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Individual Business Report

Student Name: Boby David

Student Number:

Module Title: International Business

Date: 18th December 2023

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Table of Contents

A: Introduction.................................................................................................................................3

B: Literature Review........................................................................................................................4

B.1: Overview of Tata Motors.....................................................................................................4

B.2: Modes of Market Entry........................................................................................................4

B.3: Factors that Influence Business Expansion..........................................................................5

B.4: Significance of Business Internationalization......................................................................6

B.5: Challenges of International Business Expansion.................................................................8

C: Analysis and Discussion.............................................................................................................9

C.1: Rational behind Choosing Cuba...........................................................................................9

C.2: Barriers that Tata Motors could Face during the Expansion..............................................10

C.3: Implementation Process for the Cuban Market..................................................................11

C.4: Recommended Mode of Entry...........................................................................................12

D: Conclusion................................................................................................................................12

E: Reference List...........................................................................................................................13

F: Appendices................................................................................................................................16
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Executive Summary

This report aims to examine the internationalization strategies of Tata Motors in Cuba, a

new foreign market. From a small store in India, Tata has thrived in the automotive industry to

being one of the best multinational corporations. The paper uses a literature review of other

researchers to compile viable data related to Tata's globalization of its business operations. The

report examines factors that would influence Tata's ability to expand internationally, its

significance and the challenges of the expansion. Cuba is seen as a potential expansion country

for Tata Motors due to its untapped automotive market and growing economy. Possible barriers

that could affect the expansion are cultural differences, limited infrastructure, and political

uncertainties. The implementation process includes an intensive marketing campaign, a good

relationship with the Cuban community, and liaising with the government to improve

infrastructure. The paper also conducts a study of different market entry modes and determines

that the best one for Tata Motors to use while entering Cuba is a partnership with CIMEX, the

leading car dealer in Cuba.

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A: Introduction

Over the recent decades, the world has undergone massive changes in technology and

globalization. This has transformed the business industry, and business entrepreneurs have been

proactive in implementing strategies that enhance their sustainability in the market (Mariadoss,

2018). Expansion of business operations into new markets is one of the viable strategies that

enable businesses to grow financially. Tata Motors is among the companies adopting effective

tactics to remain competitive in the automotive industry. This assignment intends to critically

analyze how Tata Motors can strategically enter one of its untapped markets. The country

selected for this task is Cuba. An overview of Tata Motors will be discussed, as well as the

rationale for selecting Cuba as the most suitable international market to explore. The literature

review examines the factors that influence the expansion, its significance, and its challenges.

Besides, a comprehensive literature review will be conducted to assess business factors such as

economic, social, legal, and political factors that could impact Tata Motors if it enters the Cuban

market. The paper also evaluates possible barriers and challenges Tata Motors could face in the

foreign market and the most appropriate implementation approach. The best entry mode is also

recommended for the company to succeed in Cuba. Exploring untapped markets is necessary for

Tata Motors because it would significantly improve its revenue and profitability.

B: Literature Review

B.1: Overview of Tata Motors

Tata Motors is one of the largest global manufacturers of cars, buses, trucks, utility

vehicles, defense vehicles, and smart mobility. The company was founded by Jehangir Tata in

1945 and was headquartered in Mumbai, India (Tata Motors, 2023). It started as a cotton mill but

later developed an interest in steel, chemicals, and, later, automotive manufacturing. Tata's
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prosperity started in 1954 when it formed a joint venture with Daimer-Benz, a German

locomotive manufacturer (Moneycontrol, n.d.). Over the years, the company entered more

international markets and has managed to remain competitive due to its outstanding product

designs and strategic market approaches. The rationale for expanding into international markets

is to explore new and untapped markets to improve its business operations, income, and

profitability. Today, Tata Motors has several subsidiary companies and operates in more than

100 countries worldwide. As of 2022, Tata reported a revenue of 44 billion USD and a net

income of US$300M and has employed over 80,000 human workers (Pitchbook, 2023). Tata has

therefore positioned itself successfully in the global business environment and, through its

innovative tactics, will remain competitive in the industry.

