive dealer network in India, as well as yearly manufacturing capacity exceeding 1 million vehicles. Similar to Tata Motors, competitors such as Maruti-Suzuki have increasingly produced like products targeting low-income households and thus driving competition even higher (Shafiulla, 2014). The low-income clients form the largest part of the client base in India and across the region, which is reflected in the trend by manufacturers to produce low-cost automobile models. As such, the demand curve is relatively elastic as any percent in price hike would likely mean considerable decrease in demand. After all, the competition is considerably high and the majority low-income household targets are highly sensitive to price increases. The firm’s ability to mark up price above marginal cost is thus almost non-existent.

   Production Costs and Sales

               The first factor of production involves high capacity utilization in which the fixed costs are spread over more units when client demand skyrockets and the capacity is fully utilized to lead to lower unit costs. Conversely, when clients’ demand plummets the goal is to spread the fixed costs over fewer units including assembled vehicles as well as clients to ensure that cost of each unit rises. This is particular significant for Tata motors as a manufacturing business, and it emerges as a variable factor of production. The concept implies is that if Tata motors is capable of maintaining higher capacity utilization levels via demand forecasting and aggressive pricing, it will be in a position to uphold lower cost structure than competitors such as Maruti-Suzuki. The second factor of production involved is economies of scale (Shafiulla, 2014). As insinuated, increases in capacity utilization spreading fixed expenses can result in lower unit costs. True economies of scale relate to cost benefits linked to larger-sized facilities instead of increased volume via an existing facility. As an example, the cost of manufacturing 200 passenger vehicles should not be twice the cost of manufacturing 100 passenger vehicles when all other factors are constant to ensure that the initial fixed cost per unit will be lower. Worth noting, is that diseconomies of scale in manufacturing business often arise when companies construct huge facilities huge and their administrative costs as well as other bureaucracies overwhelm any chance of cost savings.

   The next variable factor for production involves technological advances. The area of manufacturing business is heavily affected by technological changes in the market, and the goal is to be up-to-date while ensuring that costs are kept at a minimum. Indeed, manufacturing firms are known for investing in research and development contributing to cost-saving technologies. Firms that invest in such technologies are often trading a rise in fixed costs for a drop in variable costs. These types of investments characterize manufacturing business. The cost structure implies that fixed costs are small relative to variable costs, even though this has seen the manufacturing firm encounter cost pressures in the past. For instance, materials cost in the financial year 2000 amounted to 65 percent of total cost. Tata Motors sought to address the problem beginning with direct materials procurement. The implication is that its optimal size is likely medium.

   Macro Business Environment

               Tata motors conduct its business in various nations across the planet including such continents as Europe, Africa, Australia, as well as Middle East and Asia. This indicates that firms products are sold in a variety of geopolitical markets and it is the subject to countless risks that come with operating outside the local market including terrorism as well as regional or multinational conflicts all of which have considerable impact on political stability. In fact, the nation in which Tata motors conducts business have different political stability levels ranging from relatively stable nations to turbulent ones. This has seen the firm concentrate on political climate as well as regional leading bodies. In essence, the company has been forced to understand the laws as well as regulations governing a country or region it operates in. This was evidenced Tata motors’ 2008 deal with Ford to purchase Land Rover. In fulfilling the feat, the firm needed to understand the laws as well as regulations instituted by the United Kingdom. In addition, Tata motors had to comprehend laws and regulations in nations Land Rover operate in (Kapila, 2008). The implication is that the firm operates in a politically complex environment in which proper understanding of laws and regulations is vital for success. As an example, the political climate in the United Kingdom can be explained as considerably favorable as it is associated with tax benefits meant to attract foreign investments, strong reputation with regard to stability and goodwill, as well as adaptive regime support. Conversely, the entire region of the Middle East and African market presents a different political landscape altogether. Some of the countries in these regions barely recognize political stability, and this means that Tata motors has to do with turbulent market conditions. Worth noting, is that unfavorable political climate means that control of market becomes increasingly challenging for Tata motors with respect to  counterfeits, security, as well as government support for foreign investors.

   Locally in India, the firm also enjoys a somewhat stable political environment to conduct business. Indeed, Indian industries have had keen interest in the nation’s politics for a number of reasons. More so, political parties have long been known to set the agenda for legislations affecting businesses in the country. Despite the nation having experienced enormous transformation over recent years, the government still wields enormous regulatory power that can make or break an industry. This is reflected in the fact that political campaign funding is common among industrialists operating the nation (Kazmi, 2008). Socio-political movements including Maoists and ultra-leftists affect the climate in the country, and the implications are often negative because resulting upheavals do not favor business environment. For instance, West Bengal’s Singur state is affected by Naxalism and at one time faced a political crisis after the state government permitted Tata Motors to construct an assembly facility near Kolkata. Seeing that these socio-political movements still operate underground, the political environment can only be termed as somewhat stable and evidences the complex political environment faced by Tata motors.

