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Submitted by
Adreen Alva
Student Id: 3495590
Masters in Engineering Practise (Double Major)
Autumn Session 2009
Synopsis:
This report aims to study the recent strategies adopted by the Tata group to overcome its
competitors and hold a strong position in the market. The study also includes an insight on the
capabilities of Tata and its potential in being a World Class Company delivering high quality
products and service. In the last decade, the Tata group has tightened its grips towards being a
global competitor by out-bidding several companies in some key acquisitions.
Mergers & Acquisitions is a very common strategies adopted by companies
nowadays. The reasons could range from sustainability, as in the airline industry to market
penetration as for most consumer goods companies. Companies want to grow bigger and
bigger. But seldom realise that bigger does not always mean better.
After the economic slowdown in the mid 1990s, Tata has bounced back to claim a
respectable stake and control in the Indian industry. They not only are self sufficient
financially but also have gained critical skills in Research & Development and customer
relations through the years. Tata is the biggest Conglomerate in India and the most favoured
among the shareholders.
Table of Contents
From the above data we can conclude that the two wheeler segment which has had all
the limelight so far will witness significant challenges from the passenger and
commercial vehicle segments in the years to come. The BMI forecasts predict two
wheeler sales to lose as much as 18% to its four wheeler counterparts wholl in turn
grow by almost 33% in the next 5 years. As more and more players get into the Indian
market, automobile prices will continue to remain competitive and in favour of the
consumer. The forecast in total production of automobiles in India portrays a
persistent growth making it more attractive for new entrants and innovation driven
competition.
Revenue
Total Revenue
share
1,627.6
7,223.5
8,851.2
8,851.2
18.4 %
81.6 %
100.0 %
100.0 %
Table 2: Tatas domestic and international Revenues (OneSource Business Database, 2009)
From the above statistics in Fig.1 we can observe that Tata sales have been continuously on the
incline. The total assets have grown, actually catching up with its sales in the year 2008 after the
sealing of the history Tata-Jaguar deal.
4. Competitive Environment:
Bajaj,Hyundai, GM,
Maruti-Suzuki
4.1
New
Market Penetration:
Increase car
production
Continuous Product
Developments
Eg. Indica V2
Deluxe,
Existing
Markets
Market
Development
New
Diversification
Thailand,
Vietnam, Africa,
Brazil
Luxury segment
Entry
Jaguar Land
Rover
4.2
Capabilities
Threshold
Capabilities
Capabilities for
competitive
advantage
Resources
Tangible: Cheap Labour, manufacturing
setups, Finances.
Strong Asset Base in India.
Intangible: Technical Skills, Good supply
chain, Investor support.
Tangible: Diversified product range,
Strong Brand name, reputation, Self owned
subsidiaries like Steel, Auto Comp. serve
as vendors.(Backward Integration)
Intangible: Collaboration with foreign
players and acquired multinational
companies.
Technically advanced products,
High customer satisfaction levels.
Competencies
Diversify into closely related
sectors and enter new markets.
Economies of scale and cost
efficiencies achieved in
business
Core Competency: Passenger
and utility vehicles.
Making Strategic Decisions.
Highly experienced Board of
Directors.
Ingenious aggregation of
Innovation and business.
Market expansion and
increasing sales.
4.3Stakeholders Involved
High
Power
Low
Interest
Low
High
Tata Steel
B.I.
Raw Materials
Supply
Component
Suppliers
JV with Brazilian
Coachbuilders and
Italian FIAT Co.
H.I.
Distribution
Network
F.I.
Tata Technologies
Machinery Manufacturing
& Factory Automation
Tata Motors
Logistics
Marketing
Information
Service Centres
4.5
Internationalisation Driver:
Globalising TATA Motors
products, Diversification
High
Lexus
Ferrari
Perceived Product
Benefits.
Low
Low
Product Price
High
5.1.1
Porters Analysis using the Strategy Clock
With reference to the figure 7, we can conclude that Tata Motors intended to adopt the Hybrid
strategy for the Nano because it expected to deliver satisfactory product benefits at a low price to the
consumers. The advantages in doing so are as follows:
Economies of Scale for the Nano could be achieved. Hence the
move could be beneficial in growing markets.