B.2: Modes of Market Entry

In their book, Dearin (2021) noted that when a business exhausts its current markets,

expanding into new markets is an excellent opportunity to diversify and explore possibilities that

would improve its performance. There are various modes organizations use to expand

internationally. As a multinational corporation, Tata Motors has adopted different entry methods

to enter new markets. The most common method is exporting, where a company directly sells its

products in another country by shipping directly to consumers or through intermediaries such as

distributors (Dearin, 2021). An example is how the company developed Tata Nano, an affordable

city car that was exported to many developing countries such as Singapore, Malaysia, Canada,

and South Africa (Interfax, 2008). Other entry modes are Franchising and licensing, where a

company allows a foreign company to use its intellectual property, such as trademarks,

copyrights, and patents, to sell its products in exchange for royalty fees.
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Tata has also entered other foreign markets through partnerships and strategic alliances.

An example is Tata's partnership with Fiat Chrysler in Italy to develop advanced technologies for

commercial vehicles (Wayland, 2020). As indicated by Mariadoss (2018), the method entails

forming a partnership or alliance with an existing company in the targeted foreign market. A

company can also enter an international market through acquisition. This is where the company

acquires control of the acquired firm by purchasing its stock or paying its owner a purchasing

price. One of Tata's recent acquisitions is Pierburg Pump Technology GmbH, a German venture

to strengthen Tata's electric vehicle component portfolio (Shah and Paramasivam, 2023). The last

entry mode is Greenfield Venture, where a parent company establishes a subsidiary in a foreign

country and builds its operations from scratch. Tata used this strategy by building a new factory

in the UK that will produce batteries with 40GWh to power its electric vehicles (Jolly, 2023).

Tata's parent company, therefore, will have full control over the subsidiary's operations.

B.3: Factors that Influence Business Expansion

The expansion of a company such as Tata Motors is influenced by a number of factors.

One of them is market demands and consumer behaviours. According to Li et al. (2019),

consumers' preferences and demands are prone to changes; hence, companies that adopt the

changes continue thriving in the market. For example, due to the rapid climatic changes, demand

for environmentally friendly transport solutions is high while the supply is low. For this reason,

Tata has been proactive in manufacturing electric cars and exporting them to international

markets with high demand (Jolly, 2023). This also shows that innovation and technological

changes influence businesses to explore new markets. The financial capabilities and goals are

another factor that influences business expansion. As noted by Dearin (2021), financially stable

companies with enough capital, such as Tata Motors, have the advantage of quickly expanding
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their business when an opportunity emerges. For example, due to Tata's financial capabilities, it

will establish its own factory in the UK and manufacture batteries for its electric vehicles (Jolly,

2023).

Another significant factor that can influence a business expansion is competitive levels in

the industry. According to Michael Porter's competitive model, when many suppliers offer

similar goods at the same rate, their bargaining power is low; hence, they are forced to operate at

a lower profit margin (Mariadoss, 2018). Although the competition level in the automotive

industry is low due to the high capital needed for investment, the demand is limited because

automotive products are expensive. Thus, entering new markets is an effective strategy for Tata

to reduce competition and increase sales. Lastly, the government policies that regulate the

automotive industry can significantly influence international expansion. Dearin (2021) argued

that countries with friendly foreign direct investment (FDA) laws attract investors while very

strict rules discourage them. Thus, the choice of a foreign market is also determined by its

government regulations.

B.4: Significance of Business Internationalization

Research by Mariadoss (2018) indicated that consumers prefer buying products they have

seen or heard before. Business internationalization enhances brand recognition when more

people in the foreign market get used to seeing and hearing about the new company. Tata's brand

is recognized in most countries for its high quality and unique automobiles, an aspect that plays a

significant role in increasing its market size.

Transfer of technology and Innovation ideas is another benefit of business

internationalization. Dearin (2021) argued that operating internationally facilitates diversity and

inclusivity. For example, subsidiaries in foreign countries employ diverse talent who come up
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with unique strategies and ideas to enhance Tata's innovation abilities. Through partnerships and

strategic alliances, Tata also learns how other companies operate and can imitate their strategies

and become more efficient.

A study by Tien et al. (2019) shows that organizations that expand internationally are

able to mitigate risks associated with regional economic downturns, changes in market

regulations, and political instabilities, among others. Correspondingly, the diversification of Tata

Motors enables it to spread risks and enhance its overall business resilience. As an illustration,

during the recent Palestine-Israel wars, businesses in those regions were drastically affected.

However, Tata's performance in other countries that were politically stable continued to thrive

(Pitchbook, 2023). In such a case, Tien et al. (2019) argued that products can be moved from

affected regions and transferred to best-performing areas.