   The macroeconomic faced by the firm are by far and large dependent on global socio-eco-political trends. Indeed, the firm operates in a rather complex eco-political environment and as evidenced in the recent global recession, multi-national companies such as Tata motors are at a great risk. The main products are likely to be inferior and the demand is likely to plummet if another recession is to occur. This includes in India where majority of client base is fond as well as in such matured markets as the United Kingdom. The future operating costs are likely to rise, as realignment in terms of labor have profound global impact. Recent trends in exchange rates also do not favor costs as well as revenues because the Indian Rupee has shown weaknesses against major currencies including dollar and Euros.

   Sustainability Practice of the Business

               The production of the manufacturing firm is known to generate both positive and negative externalities. Positive externalities are well known including technology as well as management practices. In fact, the firm’s positive externalities in the area of technology are globally acknowledged in the fact that the company is ranked among the top automobile manufacturers. This indicates that the world of automobile manufacturing realizes that Tata motors has greatly contributed to innovativeness and continues to set an example for other manufacturers to follow and perhaps adopt similar production mechanism. As well, the fact that Tata motors has managed to expand globally after starting in India gives a perfect management imprint for companies aspiring to go global. In essence, starting firms in the area of automobile business and beyond can look up to Tata motors to learn the manner in which multinational firms are managed. On the other hand, negative externalities in the production process include environmental degradation.

   The manufacturing process involved in producing vehicles is widely known to use chemicals that have been found to have profound environmental impact. In fact, Golinska (2015) notes that harmful emissions often are found in automobile production. They come in all manner and form including solid waste generation as well as emission of voltaic organic compounds. Solid waste from the production process, for instance, can have profound effects in the environment through polluting both land and water sources. Contaminated land is likely to cease being arable because of matters that lowered soil quality or covered land area altogether. As well, solid waste is likely to have metals that react with air or rain water to generate compounds that are may change acidity or alkalinity of soil. The government in conjunction with other non-government agencies in India and across the world has come up with different measures to mitigate the negative externalities associated with the production process. More so, the government has laws and regulations to direct business on waste management. Indeed, faulting companies found to have polluted the environment in any way risk lawsuits, heavy fines, as well as closures by the government. Tata motors and other manufacturers in the nation are expected to conform to set laws and regulations with regard to waste management to ensure sustainability. On its part, Tata motors seeks to mitigate negative externalities through policies designed to contribute to environmental wellbeing. For instance, the business has CSR (corporate social responsibility) policy that simply means that it recognizes and acknowledges the indispensible need to live harmoniously with the environment (John, 2015). This means being conscious about what the environment and society needs or expects including acting responsibly in case of pollution as well as following laws and regulations stipulated by the government.

   The consumption of the firm’s products are widely known to give rise to negative externalities including pollution as well as congestion. Indeed, the firm’s automobiles are low-cost meaning that most households in India and around the world are able to acquire them. The outcome is increased vehicles on the road, and thus increased air, water, and land pollution. Heavy consumption, in particular, has been found to negatively affect air quality through noise and exhaust emission. Noise pollution results out of many, uncoordinated sound generated by vehicle engines as well as horns and music systems often found in automobiles. On the other hand, exhaust emissions are due to significant amount of fossil fuels used by automobile engine. Some of the harmful substances found in automobiles’ exhaust emissions are sulphur and nitrogen oxides, carbon dioxide, carbon monoxide, ozone, particulate material, hydrocarbon particles, as well as aldehyde compounds (Golinska, 2015). These compounds negatively affect human’s health. The government laws and regulations pertaining congestion in such cities as Mumbai have been erected to control the problem. The aim is to control automobile use to keep it a minimum and thus decreased exhaust emissions as well as congestion. Tata motors, like other automobile manufacturers, have come up with measures to mitigate the negative externalities including adopting emerging automobile technologies that lead to less fuel usage. This is an area under constant research and development and Tata motors has shown its dedication to contribute to fuel efficient automobiles, and thus less exhaust emissions.

   Sustainability practice in the automobile industry is at the core of modern-day business operation and dictates the future viability of a business. More so, consumers are increasingly recognizing the need to cater for environment and they are choosing products that abide to local and international standards with regard to green energy and pollution. This implies that businesses in the automobile industry ought to be conscious about their production process and product’s pollution levels. Long-term viability hinges on assuring automobile clients that a particular model meets local jurisdictions with respect to pollution. In sum, sustainability is indispensible for any multinational corporation and Tata motors must work towards this end.