Tata motors rev 2

2013

TATA MOTORS

IMM ASSIGEMENT (TOPIC 7)

TATA MOTORS :INTERNATIONAL STRATEGY FOR GLOBAL EXPANSION

31st July 2013

Table of Contents

1. INTRODUCTION..........................................................................................................................................4

2. EVENTS IN MAKING....................................................................................................................................5

3. TATA MOTORS: GLOBAL FOOTPRINTS........................................................................................................6

3.1. MERGER, ACQUISITION & JOINT VENTURE STRATEGY...............................................................................6

3.1.1. TATA MOTORS ACQUISITIONS............................................................................................................7

IIFT EPGDIB 2012-13 (VSAT) | INTRODUCTION2

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3.1.2. TATA DAEWOO...................................................................................................................................8

3.1.3. TATA HISPANO....................................................................................................................................8

3.1.4. JAGUAR LAND ROVER.........................................................................................................................8

4. TATA MOTORS JOINT VENTURES................................................................................................................9

4.1. TATA MARCOPOLO.....................................................................................................................................9

4.2. FIAT INDIA AUTOMOBILES..........................................................................................................................9

4.3. TELCON CONSTRUCTION SOLUTIONS.........................................................................................................9

5. TATA MOTORS OPERATIONS AND PRODUCT LINE.....................................................................................9

5.1. TATA DAEWOO, SOUTH KOREA................................................................................................................10

5.2. TATA HISPANO, SPAIN..............................................................................................................................10

5.3. JAGUAR LAND ROVER, UK........................................................................................................................10

5.4. HV TRANSMISSION AND HV AXLES...........................................................................................................10

5.5. TATA TECHNOLOGIES...............................................................................................................................10

5.6. EUROPEAN TECHNICAL CENTRE...............................................................................................................10

6. TATA MOTORS EXPANSION STRATEGY IN VARIOUS COUNTRIES..............................................................11

6.1. KOREAN OPERATIONS..............................................................................................................................11

6.2. UK OPERATIONS.......................................................................................................................................12

6.3. EUROPEAN OPERATIONS..........................................................................................................................13

6.4. LATIN AMERICAN OPERATIONS................................................................................................................14

6.5. SOUTH AFRICAN MARKET.........................................................................................................................15

6.6. THAILAND/ASEAN OPERATION.................................................................................................................15

6.7. INDONESIA...............................................................................................................................................15

6.8. MALAYSIA.................................................................................................................................................16

7. FUTURE INTERNATIONAL STRATEGY FOR SUSTAINABLE BUSINESS..........................................................16

7.1. RECOMMENDATION MATRIX...................................................................................................................17

7.2. CONTINGENCY PLANS...............................................................................................................................19

1. INTRODUCTION

Tata Motors is India's largest automobile company, with consolidated revenues of Rs 1,88,818

crore ($34.7 billion) in 2012-13. Tata Motors Limited is an Indian multinational automotive

corporation headquartered in Mumbai, India. Part of the Tata Group, it was formerly known as

TELCO (TATA Engineering and Locomotive Company). Its products include passenger cars,

trucks, vans and coaches.


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http://en.wikipedia.org/wiki/Mumbai

http://en.wikipedia.org/wiki/Automotive_industry

Through subsidiaries and associate companies, Tata Motors has operations in the UK, South

Korea, Thailand and Spain. Among them is Jaguar Land Rover, the business comprising the two

iconic British brands. It also has an industrial joint venture with Fiat in India. Tata Motors is

South Asia’s largest automobile company; it is the leader in commercial vehicles and among the

top three in passenger vehicles. The company is the world's fourth largest truck manufacturer,

the world's second largest bus manufacturer, and employs 50,000 workers. Tata Motors has

produced and sold over 4 million vehicles in India since 1954.

Established in 1945, when the company began manufacturing locomotives, the company

manufactured its first commercial vehicle in 1954 in collaboration with Daimler-Benz AG, which

ended in 1969. Tata Motors is a dual-listed company traded on both the Bombay Stock

Exchange and New York Stock Exchange. In 2010, Tata Motors surpassed Reliance to win the

coveted title of 'India's most valuable brand' in an annual survey conducted by Brand Finance

and The Economic Times.

