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Case Analysis ON Tata Motors & Fiat Auto (Joining Forces)
Case Analysis ON Tata Motors & Fiat Auto (Joining Forces)
By : Mangesh Joshi Piyoosh Bajoria Ankita Arora Kanika Tyagi Ankur Sharan Eeti Gupta Ajay Raja
INTRODUCTION :
In July 2006, FIAT and TATA motors signed a MOU. Earlier 2006, both had signed a marketing and distribution agreements.
CONTINUE.
After World War 2, FIAT became a major manufacturer of small cars in ITALY, and later on in Europe. In the 1950s, the FIAT group entered into a license agreement with India-based Premier Automobiles Ltd.(PAL) to manufacture its car. JV would benefit both parties: TM would gain in terms accessibility, technology, design,, and global presence.
TATA MOTORS
TM was acquired by TATA sons Ltd. On June 1945 from GoI. It was renamed to TELCO. Initially TELCO was in commercial vehicle market. In 1991, after liberalization, the first utility vehicle under the TATA marquee called Sierra was launched. In this period company had JV with various groups.
Become a cost effective Organization. Improving on internal efficiencies and restructuring its debts.
CONTINUE
Additional Investment and Market Expansion Strategies Implemented In South Africa. New York Stock Exchange (NYSE) Listing in Sept. 2004. Strategic Alliance with Hispano Carrocera SA of Spain.
Agreement with Thai Rung Union Car Plc. Of Thailand to target South Asian Markets.
Created new segment by launching Indigo Marina. Improved Versions Like Indica V2 and Sumo Victa.
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 groups 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 Italys GDP & was Italys 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.
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.
On Sept.22, 2005, TM announced that it was signing a MOU with Fiat Auto to explore the possibility of cooperation across different areas in the car market.
A 15-member joint team consisting both org was set up to study the visibility and the specifics of the nature of cooperation.
Both companies appeared optimistic about the possibilities from the alliance.
In Jan 2006 the TM-Fiat Auto alliance moved another step forward shared dealer network in 11 cities that cover 70% of market share Officials said that new agreements would be reached as and when their feasibility was established. Fiat Autos alliance with TM took place against the backdrop of a revival in sales in Europe.
Fiat Auto and TM also commissioned a 60-day study aimed at exploring industrial and commercial cooperation in Latin America. Moreover, the Fiat Group intended to take TMs assistance in establishing a market for its truck unit Iveco in India. In mid-2006, Fiat India began using the paint booth facility at its Kurla complex for painting the tatamobile 207 TM picks up.
JOINING HANDS
JV will make Fiats 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 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
Improved dealership network for Fiat India. To improve position of TM in diesel passenger car segment.
THREATS :
Competition from other alliances like Renault SA and Mahindra & Mahindra. Challenge to TMs diesel supremacy. Threat from GM.. Problems for TM in European market. Brand Dilution for both Companies.
Entrance of Honda , Nissan, Toyota Volkswagen and Skoda into Indian Hatchback Car Market
STRATEGIC OUTCOME
COST REDUCTION EXPORT BASE ENTRY INTO INDIAN MARKET