Question

Diversification does have it's advantages- Especially in economies of scope and minimizing transaction costs. As far as economies of scope; Tata group has an advantage of tangible resources that can be shared across industries such as raw materials, sales, and technology systems. Additionally, large corporations have intangible resources that give them advantages in These create synergies, interactions between the businesses that increase the profitability of both. For example, a strong management capability such as technological and organizational systems can be applied across the businesses. Additionally, in balancing cost generating and cost drawing businesses, avoiding costs and timelines associated with getting external investments. Large companies can also expand and diversify by acquiring existing

However, why does Tata have such diversification as compared to western companies?

Answer 1

The diversification is seen as one of the most important aspects of the businesses to manage the risks prevailing at the different business areas. There are a number of organizations that look to diversify its operations and businesses so that any negative impact on the business can be compensated by the positive influence of the other business.

Tata Group is one of the most diversified and professionally managed organizations of the world and it has huge diversification from manufacturing tea leaves to holding the automobile brand such as Jaguar. The main reason for such a diversification for Tata Group is to ensure that it offers its high-quality services to the customers in every possible segment and thus winning the trust of the customers. The most important aspect of the Tata group is to perform the business with ethics and with an inspiration to serve the people. The high diversification also mitigates the volatility of the business. If one industry faces the slowdown, it is supported by the increase in sales of others. Thus serving the customers on a large scale and helping to manage its business threats are the main reasons for such a wide diversification of the Tata group.