Tata Engineering & Locomotive Company Essays - Jamshedpur

Tata Engineering & Locomotive Company THE COMPANY The Tata Engineering & Locomotive Company (commonly known as Telco), is India's largest private sector company in terms of revenues and market capitalisation. It is also one of the 6 largest manufacturers of commercial vehicles in the world. Telco is a part of Tata Enterprises, which is the largest industrial group in India, employing assets of Rs.267 million (US$7.6 billion) in a wide range of businesses including Automobiles, Steel, Information Technology, Telecommunications, Energy, Chemicals, Hotels and Tea Telco was incorporated in 1945, to manufacture steam locomotives. Today it has a domestic market share of 68% in the MCV/HCV segment, 64% in the LCV segment and 32% in the multi-utility segment. Telco has been exporting its products since 1969 and currently exports about a tenth of its output. Export markets include the Middle East, Africa and Southeast Asia, as well as developed countries in Europe like France, UK and Spain. It is intended that exports should account for 20% of the automobiles sold by the Company. The analysis of the macroeconomic environment can be done by PEST model: P-Political A rigid and closed system has always been the main hurdle for growth of industry in India, which is virtually plagued by legislation and legal procedures. The complex bureaucratic style of working in this otherwise democratic country has always been a handicap for automobile industry. The stringent laws especially regarding foreign investments had deprived India from global technology and services. The early nineties liberalisation saw some major policy changes of the government- Depreciation of the rupee and promoting foreign trade. Exim scrips to be replaced by partial and later full convertibility of the rupee on trade account. Liberalisation of trade policies. Opening up of a number of areas to the private sector. Deregulating the banks' and financial institutions' lending rates. Reduction of statutory liquidity ratios. Freeing of the capital market from government control. Abolition of the office of the Controller of Capital Issues. Implementation of the National Renewal Fund. Slashing of fiscal duties on a number of items meant for industrial production. The international exposure led to a general increase in the awareness level of the masses. The demand for quality and environmentally friendly automobiles led to strict legislation. Certain states of the union passed legislation against polluting vehicles and banned the trade of inferior quality vehicles. The new legal and political order is directly effecting TELCO. The positive effects are: Direct foreign investment has led to new and valuable business partners. Cost of importing technology is less. New era of exports has dawned. Growth in the market and international exposure. The negative affects are: The foreign carmakers are entering the huge Indian market thus making it very competitive for TELCO. The expertise of TELCO in diesel engines is facing threats from the new- found environmental awareness and new legislation. The cost effective TELCO is facing a new threat in form of new found quality measures. Spearheading the ?swadeshi' aspect of the Indian automobile industry TELCO is trying to restrict the slaughter of the Indian industry in the hands of the foreign giants. It is through societies and pressure groups like Society of Indian Automobile Manufacturers that TELCO is raising a voice against anti ?swadeshi' legislation. E-Economic Despite some bouts of recession in the recent past, the macro fundamentals of the Indian economy are sound. Gross Domestic Product growth has averaged more than 7% for the last three years. The rate of inflation has remained low. The nation's foreign exchange reserves are brimming with nearly US$ 30 billion. Even in the face of such crises like the currency depreciation in Southeast Asian countries and the stock market crashes in various countries, the Indian economy has stood firm. Industry observers believe that largely cyclical factors and industrial have driven the general slowdown growth will pick up again. In the first six months of the 1997-98, the corporate sector registered a 11% growth in net profit. Advance corporate tax payments jumped by16%, indicating a better profit performance by companies. In the dynamics of transition of the Indian economy, the automobile industry is emerging as a leading industry. The large volumes of investment including foreign direct investment in the automobile manufacturing ventures and technical collaboration are propelling a quantum jump in