2014

International Business Assignment

Tata Motors
International Strategies

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Farhan Khan
11/30/2014

Table of Contents
Indian Automobile Industry .................................................................................................................................... 2

1.
2.

Tata Motors Overview ................................................................................................................................................. 2

3.

Porters Five Forces Analysis of UK Car market considering Tata Motors Strategy........................................ 3

i.

Competitors bargaining power............................................................................................................................... 3

ii.

Buyers bargaining power ........................................................................................................................................ 3

iii.

Suppliers bargaining power................................................................................................................................ 3

iv.

The threat of Substitutes ...................................................................................................................................... 3

8.

v.

Threat of New entrants ................................................................................................................................................ 4

4.

Strategy adopted by Tata Motors................................................................................................................................ 4

i.

Competition at Home ................................................................................................................................................... 4

ii.

Making Waves Internationally .................................................................................................................................... 4

iii.

M&A Strategy of Tata Motor ...................................................................................................................................... 5

5.

UK ENTRY DECISION............................................................................................................................................... 5

i.

Jaguar and Land Rover ............................................................................................................................................... 5

ii.

Reason for entry............................................................................................................................................................ 6

iii.

Challenges faced by Tata Motors ................................................................................................................................ 6

iv.

Despite criticism for this move the acquisition proved to be profitable................................................................... 6

6.

Organizational Structure ............................................................................................................................................. 7

i.

Overview ........................................................................................................................................................................ 7

ii.

Organizational Culture and Strategy ......................................................................................................................... 7

iii.

Management and Leadership ...................................................................................................................................... 8

7.

Value Chain & Value System of Tata Motors ............................................................................................................ 8

a)

Primary Activities ......................................................................................................................................................... 8

i.

Inbound Logistic: .......................................................................................................................................................... 8

ii.

Operation: ..................................................................................................................................................................... 9

iii.

Outbound logistic:......................................................................................................................................................... 9

iv.

Marketing & Sales: ....................................................................................................................................................... 9

v.

Service: .......................................................................................................................................................................... 9

b)

Support Activities ......................................................................................................................................................... 9

i.

Procurement: ................................................................................................................................................................ 9

ii.

Technological Development ....................................................................................................................................... 10

iii.

Human Resource:........................................................................................................................................................ 10

iv.

Firms Infrastructure .................................................................................................................................................. 10

Conclusion ............................................................................................................................................................... 10
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TATA MOTORS- Truly Global

1. Indian Automobile Industry
The automobile industry is one of Indias most vibrant and growing industries. This industry accounts for 22
per cent of the country's manufacturing gross domestic product (GDP). The auto sector is one of the biggest job
creators, both directly and indirectly. It is estimated that every job created in an auto company leads to three to
five indirect ancillary jobs.
India's domestic market and its growth potential have been a big attraction for many global automakers. India is
presently the world's third largest exporter of two-wheelers after China and Japan. According to a report by
Standard Chartered Bank, India is likely to overtake Thailand in global auto-export market share by the year
2020.
The next few years are projected to show solid but cautious growth due to improved affordability, rising
incomes and untapped markets. With the governments backing, and trends in the international scenario such as
the decline in prices of natural rubber, the Indian automobile industry is slated to witness some major growth.

2. Tata Motors Overview

Tata Motors Limited is Indias largest automobile company, with consolidated revenues of INR 2,32,834 crores
(USD 38.9 billion) in 2013-14. It is the leader in commercial vehicles in each segment, and among the top in
passenger vehicles with winning products in the compact, midsize car and utility vehicle segments.
Established in 1945, Tata Motors presence cuts across the length and breadth of India. Over 8 million Tata
vehicles ply on Indian roads, since the first rolled out in 1954.
Tata Motors, also listed in the New York Stock Exchange (September 2004), has emerged as an international
automobile company. Through subsidiaries and associate companies, Tata Motors has operations in the UK,
South Korea, Thailand, South Africa and Indonesia. Among them is Jaguar Land Rover, acquired in 2008. In
2004, it acquired the Daewoo Commercial Vehicles Company, South Koreas second largest truck maker.
Tata Motors is also expanding its international footprint, established through exports since 1961. The
companys commercial and passenger vehicles are already being marketed in several countries in Europe,
Africa, the Middle East, South East Asia, South Asia, South America, CIS and Russia. It has franchisee/joint
venture assembly operations in Bangladesh, Ukraine, and Senegal

3. Porters Five Forces Analysis of UK Car market considering Tata Motors

Strategy.

i.

Competitors bargaining power

The UK automotive market is highly consolidated. The major rivalry involves Ford, GM, VW, Renault,
Peugeot, Toyota, BMW, Citroen and Honda. The presence of powerful competitors with established brands
create a threat of intense price wars and poses s strong requirement for product differentiation. The present
market conditions are so tough, that certain manufacturers had to close certain plants to cut the costs and
survive on the market. The emerging opportunities require the extremely high level of operational
responsiveness and leave little space till market opportunity will be leveraged by competitors.

ii.

