TATA Motors and Toyota: Innovation Management, Strategies & Learnings

This report provides a comparative analysis of innovation management at TATA Motors and Toyota, two major players in the automotive industry with headquarters in different countries. It examines key aspects of their innovation strategies, utilizing models and frameworks such as Tidd and Bessant’s four-step innovation process (search, select, implement, and learn). The report delves into the political, economic, social, technological, environmental, and legal (PESTEL) factors influencing each company's innovation approach. Furthermore, it identifies potential learning opportunities for each organization from the other's practices and offers recommendations to improve innovation management within both TATA Motors and Toyota, emphasizing the importance of adapting to technological advancements and environmental regulations to maintain a competitive edge.

Running head: INNOVATION AT TATA AND TOYOTA
Innovation at TATA Motors and Toyota
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Introduction:
TATA Motors
The company was started in the year 1945, which was named earlier as Tata Locomotive
and Engineering Company that was renamed in the year 2003 to Tata Motors. The headquarters
of the company is located in India from where the business is operated on a global scale. The
company started manufacturing vehicles on a commercial manner by collaborating with
Daimler-Benz AG, which is now known as Daimler AG. By the mid of 2008, the company
acquired the Jaguar Land Rover business from Ford Motor Company. The acquiring of the
company resulted in designing and manufacturing sports and luxury sedans for Land Rover,
which helped the company in gaining international recognition in a better manner. The business
of the company is situated on a global scale and after the acquisition took place, the company
was also able to gain the three main facilities of manufacturing located in Castle Bromwich,
Halewood and Solihull. It also gained the engineering and design facilities that are located in
Gaydon and Whitley in the United Kingdom. This helped the company in innovating the
products in a better manner so that it can gain a competitive advantage in the market and the
level of profit can increase ("Tata Motors Limited - Largest Indian Automobile Manufacturer",
2018).
The company is known to take care of the employees so that they can act in the best
interest for the company, which will help the company gain a competitive advantage in the
market.
Toyota
The company was started in the year 1918 by Sakichi Toyoda and was specialist in
manufacturing the cars at a cheaper rate for the customers. The company was known to introduce

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the ‘just in time’ inventory, which meant that the necessary parts of the cars will be produced
within the time that was actually needed for the production of the car. By the end of 1980, the
company as able to sell 300 million cars in Japan itself. This led to the fact that the company had
to expand in the market. The company makes it a point to value the employees in a better manner
so that they can be motivated and can remain with the work force. This will help in increasing
the level of capability of the employees within the organization. In the month of July 1982, the
company was renamed as Toyota Motor Corporation. In the present times, the company is
innovating its technology, as the customers are aware of the pollution that can be created in the
market due to the effects of carbon footprint. This has resulted in manufacturing environment
friendly cars so that it can help in increasing the competitive advantage of the company in the
market ("Toyota Motor Corporation Global Website", 2018).
The company is known to manage the employees in an efficient manner. The company
identifies the level of skills of the employees based on which they are assigned the roles and
responsibilities within the organization. They are provided with adequate training facilities so
that the employees can improve their skills and knowledge. This helps in increasing the level of
production, as innovation takes place in the organization on a constant manner.
PESTEL Analysis:
Political
The second largest country with respect to democracy is the United States of America
where the president is elected for a period of four years. The elections that take place in the
country are done in a transparent manner so that the head can be chosen in a fair manner. The
political scenario in the country is very stable and recently it has seen some challenges but it
does not affect the political climate of the country. The country also plays an influential role in

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the dynamics of politics for some of the countries for which the country faces criticism. The
country needs to reduce its intervention policies so that it can stay away from the criticisms that
it faces in the other countries (Grant, 2016).
The stable political environment within the country helps in promoting the advanced
technologies and infrastructure so that the companies can thrive in the market. The country is
open towards the Foreign Direct Investment (FDI), which has helped in the rise of the many
industries. The government supports the technological innovations that are taking place within
the automotive industry along with the opportunity of international agreements on trade. The
support that is received from the government allows the automotive industry to develop its
infrastructure in a proper manner with the help of the technological advancements (Pavlínek,
2018).
Economic
The country is one of the largest economies in the world with a high Gross Domestic
Product (GDP). Most of the headquarters of major companies are located in the country that
helps in operating in an efficient manner. The recession that took place in 2009 had affected the
economy of the country in a better manner, which led to the increase in the rate of
unemployment and the collapse of the companies. The labour force in the country is not cheap
and has to be procured at a higher rate. This has led the company to invest in labour force in
countries like China and India where the rate is less. This has led to the outsourcing of many
companies that are present in the country (Wheeten et al., 2017).
The automotive industry of the company has seen many opportunities due to the growth
of the economy within the country. The developing market is also growing at a faster rate, which
has been providing great opportunities to the automotive industry as well. The growth of the

