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Transcript of tatamotors Global Strategy International Business
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2013
TATA MOTORS
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IIFT EPGDIB 2012-13 (VSAT) | INTRODUCTION
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TATA MOTORS 2013
IMM ASSIGEMENT (TOPIC 7)
TATA MOTORS :INTERNATIONAL
STRATEGY FOR GLOBAL EXPANSION
31st
July 2013
Table of Contents
1. INTRODUCTION ........................................................................................................................................... 3
2. EVENTS IN MAKING ..................................................................................................................................... 4
3. TATA MOTORS: GLOBAL FOOTPRINTS ........................................................................................................ 5
3.1. MERGER, ACQUISITION & JOINT VENTURE STRATEGY ................................................................................ 6
3.1.1. TATA MOTORS ACQUISITIONS ............................................................................................................. 6
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3.1.2. TATA DAEWOO .................................................................................................................................... 7
3.1.3. TATA HISPANO ..................................................................................................................................... 8
3.1.4. JAGUAR LAND ROVER .......................................................................................................................... 8
4. TATA MOTORS JOINT VENTURES ................................................................................................................. 8
4.1. TATA MARCOPOLO ...................................................................................................................................... 8
4.2. FIAT INDIA AUTOMOBILES ........................................................................................................................... 9
4.3. TELCON CONSTRUCTION SOLUTIONS ......................................................................................................... 9
5. TATA MOTORS OPERATIONS AND PRODUCT LINE ...................................................................................... 9
5.1. TATA DAEWOO, SOUTH KOREA ................................................................................................................... 9
5.2. TATA HISPANO, SPAIN ............................................................................................................................... 10
5.3. JAGUAR LAND ROVER, UK ......................................................................................................................... 10
5.4. HV TRANSMISSION AND HV AXLES ............................................................................................................ 10
5.5. TATA TECHNOLOGIES ................................................................................................................................ 10
5.6. EUROPEAN TECHNICAL CENTRE ................................................................................................................ 10
6. TATA MOTORS EXPANSION STRATEGY IN VARIOUS COUNTRIES .............................................................. 10
6.1. KOREAN OPERATIONS ............................................................................................................................... 11
6.2. UK OPERATIONS ........................................................................................................................................ 12
6.3. EUROPEAN OPERATIONS ........................................................................................................................... 13
6.4. LATIN AMERICAN OPERATIONS ................................................................................................................. 14
6.5. SOUTH AFRICAN MARKET .......................................................................................................................... 14
6.6. THAILAND/ASEAN OPERATION .................................................................................................................. 15
6.7. INDONESIA ................................................................................................................................................. 15
6.8. MALAYSIA .................................................................................................................................................. 15
7. FUTURE INTERNATIONAL STRATEGY FOR SUSTAINABLE BUSINESS .......................................................... 16
7.1. RECOMMENDATION MATRIX .................................................................................................................... 16
7.2. CONTINGENCY PLANS ................................................................................................................................ 19
1. INTRODUCTION
Tata Motors is India's largest automobile company, with consolidated revenues of Rs 1,88,818
crore ($34.7 billion) in 2012-13. Tata Motors Limited is an Indian multinational automotive
corporation headquartered in Mumbai,India. Part of the Tata Group, it was formerly known as
TELCO (TATA Engineering and Locomotive Company). Its products include passenger cars,
trucks, vans and coaches.
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Through subsidiaries and associate companies, Tata Motors has operations in the UK, South
Korea, Thailand and Spain. Among them is Jaguar Land Rover, the business comprising the two
iconic British brands. It also has an industrial joint venture with Fiat in India. Tata Motors is
South Asias largest automobile company; it is the leader in commercial vehicles and among the
top three in passenger vehicles. The company is the world's fourth largest truck manufacturer,
the world's second largest bus manufacturer, and employs 50,000 workers. Tata Motors has
produced and sold over 4 million vehicles in India since 1954.