Buyers bargaining power

Due to high intensity of competition on the global scale and increasing overcapacity issue UK buyers
experience very strong bargaining power. According to Mintel buyers have indicated a high level of bargainseeking behaviour.

iii.

Suppliers bargaining power

Though vehicle manufactures have consolidated forming large entities it did not make a significant shift of
bargaining power in OEM-suppliers relations. Demand chain partners, car dealers, especially the large ones do
experience large bargaining power in the light of the overcapacity issue.

iv.

The threat of Substitutes

Apart from direct competitors (public transport) cars compete with other transport services: air, rail and sea.
The increasing importance of door-to-door transportation and environmental concerns decrease the current
threat of other transportation means as substitutes.

v.

Threat of New entrants

The high level of entry barriers (extremely consolidated industry, well-developed value-added chain, R&D
capability, investment capability in promotions and new product development) minimizes the threat of new
entrants. Nevertheless, due to globalised nature of the industry the notion of new entrant is not that clear-cut,
since existing players might enter new geographical markets.

4. Strategy adopted by Tata Motors

i.

Competition at Home

TATA Motors is vulnerable to greater competition at home. Foreign vehicle makers including Daimler, Nissan
Motor, Volvo and MAN AG have struck local alliances for a bigger presence.
TATA Motors, which has a joint venture with Fiat for cars, engines and transmissions in India, is also facing
heat from top car maker Maruti Suzuki India Ltd, Hyundai Motor, Renault and Volkswagen.

ii.

Making Waves Internationally

NANO will mark the advent of India as a global centre for small-car production
International praise came from Standard & Poors, which in December 2006 expressed the view that the
policy to support its companies and the improved financial profile of its entities also enhances the overall
financial flexibility of TATA Motors.

iii.

M&A Strategy of Tata Motor

Sensing the intense competition which was arising in Indian Automobile industry Tata Motors decided to
expands it business globally by taking the advantage of its core competencies. Their strategy was:

Technology: Access to Technology and R&D capabilities will help Tata reduce the cost and improve
the quality of its product to come ahead of its competitors.

New Market: Access to new markets to support TMs globalization drive

Products: Complementary product range to ensure faster Time-to-market

Price: Right price to create value.

5. UK ENTRY DECISION
i.

Jaguar and Land Rover

TATA Motors bought the iconic Jaguar and Land Rover operations from Ford for 1.15 billion pounds in MarApr08. Tata gained the rights to the Daimler, Lanchester, and Rover brand names. In addition to the brands,
Tata Motors also gained access to 2 design centres and 3 plants in UK. The key acquisition would be of the
intellectual property rights related to the technologies. With the acquisition of Jaguar and Land Rover (JLR),
Tata Motors killed several birds with one stroke.

Why JLR?

Long term strategic commitment to automotive sector

Opportunity to participate in two fast growing auto segments

Increased business diversity across markets and products

Land rover provides a natural fit for TMLs SUV segment

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Jaguar offers a range of performance/luxury vehicles to broaden the brand portfolio

Benefits from component sourcing, design services and low cost engineering

ii.

Reason for entry

As this is a more technically developed country the infrastructure available is much moreadvance and stable
then India.

Tata motors European technical centre (TMETC) brought up for R&D a purpose which is steadily
taking Tata motors towards achieving global standards.

The political environment of United Kingdom is very stable and well structured.

The laws and trading policies are well developed.

Tata Motors will acquire a global footprint and enter the high-end premier segment of the global
automobile market

Tata Motors gets access to latest technology which would allow Tata to improve their core products in
India

iii.

This deal provided Tata an instant recognition and credibility across globe

Challenges faced by Tata Motors

Buying over Land Rover and Jaguar for 2.3$ billions Tata was under tremendous pressure as there were
mixed reactions from all Britain.

Plenty feared about devaluation by Indian brand and suggested government to take control of Jaguar
brand, as it symbolizes best of British

There were some MPs who did not like an Indian brand taking over British Companies

The British health and safety laws for the better conditions of workers are the most strong and
predominant

There are also some policies by the labour contract to avoid exploitation of labour which makes this
country much more expensive

iv.

Despite criticism for this move the acquisition proved to be profitable.

Internationalisation: TML would instantly become an international player with operations in North
America, Europe and Asia.

Fit: Land Rover fit in the position above TMLs existing utility vehicles; there were likely synergies to
be obtained with the SUV range in sourcing, design and engineering.

Scale: Possible synergies in parts procurement (from India) might help reduce the costs for the British
brands (although this has met with scepticism).

Demand: there is a growing demand for luxury cars in emerging markets, including India, which TML
might be able to exploit better then Ford.

Technologies: there would be access to proprietary designs and multiple learning opportunities and
synergies between the R&D capabilities of JLR, INCAT, TMETC and the ERC in Pune.

