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Transcript of Economics Mnc
CONTENTS Page no.
INTRODUCTION 2
HISTORY 2
CHARACTERISTICS OF MNC’S 3
BENEFITS OF MNC’S TO HOME COUNTRY 5
PHENOMENAL GROWTH OF MNCS 9
ROLE OF MNC IN INDIA 11
DISADVANTAGES OF MNCS 13
TATA GROUP 14
TATA'S GLOBAL OPERATIONS 28
1
INTRODUCTION
Multinational corporations are business entities that operate in more than one country. The
typical multinational corporation or MNC normally functions with a headquarters that is
based in one country, while other facilities are based in locations in other countries. In some
circles, a multinational corporation is referred to as multinational enterprise (MBE) or a
transnational corporation (TNC).
The exact model for an MNC may vary slightly. One common model is for the multinational
corporation is the positioning of the executive headquarters in one nation,while production
facilities are located in one or more other countries. This model often allows the company to take
advantage of benefits of incorporating in a given locality, while also being able to produce goods
and services in areas where the cost of production is lower.
History
There is a dispute as to which was
the first MNC. Some have argued
that the Knights Templar, founded in 1117,
became a multinational when it stumbled
into banking in 1135. However, others
claim that the Dutch East India Company
was the first proper multinational.
2
The multinational corporations have certain characteristics which may be discussed below:
Giant Size:
The most important feature of these MNCs is their gigantic size. Their assets and sales run
into billions of dollars and they also make supernormal profits. According to one definition
an MNC is one with a sales turnover of f 100 million. The MNCs are also super powerful
organizations. In 1971 out of the top ninety producers of wealth, as many as 29 were MNCs,
and the rest, nations. Besides the operations, most of these multinationals are spread in a vast
number of countries. For instance, in 1973 out of a total of (, 000 firms identified nearly 45
per cent had affiliates in more than 20 countries.
International Operation:
A Fundamental feature of a multinational corporation is that in such a corporation, control
resides in the hands of a single institution. But its interests and operations sprawl across
national boundaries. The Pepsi Cola Company of the U.S operates in 114 countries. An MNC
operates through a parent corporation in the home country. It may assume the form or a
subsidiary in the host country. If it is a branch, it acts for the parent corporation without any
local capital or management assistance. If it is a subsidiary, the majority control is still
exercised by the foreign parent company, although it is “incorporated in the host country. The
foreign control may range anywhere between the minimum of 51 per cent to the full, 100 per
cent. An MNC thus combines ownership with control. The branches and subsidiaries of
MNCs operate under the unified control of the parent company.
3
Oligopolistic Structure:
Through the process of merger and takeover, etc., in course of time an MNC comes to
assume awesome power. This coupled with its giant size makes it oligopolistic in character.
So it enjoys a huge amount of profit. This oligopolistic structure has been the cause of a
number of evils of the multinational corporations.
Spontaneous Evolution:
One thing to be observed in the case of the MNCs is that they have usually grown in a
spontaneous and unconscious manner. Very often they developed through "Creeping
instrumentalism." Many firms become multinationals by accident. Sometimes a firm
established a subsidiary abroad due to wage differentials and better opportunity prevailing in
the host country.
Collective Transfer of Resources:
An MNC facilitates multilateral transfer of resources Usually this transfer takes place in the
form of a "package" which includes technical know-how, equipment's and machinery,
materials, finished products, managerial services, and soon, "MNCs are composed of a
complex of widely varied modern technology ranging from production and marketing to
management and financing. B.N. Ganguly has remarked in the case of an MNG "resources
are transferred, but not traded in, according to the traditional norms and practices of
international trade."
4
Benefits of MNC’s to Home Country
Benefits of MNC’s to host countries:
Multinational corporate structure :
Promote global co-operations:
Facilitate inflow of foreign
exchange:Promote
bilateral trade relations:
Ensure optimum
utilization of resources:
Raise the rate of investment:
Accelerate industrial growth:
Facilitate transfer of technology:
Promote export and reduce
imports:
Provide services to professionals:
Facilitate efficient
utilization of resources:
Provide benefits of R and D activities:
Support enterprises in
host countries:
Break domestic monopolies:
5
Multinational corporations can be divided into three broad groups according to the
configuration of their production facilities:
· Horizontally integrated multinational corporations
manage production establishments located in different countries to produce the same or
similar products.(example: McDonalds)
· Vertically integrated multinational corporations
manage production establishment in certain country/countries to produce products that
serve as input to its production establishments in other country/countries. (example: Adidas)
· Diversified multinational corporations
manageproduction establishments located in different countries that are neither
horizontally nor vertically norstraight, nor non-straight integrated. (example:
Microsoft)
Others argue that a key feature of the multinational is the inclusion of back office functions in
each of the countries in which they operate. The globally integrated enterprise, which some see
as the next development in the evolution of the multinational, does away with this requirement.
