79316022 Tata Motors and FIAT Auto Final Ppt

TATA MOTORS & FIAT AUTO : JOINING FORCES

BUSINESS STRATEGY - II

CONTENTS

COMPANY PROFILESGROWTH STRATEGY AT TATA MOTORSFINANCIAL PROBLEMS AT FIAT AUTO TM & FIAT AUTO- JOINING FORCESTHREATS – CANIBALIZATION AND DILUTIONPRESENT SCENARIOOTHER INDUSTRY JV EXAMPLES

TATA MOTORS AND FIAT AUTO : JOINING FORCES

COMPANY PROFILE – TATA MOTORSPRODUCT VARIANTSLOCAL COMPETITORS

TATA MOTORS•Tata motors has its origins in Tatanagar shops, which was acquired by Tata Sons Ltd. on June 1,1945• From the year 1960 it was referred to as Telco(Tata Engineering and Locomotive Co Ltd)

•C •

( 1945-1973) (1973-1988)

• Co Started manufacturing HCV in the year 1983 & LCV in the year 1986

• In the year 1988 Ratan Tata replaced the chairman

PRODUCTS VARIANTS• The First utility vehicle under the TATA marquee called

the Sierra was launched in 1991• The company entered into a JV with Daimler-Benz for

the manufacture of Mercedes Benz passenger cars until the year 2001

• They also launched the Safari India’s first SUV in the year 1998

Indian Competitors

• During the time of launching of the INDICA the small car market in India was dominated by the MARUTI 800

• It forced MUL to lower the retail price of Maruti 800, which made small cars more affordable to the Indian middle class

• In this way TELCO changed the rules in the Indian automobile by providing options like AC, power steering , alloy wheels etc-only in premium cars

• It was the clear sign of success with INDICA with 115000 bookings by the year 1999

Financial Records

• TELCO was making impressive inroads into the passenger car market ,but in year 2001 saw an record of loss of about Rs. 5 Billon-the first loss in 57 years

• After this attempt the focused on improving internal efficiencies and restructuring its debts

• In the year 2002-2003 , TELCO registered a net Profit of Rs. 3 Billion……


COMPANY PROFILE – FIAT AUTOPRODUCT VARIANTS

LAUNCH OF FIAT INDIA

FIAT Auto

Fiat came into existence on July 11, 1899 which was established by Giovanni Agnelli.

1st Fiat car manufacturing facility was opened in 1900 in Corso Dante, Italy.

By 1911 Fiat group diversified in the production and marketing.

By 1925, it had entered the steel, railways, power.

Fiat group’s auto division used mass production.

Product Profile

Fiat group expanded its operations into Aerospace & Telecommunications.

Fiat group purchased Autobianchi & Ferrari in 1967 & 1969 respectively.

Fiat Auto took over Alfa Romeo & Maserati in 1986 & 1993 respectively.

By 1980, Fiat Auto was facing severe from Japanese auto manufacturers.

Fiat group accounted for 5% of Italy’s GDP & was Italy’s biggest employer.

FIAT India

Fiat group appointed Bombay Motor Cars Agency as the sales agent for its cars in 1905.

Fiat group entered into a license & service agreement with PAL to manufacture cars.

Premier Padmini launched in 1968.

FIAL, a wholly-owned subsidiary of Fiat auto was established in 1995.

Fiat India launched Siena & Palio in 1999 & 2001 respectively.


GROWTH STRATEGY

Growth Strategy

Going Global • In March 2004 Tata motors acquired Korean based Daewoo commercial vehicle business to gain entry into high volume Chinese market.• Tata motors launched Indica in Europe as well in South Africa.• Tata motors got listed in NYSE in Sep2004.• Tata motors acquires 21 % in Hispano carrocera, a Spanish bus manufacturing co. to access its design and technological capabilities.

New Product Initiatives

• In 2004 Tata motors launched Indica.• The same year it launched improved versions like

Indica V2 and the Sumo Victa.• At Geneva Motor show in March 2005 they

unveiled the Xover, a concept car.• In May 2005, Tata motors launched the Ace, a

sub-one ton mini truck.• Tata motors also launched the Safari Dicor, Indigo

SX series and the TL 4*4 ( India’s first sports utility truck) during this period.


FINANCIAL PROBLEMS AT FIAT AUTO

Financial Problems at Fiat Auto In late 1990’s Fiat Auto was in deep trouble. Reasons of Fiat Auto trouble:-• Failed to move from small segment cars to larger segment cars.• Italian’s Government decision to withdraw the concessions and subsidies given to the company.• Give foreign auto companies free access to the Italian market.• Demand for cars started falling in Italy and European countries.

• By 2002 Fiat had a loss of US$ 2.5 billion and market share was down to 28 % in Italy and 7% in Europe.• Fiat announced its intention to trim its workforce to cut cost.• Sold some of its industrial assets to pay off loans.• Fiat group sold its insurance and aviation business.• Through the early 2000s Fiat auto saw the entry and exit of 4 CEOs.