Tata Motors has auto manufacturing and assembly plants in Jamshedpur, Pantnagar, Lucknow,

Sanand, Dharwad and Pune, India, as well as in Argentina, South Africa, Thailand and the

United Kingdom.

Tata Motors is the country's market leader in commercial vehicles and among the top three in

passenger vehicles. It is also the world's fourth largest manufacturer of medium / heavy

commercial vehicles, and the second largest bus manufacturer. Tata cars, buses and trucks are

being marketed in several countries in Europe, Africa, the Middle East, South Asia, South East

Asia and South America.

The company, formerly known as Tata Engineering and Locomotive Company, began

manufacturing commercial vehicles in 1954 with a 15-year collaboration agreement with Daimler

Benz of Germany. It has, since, developed Tata Ace, India's first indigenous light commercial

vehicle, Tata Safari, India's first sports utility vehicle, Tata Indica, India's first indigenously

manufactured passenger car, and the Nano, the world's cheapest car.

Tata Motors has over 1,400 engineers and scientists in six R&D centers in India, South Korea,

Spain and the UK.

2. EVENTS IN MAKING

1945 – Tata Engineering and Locomotive Co. Ltd. were established to manufacture locomotives and other engineering products.


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1948 - Steam road roller introduced in collaboration with Marshall Sons (UK). 1954 - Collaboration with Daimler Benz AG, West Germany, for manufacture of medium

commercial vehicles. The first vehicle rolled out within 6 months of the contract. 1959 - Research and Development Centre set up at Jamshedpur. 1961 – Exports begin with the first truck being shipped to Ceylon, now Sri Lanka. 1966 - Setting up of the Engineering Research Centre at Pune to provide impetus to

automobile Research and Development. 1977 – First commercial vehicle manufactured in Pune. 1991 – Launch of the 1st indigenous passenger car Tata Sierra. TAC 20 crane

produced. One millionth vehicle rolled out. 1994 – Launch of Tata Sumo – the multi utility vehicle. Launch of LPT 709 – a full

forward control, light commercial vehicle. Joint venture agreement signed with M/s Daimler – Benz / Mercedes – Benz for manufacture of Mercedes Benz passenger cars in India. Joint venture agreement signed with Tata Holset Ltd., UK for manufacturing turbochargers to be used on Cummins engines.

1998 - Tata launched the Indica in 1998, the first fully indigenous Indian passenger car. Although initially criticised by auto-analysts, its excellent fuel economy, powerful engine and an aggressive marketing strategy made it one of the best selling cars in the history of the Indian automobile industry. A newer version of the car, named Indica V2, was a major improvement over the previous version and quickly became a mass-favourite. Tata Motors also successfully exported large quantities of the car to South Africa. The success of Indica played a key role in the growth of Tata Motors.

In 2004 Tata Motors acquired Daewoo's South Korea-based truck manufacturing unit, Daewoo Commercial Vehicles Company, later renamed Tata Daewoo.

In 2005, Tata Motors acquired a 21% controlling stake in the Spanish bus and coach manufacturer Hispano Carrocera. Tata Motors continued its market area expansion through the introduction of new products such as buses (Starbus & Globus jointly developed with subsidiary Hispano Carrocera) and trucks (Novus, jointly developed with subsidiary Tata Daewoo).

In 2006, Tata formed a joint venture with the Brazil-based Marcopolo, Tata Marcopolo Bus, to manufacture fully built buses and coaches.

In 2008, Tata Motors acquired the British car maker Jaguar Land Rover, manufacturer of the Jaguar, Land Rover and Daimler luxury car brands, from Ford Motor Company.

In May 2009 Tata unveiled the Tata World Truck range jointly developed with Tata Daewoo. Debuting in South Korea, South Africa, the SAARC countries and the Middle-East by the end of 2009.

Tata acquired full ownership of Hispano Carrocera in 2009. In 2010, Tata Motors acquired an 80% stake in the Italian design and engineering

company Trilix for €1.85 million. The acquisition formed part of the company's plan to enhance its styling and design capabilities.

In 2012, Tata Motors announced it will invest around 6 billion on developing Futuristic Infantry Combat Vehicles in collaboration with DRDO.