Established in 1945, when the company began manufacturing locomotives, the company
manufactured its first commercial vehicle in 1954 in collaboration with Daimler-Benz AG, which
ended in 1969. Tata Motors is a dual-listed company traded on both the Bombay Stock
Exchange and New York Stock Exchange. In 2010, Tata Motors surpassed Reliance to win the
coveted title of 'India's most valuable brand' in an annual survey conducted by Brand Finance
and The Economic Times.
Tata Motors has auto manufacturing and assembly plants in Jamshedpur, Pantnagar, Lucknow,
Sanand, Dharwad and Pune, India, as well as in Argentina, South Africa, Thailand and the
United Kingdom.
Tata Motors is the country's market leader in commercial vehicles and among the top three in
passenger vehicles. It is also the world's fourth largest manufacturer of medium / heavycommercial vehicles, and the second largest bus manufacturer. Tata cars, buses and trucks are
being marketed in several countries in Europe, Africa, the Middle East, South Asia, South East
Asia and South America.
The company, formerly known as Tata Engineering and Locomotive Company, began
manufacturing commercial vehicles in 1954 with a 15-year collaboration agreement with Daimler
Benz of Germany. It has, since, developed Tata Ace, India's first indigenous light commercial
vehicle, Tata Safari, India's first sports utility vehicle, Tata Indica, India's first indigenouslymanufactured passenger car, and the Nano, the world's cheapest car.
Tata Motors has over 1,400 engineers and scientists in six R&D centers in India, South Korea,
Spain and the UK.
2. EVENTS IN MAKING
1945 Tata Engineering and Locomotive Co. Ltd. were established to manufacture
locomotives and other engineering products.
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1948 - Steam road roller introduced in collaboration with Marshall Sons (UK). 1954 - Collaboration with Daimler Benz AG, West Germany, for manufacture of medium
commercial vehicles. The first vehicle rolled out within 6 months of the contract. 1959 - Research and Development Centre set up at Jamshedpur. 1961Exports begin with the first truck being shipped to Ceylon, now Sri Lanka. 1966 - Setting up of the Engineering Research Centre at Pune to provide impetus to
automobile Research and Development. 1977First commercial vehicle manufactured in Pune. 1991 Launch of the 1st indigenous passenger car Tata Sierra. TAC 20 crane
produced. One millionth vehicle rolled out. 1994 Launch of Tata Sumo the multi utility vehicle. Launch of LPT 709 a full
forward control, light commercial vehicle. Joint venture agreement signed with M/sDaimlerBenz / MercedesBenz for manufacture of Mercedes Benz passenger cars inIndia. Joint venture agreement signed with Tata Holset Ltd., UK for manufacturingturbochargers to be used on Cummins engines.
1998 - Tata launched the Indica in 1998, the first fully indigenous Indian passenger car.Although initially criticised by auto-analysts, its excellent fuel economy, powerful engine
and an aggressive marketing strategy made it one of the best selling cars in the historyof the Indian automobile industry. A newer version of the car, named Indica V2, was amajor improvement over the previous version and quickly became a mass-favourite. TataMotors also successfully exported large quantities of the car to South Africa. Thesuccess of Indica played a key role in the growth of Tata Motors.
In 2004 Tata Motors acquired Daewoo's South Korea-based truck manufacturing unit,Daewoo Commercial Vehicles Company, later renamed Tata Daewoo.
In 2005, Tata Motors acquired a 21% controlling stake in the Spanish bus and coachmanufacturer Hispano Carrocera. Tata Motors continued its market area expansionthrough the introduction of new products such as buses (Starbus & Globus jointlydeveloped with subsidiary Hispano Carrocera) and trucks (Novus, jointly developed withsubsidiary Tata Daewoo).
In 2006, Tata formed a joint venture with the Brazil-based Marcopolo, Tata MarcopoloBus, to manufacture fully built buses and coaches.
In 2008, Tata Motors acquired the British car maker Jaguar Land Rover, manufacturer ofthe Jaguar, Land Rover and Daimler luxury car brands, from Ford Motor Company.
In May 2009 Tata unveiled the Tata World Truck range jointly developed with TataDaewoo. Debuting in South Korea, South Africa, the SAARC countries and the Middle-East by the end of 2009.
