Tata Motors – a peek into its globalization process, journey and challenges faced
This brief report will cover the following:
Brief background of Tata Motors – founding, growth & internationalisation journey
Competitive positioning of Tata Motors
Globalization strategy
Management Challenges faced during globalization
Tata Motors background:
Tata Motors is a $35 Billion organization, part of the $110 Billion Tata Group. Tata Motors is a
leading global automobile manufacturing company. Its diverse portfolio includes an extensive range
of cars, sports utility vehicles, trucks, buses, and defence vehicles. Tata Motors is one of India's
largest OEMs offering an extensive range of integrated, smart, and e-mobility solutions.
Source: Tata Motors Group company website – About-us
Tata Motors Facts & Figures:
Founded in 1945
FY 20-21 employee strength: 75,278
FY 20-21 vehicle sales: 8,37,783 (consolidated)
FY 20-21 sales & service touch points: > 8,800
FY 20-21 Total revenue: INR 2,49,795 Crores
FY 20-21 No. of countries of operation: 125+
FY 20-21 Revenue from India Operations:
FY 20-21 Revenue from Global operations:
Source: Tata Motors Group company website – About-us & Consolidated Annual Report 20-21
Tata Motors Mission:
“We innovate mobility solutions with passion to enhance the quality of life”
Tata Motors Vision by FY2024:
TO become the most aspirational Indian auto brand, consistently winning by, Delivering superior
financial returns; Driving sustainable mobility solutions; Exceeding customer expectations and
Creating a highly engaged work force
Tata Motors globalization strategy:
The Tata Motors strategy behind globalization through collaborations, M&As, JVs is to develop new
technologies, new markets, and new product development to take a competitive advantage and
thus creating sustainable business model & creating value to its customers
Technology: New Markets:
Access to emerging technology and R&D Access to new markets to support Tata
capabilities which can be used to Motors’ globalization drive – primarily to
improve their Indian core products offset the cyclicity in Indian Auto
portfolio Industry
Classification: Public
Products:
Complimentary product range to ensure faster Pricing:
time to market
Entry to new segment – luxury & high-end
Right pricing to create value
premium segment
Tata Motors history of globalization:
In 2001, Ratan Tata changed the international business strategy of Tata Motors from an
international to global strategy. He dismantled the independent Export Division. This was a major
step as international business was looked as not just for exports of surplus production but an
integrated strategy for growth.
Tata Motors entry into different geographic markets:
Year Country Mode of entry
1991 Bangladesh JV with Nitol Motors to set up NITA company (CV)
2008 Thailand WOS – sets up Tata Motors Thailand (CV)
2011 Indonesia WOS – sets up Tata Motors Indonesia (CV)
2003 Nepal
2004 Sri Lanka, South Africa
2005 Tanzania
2006 Ghana
2008 Europe – via the acquisition of JLR
2011 Indonesia
2012 Bangladesh
2013 Myanmar
2014 Philippines, Algeria, Uruguay
2015 Bolivia
<to add CAGE framework here>
CAGE APAC (Bangladesh, Middle East (Abu Latin America Africa (Ghana,
Nepal, Bhutan, Dhabi, Dubai, (Bolivia, Chili, Ivory Coast,
Indonesia, Iraq, Kuwait, Ecuador, Kenya,
Malaysia, Oman, Qatar, Uruguay, Mozambique,
Philippines, Saudi Arabia, Paraguay) Nigeria,
Classification: Public
Senegal, SA,
Tanzania,
Thailand, Vietnam) Turkey)
Uganda,
Zambia)
Lack of common • •
Known Languages
currency
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Cultural Similar Ethnicity
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Known Religions •
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Different Values •
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A Administrative Distance • •
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G Geographic Distance • •
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E Economic Distance • •
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Tata Motors prominent Acquisitions:
Year Brief description
2004 Tata Motors acquired Daewoo Motor’s truck manufacturing unit in South Korea
2005 Tata Motors acquired 21% of Aragonese Hispano Carrocera giving it
controlling rights of the company.
2008 Tata Motors acquired the iconic British Jaguar Land Rover (JLR) from Ford
2010 Tata Motors acquired 80% stake in Italy-based design and engineering
company Trilix for a consideration of €1.85 million
Classification: Public
Tata Motors prominent international JVs:
Year Brief description
2007 Tata Motors formed a joint venture with Marcopolo of Brazil and introduced low floor
buses in the Indian Market
?? Tata Motors formed a joint venture with Fiat and gained access to Fiat’s diesel engine
technology
1993 Tata Motors formed a JV with Cummins to develop commercial vehicle diesel engines
To analyse the various actions of Tata Motors towards their internationalization journey – we use
the below framework:
Why to enter?
Exports – Product range to emerging economies
To achieve economies of scale
New technology acquisition / access to R&D for product superiority
Develop resource competencies
Where to enter?