3. TATA MOTORS: GLOBAL FOOTPRINTS

Tata Motors is creating its global footprints through collaboration, Mergers & Acquisitions and Joint Ventures in almost all the continents across globe.


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Malaysia*Thailand

Bangladesh *Nepal, Sri Lanka

Kenya*

Russia*Ukraine* U.K.

Italy

Senegal

Afghanistan Uzbekistan

Brazil

South Africa*

Egypt

Saudi Arabia Iraq, Iran

China South Korea*

LATAM

West Africa

North Africa

West Europe

Central Asia East Asia

South Asia

South East Asia West Asia

East Africa South Africa

* Assembly Operations also

OTHER COLLABORATIONS/M&A & JVs• Tata Daewoo Commercial Vehicle• Hispano in Spain & Marcopolo In Brazil• JV with Jardine Matheson for ConcordeMotors• Technology Tie Ups at Spain,Italy

3.1. MERGER, ACQUISITION & JOINT VENTURE STRATEGY

The Tata Motors strategy behind collaborations, Mergers & Acquisition and Joint Ventures 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.

3.1.1.TATA MOTORS ACQUISITIONS

1. In 2004 Tata Motors acquired Daewoo's truck manufacturing unit, now known as

Tata Daewoo Commercial Vehicle, in South Korea.


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2. In 2005, Tata Motors acquired 21% of Aragonese Hispano Carrocera giving it

controlling rights of the company.

3. In 2007, formed a joint venture with Marcopolo of Brazil and introduced low-floor

buses in the Indian Market.

4. In 2008, Tata Motors acquired British Jaguar Land Rover (JLR), which includes the

Daimler and Lanchester brand names.

5. In 2010, Tata Motors acquired 80% stake in Italy-based design and engineering

company Trilix for a consideration of €1.85 million. The acquisition is in line with the

company’s objective to enhance its styling/design capabilities to global standards.

3.1.2.TATA DAEWOO

In 2004, Tata Motors acquired Daewoo Commercial Vehicle Company of South Korea. The reasons behind the acquisition were:

Company's global plans to reduce domestic exposure - The domestic commercial vehicle market are highly cyclical in nature and prone to fluctuations in the domestic economy. Tata Motors has a high domestic exposure of ~94% in the MHCV segment and ~84% in the light commercial vehicle (LCV) segment. Since the domestic commercial vehicle sales of the


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http://en.wikipedia.org/wiki/Arag%C3%B3n

company are at the mercy of the structural economic factors, it is increasingly looking at the international markets. The company plans to diversify into various markets across the world in both MHCV as well as LCV segments.

To expand the product portfolio Tata Motors recently introduced the 25MT GVW Tata Novus from Daewoo’s (South Korea) (TDCV) platform. Tata plans to leverage on the strong presence of TDCV in the heavy-tonnage range and introduce products in India at an appropriate time. This was mainly to cater to the international market and also to cater to the domestic market where a major improvement in the Road infrastructure was done through the National Highway Development Project.

Tata Daewoo is the second-largest heavy commercial vehicle manufacturer in South Korea. Tata Motors has jointly worked with Tata Daewoo to develop trucks such as Novus and World Truck and buses including GloBus and StarBus. In 2012, Tata will start developing a new line to manufacture competitive and fuel efficient commercial vehicles to face the competition posed by the entry of international brands like Mercedes-Benz, Volvo and Navistar into the Indian market

3.1.3.TATA HISPANO

Tata Hispano Motors Carrocera, S.A. is a bus and coach cabin manufacturer based in Zaragoza, Aragon, Spain and a wholly owned subsidiary of Tata Motors. Tata Hispano has plants in Zaragoza, Spain and Casablanca, Morocco. Tata Motors first acquired a 21% stake in Hispano Carrocera SA in 2005,[9] and acquired the remaining 79% for an undisclosed sum in 2009, making it a fully owned subsidiary, subsequently renamed Tata Hispano.

3.1.4.JAGUAR LAND ROVER

Jaguar Land Rover PLC is a British premium automaker headquartered in Whitley, Coventry, United Kingdom and has been a wholly owned subsidiary of Tata Motors since June 2008, when it was acquired from Ford Motor Company. Its principal activity is the development, manufacture and sale of Jaguar luxury and sports cars and Land Rover premium four wheel drive vehicles. It also owns the currently dormant Daimler, Lanchester and Rover brands.