Tata acquired full ownership of Hispano Carrocera in 2009. In 2010, Tata Motors acquired an 80% stake in the Italian design and engineering
company Trilix for 1.85 million. The acquisition formed part of the company's plan toenhance its styling and design capabilities.
In 2012, Tata Motors announced it will invest around 6 billion on developing Futuristic
Infantry Combat Vehicles in collaboration with DRDO.
3. TATA MOTORS: GLOBAL FOOTPRINTS
Tata Motors is creating its global footprints through collaboration, Mergers & Acquisitions andJoint Ventures in almost all the continents across globe.
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3.1. MERGER, ACQUISITION & JOINT VENTURE STRATEGY
The Tata Motors strategy behind collaborations, Mergers & Acquisition and Joint Ventures is todevelop new technologies, new markets and new product development to take a competitiveadvantage and thus creating sustainable business model & creating value to its customers.
3.1.1.TATA MOTORS ACQUISITIONS
1. In 2004 Tata Motors acquired Daewoo's truck manufacturing unit, now known as
Tata Daewoo Commercial Vehicle, in South Korea.
Malaysia*
Thailand
Bangladesh *
Nepal, Sri Lanka
Kenya*
Russia*
Ukraine*U.K.
Italy
Senegal
Afghanistan
Uzbekistan
Brazil
South Africa*
Egypt
Saudi Arabia
Iraq, Iran
ChinaSouth Korea*
LATAM
West Africa
North Africa
West Europe
Central Asia
East Asia
South Asia
South East AsiaWest Asia
East AfricaSouth Africa
* Assembly Operations also
OTHER COLLABORATIONS/M&A & JVs
Tata Daewoo Commercial Vehicle
Hispano in Spain & Marcopolo In Brazil
JV with Jardine Matheson for
ConcordeMotors
Technology Tie Ups at Spain,Italy
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2. In 2005, Tata Motors acquired 21% of Aragonese Hispano Carrocera giving it
controlling rights of the company.
3. In 2007, formed a joint venture with Marcopolo of Brazil and introduced low-floor
buses in the Indian Market.
4. In 2008, Tata Motors acquired British Jaguar Land Rover (JLR), which includes the
Daimler and Lanchester brand names.
5. In 2010, Tata Motors acquired 80% stake in Italy-based design and engineering
company Trilix for a consideration of 1.85million. The acquisition is in line with the
companys objective to enhance its styling/design capabilities to global standards.
3.1.2.TATA DAEWOO
In 2004, Tata Motors acquired Daewoo Commercial Vehicle Company of South Korea. Thereasons behind the acquisition were:
Company's global plans to reduce domestic exposure - The domestic commercial vehiclemarket are highly cyclical in nature and prone to fluctuations in the domestic economy. TataMotors has a high domestic exposure of ~94% in the MHCV segment and ~84% in the lightcommercial vehicle (LCV) segment. Since the domestic commercial vehicle sales of the
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company are at the mercy of the structural economic factors, it is increasingly looking at theinternational markets. The company plans to diversify into various markets across the worldin both MHCV as well as LCV segments.
To expand the product portfolio Tata Motors recently introduced the 25MT GVW Tata
Novus from Daewoos (South Korea) (TDCV) platform. Tata plans to leverage on the strongpresence of TDCV in the heavy-tonnage range and introduce products in India at anappropriate time. This was mainly to cater to the international market and also to cater tothe domestic market where a major improvement in the Road infrastructure was donethrough the National Highway Development Project.
Tata Daewoo is the second-largest heavy commercial vehicle manufacturer in South Korea.Tata Motors has jointly worked with Tata Daewoo to develop trucks such as Novus andWorld Truck and buses including GloBus and StarBus. In 2012, Tata will start developing anew line to manufacture competitive and fuel efficient commercial vehicles to face thecompetition posed by the entry of international brands like Mercedes-Benz, Volvo andNavistar into the Indian market
3.1.3.TATA HISPANO
Tata Hispano Motors Carrocera, S.A. is a bus and coach cabin manufacturer based inZaragoza, Aragon, Spain and a wholly owned subsidiary of Tata Motors. Tata Hispano hasplants in Zaragoza, Spain and Casablanca, Morocco. Tata Motors first acquired a 21% stakein Hispano Carrocera SA in 2005,[9] and acquired the remaining 79% for an undisclosedsum in 2009, making it a fully owned subsidiary, subsequently renamed Tata Hispano.