Market seeking – Emerging economies with similar infra & similar requirements. Same product
range could be expanded.
Efficiency seeking – Subsidiaries in Thailand for production of pick-up trucks
Innovation seeking – Spain & Brazil for bus technology; UK for PV design tech; S. Korea for CV
Strategic goals – Location specific advantages (cultural similarity w.r.t the CAGE framework)
When to enter?
First mover advantage – First entry into emerging economies which had the same economic
characteristics of India.
Late mover advantage – Late entry into developed markets (inorganic acquisition) or via their
acquired company (like DWCV in China). Helps leverage the production scale in India for
outsourcing & low cost of engineering development in India – both reduce costs.
How to enter?
Inorganic growth – Acquisitions – e.g. DWCV (S. Korea) & JLR (UK)
JVs – e.g. Marcopolo in Brazil
Wholly Owned Subsidiaries – e.g. in Thailand for pick-up truck manufacturing
License sharing agreements – e.g. with FIAT for Latin American markets
Globalization challenges - Analysis of few prominent acquisitions by Tata Motors:
Classification: Public
Tata Motors acquisition of Daewoo Commercial Vehicles Company (DWCV)
o Synergies:
Tremendous synergy in terms of product strategy and R&D. Tata Motors
planned to use this merger and leverage the technology for developing a
World Truck for India and international markets.
This also opened doors to a new, advanced market for Tata Motors – Korea
which gave Tata Motors the opportunity to de-risk its business by
countering domestic market cyclicality through overseas expansion
o Build-up to the acquisition:
Tata Motors had chalked out a globalization strategy in early 2003 and had
created a M&A team to look out for acquisition targets.
Tata Motors planned to increase exports from INR 10 billion in 2004 to INR
20 billion by 2005- 06. They also wanted to enter the Chinese market
through joint ventures or technology transfers. But these efforts had not
materialized.
The DWCV offer came from the target firm itself, through KPMG, the official
advisor to DWCV.
o Challenges faced by Tata Motors:
The labour unions in Korea could prevent the deal or create labour problems
after the acquisition.
Tata Motors had virtually no global experience at that point, and this could
make integration difficult.
Need for a quick & comprehensive Due Diligence
Complimentary product range between Tata Motors CV and DWCV
Winning the 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 Group‘s 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
o How Tata addressed the challenges:
XXX
o Success of the acquisition:
The acquisition of DWCV helped Tata Motors to accelerate its entry into new
markets in China, Western Europe, South Africa and Latin America.
Launch of ‘Novus’ truck brand in Indian market
Joint development of ‘World Truck’ between Tata Motors India & TDCV
Korea launched in 2009
Post-acquisition, the merged entity, Tata Daewoo Commercial Vehicles
(TDCV) is Korea’s second-largest truck maker, exporting to more than 60
countries across the world.
Tata Motors acquisition of Jaguar Land Rover (JLR) from Ford
Classification: Public
o Synergies:
Tata Motors saw the JLR acquisition as an opportunity to acquire a global
footprint
This acquisition gave Tata Motors an entry into the luxury and high-end
premium segment of the global automobile market.
It also allowed Tata Motors access to superior technology which allowed
them to improve their Indian core products portfolio – now the Tata Motors
European Technical Centre (TMETC)
o Build-up to the acquisition:
In 2008, as the US market was slipping into recession and demand for luxury
cars and SUVs were sliding, JLR was headed towards major losses.
Ford was on the verge of bankruptcy and was looking for a suitable buyer for
their Jaguar - Land Rover division.
o Challenges faced by Tata Motors:
Post-acquisition of JLR for USD 2.3 Billion, Tata was under tremendous
pressure as there were mixed reactions from all of UK. Many feared about
devaluation of JLR by an Indian brand and suggested government to take
control of the Jaguar brand, as it symbolized the best of Britain.
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 other problem that Tata Motors faced is the high tax rates. Which
makes it more expensive as the raw material increases the cost of
productions also goes up automatically 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 which makes this country much more expensive.
o How Tata Motors addressed the challenges:
Tata Motors let JLR retain its brand identity, value & core character –
understood them and invested in them to reap benefits
Tata Motors invested heavily in JLR product development which was flagging
under Ford ownership to keep the churn of new models alive at JLR
Not moving manufacturing out of the UK in spite of cost pressures
Got the company staff to agree for a 2 year pay freeze v/s a no job cut
guarantee that saved JLR millions
Look to do a part of the engineering development from India where the
costs are a fraction of that in Europe
Look to enhance the value & capabilities of JLR in their own terms – give
them autonomy rather than trying to integrate product segments and cars –
which Ford tried to do
Manage the supply chain costs by looking to outsource products from India
o Success of the acquisition:
By 2013, the strategy to invest in new products started to pay off. JLR almost
tripled its sales in 2017 from 2009 with revenues topping USD 34 Billion.