6
Benefits of MNC’s to home country:
1) Facilitate inflow of foreign exchange: - MNC’s collect funds from the
enterprises of other countries in the form of fees, royalty, and service
charges. This money is taken to the country of their origin. MNC’s make their
home countries rich by facilitating inflow of foreign exchange from other
countries.
2) Promote global co-operations: - MNC’s provide co-operation to poor or
developing
countries to develop their industries. The countries of their origin participate
in such
international co-operation, which is beneficial to all countries- rich and poor.
3) Ensure optimum utilization of resources: -MNC’s ensure optimum
utilization of natural and other resources available in their home countries.
This is possible due to their worldwide business contacts.
4) Promote bilateral trade relations: -MNC’s facilitate bilateral trade
relations between their home countries and the other countries with which
they have business relations.
Benefits of MNC’s to host countries:
1) Raise the rate of investment: - MNC’s raise the rate of investment in
the host countries and thereby bring rapid industrial growth accompanied by
massive employment opportunities in different sectors of the economy.
7
2) Facilitate transfer of technology: -Multinationals act as agents for the
transfer of
technology to developing countries and thereby help such countries to
modernize their
industries.They remove technological gaps in developing countries by
providing technomanagerial skills.
3) Accelerate industrial growth: - multinationals accelerate industrial
growth in host countries through collaborations, joint ventures and
establishment of subsidiaries and branches. They facilitate economic growth
through financial, marketing and technological services. MNC’s are rightly
called “ messengers of progress”.
4) Promote export and reduce imports: - MNC’s help the host countries
to reduce the imports and promote the exports by raising domestic
production. Marketing facilities at global level are provided by MNC’s due to
their global business contacts.
5) Provide services to professionals: - MNC’s provide the services of the
skilled professional managers for managing the activities of the enterprises
in which they are involved/interested.This raises overall managerial
efficiency or enterprises connected with multinationals.MNC’s bring
managerial revolution in host countries.
6) Facilitate efficient utilization of resources: - Multinationals facilitate
efficient utilization of resources available in host countries. This leads to
economic development.
8
7) Provide benefits of R and D activities: -Multinationals has enormous
resources at their disposal. Some are utilized for R and D activities. The
benefits of R and D activities are passed on to the enterprises operating in
the host countries.
8) Support enterprises in host countries: - MNC’s support to enterprises
in the host countries in order to support their own operations indirectly. This
is how MNC’s support enterprises in the host countries to grow. Even
consumers get new goods and services due to the operations of MNC’s.
9) Break domestic monopolies: - MNC’s raise competition in the host
countries and thereby break domestic monopolies.
A number of factors have contributed to the phenomenal growth of MNCs.
Some of the important factors are as follows: -
1) Expansion of market territories: -
Rapid economic growth in a number of countries resulting in rising GDPs and per capita
incomes contributed to the growing standards of living. This in turn contributed to the
continuous expansion of market territories. MNCs both contributed to the expansion of
market territories and also grew in size and spread as a result of expansion of market
territories.
2) Market superiorities: -
9
In many ways, MNCs have an edge over domestic firms, such as: -
a) Availability of reliable and current data,
b) MNCs enjoy market reputation,
c) MNCs encounter relatively less problems and difficulties in marketing the products,
d) MNCs adopt more effective advertising and sales promotion techniques, and
e) MNCs enjoy faster transportation and adequate warehousing facilities
3) Financial superiorities: -
MNCs also enjoy a number of financial advantages over domestic firms. These are: -
a) Availability of huge financial resources with the MNCs helps them to transform business
environment and circumstances in their favor.
b) MNCs can use the funds more effectively and economically on account of their activities
in numerous countries.
c) MNCs have easy access to international capital markets, and
d) MNCs have easy assessed to international banks and financial institutions.