3.1.4.JAGUAR LAND ROVERJaguar Land Rover PLC is a British premium automaker headquartered in Whitley,Coventry, United Kingdom and has been a wholly owned subsidiary of Tata Motors sinceJune 2008, when it was acquired from Ford Motor Company. Its principal activity is thedevelopment, manufacture and sale of Jaguar luxury and sports cars and Land Roverpremium four wheel drive vehicles. It also owns the currently dormant Daimler, Lanchesterand Rover brands.
Jaguar Land Rover has two design centres and three assembly plants in the UK. UnderTata ownership, Jaguar Land Rover has launched new vehicles including the Range RoverEvoque, Jaguar F-Type and the fourth-generation Range Rover.
4. TATA MOTORS JOINT VENTURES
4.1. TATA MARCOPOLO
Tata Marcopolo is a bus manufacturing joint venture between Tata Motors (51%) and theBrazil-based Marcopolo S.A. (49%). The joint venture manufactures and assembles fullybuilt buses and coaches targeted at developing mass rapid transportation systems. Itutilises technology and expertise in chassis and aggregates from Tata Motors, and know-
how in processes and systems for bodybuilding and bus body design from Marcopolo. Tata
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Marcopolo has launched a low-floor city bus which is widely used by Chennai, Coimbatore,Delhi, Hyderabad, Mumbai, Lucknow, Pune, Kochi, Trivandrum and Bengaluru transportcorporations. Its manufacturing facility is based in Dharwad.
4.2. FIAT INDIA AUTOMOBILESTata Motors also formed a joint venture with Fiat and gained access to Fiat s diesel enginetechnology. Tata Motors sells Fiat cars in India through a 50/50 joint venture FiatAutomobiles India Limited, and is looking to extend its relationship with Fiat and Iveco toother segments.
4.3. TELCON CONSTRUCTION SOLUTIONS
Telcon Construction Solutions is a joint venture between Tata Motors and Hitachi whichmanufactures excavators and other construction equipment.
5. TATA MOTORS OPERATIONS AND PRODUCT LINE
Tata Motors is among the top four in passenger vehicles in India with products in the compact,midsize car and utility vehicle segments. The companys manufacturing base in India is spreadacross Jamshedpur (Jharkhand), Pune (Maharashtra), Lucknow (Uttar Pradesh), Pantnagar(Uttarakhand), Dharwad (Karnataka) and Sanand (Gujarat). Tata's dealership, sales, serviceand spare parts network comprises over 3,500 touch points.
Tata also has franchisee/joint venture assembly operations in Kenya, Bangladesh, Ukraine,Russia and Senegal. Tata has dealerships in 26 countries across 4 continents. Though Tata ispresent in many countries it has only managed to create a large consumer base in the IndianSubcontinent, namely India, Bangladesh, Bhutan, Sri Lanka and Nepal. Tata has a growingconsumer base in Italy, Spain and South Africa.
Tata Motors has more than 250 dealerships in more than 195 cities across 27 states and 4Union Territories of India. It has the 3rd largest Sales and Service Network after Maruti Suzukiand Hyundai.
5.1. TATA DAEWOO, SOUTH KOREA
Tata Daewoo is the second-largest heavy commercial vehicle manufacturer in South Korea.Tata Motors has jointly worked with Tata Daewoo to develop trucks such as Novus andWorld Truck and buses including GloBus and StarBus. In 2012, Tata will start developing anew line to manufacture competitive and fuel efficient commercial vehicles to face thecompetition posed by the entry of international brands like Mercedes-Benz, Volvo andNavistar into the Indian market.
