TATA MOTORS

Tata Motors Ltd is India's largest automobile company. The company is the leader in commercial vehicles in each segment, and among the top three in passenger vehicles with winning products in the compact, midsize car and utility vehicle segments. They are the world's fourth largest truck manufacturer, and the world's second largest bus manufacturer. Tata Motors manufactures commercial vehicle, three passenger vehicle, truck and bus. They have a portfolio of automotive products, ranging from sub-1 ton to 49 ton gross vehicle weight (GVW), trucks (including pickup trucks) and from small, medium, and large buses and coaches to passenger cars, including the car, the Tata Nano. The company's passenger cars include the Indica, the Indica Vista, the Indigo and the Indigo Marina. Jaguar produces four car lines: XK, XF, XJ and X-Type. They manufacture a number of utility vehicles (UV), including the Sumo, and the sports utility vehicle (SUV), Tata Safari. They also manufacture a variety of light commercial vehicles (LCVs), including pickup trucks, trucks and buses with GVW of between 0.7 ton and 7.5 tons. This also includes the Ace, a mini-truck with a 0.7 ton payload, the Magic, a passenger variant for commercial transportation and the Winger. It faces higher competition in the LCV segment, where its Tata ACE has been a huge success. Internationalization forms a key component of Tata Motor's strategy and it has successfully entered countries having a demand similar to India like South Africa, Thailand and Argentina, mainly through acquisitions and joint ventures.

STRATEGIC EDGE OF THE COMPANY

Tata motors has been the flag bearer of change in the Indian Automobile Industry and lately has been leading the way even on the global arena. Certain Parameters that have fostered well for the firm have been:

Mergers and Acquisitions:

Since its inception in 1945, Tata motors has made the right mergers and acquisitions at the right time , enabling it to better serve the existing markets and enter newer markets . Some leading examples are a) In the year 2004, the company acquired Daewoo Commercial Vehicle Company and renamed it as Tata Daewoo Commercial Vehicle Co. Ltd. This company launched the heavy duty truck 'NOVUS' in Korea. b) In the year 2005, the company acquired 21% stake in Hispano Carrocera SA, Spanish bus manufacturing Company. The company launched branded buses and coaches, namely Starbus and Globus in the market. c) In the year 2006, the company made a joint venture with Marcopolo, Brazil for manufacturing fully built buses & coaches for India & markets abroad d) In the year 2007, the company and Thonburi Automotive Assembly Plant Co. (Thonburi) formed a joint venture company in Thailand to manufacture, assemble and market pickup trucks e) In June 2, 2008, the company acquired the businesses of Jaguar and Land Rover for USD 2.3 billion. Jaguar and Land Rover are in the business of development, manufacture and sale of high end luxury cars and SUVs respectively.

Extensive and Global Manufacturing Facilities:

Tata Motors has Manufacturing facilities at Jamshedpur (Jharkhand), Pune (Maharashtra), Lucknow (Uttar Pradesh), Pantnagar (Uttarakhand), Dharwad (Karnataka) and Sanand (Gujarat). Through their subsidiaries

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and associate companies, the company has operations in the UK, South Korea, Thailand and Spain. This acts as a major Strategic Advantage the firm enjoys.

Strong focus on Research and Development:

Since the inception days, Tata motors has laid strong stress on Research and Development activities. This has acted as a major reason that the firm has been the first one to roll out the first indigenously designed car from India (Indica), Cheapest Car in the world (Nano) and also Commercial vehicles. The R&D history goes back to 1959 when, they set up a Research and Development Centre at Jamshedpur.

2010 Capital Expenditure Recurring Expenditure Total Expenditure Total R&D expenditure as percentage of net turnover(%) 1,089 82 1,171

2009 1,422 54 1,477

2008 1,057 139 1,196

2007 637 160 797

2006 344 132 476

2005 0 365 365

2004 0 152 152

2003 0 0 0

2002 0 0 0

3.29%

5.75%

4.20%

2.90%

2.30%

2.10%

0.98%

1.30%

1.20%

Collaboration with best Institutes of the world:

Tata Motors has one of the most admirable network of collaborations among peers. The collaborations range from technical front to specialised knowledge experts to design experts. The culture of collaboration dates back to 1948 when the company introduced steam road roller in collaboration with Marshall Sons (UK). Currently the firm is in collaboration with following partners:

Collaborator's Name Le Moteur Moderne Schaudt Maschinenbau Gmbh John Deere Industrial Equipment Co Nachi-Fujikoshi Corporation Robert Bosch GmbH Hitachi Construction Machinery Co. Inst for Development Automotive Engineering s.p.a

Country France Germany U.S. Japan Germany Japan Italy

Remarks Technical Technical Technical Technical Technical Technical Technical

Financial Performance of Tata Motors

Over the years the company has performed exceptionally well financially inspite of the cyclical nature of the industry. A critical analysis of the financial statements provides us with the following insights. 1. The issue of Cyclicality is plaguing the automotive sector and the future outlook in India is not great considering the robust performance of the past 3 years. Tata Motors has countered this by increasing the share of exports in the sources of revenue. Excess debt has led to a high Debt to Equity ratio and this is not good news as the company plans to go for further capital expansion. Also the percentage of cash flow used for CAPEX is increasing

2.