4) Technological superiorities: -
MNCs are technologically prosperous on account of high and sustained spend on R&D.
developing countries on account of their technological backwardness welcome MNCs to their
countries because of the attendant benefits of technology transfer.
10
Role of MNC in India
There are a number of reasons why the multinational companies are coming
down to India.India has got a huge market. It has also got one of the fastest
growing economies in the world. Besides, the policy of the government
towards FDI has also played a major role in attracting the multinational
companies in India.
For quite a long time, India had a restrictive policy in terms of foreign direct
investment. As a result, there was lesser number of companies that showed
interest in investing in Indian market. However, the scenario changed during
the financial liberalization of the country, especially after 1991. Government,
nowadays, makes continuous efforts to attract foreign investments by
relaxing many of its policies. As a result, a number of multinational
companies have shown interest in Indian market.
It is too specify that the companies come and settle in India to earn profit. A
company
enlarges its jurisdiction of work beyond its native place when they get a wide
scope to earn a profit and such is the case of the MNCs that have flourished
here. More over India has wide market for different and new goods and
services due to the ever increasing population and the varying consumer
taste. The government FDI policies have somehow benefited them and
drawn their attention too. The restrictive policies that stopped the company's
11
inflow are however withdrawn and the country has shown much interest to
bring in foreign investment here.
Besides the foreign directive policies the labor competitive market, market
competition and the macro-economic stability are some of the key factors
that magnetize the foreign MNCs here.
Following are the reasons why multinational companies consider India as a
preferred
destination for business:
Huge market potential of the country
FDI attractiveness
Labor competitiveness
Macro-economic stability
Advantages of the growing MNCs to India
There are certain advantages that the underdeveloped countries like and the developing
countries like India derive from the foreign MNCs that establishes. They are as under:
Initiating a higher level of investment.
Reducing the technological gap
The natural resources are utilized in true sense.
The foreign exchange gap is reduced
Boosts up the basic economic structure.
12
Disadvantages of MNCs
Roses do not come without thrones. Disadvantages of having MNCs in a developing country
like India are as undero
Competition to SMSI
Pollution and Environmental hazards
Some MNCs come only for tax benefits only
Exploitation of natural resources
Lack of employment opportunities
Diffusion of profits and Forex Imbalance
Working environment and conditions
Slows down decision making
13
Tata Group
The Tata Group is a multinational conglomerate based in Mumbai, India. In terms of market
capitalization and revenues, Tata Group is the largest private corporate group in India and has
been recognized as one of the most respected companies in the world. It has interests in steel,
automobiles, information technology, communication, power, tea and hospitality. The Tata
Group has operations in more than 85 countries across six continents and its companies
export products and services to 80 nations. The Tata Group comprises 114 companies and
subsidiaries in seven business sectors, 27 of which are publicly listed. 65.8% of the ownership of
Tata Group is held in charitable trusts. Companies which form a major part of the group include
Tata Steel, Corus Steel, Tata Motors, Tata Consultancy Services, Tata Technologies, Tata Tea,
Titan Industries, Tata Power, Tata Communications, Tata Teleservices, Tata AutoComp Systems
Limited and the Taj Hotels.
The group takes the name of its founder, Jamsetji Tata, a member of whose family has almost
invariably been the chairman of the group. The current chairman of the Tata group is Ratan Tata,
who took over from J. R. D. Tata in 1991 and is currently one of the major international business
figures in the age of globality. The company is currently in its fifth generation of family
stewardship. The 2009 annual survey by the Reputation Institute ranked Tata Group as
the 11th most reputable company in the world. The survey included 600 global companies.
14
HISTORY
Tata, family of pioneer Indian industrialists and philanthropists. The founder of the Tata
business empire was Jamsetji Nusserwanji Tata (1839-1904). Born in Navsari, into a Parsi
family,Jamsetji studied at Elphinstone College in Mumbai before entering his father’s business
as a general merchant trading with the East. He soon proved highly successful, setting up a
branch in Shanghai and steering the family through the speculation and collapse of cotton prices
that arose due to the American Civil War.