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5.2. TATA HISPANO, SPAIN
Tata Hispano Motors Carrocera, S.A. is a bus and coach cabin manufacturer based inZaragoza, Aragon, Spain and a wholly owned subsidiary of Tata Motors. Tata Hispano hasplants in Zaragoza, Spain and Casablanca, Morocco
5.3. JAGUAR LAND ROVER, UK
Jaguar Land Rover has two design centres and three assembly plants in the UK. UnderTata ownership, Jaguar Land Rover has launched new vehicles including the Range RoverEvoque, Jaguar F-Type and the fourth-generation Range Rover.
5.4. HV TRANSMISSION AND HV AXLES
HV Transmission (HVTL) and HV Axles (HVAL) are 100% subsidiary companies of TataMotors engaged in the business of manufacture of gear boxes and axles for heavy andmedium commercial vehicles, with production facilities and infrastructure based atJamshedpur. HVAL and HVTL have been amalgamated ton HVAL and are renamed asTML Drivelines Ltd.
5.5. TATA TECHNOLOGIES
Tata Technologies Limited (TTL) provides engineering and design services to theautomotive industry. Tata Motors holds 86.91% of TTLs share capital. TTL is based in Pune(Hinjawadi) and operates in the United States and Europe through its wholly owned
subsidiaries in Detroit and London respectively. It also has a presence in Thailand. TataTechnologies is a software service provider in the IT services and business processoutsourcing (BPO) space. Its global client list includes Ford, General Motors, Toyota andHonda. TTL acquired the British engineering and design services company IncatInternational Plc for INR4 billion in August 2005. Incat specialises in engineering and designservices and product lifecycle management in the international automotive, aerospace andengineering markets.
5.6. EUROPEAN TECHNICAL CENTRE
The Tata Motors European Technical Centre (TMETC) is an automotive design, engineeringand research company based at the campus of the University of Warwick in the UnitedKingdom. It was established in 2005 and is a wholly owned subsidiary of Tata Motors. It wasthe joint developer of the World Truck.
6. TATA MOTORS EXPANSION STRATEGY IN VARIOUS COUNTRIES
Tata motors have decided to focus on a narrow base of 14-15 countries where marketconditions are similar to that of India.
As a part of the company's new internationalization strategy, the company has decided to focuson a narrow base of 14-15 countries where market conditions are similar to that of India. In
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these countries, Tata Motors now has dedicated manufacturing facilities, marketing teams andsales teams. The idea is to have self-sustained operations in this narrow band of countries. Thecompany evaluates locations on the basis of market opportunities and labor skills.
In the framework pertaining to international expansion strategies, Tata Motors can be identifiedas an Extender, and is focusing on expanding into markets similar to those of the home base,using competencies developed at home
6.1. KOREAN OPERATIONS
Tata Motors entered the advanced Korean Market by acquiring Daewoo, with which it hastremendous synergies in terms of product strategy and R & D. Tata Motors has planned touse this merger and leverage the technology for developing a World Truck for India andinternational markets.
