To: Re:

Prof. Peter Lane Executive Summary of Tata Co.

Date:

April 11, 2012

Company Overview Company Name: Tata Corp. Industry: Auto. and Steel Geographic market: Global Ownership: Private Headquarter: Maharashtra, India CEO: Ratan Tata Primary products: Vehicles, steel, tea. I only analyzed auto and steel industries since these two contributes 85% revenue.

Financial Assessment
Automobile
Revenue Tata Industry average 325k 179k Growth 36% NI 22k Growth 25% ROS 7.00% ROA 10% 9% ROE 31% 30% D/E 0.95 0.75 Revenue 252k 26k Growth% 24% Net income 42

Steel
Growth% 12% ROS 17% ROA 11% 9% ROE 34% 24% P/E 1.71 0.66

Tatas growth rates were robust on both auto and steel industries. However active M&A led to higher D/E ratio than industry averages, and put Tatas cashflow in a perilous situation. Poor operating profits implies very long payback periods

Industry structure analysis(India)

Industry rivalry Power of Buyers Power of Suppliers Risk of New entry Substitute

Automobile Overall median. High for light commercial vehicles, low for trucks(close to monopoly) High, low income market, customers are pricesensitive and can switch product easily Low in India because suppliers are small and automakers are usually vertically integrated Low, high capital intensity industry Medium, train and airplane

Steel Low, high duties over import Medium, commodity characteristic but transportation limit Medium, fluctuated based on global supply and demand Low, high capital intensity industry Low, there is no material can replace steel

Industry Profit Pool Analysis

Exhibit 1 shows the major activities for auto industry. Auto manufacturing has very low profit margin and used car dealer gets the lowest profit margin. Although service focused activities, such as leasing, rental and repair have higher margin, but these activities generate much less in revenues. It is worth mentioning that auto insurance is the segment that generates higher revenue and high margin. The primary activities that compromise the steel industry value chain are iron ore, coal and steelmaking. Steelmaking has the highest profit margin but the margin can be eroded by uprising price of iron ore and coal. Big corporations can get vertically integrated to increase overall profit margin.

Competitive Strategy
Tata established cost leadership as its most distinct competitive strategy. Tata has evolved into a highly integrated corporation, covering from upstream steelmaking to end auto-market by continuous M&A. It also established jointed venture with logistic companies to lubricate the supply chain. The cost leadership enables Tata to build a $2500 car, which is half the price of its closest competitor.

Resources, Capabilities, &Core competences

The main resource Tata stands on is financial resource. Tata was able to borrow cash to run its business and leverage its capital at an extremely high level. Ease of obtaining loans also leverages Tatas capability to grow faster through M&A. Tata also proved their innovation capability to develop a $2500 car by innovatively assemble available technologies. Tatas core competence was well-respected brand name TATA in India and its capability in integrating cross-industry operations. This core competency enabled them to do diversification through M&A to maintain profitable. Conversely successful M&A(e.g Landover) and technology innovation(e.g Tata Nano) enhanced its brand name and core competency.

Diversification Strategy
The initial purpose of Tatas diversification strategy is to maintain stable revenue and profit and reduce portfolio risk. In recent years, Tata made frequent M&A to learn new auto technology and establish global distribution channels.

Exhibit 1

Shaws Consulting Group