Internationalization fosters societal contribution by creating job opportunities in host

countries, contributing to economic development, and improving infrastructure. In the article,

Jolly (2023) noted that Tata's investment in the UK is anticipated to provide thousands of jobs

and upgrade local infrastructure. The article argues that China has been the dominant player in

the global battery supply, but through Tata's establishment of a battery factory in the UK, the

country will rise on the list.

Internationalization helps organizations achieve financial goals. The reason is it

facilitates larger production volumes that result in economies of scale during the purchase of war

materials and manufacturing. This ultimately reduces costs and increases profitability. Most

countries also have free trade agreements and friendly policies that reduce tariffs and import

costs and allow foreign companies to compete favorably with locals, further improving

profitability and growth sustainability (Dearin, 2021).

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B.5: Challenges of International Business Expansion

Although international expansion is a key driver to a business's success, Dearin (2021)

noted that expansion entails several potential challenges. One of the challenges is the need to

adapt to the cultural and market differences of foreign markets. Mariadoss (2018) stated that

consumers' buying journeys are highly determined by their beliefs and perspectives that are

strongly related to their cultural practices. Offering products, marketing, and managing

employees in a way that meets the consumers' cultural preferences can, therefore, be complex.

For example, in 2008 when Tata Motors acquired Jaguar Land Rover, it had to retain most of the

acquired organizational strategies, such as marketing positioning, to minimize cultural conflicts

(Tata Motors, 2023).

Another challenge includes regulatory compliance. Countries worldwide have rules that

shape their business markets; thus, a foreign company has to ensure that the business can adhere

to the rules to avoid litigation or closure. For instance, countries that signed the Paris agreement

to reduce global pollution have different emission and safety standards that automotive

companies, including Tata Motors, have to follow (Li et al., 2019). In addition, countries

experience different economic and political factors that impact local and foreign investors. For

example, in a nation with a poor GDP, consumers' spending habits on luxury products such as

vehicles are low, unlike in well-developed countries, which have high GPDs (Tien et al. 2019).

Also, managing the global supply chain when a business expands introduces the risk of

disruptions due to trade barriers, geographical locations, and transport challenges. The delays

further affect the supply of products and revenues in the markets.

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C: Analysis and Discussion

C.1: Rational behind Choosing Cuba

As a consultant for Tata Motor's international business expansion, the most suitable

country that I would recommend is Cuba. Despite not having operations in Cuba, the market has

potential opportunities that would enhance Tata Motors' performance. The economy of Cuba has

been rising since 2021 after the covid-19 pandemic. As shown in Appendix 1, the country's GDP

rose from -20.5 in 2020 to 19.9 in 2022 (Trading Economics, 2023). The growth creates demand

for affordable, reliable automobiles that align with Tata Motor's offering. Besides, the Cuban

automotive industry mostly relies on used cars; hence, the market for new luxurious vehicles is

untapped (Economist., 2017). This is an excellent opportunity for Tata Motors to establish strong

roots in the market before competition intensifies. Entering the market would also allow Tata

Motors to expand into other untapped regions, specifically the Caribbean and Latin America.

Cuba passed the Foreign Investment Act in 1995, which provided incentives to investors

and encouraged FDI to recover the country's economy (United Nations, n.d.). Besides, in 2022,

Ana Teresita Gonzalez, the Cuban deputy minister of trade, announced that the country had

relaxed most of its tariffs and trade rules to encourage local and foreign investors to compete

favorably (Marc, 2022). The reforms have been active, and the market is flooding with investors

all over the world. In addition, the global trends show increased demand for electric cars. As a

fast market response, Jolly (2023) stated that Tata Motors is already committed to sustainable

electric vehicles; thus, if Cuba shows interest in adopting green technology, the company can

leverage its expertise in the area.

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C.2: Barriers that Tata Motors Could Face during the Expansion

Cuba already has some Chinese and European automotive brands, such as Nissan,

Hyundai, and Citroens, and local dealers who buy and sell used vehicles. This poses a potential

competitive threat for Tata while it enters and establishes its brand in the country. However, by

establishing itself as a high-quality and affordable automotive provider, the company will be able

to build its brand and acquire a significant market in Cuba, as Dearin (2021) suggested. Cuba's

unique Hitch-hiking culture could also impact Tata Motors. According to Frendo (2019), it is

normal to spot a large crowd hitch-hiking on main roads. Due to this cultural practice, most

people do not own cars, and as for long-distance travelers, they prefer public buses. Therefore,

Tata Motors would require an intensive marketing strategy to convince locals how its products

could enhance their living style and create a positive attitude towards owning automobiles.