Established by Daewoo Group in 1982 and built into the second largest automobile andtruck manufacturer in Korea
Daewoo Groups bankruptcy leadto the bankruptcy of Daewoo Motors in 2000Car business of Daewoo Motors sold to GM in Nov 2002 Daewoo Commercial Vehicles Company (DWCV) had an installed capacity of 20,000
vehicles from a state-of-the-art plant built in 1995Produced more than 90 truck models in the heavy commercial vehicle range (210400
hp engine)DWCV had the second largest market share in heavy trucks in Korea in 2003
Reason for Entry
Opportunity to overcome cyclicality of Indian CV market
Enhance product portfolio through catering to increasing demand for heavy vehicles
Managing business in developed markets
Access to technology and complementary product range
Lead a change in the domestic market
Strong technical and manufacturing capability
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Challenges faced by Tata Motors
Need for Quick and dirty Due Diligence Complimentary product range
Beyond the bid price - Winning acceptance of DWCV employees Structured program to educate DWCV about India, Tata Group and Tata Motors Communication (in Korean) to management, unions and employees emphasizing
Tata Motors capabilities and Tata Groups reputation for good corporate governance. Respecting strong work ethics of Koreans through significant efforts during the Due
diligence process Managing the Korean culture Respecting hierarchy and values Managing Unions
Measuring Success
TDCV launched a new range of medium trucks in 2006 first major product launchsince 2000
Doubling of exports in 2004 and 2005 accounting for 66% of heavy truck exports from
South Korea
Launch of Novusin Indian market
Increased market share in HCVsfrom 25% to 28% and achieved market share of
13.5% in MCVs
Joint development of World Truck between Tata Motors India and TDCV, Korea
launched in 2009
6.2. UK OPERATIONS
Jaguar and Land Rover
In June 2008, Tata Motors Ltd. announced that it had completed the acquisition of the twoiconic British brands - Jaguar and Land Rover (JLR) from the US-based Ford Motors forUS$ 2.3 billion. Forming a part of the purchase consideration were JLR's manufacturingplants, two advanced design centres in the UK, national sales companies spanning acrossthe world, and also licenses of all necessary intellectual property rights.
Reason for entry
As this is a more technically developed country the infrastructure available is much moreadvance and stable then India.
Tata motors European technical center (TMETC) brought up for R&D a purpose whichis steadily taking Tata motors towards achieving global standards.
The political environment of United Kingdom is very stable and well structured. The laws and trading policies are well developed. Tata Motors will acquire a global footprint and enter the high-end premier segment of
the global automobile market
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Tata Motors gets access to latest technology which would allow Tata to improve theircore products in India
This deal provided Tata an instant recognition and credibility across globe
Challenges faced by Tata Motors
Buying over Land Rover and Jaguar for 2.3$ billions Tata was under tremendouspressure as there were mixed reactions from all Britain.
Plenty feared about devaluation by Indian brand and suggested government to takecontrol of Jaguar brand, as it symbolizes best of British
There were some MPs who did not like an Indian brand taking over British Companies The British health and safety laws for the better conditions of workers are the most
strong and predominant The only problem that the firm faces is the high tax rates. Which makes it more
expensive as the raw material increases the cost of productions also goes upautomatically and this is the reason why many firms stay out of United Kingdom.
There are also some policies by the labour contract to avoid exploitation of labour whichmakes this country much more expensive.
6.3. EUROPEAN OPERATIONS
TATA HISPANO is a prominent manufacturer of bus and coach bodywork in Spain andMorocco, with sales in several other countries of Europe. TATA HISPANO is a 100%subsidiary of TATA Motors, the largest automobile manufacturer of India, Worlds secondlargest bus manufacturer and Worlds fourth largest truck manufacturer.
Reason for entry
The labour market of Spain is moving from a system of temporary contracts topermanent contracts. It will provide long-term predictability to employers with respect toavailable employees.
Spain Market is technologically evolved market as compared to India
Spanish law permits foreign investment of up to 100% of equity, and capital movementsare completely liberalized.
The authority of the Spanish competition commission has been widened to make
enforcement more effective
The country's environmental policies have been developed along EU guidelines.
The strategy on sustainable development and on climate change has been approved toreduce GHG emissions by developing a technical construction code and a bonus systemto encourage people to buy energy efficient vehicles
Challenges faced
Country fares poorly in terms of the number of patents received as compared to France
and Germany.
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6.4. LATIN AMERICAN OPERATIONS
Tata Motors has taken its alliance with Fiat to produce a new one-tonne pick-up truck, forLatin American markets from Fiat's facility in Argentina. This arrangement will also see TataMotors forming a joint venture with a subsidiary of Iveco, the commercial vehicle division on
Fiat, to set up a distribution network.
TATA Tata Marcopolo Motors Limited (TMML) is a 51:49 joint venture company of TataMotors Ltd. (TML) India and Marcopolo S.A. Brazil for manufacturing of buses in India.
Reason for entry
Tata Motors, through the joint venture, would benefit from Marcopolo's technology formass production of buses along with its expertise in the mass rapid transport (MRT)systems.
