Tata Group

Agenda

 Overview of the group

 Trends
 Growth path in internationalization
 Case based study
 Acquisition of Tetley
 Acquisition of Glacéau
 Acquisition of Jaguar/Land Rover
 Conclusions
Group Overview
 Founded by Jamsetji Tata in 1868, A well respected name in India
 Launched the Indica, the first completely made in India car
 Recently launched the Nano, the world’s cheapest car
 Today mainly owned by a trust, has major philanthropic initiatives
 Comprises 90+ operating companies
 seven business sectors: communications and information technology,
engineering, materials, services, energy, consumer products and chemicals.
 Operates in more than 80 countries across six continent
 Total revenue : $67.4 billion in 2009-10, with 57 per cent of this coming
from business outside India.
 28 publicly listed companies have a combined market capitalisation of
about $95.13 billion
 Major Tata companies are: Tata Steel, Tata Motors, Tata Consultancy
Services (TCS), Tata Power, Tata Chemicals, Tata Global Beverages, Indian
Hotels and Tata Communications.
 Employ around 395,000 people worldwide.
 Each company is independent, and has its own board of directors and
shareholders
Trends
 Outward-orientation from the very beginning

 Tata Limited was established in London in 1907 as

the Tata Group’s representative in Europe.
 During WW-II, the Tatanagar, a light armoured car, “was
used extensively by the British Army engaged on the
North African front”

 Immediately after WW-II, Tata Incorporated was

established in New York as the representative office
of the Tata Group in the Americas.

 Tata International was established in 1962 to offer

value-added services in international trading
focused on leather and engineering.
Trends
 Established in 1972, Singapore-based Tata Precision
Industries specializes in high-precision machining,
precision fine blanking, engineering plastic moulded
parts and tool design.

 A wholly-owned subsidiary of Tata International, Tata

Africa Holdings was established in Johannesburg in
1994.
 operates in major industrial sectors such as automobiles,
steel and engineering, chemicals, information technology,
hospitality, farming, and other business areas

 In 2000, Tata Tea acquired Tetley in a £271 million

(US$432 million) leveraged buyout that was the largest
takeover of a foreign company by an Indian one to that
date.
Trends
 In early 2007 Tata Steel acquired Anglo-Dutch firm
Corus for US$11 billion – the largest deal out of India
and the fourth-largest ever in the steel industry

 Tata Chemicals, the world‘s third-largest manufacturers

of soda ash after the acquisition of the three plants of
Brunner Mond, the second-largest producer in Europe,
in December 2005

 Tata Power has purchased 30 percent equity stakes in

two major Indonesian thermal coal producers (Kaltim
Prima Coal and Arutmin Indonesia) and a related trading
company owned by Bumi Resources.
 The companies are together among the top three largest
exporting thermal coal mines in the world.
Trends
 TCS acquired Switzerland-based TKS-Teknosoft to possess
marketing and distribution rights to the QUARTZ® platform for
wholesale banks

 VSNL acquired advanced voice, data and signalling capabilities

by buying Tyco Global Network and more than 200 direct and
bilateral agreements with leading voice carriers.

 Indian Hotels has bought existing properties such as 51

Buckingham Gate in London, W (now renamed Blue) in Sydney,
and Boston’s Ritz-Carlton Hotel, renamed the Taj Boston