The acquisition of JLR has been a great success and currently JLR contributes
close to 80% of Tata Motors revenues.
Classification: Public
Successfully brought the JLR brand to India
Further internationalization plans of Tata Motors:
o Post their spree of global JVs / acquisitions Tata Motors till around 2010; in its 2017-
18 strategic roadmap Tata Motors signalled the intent to increase their global
footprint further - looking to enhance volumes from non-SAARC markets driven by
growth in ASEAN, Africa and the Middle East.
o Tata Motors to focus on four key areas: developing suitable products, driving
optimal sourcing and manufacturing, enhancing overall customer experience and
further establishing the TML brand across geographies.
o Tata Motor’s KD (knocked down) assembly facilities are spread across eight
countries, and it aims to grow this to other strategic markets, taking KD contribution
to almost 20% of total exports in FY21 compared to 8% in FY18.
o JLR’s manufacturing footprint to expand, with the Slovakia plant to start production
by the end of 2018.
o The Company’s approach will be to support key markets while accessing a lower cost
base.
o JLR will also work on further expansion of its manufacturing footprint in China
through its JV while JLR continues to expand in new markets.
Competitive Positioning of Tata Motors:
Commercial Vehicles FY20-21 position Key actions leading to competitive position
MHCV Market share 58.1% (up by 70 Cost reduction - direct material cost reduction, fixed cost
bps) restructuring and judicious deployment
EBITDA 5.3% (up by 130 bps) of CAPEX
1553 sales touchpoints Value addition – Fleet Edge – the next gen connected
2892 service touchpoints vehicle solution; uptime guarantee to customers
Counter volatility – Strengthen S&OP for tighter
inventory control and cater to a volatile demand
situation
Ecosystem engagement - channel partner engagement
initiatives, extended financial tie ups, product demos to
establish superiority of our BS VI range
Passenger Vehicles FY20-21 position Key actions leading to competitive position
3rd largest market share in PV in India Brand - There has been strategic focus to consistently
with 12.01% (as of Dec 2021) - seeing increase brand health indicators. There has been an
highest PV sales in 8 years increase in the Net Promoter Score (NPS) with sharp
Volume growth of 69% against an decrease in detractors and passives. NPS increased
industry volume decline of 2% from 23 in 2019 to 30 in 2021.
EBITDA 2.2% (up by 1160 bps) – highest Product Strategy - The strategy is to enhance targeted
in last 10 years market and strengthen customer association through
906 sales touchpoints stylish design, safety, and new technology features
608 service touchpoints driven products. The recently launched New Forever
range has seen excellent market response.
Structural Margin Improvement - Value Analysis
and Value Engineering (VAVE) process implementation,
feature rationalisation, alternate sourcing, achieve
economies of scale with increased modularity
Classification: Public
and localisation of key components to consistently
deliver margin improvement.
Mfg. & Quality leadership - Ramp up production aligned
to future market demand with proactive debottlenecking
actions to maintain market dominance. Adopt Industry
4.0, robust software maturation to reduce defects and
attain flawless launch.
Re-imagine the front end - TML front-end is being given
an image overhaul and repositioned across the four
key planks of customer-facing product life cycle: sales,
dealer processes and resources, after sales and,
customer experience. Digital will be extensively used for
seamless and best-in-class experience.
Electric Vehicles FY20-21 position Key actions leading to competitive position
Market share: 71.4% Product – India specific product specs with a
218% YoY volume growth differentiated value prop. Transition towards a multi-
Nexon EV is driving the growth of EV energy platform.
segment in India with 65% of total sales Sales & Marketing – Higher penetration in micro-
in FY 21. markets coupled with brand building for awareness
Presence across 50+ cities creation.
93 sales touchpoints Capacity building – Leveraging Tata Group EV Ecosystem
97 service touchpoints – TATA UniEVerse
Ecosystem Solutions – Exploring partnerships to enable
comprehensive charging offering. Localising & aligning
with Govt. mandates.
Source: Tata Motors Annual Report 2020-21
Reference links:
https://tejas.iimb.ac.in/articles/31.php
https://www.tatamotors.com/blog/international-business/tata-motors-amazing-journey-towards-
global-recognition/
https://www.tatamotors.com/about-us/
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right-afterall-11642741798552.html
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essay.php
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%20Acquisition%20of%20Daewoo%20Commercial%20Vehicles.htm
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strategy/articleshow/65030433.cms
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road-or-smooth-ride/
Classification: Public
https://www.business-standard.com/article/companies/a-year-after-dream-acquisition-tata-forced-
to-justify-jlr-buy-109032900012_1.html
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Classification: Public