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economy has been a boost to the industry due to the rise in the value of dollar, which has helped
the industry. The products have been exported to the other countries at a higher rate of returns
(Pavlínek, 2016).
Social
The country is the third largest populous country and has a population of about 300
million. The country is also very diverse in its culture, which consists of Asian, African, Native
American and Latin people as well. The country has one of the best education and medical
facilities, which has resulted in increasing the life expectancy of the population. The population
is most conscious about its health, as they know the ill effects of obesity and other types of
illnesses. The mind-set of the population is largely liberal nevertheless the country has faced
racial abuses in the past (Alkhafaji & Nelson, 2013).
This has led to an advantageous position for the automotive industry. There has been an
increase in the demand for the electric and the hybrid automobiles due to the knowledge among
the customers regarding the effect of pollution. The automotive industry is suffering due to the
gap in the wealth among the society. There has been an increase in the wealth accumulation
among the rich section of the people whereas the poor people cannot accumulate the wealth
(Kushwaha & Sharma, 2016).
Technological
The country leads with the innovation with respect to technology and science. The people
of the country have a fascination to adopt the latest technologies so that they can minimize the
effort that they need to put in within the companies. The technological advancements in the
country has led to address many weaknesses of the country so that they can be developed in a
proper manner. The country is one of the global leaders in the world with respect to technology.

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They try to apply the technologies in all the fields so that the work can be done in an easy
manner. It has helped the country in lowering its cost of production with its innovation process in
technology (MacKay & Chia, 2013).
The automotive industry has also been developing due to the increase in the technological
innovations. It has helped the companies in using the support systems that are attached with
mobile support so that the marketing of the vehicles can be done in a better manner. However,
the industry is facing threat of the alternative fuel options that are being presented within the
vehicles, as there are less number of fuel stations. The automotive industry needs to focus on
improving the services so that they can be competitive in the market (Du, Hu& Song, 2016).
Environmental
The country has a diverse climate and geography, which helps in attracting a large
number of tourists every year. The country also faces one of the toughest climatic conditions,
which has led to many disasters with respect to weather conditions. The automotive industry will
be affected with the change of the climate that the country faces. This is due to the fact that the
availability of the raw materials will be difficult during the crisis period. The industry can
increase its opportunity of producing the vehicles that will have a lower rate of carbon footprints
so that it can help in reducing the pollution in the environment. The industry can also capitalize
on the fact that the oil reserves are declining on a global scale, which will give rise to alternate
solutions for the vehicles. The innovative technologies that will be used by the automotive
industry will result in manufacturing the vehicles that will not depend on the oil reserves. This
will allow the industry to gain a competitive advantage in the market based on the new
technologies and innovations that are being implemented by them (Martin-Pena, Diaz-Garrido &
Sanchez-Lopez, 2014).

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Legal
Most of the states in the country have their own legal structure so that they can operate in
their own manner. The businesses that are operating in the country are under the regulatory
environment of the state where they are carrying out its operations. The country treats the
foreigners and the local people in an equal manner and the employees who have committed a
crime will face the judicial system in an unbiased manner. The legal system of the country also
offers strong policies with respect to the protection of Intellectual Property Rights (Arena,
Azzone & Conte, 2013).
The automotive industry needs to capitalize on the regulations that are meant to protect
the environment. This will help the companies in manufacturing the vehicles according to the
laws and regulations that are present within the country. The industry also need to follow the
safety regulations that are present within the country with respect to the customers. This will
allow them to give the products to the customers by following the proper safety protocols, which
will not harm the customers when they use the vehicles. The companies also need to take the
advantage of the laws related to intellectual property on a global scale (Mahmassani, 2016).
Key aspects of innovation management: Tidd and Bessant’s innovation model:
The innovation process according to the model proposed by Tidd and Bessant contains
four steps namely search, select, implement and learn.
Search:
Business organisations including multinational automobile companies search for
opportunities to bring about innovation in the operations. The operational areas pertain to various
aspects like financing and marketing. These business organisations also recognise threats which

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exist in the international market. They collect information regarding these market factors which
leads to the next step of selection.
Selection:
The automobile companies then consider the information they have gained on the various
markets like the US. They judge the various information on the parameters like costs, their
present resourcesand their present technological prowess. They then select the most profitable
and feasible alternatives which they then consider for their innovations (Dal Molin, de Freitas
Ayres& de Araujo Junior, 2017).
Implementation:
The companies then implement the selected information to form projects. The innovation
process at these stage reaches a more feasible stage of project management and engineering.
Learning:
The automobile companies at this stage learn from the hurdles which they face while
implementing the projects. This phase is the learning phase which companies learn from their
shortcomings which they deal with in the future.