Another possible barrier that Tata could face in Cuba is limited infrastructure. The

country does not have an effective transport system, and most of its roads are filled with potholes

(Nicoll, 2022). As an electric car-oriented manufacturer, Tata's lack of reliable electric power

also limits its expansion. Good roads, power systems, and reliable water sources are necessary

for business ventures, especially in the automotive industry (Dearin, 2021). They also facilitate

smooth operations, such as distributing raw materials and finished goods. However, as Cuba's

technology and economy continue to thrive, there is a high chance that, in the near future, the

infrastructure of the country will be stable (Marc, 2022). Lastly, uncertainty in the country's

political stability could also affect the company. Since 1965, when Fidel Castro took over power,

Cuba has been a one-party state that is a communist party and has been confided in their

constitution for decades (Frendo, 2019). As human rights and the need for democracy increases
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globally, it is uncertain whether Cuba will remain a one-party country in the future. Thus, if the

change is initiated by force, Tata's operations in the country could be disrupted.

C.3: Implementation Process for the Cuban Market

The first step Tata should adopt while entering the Cuban market is an intensive

marketing campaign. Mariadoss (2018) stated that an effective marketing strategy helps a new

venture to establish a strong presence in the new market as well as connect with customers.

Conducting thorough market research to understand the Cuban market is therefore crucial for

Tata to fit in the region. The company should then build a relationship with locals through active

engagement in corporate social responsibilities, such as employing local talents rather than

foreigners (Mariadoss, 2018). This would help the locals improve their incomes and living

standards, contributing to the company's brand image. In addition to electric battery

manufacturing, the company should offer Cuban consumers vehicles based on their preferences

and needs to enhance their satisfaction.

As noted earlier, Cuba has poor infrastructure. Thus, collaboration with local authorities

to address infrastructure issues such as the development of roads and a stable supply of

electricity and water. Dearin (2021) argued that engaging in such initiatives boosts a business's

brand, reputation, and image. Most vehicles used in Cuba are gasoline-powered. Thus, by

introducing electric batteries and cars in the region, Tata will be iconic and create the perception

of a business that considers the environment in people's minds. Before and after entering the

market, the company should also review all rules and regulations that guide foreign automotive

companies to avoid legal cases and bad reputations. As noted by the United Nations (n.d.), Cuba

is very cautious about what is imported or exported. For example, in 1959, Castro banned the

importation of American Cars and mechanical parts into the country due to political tension and
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government rules. Thus, to avoid being on the wrong side of the law, Tata should be careful to

comply with set trade rules.

C.4: Recommended Mode of Entry

Based on the opportunities and challenges for foreign investors in Cuba, a recommended

mode of entry could be a partnership with a local company such as CIMEX Corporación.

CIMEX is the leading Cuban dealer with excellent experience in retail, distribution, and

automotive service. The company also operates with over 3,000 stores in Cuba and has high

brand recognition and government connections, making it an ideal partner for Tata Motors in

Cuba (Cimex, 2023). There will also be a transfer of knowledge, risk sharing, and deeper market

penetration because CIMEX is already established in the region. The partnership could be

structured in a way that each part gets 50/50 ownership. Areas of collaboration could be electric

battery production, assembling and distribution of electric vehicles, and after-sales and

maintenance services to customers. After the agreed partnership period seizes, Tata Motors can

decide whether to quit the market or expand it depending on the performance outcomes in the

country.

D: Conclusion

Tata Motor's internationalization efforts reflect the dynamic and strategic approach that

drives business success in a competitive market environment. The company's ability to navigate

diverse global markets through different entry modes, adapt to foreign cultures, and achieve its

financial goals shows its commitment to long-term sustainability. Thus, an entry into the Cuba

market is part of the company's opportunities to enhance its performance and global presence. It

has been recommended that Tata Motors enter the market by partnering with Cimex to minimize

its risks, share resources, quickly attract customers, and connect with the authority. Although
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internationalization is beneficial to the company, the company could encounter barriers such as

poor infrastructure, political uncertainties, and cultural conflicts. However, effective strategies to

mitigate the barriers have been discussed. Thus, an entry into the Cuban market is a great

opportunity for Tata to establish its dominance before rivals flood the market.
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E: Reference List

Cimex., 2023. Corporacion Cimex S.A., OpenSanctions.org. Available at:

https://www.opensanctions.org/entities/NK-LhAg9Hfd4v9dWLS4y69zve/ (Accessed: 15

December 2023).