The technology and expertise in chassis and aggregates will be provided by Tata
Motors, and know-how in processes and systems for bodybuilding and bus body designwill come from Marcopolo
The JV with Marcopolo, which is one of the largest bus body builders, will enable TataMotors to successfully address the growing demand in India
Measuring Success
The joint venture of the state-of-the-art bus manufacturing by Tata Marcopolo Motors inthe well-established plant at Dharwad (Karnataka) helped the company in achieving itsgoals in the commercial operations with the production of vehicles.
It was the understanding between the two companies at 51:49 shares in establishment.Both the companies Tata Motors and Marcopolo of Brazil have become successful inmanaging the higher profit range with better deals in sales
6.5. SOUTH AFRICAN MARKET
Tata Motors entered South African market in 2004 to open two production facilities to makesmall cars. The distribution and marketing of Tata cars in South Africa is handled byAccordian Investments (Pty) Ltd., JV between the Imperial Group, Ukhamba Holdings (Pty)Ltd. and Tata Africa.
Reason for Entry
The original intention was to take advantage of European Unions Free Trade Agreement(FTA). Tata motors would use this to assemble and export its cars to European markets asits competitors like Toyota, Volkswagen and Ford were already doing.
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With the growing demand of cars among the country itself, the company targeted not onlythe local people but international markets as its targets as well.
6.6. THAILAND/ASEAN OPERATION
Tata Motors formed a joint venture with Thonburi Automotive Plant, a Thailand-basedindependent assembler of automobiles to manufacture, assemble and market pickuptrucks, to enter Thailand.
Reason for Entry
Tata Motors entry into the Thai auto market is targeted at leveraging Thailand's boomingpick-up market, providing the company access to the established ancillary market as well asgreater volumes for engines produced in India.
Apart from local market, this gives Tata Motors an entry into ASEAN countries, since the
pick-ups were exported potentially using Thailand's membership in AFTA (ASEAN FreeTrade Zone)
6.7. INDONESIA
Operations through wholly-owned Jakarta-based subsidiary PT Tata Motors IndonesiaCommercial launch and local assembly in 2013 Countrywide dealer network beingestablished for sales Service and spare parts Plans for development of components locallywith Indonesian vendors.
Reason for Entry
Indonesia is a key market for Tata Motors, which has a wide range of products from smallcars to buses in passenger vehicles and from 0.5T mini-trucks to 49T heavy trucks incommercial vehicles. The company will begin to launch its products in 2013, for whichextensive preparations are now on.
6.8. MALAYSIA
As part of its plans, the company has plotted broadly three routes for internationalexpansion:
Traditional method of export Setting up assembly operations abroad Third is JV & Acquisition
In order to that Malaysia played a very important role for Tata motors as far as internationalexpansion is concerned.Tata Motors worked on setting up assembly operation strategy by setting up first assemblyoperation in Malaysia in 1974. Since then the company has similarly expanded intoMalaysia, Bangladesh, Senegal, South Africa and Ukraine. All these assembly operations
are set up by the distributors of Tata Motors for these countries.
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Reason for Entry
Malaysia is very lucrative market in ASEAN due to its world class infrastructure & demand.Malaysias membership of AFTA & its bilateral agreement with Japan made it moreattractive for Tata motors
7. FUTURE INTERNATIONAL STRATEGY FOR SUSTAINABLE BUSINESS
Now that Tata Motors has established a sustainable model in some countries, its mainchallenge is to replicate this model in other countries as well.
How to replicate this strategy for 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 averageterms, presents the best solution. For Tata Motors, the combination of resources providing it
competitive superiority on a weighted average basis includes:
1. Product Reliability
2. Service Network
3. 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 arguablyoffer products that are far more refined. But this is more than compensated by a dependableservice network and extensive channel reach. Tata's service and distributor network is by farthe most extensive of any player in the trucks industry. Hence in overall weighted averageterms, Tata Motors still has a winning proposition.