Jamsetji traveled widely and introduced sound business principles which he believed to
be the cornerstone of his success. His key concerns were to utilize modern technology, and to
ensure good working conditions and welfare for his employees. These principles could clearly be
seen in his first major venture, the establishment of the Empress Mills in 1877 at Nāgpur. In
1886 he founded the Svadeshi Mills Company—the name of which indicated his sympathies
with a nationalist movement of the day competing directly with British firms in the manufacture
of fine cotton. His iron and steel works at Sakchi, around which he built houses, schools, and a
hospital for the workers, expanded from a village into the current industrial town of Jamshedpur.
Other projects included the founding of the famous Taj Mahal Hotel in Mumbai, and the
beginning of work on a major hydroelectric project in the Western Ghats mountain range.
Jamsetji was also concerned with the development of Mumbai, and India as a whole, and hoped,
through improving educational and research facilities, to provide the skilled workforce needed
for an emerging modern, industrialized nation.
15
He founded a number of educational institutions, but his efforts to form an Indian
university as a center of excellence for science did not reach fruition until after his death when,
in 1909, the Indian Institute of Science was established in Bangalore. It remains an outstanding
research center.
Jamsetji’s achievements were built upon by his sons Sir Dorabji Jamsetji Tata (1859-
1932) and Sir Ratan Tata (1871-1918), who completed the hydroelectric project. They also
brought the original companies under the name of Tata Sons and Company, and set up branches
of their business in London, Paris, New York,Shanghai, and Kobe. The Tata Trust has provided
funds for hospitals and research establishments, including the Tata Institute for Fundamental
Research. Tata Airlines was founded in 1932, being renamed Air India in 1946, and was taken
over by the government as India’s national airline in 1953. The Tata empire remains one of
India’s largest business groups. From 1938 to 1993, it was chaired by Jehangir Ratanji Dadabhoy
Tata (1904-1993), under whom the business continued to expand and diversify. On the death of
J.R.D. Tata, the chairmanship passed to Ratan Naval Tata.
16
TATA’S DIVERSITY OVER THE GLOBE
TATA
NORTH AMERCIATATA SONS
JAGUAR LAND
ROVERTATA
GROUPTATA
CHEMICALSTATA
COMMONICATION
TCSTATA ELXSI
TATA GLOBAL
BEVERAGESTATA
INTERACTIVE SYSTEM
TATA STEELTATA
TECHNOLOGIES
SOUTH AMERICA
RALLISTATA
CHEMICALS
TATA COMMUNICATION
TCSTATA
MOTORSTATA STEEL
AFRICATATA
GROUPTATA
HOLDINGSTATA
AUTOMOBILES
TATA CHEMICALS
TATA POWERS
TATA STEEL
WEST ASIA
VOLTASTITAN
TATA ELXSITCS
TATA INTERACTIVE SYSTEM
AUSTRALIA
TATA GROUPTATA
CHEMICALS
TATA COMMONICATIO
NTCS
TATA ELXSITATA
GLOBALBEVERAG
ESTATA
INTERACTIVE
SYSTEMTATA STEEL
SOUTH EAST
ASIA,EAST ASIA AND
SOUTH ASIA
TATA COMMONICATIO
NTCS
TATA ELXSITATA
GLOBALBEVERAG
ESTATA
INTERACTIVE
SYSTEMTATA
STEEL.
CHINATATA SONS
JAGUAR LAND
ROVERTATA
GROUPTATA
CHEMICALSTATA
COMMONICATION
TCSTATA ELXSI
TATA GLOBAL
BEVERAGESTATA
INTERACTIVE SYSTEM
TATA STEELTATA
TECHNO
INDIA (HEADQUATERS)
17
TATA DIVERSITIES OVER THE SECTORS
SECTORS
Information Technology & CommunicationEngineeringMaterialsServicesEnergyConsumer ProductsChemicals
18
ENGINEERING
TAL Manufacturing Solutions exports titanium-composite floor beams that are installed
in the Boeing 787 aircraft.[13]
Tata AutoComp Systems Limited (TACO) and its subsidiaries, auto-component
manufacturing
Tata Motors (formerly Tata Engineering and Locomotives Company Ltd (TELCO)),
manufacturer of commercial vehicles (largest in India) and passenger cars
Jaguar and Land Rover
Tata Projects
TCE Consulting Engineers
Telco Construction Equipment Company
TRF Bulk Material Handling Equipment & Systems and Port & Yard Equipments.