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Figure 1. Figure showing Tidd and Bessant's Innovation model
(Source: Author)
Application of the model in Toyota and TATA Motors:
The following are the ways in which Toyota and TATA Motors use Tidd and Bessant
Innovation Model:
Innovation in capital acquisition:
The automobile companies Toyota and TATA Motors follow innovative ways of
financing their business operations. IT must be noted that these two automobile giants are
present in hundreds of countries other than their host countries Japan and India respectively.
They first search appropriate markets to expand their business and then select profitable markets
like the US. They implement innovative capital acquisition strategies like getting listed on the
resident stock exchanges to exploit these capital markets. For example, Toyota is primarily listed
SearchSelectImplementLearn

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listed on Tokyo Stock Exchange while TATA Motors has its primary listing on National Stock
Exchange and Bombay Stock Exchange in India(nseindia.com, 2018). Both these Asian
multinational automobile manufacturing giants are present in the United States. They are both
listed on the NYSE which enables them to generate immense capital from the American
economy. This listing on multiple stock exchanges enables these multinational companies to
generate immense capital from different markets. This strategy is aligned with the innovative
strategy of integrating their global strategies with their local strategies. This innovative ways of
raising capital paves ways for financial sustainability of the international branches of these two
multinational companies(bloomberg.com, 2018).
The second innovation in capital acquisition which Toyota and TATA Motors follow are
operating in host markets like the US through subsidiary companies which are public limited
companies as well. The automobile giants while after identifying profitable markets according to
the Tidd and Bessant Innovation Model, decide on the entry formats which they can follow to
enter these markets. The companies for less profitable markets may opt for entry strategies like
export but for highly profitable markets, they opt for subsidiary model in which their subsidiaries
are also public limited companies. This innovative strategy is line with the first innovative
strategy of listing on top exchanges in host countries as well (Veloso Dal Molin, de Freitas
Ayres& Pellegrino, 2015)
The third innovative strategy which TATA Motors and Toyota use to strengthen their
capital and asset structures is investment in capital of other companies often from different
industries. This allows these giants to search and explore new markets to expand into and
maximise their present revenue generation. For example, Toyota invested in the American
service provider Uber (reuters.com, 2018). This allowed the company to own assets in the US

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which would make it financially stronger to expand into other markets like car in future. TATA
Motors on its part acquired Jaguar Land Rover which allowed the Indian automobile giant to
enter the premium car market (tatamotors.com, 2018). These innovative investment strategies
enable automobile companies to acquire assets in host markets like the US which boosts their
capital generation in these markets.These innovative capital generation strategies like acquiring
of foreign companies even across industries enable these automobile companies to boost their
product lines (Dhingra et al., 2016).
Innovation in product line:
Toyota and TATA Motors both have huge product lines which again exemplify the use of
Tidd and Bessant Innovation Model. Toyotas’ product umbrella consist of sports car segment,
car segment, MPV and vans segment, SUVs, commercial vehicles, hybrids, plug-in hybrids, fuel
cell and pickup trucks. The product umbrella of TATA Motors consist of cars, utility vehicles,
trucks and buses and defence vehicles. An analysis product umbrellas of Toyota and TATA
Motors would show that these companies search market opportunities in diverse product market
before entering. These product decisions form parts of the strategic decisions which are taken by
their apex management bodies like Aichi, Japan and Mumbai, India respectively. These
decisions are then adapted according the conditions of the American economy to be implemented
successfully (Vahlne & Johanson, 2017).
A comparison of the innovative product umbrella of Toyota and TATA Motors show
their strong presence in certain markets and weaker presence in the others. For example, Toyota
is the top automobile brand globally as far as cars are concerned (money.usnews.com, 2018).
TATA Motors in turn rules the trucking industry globally far ahead of Toyota along with its top
counterparts like Volvo. Again, Toyota is present in the sports car segment while TATA Motors

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is absent. TATA Motors has a strong presence in the defence sector while Toyota is absent. This
comparison shows clearly that Toyota has more innovative power to bring about new cars and
sports cars. TATA Motors on its part has the power to bring about more innovation in truck and
defence vehicle segment. This gaps leaves spaces for more innovation for both the companies
which corresponds to the learning segments of the Tidd and Bessant Innovation model.The
outcome of this innovative and powerful product segment for both the company is robust
revenue generation which boosts their global market operations (Penna& Geels, 2015).
Innovation in sustainability:
The innovations which Toyota and TATA Motors follows in the field of sustainability
follows the innovation in capital acquisitions and product line innovation discussed above.
Toyota and TATA Motors aim to attain sustainability using their innovation prowess. First, both
Toyota and TATA Motors employ human resources in their host countries like the US which
enables them to make their operations in different host countries sustainable. Secondly, they
have set up supply chains in their host countries. These two strategies enable the automobile
giants to search and select business opportunities according to the Tidd and Bessant Innovation
model (Adam et al., 2016). However, TATA Motors has more competitive advantage as far as
sustainability is concerned. The Indian automobile giant is actually a subsidiary of TATA Group
of Companies. The Indian business conglomerate is present in other industries like investment
and telecommunications which Toyota does not have. It is evident that TATA Motors can pool
resources from within the business group to bring about innovation. For example, TATA Motors
can team up with TATA Communication to bring about innovation in vehicle tracking while
Toyota has to depend on its third party business partners like Uber. Thus, TATA can bring about
innovation by pooling resources from within the business group (Ford, et al., 2018).