Cost reductions outside differentiated activities, like extra features
in the car, were possible.
Already existing strong supply chain developed over the years by
Tata Motors.
5.2.1
From the Figures, it is evident that Fords was undergoing a rough time in the markets when its
worldwide sales profit margins plummeted by around 8% in the year 2006. At the same time Tatas
net income was steadily growing and had a marginal drop in its profits margins. Ford, on the other
hand, even though it seemed to have recovered a bit in 2007 by a staggering amount, still was finding
it difficult to manage the luxury brands and trying to make a mark in the luxury car segment.
5.2.2
Ford tried to market the luxury Brand under the same rules as
marketing its mass selling models, consequently diluting the brands appeal. For example, in
2001 Ford launched the Jaguar X-Type along with the Ford Mondeo. The baby Jag, as they
called it, released with the Ford model, struggled to find its niche and eventually was pulled
off the US markets.(wardsautoworld,2008)
Ford Tried to increase volumes of the luxury brand rather than
maintaining its exclusivity to manufacturing sports cars and sedans.(Pope,2008)
Ford probably tried to hard at horizontal integration but somehow
couldnt manage the luxury brand later admitting that it needed to focus more on its core
products.(Hofman,2008)
With a quarter to half of Jaguars sales coming from the US, the
weakening dollar had a significant impact on the car sales. Despite this fact, Ford did not even
switch part of Jaguars production across the Atlantic.
The figure illustrates Jaguars Decline during the time of its management under Ford. Seeing an
opportunity, Tata cashed in on the proposition of the sale of the luxury car brands and thus acquired it
from Ford in 2007.
5.2.3
Organisation Structures
Ford follows a traditional and bureaucratic structure with the CEO dictating most of the decision
making. When Allan Mullaly took over as CEO of Ford in 2006, he quickly decided to get rid of the
loss masking assets like the luxury car brands. This shows his authoritarian style of leadership.
Tata on the other hand, is more of partipative style. The Tata organisation structure is of federal type
with two main bodies: Group Executive Office(G.E.O) which monitors the current strategies being
implemented along with the functioning issues of the group companies making the group more
synergistic while the Group Corporate Centre(G.C.C) deals with the growth and new entry strategies
of the group companies.
Acceptability
( /10)
2
7
7
Do Nothing
Diversify in local market
Collaborate with foreign
players
Organic Development
6
(Product Innovations )
Internationalise(Acquisitions) 9
Feasibility
( /10)
9
8
7
Suitability
( /10)
3
5
7
Final
Score
14
20
21
19
26
Opportunities
Threats
Weaknesses
Increasing market penetration in
India as safe guard against
declining cash flows. New
markets and diversification is
possible through joint ventures.
Rising raw material prices could
be tackled by backward vertical
integration.
With the initial financial backing of the giant parent company, Tata Group, the division has built a
strong business over the past 60 years and continues to show strong financial results. The continual
improvement and introduction of new products in the market have allowed it to successfully enter as
well as dominate the automobile industry in India. With increasing sales, employees, product
offerings, manufacturing facilities and distribution centres along with expansion outside India, the
company seems to have a promising future.(Humad,2005)
References:
1)Tata Sons, OneSource Global business database, accessed 15/03/2009,
http://globalbb.onesource.com.ezproxy.uow.edu.au/web/Reports/ReportMain.aspx?ftrId=UNIFIE
DOVERVIEW&Process=CP&KeyID=48608568&Expand=BusDesc#BusDesc48608568
2)www.tata.com,accessed on 24/03/2009,http://www.tata.com/htm/heritage/HeritageOption1.html.
3)BMI Ltd.,2009,India Autos Report Q1,2009 ISSN: 1748-9946, Business Monitor International
(BMI),(http://www.businessmonitor.com)
4)Data Monitor 2008,New Cars in India, Industry Profile Reference Code:0102-0358,Pg.12
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Working Paper Series, Number 08-02,Centre of Advanced Study of India, University of
Pennsylvania.
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Business Standard,2009
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Live Issue, Analysis 4,Pg 20..
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accessed 12/04/2009
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Source: Financial Times Information Limited http://forums.mg-rover.org/archive/index.php/t47486.html
11) Randall Jeff(2009),Wanted: Rich owner for old Jaguar,
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