House of TATA: Acquiring a global

footprint
Group F
Question 1

What is your assessment of the globalization strategies

of the Tata group operating companies particularly
Indian Hotels, Tata Tea and Tata Steel?
Indian Hotels
Tata Group’s hospitality business
Parent of the TAJ hotels.
Strategy : Took an incremental approach to international
expansion
STRATEGY IMPLEMENTATION
Outright buying -> Properties posted significant losses - >
Divested the properties
Decided to focus higher –end properties befitting the Taj.
Company preferred management contracts with small
equity positions. However IHC later acquired several
properties outright.
Tata Steel
Domestic expansion: Expand production in India
De-integrated strategy: Supply India sourced raw and semi- finished materials to
finishing facilities closer to consumer end Markets
Mature market M & A : Acquire companies in advance markets to improve R & D
operating practices
Raw material security: vertical integration made it the world’s lowest cost steel
producer
Downstream products: Moved into value added product segments and sell branded
steel products
Logistics Control: Established the JV with shipping company.
Acquisition of Corus was done for the following reasons
Consolidation of the global steel industry
Global supply chain services business
Major presence in European markets and in higher value added products.
Saving of $450 million in production, procurement, financing and other synergies over the
first three years.
TATA TEA
Slow growth in Tea industry
Commodity tea producer
Looking for new growth opportunities and transform itself
into a branded company.
Acquired a much larger company “Tetley”.
Changed overseas acquisition.
Funded by a mixture of Debt and equity. Ensured that
creditors could not seek repayment from assets other than
the project for which the money was loaned
Management remained unchanged after the acquisition
Lesser than expected synergy in operation
 Conclusion
Tata Group was a large conglomerate with diverse
businesses
The separate businesses pursued an ad-hoc
internationalization and M&A strategy with mixed results
Acquisition of Tetley was not upto the shareholder’s
expectations and synergy of the acquisition was not realized
Indian Hotels was not very successful in some acquisitions
There was a perception of “leaving money on the table”
i.e. paying more than you should
Thus, there was a need for a more focused and coherent
business strategy
Question 2

What is your assessment of the role of the TATA group

center in globalization?
 Operational leadership to strategic leadership
Navigator (leverage opportunities)
Brought together representatives of different operating
companies in the same country to identify mutually
beneficial initiatives
Strategist (Align with orgn. Vision)
Group center makes TATA group as unified corporate entity
Entrepreneur (Exploits opportunities for new services)
Provided a Venture Capitalist type of support system for the
group companies
Operational leadership to strategic leadership
Mobilizer (Aligns resources to achieve complex
objectives)
Provided financial support for acquisitions and signaled
deeper pool of capital

Talent advocate (Attracts & retains talent to meet

business needs)
GEO, GCC, Arun Gandhi, M&A specialist
Alan Rosling, Consultant
Operational leadership to strategic leadership
Global thinker (Integrates information to optimize
organizational performance)
Established integration committees to help combine
entities and realize synergies

Entrepreneurial guardian (Ensure share holder value

through courageous decision making)
Paid 33.6% more for Corus acquisition
 W Hotel Tetley
Ritz carlton Good earth Corus Daewoo
Camptn place Jemca

TATA TATA
IHC TATA Tea
Steel Motors

TATA Group Center

Financial M&A Creating

Transformational
might expertise boundary
change
disruption
Question 3
Tata motors currently target the passenger –car market
and the commercial truck market.
Jaguar and Land Rover(JLR) in the high – end Luxury
and high-end SUVs.

SHOULD TATA MOTORS ACQUIRE JLR ?

 Internationalization strategy

M&A
Partnerships/A Incremental
Daewoo (2004) –
Exports (2001) greements speeding up the
South MG Rover Joint Ventures internationalizati
Marcopolo on; reducing lead
Africa (2003) times
Thornburi
Middle Fiat Automotive
Hispano
Carrocera (2005-
East Technical (2006) 21% stake)
Korea Center Transformation
(2007) al
Jaguar and Land
Rover
 The Why- Global Footprint
Marginal
presence in
Europe.
Limited
presence in
Lack of
UK
significant
Lack of presence in
presence in China but
US Market. plans to
JLR offered increase
entry into presence
this market
Present in
SE Asia
S.America through
Present in exports
Brazil Exporter to and JV
(Marcopolo), Africa esp.
Argentina South Africa
(Fiat)
Pros
Strategic opportunity of becoming one of the major
players in the automobile industry.
Diversification across markets and Product segment.
Access to new technology and advanced distribution
channels
Ability to track competition and product development
in advanced markets.
JLR in a less-cyclical segment as compared to
commercial truck business.
Cons
Customers of high-end luxury brands value image and exclusivity
factors which conflicts with the venture of inexpensive Nano
Objective of internationalization – Mitigate risks in its business .
However acquiring JLR would carry its own potential risks:
Jaguar – an unprofitable brand. This requires a financial turnaround
Poor operating profitability of the takeover targets could lead to a very
long payback period.
Increasing leverage: Tata motors to raise Rs 120 billion for
capacity expansion and new product development over the next
three – four years. JLR was expected to be priced at around 2
billion dollars. Acquisition would increase the debt of the company.
Increase in the interest expenses will put the company’s cash flow
situation at a higher risk.
Cons
Several constraints
1) Cannot close any of the three factories related to
jaguar and land rover and that ford maintain a
minority stake in the companies after the sale
2) Resistance from Unions due to the fear of pay cuts
and lay-offs.
3) Both brands share the same resources. This
complicates the possibility of separate sales of the
two brands.
Conclusion
Decision to compete in both high end and low end
economy markets is a big audacious task
If proven successful the strategy would provide the
company with high margin (JLR) as well as high
volume revenues(Nano). mitigate each other’s risks.
The revenue streams if proven compatible, could
Automobile industry was going for a downturn. In that
environment, it does not make good business.
Tata motors should not acquire JLR at this point
Thank You
Q&A