Voltas , consumer electronics company
Energy
Tata Power is one of the largest private sector power companies. It supplies power to
Mumbai, the commercial capital of India and parts of New Delhi. Chemicals.
Rallis India
Tata Pigments
Tata Chemicals , headquartered in Mumbai, India, Tata Chemicals has the largest single
soda ash production capacity plant in India. Since 2006 Tata Chemicals has owned
Brunner Mond , a
United Kingdom-based chemical company with operations in Kenya and the Netherlands.
19
Advinus Therapeutics , headquartered in Bangalore, India, a Contract research
organization focused on drug discovery and development for Pharmaceutical, Agro and
Biotech industries.
Services
The Indian Hotels Company
Tata Housing Development Company Ltd. (THDC)
Tata-AIG General Insurance , a joint venture with AIG
Tata-AIG Life Insurance , a joint venture with AIG
Tata Advanced Systems Limited
Tata Asset Management
Tata Financial Services
Tata Capital
Tata Investment Corporation
Tata Quality Management Services
Tata Share Registry
Tata Strategic Management Group
(TSMG) is one of the largest consulting firms in South Asia.
Consumer Products
20
Tata Salt, I Shakti Salt, Tata Salt Lite
Tata Ceramics
Infiniti Retail
Tata Tea Limited is the world's second largest manufacturer of packaged tea and tea
products. It also owns the Tetley brand of tea sold primarily in Europe.
Titan Industries manufacturers of Titan watches
Trent (Westside)
Tata Sky
Tata International Ltd - Leather Products Division
Tanishq jewelery
Star Bazaar
Information systems and communications
CMC Ltd
Computational Research Laboratories
INCAT
Nelco
Nelito Systems
Tata Business Support Services
(formerly Serwizsol)
Tata Consultancy Services Ltd . (TCS) is Asia's largest software company with 2008-09
revenues being over US$ 6 bn.
21
Tata Elxs i is another Software and Industrial design company of the Tata stable. Based
in Bangalore and Trivandrum. One of the leading companies in the animation industry of
India.
Tata Interactive Systems
Tata Technologies Limited
Tata Teleservices
Tatanet
Tata Communications , formerly VSNL, the Indian telecom giant, was acquired in 2002.
Tata-owned VSNL acquired Teleglobe in 2005.]
22
Tata acquisitions and targets
February 2000 - Tetley Tea Company,$407 million
March 2004 - Daewoo Commercial Vehicle Company, $102 million
August 2004 - NatSteel's Steel business,$292 million
November 2004 - Tyco Global Network, $130 million
July 2005 - Teleglobe International Holdings, $239 million
October 2005 - Good Earth Corporation December 2005 - Millennium Steel, Thailand,
$167 million
December 2005 – Brunner Mond Chemicals Limited, $120 million
June 2006 - Eight O'Clock Coffee, $220 million
November 2006 - Ritz Carlton Boston,$170 million
Jan 2007 - Corus Group, $12 billion
March 2007 - Bumi Resources, $1.1 billion
April 2007 - Campton Place Hotel, San
Francisco, $60 million
February 2008 - General Chemical Industrial Products, $1 billion
March 2008 - Jaguar Cars and Land Rover, $2.3 billion
March 2008 - Serviplem SA, Spain
April 2008 - Comoplesa Lebrero SA,Spain
May 2008 - Piaggio Aero Industries S.p.A ., Italy
June 2008 - China Enterprise Communications, China
June 2008 - Neotel, South Africa.