7.1. RECOMMENDATION MATRIX
Based on a close scrutiny of the resource based view of Tata Motors and the challenges itfaces, we propose a recommendation matrix arranged along three broad dimensions -Tangible, Intangible and Capabilities
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Three Dimensional Recommendation Matrix
Tangible
The strategies in this domain are primarily directed at sustaining Tata Motors' first moveradvantage with respect to its offering in the Small Commercial Vehicle segment - ACE.
Strategy Sustaining the First Mover's Ad vantage of ACE
National
Footprint
Tata Motors has an unparalleled network of dealers and service stations across the
country for Medium and Heavy Commercial Vehicles (M and HCV). However most of
these service stations are along inter-city routes. It would need to replicate this
network at intra-city level for its hugely successful SCV - the Tata ACE. For this Tata
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Motors can liaise with small garages, train them and certify them as 'Tata Authorized
Service Station'.
Product
Portfolio
Tata Motors has positioned ACE as a multipurpose vehicle (MPV). This is where Tata
Motors can learn from the Maruti small car strategy that posits that 'there is no such
thing as a small car buyer'. Hence Tata Motors should endeavour to move form a
multi-purpose positioning to a mass customization positioning for ACE, wherein
multiple variants are offered on the ACE platform, each uniquely suited for a specific
application - such as tippers, long base trawlers, and milk carriers.
Intangible
In intangible terms, Tata Motors needs to bolster its brand loyalty, by providing a unique
customer experience.
Strategy Intangible Ass ets
Unique
Customer
Experience
In commercial vehicles industry, the uniqueness of customer experience is largely
driven by the efficacy of the 'Support' framework. If your car breaks down, you can
take a taxi to office. But that's not so for a transport operator. For him, his vehicle is at
the heart of his business and hence responsive after-sales support is critical.
Minimizing downtime calls for a service network that is highly responsive and easily
accessible. Besides, Tata Motors should also
1. Consider introducing mobile service units for Tata ACE that can respond to
customer calls anywhere within a given city.
2. Start treating "Services" as a dedicated profit center. Towards this end, the
company should "productize" annual maintenance contracts.
Brand
Reputation
Building a reputation will help sustain sales, without having to engage in discount
sales.
Capabil i t ies
There are two broad capabilities that Tata Motors should seek to acquire.
Strategy Capabi l ity Acq uisi t ion
Technology
Appropriation
Technology Appropriation is the key to Tata Motor's ambitions to offer products
with engines larger than 210 HP. As the share of ultra heavy commercial vehicles
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grows, the company will need to face up to technologically superior players like
Volvo. Here, Tata will have to carefully spearhead its 'World Truck' program by
carefully coordinating technology appropriation from its numerous international
technology partners, notably Daewoo, Fiat and Hispano.
Robust
Supply Chain
Tata Motors has made significant investments in IT systems to network its
countrywide service network. This helps them maintain very high spares parts
availability at their service stations and minimize downtime. In the years to come, it
would need to include their SCV service station within this framework. This will
however be a big challenge, since these service stations would largely be
managed by illiterate and not-so-tech-savvy repairmen.
7.2. CONTINGENCY PLANS
1. Mass customization has its own shortcomings. Firstly, it puts a disproportionate amount ofstrain on the company's supply chain. And this is a wasted effort in case the demand patternsaren't properly understood. Hence we propose that the sales of the customized vehicles beclosely tracked and in case sales achieved within a reasonable timeframe do not merit theadditional resource outlay, then the company should revert to the original multipurposepositioning.
2. In the background of rupee appreciation, exports will become costly. Hence it is prudent to openintegrated production plants in other countries rather than just concentrating on exports.
3. A few pointers on what Tata Motors ought not to do are captured below:4. Compete on price because proportion of individual players is low. Instead differentiate throughservice.
5. Engage in rapid capital expansion given the high debt to equity ratio. Use ring fencingjudiciously.
6. Focus on rapid acquisitions and instead focus on consolidation in the foreign market.7. Lose focus on the 'Value for Money' positioning, especially in the soon to be launched offering
in the Ultra Heavy Commercial Vehicle segment.
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