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Percentage of cash inflow used for CAPEX

3. 4. Rising interest rates in the economy is a cause of concern as it dampens both capital investments and softens the domestic demand. Positives: The cash flow from operations has grown 11 times compared to last year despite a huge CAPEX. Tata Ace single handedly raised the market share of Tata Motors in LCV segment by 5%. The operating leverage for Tata Motors is higher due to the high fixed costs of CAPEX. But still the overall financial leverage of Tata Motors is well under control when compared to Ashok Leyland

SWOT Analysis Strengths

The internationalisation strategy so far has been to keep local managers in new acquisitions, and to only transplant a couple of senior managers from India into the new market. The benefit is that Tata has been able to exchange expertise. For example after the Daewoo acquisition the Indian company leaned work discipline and how to get the final product 'right first time.' The company has a strategy in place for the next stage of its expansion. Not only is it focusing upon new products and acquisitions, but it also has a programme of intensive management development in place in order to establish its leaders for tomorrow. The company has had a successful alliance with Italian mass producer Fiat since 2006. This has enhanced the product portfolio for Tata and Fiat in terms of production and knowledge exchange.

Weaknesses
The company's passenger car products are based upon 3rd and 4th generation platforms, which put Tata Motors Limited at a disadvantage with competing car manufacturers. Despite buying the Jaguar and Land Rover brands (see opportunities below); Tata has not got a foothold in the luxury car segment in its domestic, Indian market.

Opportunities
In the summer of 2008 Tata Motor's announced that it had successfully purchased the Land Rover and Jaguar brands. Two of the World's luxury car brand have been added to its portfolio of brands, and will undoubtedly off the company the chance to market vehicles in the luxury segments. Nano is the cheapest car in the World - retailing at little more than a motorbike. Whilst the World is getting ready for greener alternatives to gas-guzzlers, is the Nano the answer in terms of concept or brand? The new global track platform is about to be launched from its Korean (previously Daewoo) plant. The company has put in place a very proactive Corporate Social Responsibility (CSR) committee to address potential strategies that will make is operations more sustainable.

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The range of Super Milo fuel efficient buses are powered by super-efficient, eco-friendly engines. The bus has optional organic clutch with booster assist and better air intakes that will reduce fuel consumption by up to 10%.

Threats
Other competing car manufacturers have been in the passenger car business for 40, 50 or more years. Therefore Tata Motors Limited has to catch up in terms of quality and lean production. Sustainability and environmentalism could mean extra costs for this low-cost producer. This could impact its underpinning competitive advantage. Since the company has focused upon the commercial and small vehicle segments, it has left itself open to competition from overseas companies for the emerging Indian luxury segments. Rising prices in the global economy could pose a threat to Tata Motors Limited on a couple of fronts. The price of steel and aluminium is increasing putting pressure on the costs of production. Many of Tata's products run on Diesel fuel which is becoming expensive globally and within its traditional home market.

Internationalization
As a part of the company's new internationalization strategy, the company has decided to focus on a narrow base of 14-15 countries where market conditions are similar to that of India. In these countries, Tata Motors now has dedicated manufacturing facilities, marketing teams and sales teams. The idea is to have self sustained operations in this narrow band of countries. The company evaluates locations on the basis of market opportunities and labour skills. In the framework pertaining to international expansion strategies, Tata Motors can be identified as an Extender, and is focusing on expanding into markets similar to those of the home base, using competencies developed at home.

Position of Tata Motors now on the Globalization Front

Replicating Tatas current strategy in other markets

Sustainable competitive advantage lies not in one, but a combination of multiple resources, each of which individually need not necessarily be the best, but in overall weighted average terms, presents the best solution. For Tata Motors, the combination of resources providing it competitive superiority on a weighted average basis includes: 1. Product Reliability Page 4

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2. 3.

Service Network Channel Reach

Three-way Resource Based View

In terms of product reliability, Tata Motors offers products of reasonably high standards. However, foreign players like Volvo and even local competitors like Ashok Leyland arguably offer products that are far more refined. But this is more than compensated by a dependable service network and extensive channel reach. Tata's service and distributor network is by far the most extensive of any player in the trucks industry. Hence in overall weighted average terms, Tata Motors still has a winning proposition. Based on a close scrutiny of the resource based view of Tata Motors and the challenges it faces, we propose a recommendation matrix arranged along three broad dimensions - Tangible, Intangible and Capabilities.

Three Dimensional Recommendation Matrix

Tangible: The strategies in this domain are primarily directed at sustaining Tata Motors' first mover advantage with respect to its offering in the Small Commercial Vehicle segment - ACE. Intangible: In intangible terms, Tata Motors needs to bolster its brand loyalty, by providing a unique customer experience.

Conclusion
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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. The company enjoys a number of key strengths that enable it to present a unique value proposition to its customers. However this success is far from being a given. The company must focus on combining its unique strengths, as it endeavors to replicate its recent successes in new segments and across new geographies. Apart from product reliability, the most important determinant of future success would the company's ability to bolster its support framework. If the company gets it right, the spoils could indeed be breathtaking. Not only will that catapult the company to the forefront of creating a unique customer experience, but also help spawn altogether new revenue streams. 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.

References
1) 2) 3) 4) 5) 6) Alakjary Tudu, Keka Lahiri, Tata Nano The low cost aspirational four wheeler (A), Knowledge Cell, Globsyn Business School. Peter Wells, The Tata Nano, the global value segment and the implications for traditional automobile industry regions, May 10, 2010, Cambridge Journal of Regions, Economy and Society Advance Access. Jeevan William D Almeida, Sandeep Jony, Nikhil Chandran, Keerthi Purushotham & Ashish Gupta, Autoeconomics: the Tata Nano, July 2010, Deakin papers on international business economics. Gerard J. Tellis, Tata Nano: Poor mans car or radical innovation? Atiqur Rahman, LOW COST CAR: AN OVERVIEW Murali Patibandla, Et al, Globalization of Tata Motors: Strategic Plan for the Future, August 2010, Tejas@IIMB.

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