 Tata Motors acquired Jaguar and Land Rover to expand its

international presence and enter the high end car market.
Major International Acquisitions
February-00 Tetley Tea Company $407 million
March-04 Daewoo Commercial Vehicle Company $102 million
August-04 NatSteel's Steel business $292 million
November-04 Tyco Global Network $130 million
July-05 Teleglobe International Holdings $239 million
October-05 Good Earth Corporation -NA-
December-05 Millennium Steel, Thailand $167 million
December-05 Brunner Mond Chemicals Limited $120 million
June-06 Eight O'Clock Coffee $220 million
November-06 Ritz Carlton Boston $170 million
January-07 Corus Group $12 billion
PT Kaltim Prima Coal (KPC) (Bumi
March-07 $1.1 billion
Resources)
April-07 Campton Place Hotel, San Fran $60 million
February-08 General Chemical Industrial Products $1 billion
March-08 Jaguar Cars and Land Rover $2.3 billion
May-08 Piaggio Aero Industries S.p.A., Italy -NA-
2000: Acquisition of Tetley tea
Acquisition of Tetley Tea
 2000: Tata Tea GB acquires Tetley Tea
 Tetley is the world’s second-largest tea bag brand and the second-largest brand in
the US.
 Tata indicated that it will take a hands-off approach to Tetley’s UK operation
initially and will focus on growing the brand in the US through the flavoured
and iced tea markets.
 Tetley’s Penny Inglis, said: ’There will be no changes to management
personnel in the UK as a result of the purchase and the current marketing
strategy will remain unchanged.’

Integration:
 Formed several groups comprising executives from both outfits.
 Tea procurement group (TPG): The main job of TPG is to strategise sourcing
by Tetley of tea from India, in general and from Tata Tea, in particular.
 Geographic expansion group (GEG): GEG's principal responsibility naturally is
to coordinate foray into new markets. Tetley in Europe and America, Tata Tea
in India
 Tetley has now been restructured to cut costs.
 Now integrated with 8’O clock coffee to form Tata Global Beverages.
2006: Acquisition of Glacéau
Acquisition of Glaceau
 2006 - Tata Sons and Tata Tea agree to jointly invest $677
million in Glaceau to provide additional capital.
 Glaceau: maker of vitaminwater, fruitwater and smartwater.
 Tata owned 30 % of Glaceau and nominated the chairman of the
board
 Tata Group's investment in Glaceau strengthens its US presence
and provides opportunities for the global growth of Tata's
beverage businesses
 “increasing the share of the bladder” as an integrated
beverage company

 Glaceau more-or-less retained its management independence

 2007- Sold out for $1.2bn to Coca Cola

 Made more than 90% on the investment in a year: Huge ROI
 Tata Tea vice-chairman R.K. Krishna Kumar : Tata would be a
“minority stakeholder” in Glaceau and didn’t “want to stand within
the way of Coke and create problems”. “That’s not Tata’s style,”
2006: Acquisition of Jaguar/Land
Rover
Acquisition of JLR
 2008: Tata Motors acquired Jaguar Land Rover for $2.3bn
 Tata committed to the brands as a long-term investment and
supports the current management.
 Keeping production in the UK, alleviating concerns of unions
 “Tata is seeking to establish a major European vehicle development
center, marking it as a serious global player.”
 Deal financing: Group companies financially support each –
lowers cost of borrowing
 S&P: “policy to support its companies and the improved financial
profile of its entities also enhances the overall financial flexibility
of Tata Motors.”
 Deal raised concerns about synergies as Tata made trucks and
basic cars, including the Nano, the world’s cheapest car
 But deal would quickly provide cutting-edge production
technology for Tata Motors
 2010: Jaguar returns to profitability after a decade of making
losses
Conclusions about international
strategy
Learning from Tata’s acquisition strategy
 Geocentric approach
 Leverage the best that each region has to offer
 Exploit competitive advantages of different locations

 Stays relatively hands off, few major staffing

changes so far.
 Helps build trust in the initial stages of the acquisition

 Most acquisitions made to access new markets,

integrate the value chain, and the quest for brand
control
Learning continued…
 Prefers to have a controlling stake in its acquisitions

 A pragmatic approach to selling out

 Ratan Tata- Chairman, Tata Group

“We have two guiding arrows. One points overseas, where we
want to expand markets for our existing products. The other
points right here, to India, where we want to explore the large
mass market that is emerging not by following but by
breaking new ground in product development and seeing how
we can do something that hasn’t been done before.”
Thank You

Questions ???