6. Organizational Structure
The Organizational structure of Tata Motors in broad:

i.

Overview

The organizational structure of Tata Motors follows the matrix form which incorporates the elements of
functional and divisional organizational structures. It is a global automotive giant operating in various
automobile sectors across distant geographies; hence there is a need to integrate its divisions along the various
functional units of its business. Its different functional unit are divided, which construct the strategic framework
on which Tata Motors different business sectors are based; such as India Operations, Commercial Vehicle
Business Unit and Passenger Car Business Unit. Tata Motors consists of flexible, adaptive and multi-tasking
individuals who can work in different situations in different roles.

ii.

Organizational Culture and Strategy

An indistinguishable feature of organizational structure is the flow of information; the employees follow a
formalized pattern of reporting. Tata Motors follows a code of conduct that helps in deciding on and assigning
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responsibilities to promote group working. This is extremely critical in building a culture that is positive and
productive. Tata Motors Ltd links all its functional departments through Enterprise Resource Planning (ERP). It
promotes employee engagement.

iii.

Management and Leadership

Ratan Tata, the former chairman of Tata Group is responsible for transforming Tata Motors Ltd. into business
that flourishes on strategic business thinking. He works for the company with a dream to make Tata an
international company that is known and respected by the global business world. To achieve this, he went
forward to bring in a CEO from a foreign country.
Tata Motors gives a lot of attention towards ensuring that the senior leaders of organization remain focused on
achieving the organizational vision and exceed the expected levels of performance. It believes in measuring
organizational performance, creating an atmosphere conducive for ethical behaviour and developing future
leaders for attaining excellent performance.

7. Value Chain & Value System of Tata Motors

a) Primary Activities

i.

Inbound Logistic:

Long term contract with service providers transporters and agents.

Personnel at regional offices for overseeing the smooth transit of goods.

Transparency and monitoring through deployment of IT all transactions through SAP

ii.

Operation:

Automated manufacturing processes.

Distributed manufacturing Assembly units at South Africa, Thailand, Bangladesh, Brazil etc.

Maintenance technical competence.

Capacity Utilization Mercedes Benz cars make use of Tata Motors paint shop facilities.

iii.

Outbound logistic:

Stockyards, across different location.

Long term contracts with transporters higher volume of business to transporters ensures competitive
price.

iv.

Marketing & Sales:

Pan India presence and global footprint.

Helping to augment the scarce resources Fiat selling vehicles through Tata dealerships, in return Tata
has access to Fiats technology and unutilized capacity.

Quick assessment of the changing market dynamics and consumer preferences.

Large network of dealers use of technology (CRM-DMS).

v.

Service:

Easy availability of spare parts.

Efficient collection of data from field and communication to the respective plants.

Large network of workshops Dealer workshops and TASS.

Training facilities for dealer end and TASS personnel.

b) Support Activities
i.

Procurement:

E-procurement initiative.

Global Sourcing Team China , a key destination for sourcing essential items like tires, power steering
units etc., Steel procured from Belarus

Technology driven procurement SAP and VCM.

Strategic subsidiaries & JVs TACO group of companies , Tata Cummins

Localized supplier base at mfg. locations low inventory levels.

Technological Development:

ii.

Approximately 2% of the annual profits of the company invested in research and development.

Strategic partnerships MDI (France), Fiat etc.

Formal benchmarking process.

Technology Day organized across all plant locations.

iii.

Human Resource:

Vast pool of technically competent engineers and managers.

Focus on development of technical capabilities Technical Training Centers, Alliance with technical
Institutes

Focus on development of managerial capabilities MTCs , TMTC, executive training programs at

premier business schools

iv.

Firms Infrastructure:

Multi Location facilities

Strong leadership under the aegis of Tata Sons

Best in class prototype building facilities

Technology SAP

Large product portfolio

8. Conclusion
Tata Motors has never had it so good. Today the company is the undisputed market leader in the commercial
vehicles industry in India and is gradually emerging as one of the key players internationally too. It has been
forging ahead on a number of fronts in an attempt to further entrench its position as a market leader. In the
SCV segment, the company has witnessed unprecedented success with the launch of the pioneering Tata
ACE. In the M and HCV segment, the company has been taking determined steps to further consolidate its
position. The company enjoys a number of key strengths that enable it to present a unique value proposition
to its customers. The future presents challenges and opportunities for the company in equal measure both
domestically and internationally. While pitfalls are many, Tata Motors looks well positioned indeed to
capitalize on these opportunities and take on the world.
Its international strategies seems to be well balanced with its recent success in acquision and mergers.
However this success is far from being a given. The company must focus on combining its unique strengths,
as it endeavours to replicate its recent successes in new segments and across new geographies.

References:
http://tejas.iimb.ac.in/articles/31.php
http://www.academia.edu/6512117/Tata_motors

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