• Fiat Auto look towards developing countries like India and China where small and cheap cars were in great demand.• Palio was initially very successful but other products like Siena were failed.• In the second half of 2005 there were reports that Fiat Auto was considering teaming up with Tata motors.


JOINT VENTURE BETWEEN TM & FIAT AUTOADVANTAGES OF JOINT VENTURE

TM & FIAT AUTO- Joining force Sept 22, 2005 TM and Fiat auto signed MOU.

Compatibility issues study

Octo. 2005, Giovanni De Filippis- MD of Fiat India

Global existence for TM

Targeted Indian market based on value chain for Fiat

Post MOU

Improved dealer networkOverseas operation synergyVehicle finance by Tata groupTM- Marcopolo JVMid 2006- Paint booth facility sharingRatan Tata joined Fiat s.p.aArgentinean auto sector study

Advantages

• Improved customer service and spare parts availability

• Customer data sharing(Limited)• TACO helped to become cost efficient• Technology sharing- two petrol engine- fire• Latin American market strategically alliance


INTERNAL AND EXTERNAL COMPETITORSCANNIBALIZATION AND DILUTION

COMPETITORSFaced intense Competition from other Automobile Manufacturers

MUL planning to invest Rs 32 billion to set up a new car plant and diesel engine production facility. Nissan and Suzuki had entered into an alliance in June 2006 to produce small cars. GM India successfully launched Chevrolet Optra and Chevrolet Aveo.Hyundai planned to launch diesel variants of Getz and Santro. Renault SA formed a 49:51 Joint Venture with Mahindra and Mahindra.

CANNIBALIZATION AND DILUTION

Cannibalization is reduction in sales volume because of introduction of a new product by same producer.

The launch of Indica was one such example.

Dilution is weakening the brand through ill judged brand extension.

Fiat operations small compared to Tata.

Threat from Fiat Petra.


PRESENT SCENARIOREASONS

FUTURE PLAN OF ACTION

Joining Hands

• JV will make Fiat’s premium cars, Grande Punto and Linea at Ranjangaon in Maharashtra

• Distribution and service of Fiat branded cars in India will be managed by Tata Motors

• Investment 650 million euro and the plant will employ more than 4,000 people.

Alfredo Altavilla (left), Senior Vice-President, Business

Development, Fiat Group Automobiles, with Ravi Kant,

Managing Director, Tata Motors, in Mumbai

Reasons• Dealers tend to favour selling

Tata vehicles, than Fiat• Fiat has not been able to

build an aspirational value for its brands to pull more customers

• Joint venture has reported a loss of 1,214 crores during 2007-2010

Fiat looks at life beyond Tata Motors’ dealerships

• Fiat needs to reinvigorate the brand at the ground level and building its own distribution network gaining brand affinity in the market

• opening exclusive company-owned brand stores in major cities to generate more sales

“space with the existing Tata dealerships was insufficient to house both the brands” - Rajeev Kapoor, managing director of Fiat's India operations


SOME JOINT VENTURE ORG. EXAMPLESSTRATEGIC OUTCOME

Company Joint Venture Partner Planned Products (Ave. Price)

Audi (Volkswagen) Franchise (Imported car) Audi-A4 ($85,000)

Daewoo (Korea) DCM Cielo ($15K)

Fiat Premier Automobiles (PAL) Fiat Uno 1000 cc ($10,000)

Ford Motor Company Mahindra & Mahindra Ford Escort, Festiva ($12K)

General Motors Corp. (GM) Hindustan Motors (HM) Opel Astra ($22K average)

Honda Shriram Industries Civic ($18K)

Hyundai (Korea Wholly-owned subsidiary Accent

Mercedes-Benz TELCO Mercedes E220 ($70K)

Mitsubishi Hindustan Motors (HM) Lancer ($15K)

Peugeot Premier Automobiles (PAL) Peugeot 309 ($15K)

Volkswagen Eicher Ltd. Golf ($20K)

Some Industry JV Examples

Some More Examples…

Supplier Joint Ventures

Company ParticularsHyundai Export Base for Small Cars.Skoda Hub for exports of cars to neighbouring

countriesFord Exporting CKDs of Ikon to South Africa &

other countries.Mitsubishi & Yamaha Hub for 125 cc Motorcycles.Maruti Suzuki Exports cars to EU.Honda Hub for two-wheelers exports.

Company ParticularsToyota Motors Global Hub for TransmissionFord Full Fledged Component Sourcing TeamFiat Sourcing Components.

MRF Ltd. Export Tyres To The US

COST REDUCTION

Strategic Outcome

EXPORT BASE

ENTRY INTO INDIAN MARKET

SALES AND DISTRIBUTION NETWORK

TECHNOLOGICAL KNOW HOW

79316022 Tata Motors and FIAT Auto Final Ppt

Documents

Transcript of 79316022 Tata Motors and FIAT Auto Final Ppt