PESTLE ANALYSIS
Important Trends in 2007
The global hot drinks and the coffee production by the Tata Tea Limited is one of the trends that firmly placed them in the global market scene. Its target market are the youth—and it’s a huge market because the youth nowadays are health-conscious and the offerings of Tata Tea Limited continues to benefit from a combination of strong underlying consumer trends towards health and well-being, rising affluence and key demographic factors such as the large size of the youth population in developing markets. They have also created a polypack revolution in tea in India. Jaego Re, a new marketing campaign is about a way of life, which provides a poignant platform for connection with the youth.
Joint Ventures
Tata Tea collaborated a Sri Lankan tea industry called Watatwala Plantations Limited where it focuses on production and marketing of tea, rubber and palm oil, it prospered and in May 2007, the company signed a joint-venture agreement with Zhejiang Tea Import and Export (ZTIE) company of the People’s Republic of China (PRC). This involves setting up a joint-venture company in Zhejing for the manufacture and marketing of green tea polyphenois, other green tea extracts, cold and hot soluble tea, liquid tea concentrates, and other value-added tea products. The project is of great strategic importance for the Tata Group in reaching out to the Chinese and Far East markets. ZTIE’s main shareholder is a state-owned group (54%) and the balance is owned by the employees and managers. ZTIE has experience in running joint-venture companies as well as exporting teas and tea machinery. It was amongst the first ISO 9002 trading companies in China, the turnover of the company was 0million in 2006.
Tata Tea Company Operations
Tata Tea has research and development centers in Assam and Kamataka that focus on the branded business. Research and development at Tata Tea covers the entire gamut of tea operations from cultivation to manufacture and the packaging operations. The comprehensiveness of the R&D program gives the company confidence to technologically brace itself for developing critical capabilities and meeting global challenges head on. It also allowed the company not just to gain cost competitiveness but also to enhance the overall quality of the operations. To further ensure product quality, Tata have also established the quality department that ensures that the requirements across all parameters for tea quality, packaging materials, and shop floor processes are met.
Furthermore, Tata has a team of experienced and skilled team of tea tasters and blenders across the various operational locations. Their primal responsibility is to guarantee the quality of tea delivered according to the standards for each brand of tea, which are tailor-made to the specific requirements of each target market. In order to maintain product superiority vis a vis competition, regular benchmark tasting of competitive brands us carried out by the quality group. The group is also involved in quality compliance in the field of packaging materials against laid down standards and to carrying out intensive shop floor checks and controls. Regular feedback is sought from customers consistently and all complaints thoroughly investigated. The goal is to ensure that customers remain loyal and all their complaints are addressed and acted upon.
The Tata Tea Group of Companies today represents the world’s second largest global branded tea operation with product and brand presence in 40 countries. The consolidated worldwide branded tea business of Tata Tea Group contributes to around 86% of its consolidated turnover with the remaining 14% coming from bulk tea, coffee, and investment income. The company operates through five strategic business units (SBUs) and three subsidiaries. The five SBUs are plantations, packet tea, instant tea, global business, and Tata Tetley. The subsidiaries are the Tetley Group Ltd, Tata Coffee, and Tata Tea Inc.
SWOT ANALYSIS
Strategic Directions and Methods
The company’s plantations are located in the northern part of Wets Bengal; Assam; and West Kerala. The tea estates of Assam are scattered across the entire Brahmaputra Valley. This valley is flat and subject to frequent floods. Having low hills, which are optimal for drainage of water, is necessary for ideal tea growing conditions.
Moreover, the estates in West Bengal are situated on the Dooars plateau which has an elevation of 230m above mean sea level. The estates in Kerala are clustered around the town of Munmar of the innerslopes of basin-like plateau. The highest peak in India south of the Himalayas, Anaimudi is situated in this area and some of these estates are among the highest in the world. Average annual rainfall varies from 400cm in the Dooars region to 200-270cm in Assam. The estates in Kerala are within 27km of each other, but those at the western end can receive an average of 800cm of annual rainfall compared to 130cm at the most eastern estate and this all are essential in providing quality crop of teas and coffees.
The packet division and the instant tea operation trace their roots back to the original joint venture with James Finlay and company. The instant tea operation grew out of James Finlay’s know-how in the manufacture of instant tea powder—the fully soluble solids of tea—which is a new and fast growing product in a resurgent American market in the 1960s. Commissioned in 1964 the factory today is the largest instant tea manufacturing plant outside the USA and is a 100% export oriented unit. The operation is ISO 9002 and is located in Munmar, where Tata Tea owns 2,500 acres of tea estates. Environmental regulations by the usage of raw materials is abundant throughout the year. The equipment used for the manufacture of the teas are state-of-the art and have been constantly upgraded. Instant tea is manufactured to international standards in the most developed nations in the world. It is exported to many nations worldwide.
Management Structure
The Group Executive Office (GEO) defines and reviews the business activities of the Tata Group. It is involved in the implementing of programmes in corporate governance, human resources, the environment etc. The group is more synergistic, it does this by strengthening the relationship between the Group and its companies. The GEO creates a shared understanding of a Tata company’s current activities, its strengths and its weaknesses. It then addresses the most strategic issues facing the company.
Plantation Operations
Tata Tea have taken a number of steps to reduce costs and improve productivity and quality in its plantation operations. In April 2005, it transferred 17 estates in southern India to a new company, Kanan Devan Hills Plantations Company Limited. Approximately 75% of the shares in this company were offered exclusively to the employees of the plantations: the entire management along with 12,441 out of 12,770-strong workforce subscribed to the issue. The workers contribution now constitutes 74% of the paid-up equity in the company and of the remaining equity, 19% is owned by the Tata Tea, and 7% by trusts. Tata plans to continue to source teas from the new company, among several other sources for familiar teas worldwide. It would divest 80% in its North Indian Plantation (NIPO), and spin it off to a number of investors and workers. Workers were expected to pick up a 15-20% stake. A new company, Amalgamated Plantations, was to be formed with Tata Tea and further their world domination.
Global Economy
GDP growth in China, India and Russia, which accounted for about half of global growth during the twelve-month period to is expected to be robust in 2007 and 2008 whilst other emerging markets and developing countries are also expected to record robust economic expansions thanks to strong domestic demand. Rapid growth in these economies will counterbalance moderate growth in the USA, the euro zone and Japan during 2007 and 2008. Asia is to be the world’s fastest-growing region over the medium term and steady gains in consumer spending will be the primary driver of economic expansion. Per capita income in East Asia is to rise by about 5.3% a year in real terms during 2006-1015. Because of the region’s financial crash in 1996-1997, growth has averaged around 8%. Asia is also far less vulnerable to another balance-of-payment crisis. Most countries now have large current-account surpluses and significantly lower foreign debt.
Furthermore, the key risk in the company is a more rapid than expected slowdown in the US. The sharp slowdown in the housing market will depress US consumption and residential investment, with adverse consequences for growth in both Asia and the rest of the world. Further increases in world oil prices could have serious economic consequences. Most Asian countries have been able to absorb higher fuel costs, and this may change as exchange rates stabilize. Some countries could also come under more pressure to reduce oil price subsidies. Labor productivity in many Asian countries is significantly lower than the industrialized world. Much depends on attracting more FDI. However, an increasing share of the foreign capital moving into the region is going to China while inflows to neighboring countries slow. The large current account surpluses accumulated by some East Asian economies are likely to create economic and political pressure for the evaluation of their currencies.
Credit:ivythesis.typepad.com
0 comments:
Post a Comment