Essay: Dunning Eclectic paradigm; Learning Theories and Porter Diamond: Tata Motors Company

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  • Dunning Eclectic paradigm; Learning Theories and Porter Diamond: Tata Motors Company
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Internationalization it is the process of planning with implementing products and services and it can be adapted to language and culture which is a process called localization (Ghauri and Buckley, 1993).Further, this essay will be focusing for a new destination for internationalization moreover providing background information on Tata Motors along with explaining the definitions and applying them to the company. This paper focuses on main three theories which are Dunning Eclectic paradigm; Learning Theories and Porter Diamond. Tata Motors Company is the largest vehicle within India with a 42 billion organization (Standard, 2016) the product variety of automobiles, information and technology is diverse and division of the car market as per (,2016) such as it include passenger cars, trucks, vans, coaches, buses and also deals in construction equipment and military vehicle. The research shows in Business Leadership Management (2013) the motive for internationalization which is due to its acquisition and its ease the risk posed by the recurring nature of demand for company.

OLI paradigm is also called eclectic paradigm and the theory is inclined by Dunning (Cantwell and Narula, 2003) also it has three tier frameworks for a company to follow as it is been a general economic model which is used to evaluate a company strategy to expand its operation through foreign direct investment (Johnson and Turner, 2003) .The frameworks of this theory are ownership, location and internationalization and in addition also transaction cost theory information as is base on the internationalization theory (Pitelis and Sugden, 1991).

Tata motors ownership advantage has given the opportunity and benefit of decision making as it is very important for technology and the proprietary knowledge base in the company G.Bruche, (2010). Hence the company has competitive advantage with value into the technology. The company also has gained ownership advantage through its linkages with component suppliers and this allowed achieving economies of scale (Saripalle, 2005). Furthermore, It is gone through the acquisition by seeking natural resource for example Tata Company has invested coal mines in different country and ownership advantage of the company that enables them to successfully acquire established goal companies (Kumar, 2008).Looking at Location advantage Tata motors has developed a firm with Thornburg automotive as it suggest them a location advantage in south East Asia region (Neelankavil and Rai, 2009).

(Christensen and Overdorf, 2000) argue on disrupting technologies which  bring in a different performance package, lower to normal technologies and with their lower performances, demand to the low-end, and low-profit segment of the mainstream market and this fits neatly with Tata Nano, the production and innovation of which draws on location-specific advantages. Other theory is Internationalization advantage of Tata motors which will help them in having better control over the manufacturing units such as licensing. Moreover, it also become a competitive advantage by outsourcing as the centralization is more important and it gives rise to internationalization advantage from more efficient and effective quality control and the advantages of own production for Tata company which they have done is introducing a new car called Nano an ultra low cost car D.Archibugi,(2015).

Decision making frameworks for mode of entry in the Tata Company are licensing, joint venture and wholly owned subsidiary as well as transaction cost theory which has been applied to many entry modes (Hill, 2002). Tata Motors company recommend a distinctive entry mode of which they have to stand the issues in very different markets and managing the portfolios with the world cheapest and most exclusive cars whereas the control of the company to take such a position which is a uniquely a consequence of their mode of entry that company took while internationalizing and in most of the case the company should choose the entry modes which provide rapid access to customers (Piercy, 2009).

Learning theories of internationalization is based on Uppsala model (Gabrielsson and Kirpalani, 2012). It is a theory which is specifically support on the knowledge and its perspective which is to make clear as a personality of the firm throughout the actions of its customers along with the country of its appearance (Cyert and March, 1963). There is other Uppsala model of internationalization which is base on four core concepts and they are called market knowledge, market commitment, commitment decision and current activities (Forsgren, 2002).

This section will explain the establishment chain model and there are four steps of entering an international market which are no export activities, export via independent representative, establishment of a foreign sales subsidiary and lastly foreign production and manufacturing Johanson and Wiedersheim-Paul (1975). The observation shows that Tata Company starts with the physic distance nearby that is when they improved knowledge of the market and more capable of the resources in addition when the companies gets more experienced and obtain better resources then develop to the more distance market. Tata Motors penetrate a new market through export before establishment of foreign sales subsidiary or foreign production and generally; Firms originally accomplish their knowledge beginning the home market before moving to the distant markets furthermore, the Tata motor start their overseas process from culturally or geographically and religiously and progress slowly to ethnically and in nature to further far-away countries (Johanson, 2001).The business also begin their overseas operations by production and use of the exports and gradually except it is surely moving to the using of a more increase and challenging operational modes like sales subsidiary at the company and target country level (Peng, 2006). The objectives of the firm are to manufacture overseas in all marketplace and the above aspects can be seen in the multinationalization strategies of Tata Motors Limited J.Hyvönen, (2013).