Jaguar Land Rover has two design centres and three assembly plants in the UK. Under Tata ownership, Jaguar Land Rover has launched new vehicles including the Range Rover Evoque, Jaguar F-Type and the fourth-generation Range Rover.

4. TATA MOTORS JOINT VENTURES

4.1. TATA MARCOPOLO

Tata Marcopolo is a bus manufacturing joint venture between Tata Motors (51%) and the Brazil-based Marcopolo S.A. (49%). The joint venture manufactures and assembles fully built buses and coaches targeted at developing mass rapid transportation systems. It utilises technology and expertise in chassis and aggregates from Tata Motors, and know-how in processes and systems for bodybuilding and bus body design from Marcopolo. Tata


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Marcopolo has launched a low-floor city bus which is widely used by Chennai, Coimbatore, Delhi, Hyderabad, Mumbai, Lucknow, Pune, Kochi, Trivandrum and Bengaluru transport corporations. Its manufacturing facility is based in Dharwad.

4.2. FIAT INDIA AUTOMOBILES

Tata Motors also formed a joint venture with Fiat and gained access to Fiat’s diesel engine technology. Tata Motors sells Fiat cars in India through a 50/50 joint venture Fiat Automobiles India Limited, and is looking to extend its relationship with Fiat and Iveco to other segments.

4.3. TELCON CONSTRUCTION SOLUTIONS

Telcon Construction Solutions is a joint venture between Tata Motors and Hitachi which manufactures excavators and other construction equipment.

5. TATA MOTORS OPERATIONS AND PRODUCT LINE

Tata Motors is among the top four in passenger vehicles in India with products in the compact, midsize car and utility vehicle segments. The company’s manufacturing base in India is spread across Jamshedpur (Jharkhand), Pune (Maharashtra), Lucknow (Uttar Pradesh), Pantnagar (Uttarakhand), Dharwad (Karnataka) and Sanand (Gujarat). Tata's dealership, sales, service and spare parts network comprises over 3,500 touch points.

Tata also has franchisee/joint venture assembly operations in Kenya, Bangladesh, Ukraine, Russia and Senegal. Tata has dealerships in 26 countries across 4 continents. Though Tata is present in many countries it has only managed to create a large consumer base in the Indian Subcontinent, namely India, Bangladesh, Bhutan, Sri Lanka and Nepal. Tata has a growing consumer base in Italy, Spain and South Africa.

Tata Motors has more than 250 dealerships in more than 195 cities across 27 states and 4 Union Territories of India. It has the 3rd largest Sales and Service Network after Maruti Suzuki and Hyundai.

5.1. TATA DAEWOO, SOUTH KOREA

Tata Daewoo is the second-largest heavy commercial vehicle manufacturer in South Korea. Tata Motors has jointly worked with Tata Daewoo to develop trucks such as Novus and World Truck and buses including GloBus and StarBus. In 2012, Tata will start developing a new line to manufacture competitive and fuel efficient commercial vehicles to face the competition posed by the entry of international brands like Mercedes-Benz, Volvo and Navistar into the Indian market.


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5.2. TATA HISPANO, SPAIN

Tata Hispano Motors Carrocera, S.A. is a bus and coach cabin manufacturer based in Zaragoza, Aragon, Spain and a wholly owned subsidiary of Tata Motors. Tata Hispano has plants in Zaragoza, Spain and Casablanca, Morocco

5.3. JAGUAR LAND ROVER, UK

Jaguar Land Rover has two design centres and three assembly plants in the UK. Under Tata ownership, Jaguar Land Rover has launched new vehicles including the Range Rover Evoque, Jaguar F-Type and the fourth-generation Range Rover.

5.4. HV TRANSMISSION AND HV AXLES

HV Transmission (HVTL) and HV Axles (HVAL) are 100% subsidiary companies of Tata Motors engaged in the business of manufacture of gear boxes and axles for heavy and medium commercial vehicles, with production facilities and infrastructure based at Jamshedpur. HVAL and HVTL have been amalgamated ton HVAL and are renamed as TML Drivelines Ltd.