23
October 2008- Miljo Grenland / Innovasjon, Norway Imacid chemical company,
Morocco
24
ASSETS DISTRIBUTION OF TATA GROUPS (2012-13)
Assets
Information Technology & CommunicationEngineeringMaterialsServicesEnergyConsumer ProductsChemicals
GROUP FINANCIALS
2012-13 (US$ Billion)
2011-12 (US$ Billions
% Change 2012-13 (Rs. Crores)
2011-12 (Rs.Crores)
%Change
Total Revenue 96.8 100.1 (3.3) 527,047 475,721 10.8
Sales 95.6 99.1 (3.5) 520,469 471,045 10.5
Total Assets 107.2 108.5 (1.3) 583,554 515,933 13.1
International revenue(Including Exports)
60.7 59.1 2.7 330,530 280,840 17.7
Net Forex Earnings 3.0 1.6 90.6 16,604 7,604 118.4
TOTAL REVENUE OF TATA GROUP (2012-13)
25
9%
42%
29%
4%
8%
4% 3%
Total Revenue of TATA Group
Information Technology &communication
Engineering
Materials
Services
Energy
Consumer Product
Chemicals
GROUP FINANCIALS
2012-13 (US$ Billion)
2011-12 (US$ Billions
% Change 2012-13 (Rs. Crores)
2011-12 (Rs.Crores)
%Change
Total Revenue 96.8 100.1 (3.3) 527,047 475,721 10.8
Sales 95.6 99.1 (3.5) 520,469 471,045 10.5
Total Assets 107.2 108.5 (1.3) 583,554 515,933 13.1
International revenue(Including Exports)
60.7 59.1 2.7 330,530 280,840 17.7
Net Forex Earnings 3.0 1.6 90.6 16,604 7,604 118.4
GROUPS CONTRIBUTION TO THE EXCHEQUER 2012-13
26
Tata group companies
Corporate TaxExcise #CustomsSalesOthersTolal
Tata group companies
(US$ Millions)
Government finances
(US$ Millions)
Tata group companies
(Rs.crores)
Government finances
(Rs.crores)
% Share of Tata companies
Corporate Tax 1,527 65,909 8,317 358,874 2.3Excise # 2,192 46,658 11,935 254,055 4.7Customs 549 30,276 2,989 164,853 1.8Sales 1,454 74,086 7,915 403,400 2.0Others 932 25,787 5,073 140,409 3.6Tolal 6,654 242,71
636,229 1,321591 2.7
27
Tata's global operations
Tata Motors has been aggressively acquiring foreign brands to increase its global presence. Tata
Motors has operations in the UK, South Korea, Thailand and Spain. Among them is Jaguar Land
Rover, a business comprising the two iconic British brands that was acquired in 2008. Tata
Motors has also acquired from Ford the rights to three other brand
names: Daimler, Lanchester and Rover.
In 2004, it acquired the Daewoo Commercial Vehicles Company, South Korea’s second
largest truck maker. The rechristened Tata Daewoo Commercial VehiclesCompany has launched
several new products in the Korean market, while also exporting these products to several
international markets. Today two-thirds of heavy commercial vehicle exports out of South Korea
are from Tata Daewoo.In 2005, Tata Motors acquired a 21% stake in Hispano Carrocera, a
reputed Spanish bus and coach manufacturer,[9] giving it controlling rights of the company.
Hispano’s presence is being expanded in other markets.
On Tata's journey to make an international foot print, it continued its expansion through
the introduction of new products into the market range of buses (Starbus & Globus) as well as
trucks (Novus). These models were jointly developed with its subsidiaries Tata Daewoo and
Hispano Carrocera. In May, 2009 Tata unveiled the Tata World Truck range jointly developed
with Tata Daewoo [27] They will debut in South Korea, South Africa, the SAARC countries
and the Middle-East by the end of 2009 [27] In 2006, it formed a joint venture with the Brazil-
based Marcopolo, a global leader in body-building for buses and coaches to manufacture fully-
built buses and coaches for India and select international markets.[28] Tata Motors has expanded
its production and assembly operations to several other countries including South Korea,
Thailand, South Africa and Argentina and is planning to set up plants in Turkey, Indonesia and
28
Eastern Europe. Tata also franchisee/joint venture assembly operations in Kenya, Bangladesh,
Ukraine, Russia and Senegal. Tata has dealorships in 26 countries across 4 continents Though
Tata is present in many counties it has only managed to create a large consumer base in the
Indian Subcontinent namely India, Bangladesh, Bhutan, Sri Lanka and Nepal and has a growing
consumer base.
Present and future challenges
Tata Motors have some distinct advantages in comparison to other multinational competitors
especially a cost advantage as labor costs for Tata Motors is 8-9 percent of sales as compared to
30-35 percent for most multinational companies. Another advantage in the increasing demand in
its own backyard, India due to infrastructure developments and rising GDP. Indiremainsoneof
the few developing auto markets where domestic brands have managed to keep alarge presence,
Tata and fellow compatriots account for more than 60% of the passenger vehicle sales and 95%
of commercial vehicle sales. There are also favorable Government polices and regulations in
place in order to help boost the auto industry. However, Tata has not been able to capitalize on
its global presence. Tata relies heavily on its sales in India and has not yet managed to create a
foothold in international markets even though it has a number of well reputed subsidiaries.