Another Uppsala model is based on four core concepts and the first stage is market knowledge of the company which is to understand the market and how it is going to enter and Tata motors had various levels of advantages through its major steps toward internationalization as the company takes a strategy to the representative local companies (Ireland, Hoskisson and Hitt, 2009). Tata motor company had a long term benefit like access to market knowledge and the development of firm presence on the new market and advantage would be that it limits the possibility of technology or knowledge transfer. Second stage is company market commitment and decision which Tata motor company understand the requirement of a new market also the decision and implementation concerning foreign venture are made incrementally due to market hesitation as the company has different approaches and implementation which are seen in the surroundings and has unusual prior knowledge acquisition (Johanson & Vahlne, 1977).Tata motors have understood that the understanding was based on its acquire about the market and industry dynamics and company had consequence to have the commitment and let constraint in the case of its choice with the supplier and surrounded technology. The current activities it is somewhat interesting on how precisely the crucial of Tata motors are consistent with Uppsala theory and the result was Tata motors acquisition and in the longer terms is to progress up in the value chain as much as possible, with the attention in stronger branding and the emulation from skill with other overseas acquisition to global brand building is a usual development (Leahy, 2008).

The nearest market current supply by Tata motors is in Brazil and Chile which is geologically close to Argentina and therefore physics distance is not that much. In additional establishment chain would not be hard since the decision making can be handled with the Latin America support which is present operation of Brazil and Chile (Fleury and Fleury, 2011). The diversification of the product might be ready on the source of the market requirement of Argentina. Tata motors are within a heavy industrial vehicle which is niche forte and then going forward with the passenger vehicle product variety. The diversification was completed so it can go through the strong hold point and then the introduction of other product ranges of product portfolio which this group covers the motor vehicle, cars, consulting, software and information technology power B.Hiriyappa,(2013).

Porter diamond is used for analyzing the competitive advantage and in this particular case of Tata Motors and its approach of development and operations could be measured for the analysis and show for its effectiveness. Further the diamond model helps to understand the relationship of the main factor to achievement and the effect of the government machinery on the business of the company as per (Porter, 1990).

Tata motors Firm Strategy ,Structure and Rivalry is related to the globalization and it is important when considering in an automobile industry as the competition are huge and it’s necessary for each firm to analyse in the market environment and the necessity of their product to the consumers. Tata motors analysed the fact for the need of a family car in Indian economy and its major competitors that the company faces across the globe are Ford, Toyota as they have similar strategy where they acquire or for joint venture to make sure that the company has a strong foothold in the country and region (Tata Motors Annual Report, 2014). Demand condition for company has been a growth of urbanization in India and has created a competitive advantage and the only option is the innovation which is the only key to achieve the demand and Tata company have produced world cheapest car named Tata Nano which has a huge demand in market and it will likely to enter the global market for low cars by 2015 (Julian et al, 2014). Tata motors have not developed experience of localization of product and services as per local demands which will overall take time for them to establish the global branding (Fogarty, Justin. 2009).

Related supporting industries factor for Tata motor internationalization and acquisition has been a huge success as they started of thinking new development with the help of merging activities which provides a good supply management. The component of their strategies and strong industry associate has helped the company to remain unique to challenge their competitors. In many countries it depend on the order for the demand from the local dealers(Oliver, 2012).The company factor condition is when considering the resources availability and support for the company it is well established as they manage employee and worker relationship very effectively as per the laws and regulations of a country and while going for acquisition or joint venture it is important for the Tata company to have strong hold on the resources as well it should be in a good condition as per Blitterswijk (2009).  Government plays very important role and according to Tata motors the local administration have agreed to give thousands of acres of property for its plant structure with motivation and tax profit which are actually massive for the company. Thus, government has influenced their business promotion by financing them and created goodwill on their brand value (Cullen and Parboteeah, 2009).

The recommendation would be that recently Tata Company has operated in established countries, such as in UK, South Korea, Thailand, South Africa, Spain and Indonesia. I would like them to focus somewhere which they have not operated and in my opinion, I recommend the company to internationalize in Venezuela (North South America) as they are not operating at this moment. As also I would advise them a series of international expansion possibilities such as if they build a factory in Venezuela, the company can use FDI (Foreign direct investment) to Latin American market, Brazil and Argentina.

To summarize this essay has implemented the internationalization theories by explaining Dunning Eclectic Paradigm, Learning theories and Porter Diamond moreover the above analysis refers to Tata Motors Company. This essay also includes information on relevant theories such as Ownership, Location and Internationalization and entry mode according to the company decision. The paper also based on using the appropriate framework for each of the theories to support the argument such as using Uppsala model which has two states and  changes aspect. Final theory was based on the porter diamond which was important in Tata Motors Company because of the competitive advantage. The paper has also included the recommendation which supports the thesis by providing the information on the gradual strategy of country that they are not already operating and advising them the entry form with looking at new market of international expansion.

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