Dearin, C., 2021. Business Beyond Borders: Take Your Company Global. (n.p.): Dearin &

Associates.

Economist., 2017. Cuba's crazy used-car market, The Economist. Available at:

https://www.economist.com/the-americas/2017/05/11/cubas-crazy-used-car-market

(Accessed: 1 December 2023).

Frendo, D., 2019. Interesting & little-known facts about Cuba, Caledonia Worldwide. Available

at: https://www.caledoniaworldwide.com/blog/facts-about-cuba/ (Accessed: 10

December 2023).

Interfax, S.R., 2008. The world's cheapest car, Time. Available at:

https://content.time.com/time/subscriber/article/0,33009,1702264,00.html (Accessed: 13

December 2023).

Jolly, J., 2023. Tata's £4bn gigafactory plan fills in a major blank for the UK car industry, The

Guardian. Available at: https://www.theguardian.com/business/2023/jul/19/tata-

gigafactory-plan-fills-major-blank-for-future-uk-car-industry (Accessed: 27 November

2023).

Li, J., Chen, L., Yi, J., Mao, J. and Liao, J., 2019. Ecosystem-specific advantages in international

digital commerce. Journal of International Business Studies, 50, pp.1448-1463.

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Marc, F., 2022. Cuba cracks open door to foreign investment in domestic trade, Reuters.

Available at: https://www.reuters.com/world/americas/cuba-cracks-open-door-foreign-

investment-domestic-trade-2022-08-16/ (Accessed: 15 December 2023).

Mariadoss., 2018. Core Principles of International Marketing.

Moneycontrol., n.d. Tata Motors > company history > auto - lcvs & hcvs > company history of

Tata Motors - BSE: 500570, NSE: Tatamotors. English.

https://www.moneycontrol.com/company-facts/tata/history/TM03

Nicoll, R., 2022. 'There will be more failures': Frustration as Cuba's infrastructure crumbles,

The Guardian. Available at: https://www.theguardian.com/world/2022/oct/05/cuba-

infrastructure-power-hurricane-ian#:~:text=Disintegrating%20buildings%2C

%20potholed%20roads%20and,months%20have%20flabbergasted%20the%20country

(Accessed: 15 December 2023).

Pitchbook., 2023. Tata Motors Company Profile: Stock Performance & Earnings | Pitchbook,

pitchbook.com. Available at: https://pitchbook.com/profiles/company/41517-91

(Accessed: 1 December 2023).

Shah, A. and Paramasivam, P., 2023. Tata Motors looks to expand electric car portfolio, add

pricier models... Available at:

https://www.reuters.com/business/autos-transportation/tata-motors-looks-expand-electric-

car-portfolio-add-pricier-models-2023-01-11/ (Accessed: 3 December 2023).

Tata Motors., 2023. Tata Motors: Agile, new-age & future-ready. Tata Motors - Largest

Automobile Manufacturer, Biggest Automobile Company in India.

https://www.tatamotors.com/
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Tien, N.H., Phu, P.P. and Chi, D.T.P., 2019. The role of international marketing in international

business strategy. International journal of research in marketing management and

sales, 1(2), pp.134-138.

Trading Economics, 2023 Cuba GDP Annual Growth Rate, Cuba GDP annual growth rate.

Available at: https://tradingeconomics.com/cuba/gdp-growth-annual (Accessed: 15

December 2023).

United Nations, n.d. Foreign Investment Act, Cuba - Foreign Investment Act | Investment Laws

Navigator | UNCTAD Investment Policy Hub. Available at:

https://investmentpolicy.unctad.org/investment-laws/laws/55/cuba-foreign-investment-

act#:~:text=77%20%22Foreign%20Investment%20Act%22%2C,and%20rational%20use

%20of%20human (Accessed: 13 December 2023).

Wayland, M., 2020. Fiat Chrysler and Waymo sign exclusive deal on self-driving commercial

vehicles, CNBC. Available at: https://www.cnbc.com/2020/07/22/fiat-chrysler-and-

waymo-sign-deal-on-self-driving-commercial-vehicles.html (Accessed: 1 December

2023).
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F: Appendices

Appendix 1: Cuba's GDP Growth from 2019

Source: (TradingEconomics, 2023)