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‘ Market Analysis of TATA motors prior to acquisition
‘ Factors Influencing for Larger Plant Size
‘ LRAC Influencing for Larger Plant Size
‘ Competitive Implications of LRAC
‘ Larger Plant Size: Single plant or Multi-plant
‘ Why Daewoo ?
‘ Economies of Scale and LRAC
‘ TATA-Daewoo Productivity and Learning Curve impact on
LRAC
‘ TATA-Daewoo Marketing Cost
‘ TATA-Daewoo Multi-Plant Benefit
‘ Key Strategic Points


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‘ TATA motorsǯ commercial vehicle business was minimal to
Indian market, prior to acquisition.
‘ TATA motors was unsuccessful in its planned entry into
China, which is worldǯs fastest growing Commercial
Vehicle market, through various merger and technology
transfers.
‘ TATA motorsǯ ambition of tapping the global market was
still not fulfilled due to the limited product range which
are not at par with the standards of fastest-growing
segments of the market.
‘ TATA motor was lagging behind with its global
competitors due to sub-standard Indian trucking market.
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‘ TATA motorsǯ ambition for competing with the global
players in same sector and increasing product range to
cater global market.
‘ To cater the global market, TATA motorsǯ requires
expertise and designing standards which creates the
dependency to learn this from the existing global player in
the industry.
‘ To expand the outputs, per unit average cost needs to be
minimized, which suggests that TATA motors should look
for the Economies of Scale in production.
‘ As TATA motorsǯ is planning to cater for the growing
market, it needs to go for larger plant size.
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‘ As Q is increasing due to increase in the target market

(global market), the company should operate in N2-M2
path for minimizing the long-run average cost. We can
compare that, even though M1 is the min. AC point for the
current production of TATA motors, for larger production,
min AC point will shift to N1 from M1, considering the
larger plant size in future.
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‘ Also, at high Q, TATA motorsǯ can achieve higher

economics of scale and large MES (optimum size) relative
to market size, to limit the number of competitors, and
gain the market share.
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‘ As we discussed, TATA motors needs to go for Large Plant
size for achieving its ambition as a global player. But, the
optimal plant size was the other factor to be looked upon.
‘ As TATA motors was Indiaǯs biggest auto-maker and eyeing
on the global market, a new plant at some global site it
required nearer to the market to reduce the transportation
cost.
‘ Also, the technology and equipments used for Indian
market was sub-standard as compared to the global
market, which implies that new plant with better
infrastructure, machinery and equipment needs to be set-
up by TATA motors, to inline themselves with prospective
global competitors.
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‘ TATA will get the ready-made base product, which can be
tweaked as per customer requirement.
‘ In Middle-East & Europe, TATA-Daewoo product can be
launched without much modification and exports are
expected to rise up to 25% from current 8%.
‘ Korean market for 1-tonne pick-ups is monopolized by
Hyundai, which will open the opportunity of the new market
for existing Indian product of Tata Motors in same category.
‘ With better product portfolio, Tata-Daewoo can target
Chinese market, which is fastest-growing CV market in
the world. Also, as one segment of Daewoo is merged with
GM in China, the brand value of Daewoo might help Tataǯs to
get some market share.
‘ Daewoo has its well equipped R & D centre which will help
Tata to develop better products.
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‘ Due to existing product base and expertise of Daewoo,
TATA-Daewoo is exhibiting economies of scale. Also, the
demand is rising. Hence, Tata-Daewoo will be operating
under excess capacity conditions and on the declining part
of the SRACs of the scale (i.e. N2-M2).
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‘ Daewoo have better product Design skills and technology.
It will help in reduction of the cost of production to the
greater extent if utilized to fullest. The impact of this as
the learning curve will reduce the AC to greater extent.
‘ Also, Daewoo have internationally trained managers/
labors which helps TATA motorsǯ for global strategy
planning/production.
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‘ Daewoo doesnǯt have its services & marketing team. TATA
later setup its own sales team and service centers to cater
their customers.
‘ TATA-Daewoo also acquired a finance firm, and launched
its own financing scheme to the customers. It can also
extrapolate to economies of scope for TATA Daewoo.
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‘ Tata-Daewoo will get the benefit of Declining Cost or
Constant cost in multi-plant facility by producing more
output at same or declining cost value.
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‘ As the markets are scattered and distant location. TATA-
Daewoo will be able to reduce the transportation cost by
acquiring new plant nearer to the market, and having
existing plant working at different locations.
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‘ After acquisition in 2004-05, company performance in
2008-09, is outstanding.
‘ MCV is also added in the product portfolio.
‘ Production volume increased by 100% to around 10000
units from 4600 units.
‘ Export is grown up by 400% from 900 units to 4300 units.


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