However, Tata Nano may boost its international presence atleast in developing economies.
Though it has an advantage in India, thanks to low costs and government policies it soon faces
stiff competition from it multinational competitors all eyeing for a share in the ever growing
Indian auto sector. Earlier, a policy required majority-owned subsidiaries of foreign car firms to
invest at least US$50 million in equity if they wished to set up manufacturing projects in India
and mere car assembling operations were not welcomed. An Indian cabinet panel has since
29
announced a new automobile policy that sets fresh investment guidelines for foreign firms
wishing to manufacture vehicles in the country. Investments in making auto parts by a
foreign .vehicle maker will also be considered a part of the minimum foreign investment made
by it in an auto-making subsidiary in India. The move is aimed at helping India emerge as a hub
for global manufacturing and sourcing for auto parts. The policies adopted by Government will
increase competition in domestic market, motivate
many foreign commercial vehicle manufactures to set up shops in India, whom will make India
as a production hub and export to nearest market. Thus Tata Motors will have to face tough
competition in near future, which might affect its growth negatively. Currently, the presence of
Suzuki through its subsidiary, Maruti Suzuki in the Indian market may also be alarming. Maruti
has aggressively launched family cars to undermine the Tata models. Tata has continued to be
strong in the MUV and SUV sector due to lack of competition and correct pricing. However,Tata
now faces stiff competition from fellow compatriot Mahindra as well as multinational brand like
Toyota and Chevrolet. In addition, the growing presence of fellow Indian competitors, Mahindra
and Force Motors not only in the Indian but also in the Global market may effect Tata's sales.
Mahindra and Force have formed joint ventures with Renault and MAN respectively. Mahindra
has also formed a 51:49 JV called Mahindra Navistar with ITEC, USA (parent Navistar
International), to manufacture commercial vehicles and to bolster its position in the CV
business[31] Ashok Leyland, which is the second largest commercial manufacturer in India has
remained Tata's biggest competitor in the Indian heavy commercial vehicle market and with its
aquistion of Czech Republic-based Avia[32] it may manage to increase its presence in
neighbouring markets such as Sri Lanka, Nepal where Tata Motors has a monopoly. To counter
the growth of these various companies Tata has come up with revised or new models like Indica
30
Vista, Indigo Vista, Xenon, Tata World Truck and a aggressive marketing policy.
CONCLUSION
Tata has shown that it is committed to sustainable and environmental practices as part of its
overall aim to act responsibly. It shows commitment and progress towards key targets of
sustainability as well as encouraging sustainable decision-making in its customers and within
their markets.
The key to the success of this approach is to recognise the unique properties of steel as a
recyclable material and to ensure that measurements of sustainability are taken over the entire
life cycle of a product, not just the use-phase.
The company is developing a new range of fuel-efficient commercial vehicles to tackle the
competition head on."
Tata Motors' market share in the commercial vehicles segment has steadily slipped, and in 2011-
12, its share was 59.4% compared to 61.2% a year ago. Its sales growth was also slower than the
industry's. While the country's commercial vehicle sales in 2011-12 grew at 19.2% compared to
the previous year, Tata Motors' commercial vehicle sales grew only at 15.7%.
The company's consolidated net profit for the 2011-12 fiscal grew 45.8% to R13,516.5 crore,
primarily driven by the performance of its UK arm Jaguar Land Rover. On a standalone basis,
the company's net profit for the fiscal fell 31.4% to R1,242.2 crore. Competition from Tata
Motors is emerging from German-major Daimler's BharatBenz range of trucks, which plans to
launch 20 models by the middle of CY13 and have invested R4,400 crore to set up a
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manufacturing capacity of 36,000 units a year. The capacity will be ramped up to 72,000 in the
next phase of expansion.
Mahindra Navistar has managed to eke out a market share of 3.6% after two years of operations
and is planning to ramp up capacity to get a greater share of pie. "Tata Motors will need a
significant upgrade in products to stay ahead of the competition in the next 4-5 years," said a
consultant with a foreign management consultancy firm. "Though its sales and service network
still gives it an edge and it will have leadership for the next couple of years, it needs to invest
now and start planning for what will happen after five years."
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