5.5. TATA TECHNOLOGIES

Tata Technologies Limited (TTL) provides engineering and design services to the automotive industry. Tata Motors holds 86.91% of TTL’s share capital. TTL is based in Pune (Hinjawadi) and operates in the United States and Europe through its wholly owned subsidiaries in Detroit and London respectively. It also has a presence in Thailand. Tata Technologies is a software service provider in the IT services and business process outsourcing (BPO) space. Its global client list includes Ford, General Motors, Toyota and Honda. TTL acquired the British engineering and design services company Incat International Plc for INR4 billion in August 2005. Incat specialises in engineering and design services and product lifecycle management in the international automotive, aerospace and engineering markets.

5.6. EUROPEAN TECHNICAL CENTRE

The Tata Motors European Technical Centre (TMETC) is an automotive design, engineering and research company based at the campus of the University of Warwick in the United Kingdom. It was established in 2005 and is a wholly owned subsidiary of Tata Motors. It was the joint developer of the World Truck.

6. TATA MOTORS EXPANSION STRATEGY IN VARIOUS COUNTRIES

Tata motors have decided to focus on a narrow base of 14-15 countries where market conditions are similar to that of India.

As a part of the company's new internationalization strategy, the company has decided to focus on a narrow base of 14-15 countries where market conditions are similar to that of India. In


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these countries, Tata Motors now has dedicated manufacturing facilities, marketing teams and sales teams. The idea is to have self-sustained operations in this narrow band of countries. The company evaluates locations on the basis of market opportunities and labor skills.

In the framework pertaining to international expansion strategies, Tata Motors can be identified as an Extender, and is focusing on expanding into markets similar to those of the home base, using competencies developed at home

6.1. KOREAN OPERATIONS

Tata Motors entered the advanced Korean Market by acquiring Daewoo, with which it has tremendous synergies in terms of product strategy and R & D. Tata Motors has planned to use this merger and leverage the technology for developing a World Truck for India and international markets.

Established by Daewoo Group in 1982 and built into the second largest automobile and truck manufacturer in Korea

Daewoo Group’s bankruptcy lead to the bankruptcy of Daewoo Motors in 2000 Car business of Daewoo Motors sold to GM in Nov 2002 Daewoo Commercial Vehicles Company (DWCV) had an installed capacity of 20,000

vehicles from a state-of-the-art plant built in 1995 Produced more than 90 truck models in the heavy commercial vehicle range (210 – 400

hp engine) DWCV had the second largest market share in heavy trucks in Korea in 2003

Reason for Entry

Opportunity to overcome cyclicality of Indian CV market Enhance product portfolio through catering to increasing demand for heavy vehicles Managing business in developed markets Access to technology and complementary product range Lead a change in the domestic market Strong technical and manufacturing capability


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Challenges faced by Tata Motors

Need for “Quick and dirty Due Diligence” Complimentary product range Beyond the bid price - Winning 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 Managing Unions

Measuring Success

TDCV launched a new range of medium trucks in 2006 –first major product launch since 2000

Doubling of exports in 2004 and 2005 accounting for 66% of heavy truck exports from South Korea

Launch of “Novus”in Indian market Increased market share in HCVsfrom 25% to 28% and achieved market share of

13.5% in MCVs Joint development of “World Truck” between Tata Motors India and TDCV, Korea

launched in 2009

6.2. UK OPERATIONS

Jaguar and Land Rover

In June 2008, Tata Motors Ltd. announced that it had completed the acquisition of the two iconic British brands - Jaguar and Land Rover (JLR) from the US-based Ford Motors for US$ 2.3 billion. Forming a part of the purchase consideration were JLR's manufacturing plants, two advanced design centres in the UK, national sales companies spanning across the world, and also licenses of all necessary intellectual property rights.

Reason for entry

As this is a more technically developed country the infrastructure available is much more advance and stable then India.

Tata motors European technical center (TMETC) brought up for R&D a purpose which is steadily taking Tata motors towards achieving global standards.

The political environment of United Kingdom is very stable and well structured. The laws and trading policies are well developed. Tata Motors will acquire a global footprint and enter the high-end premier segment of

the global automobile market Tata Motors gets access to latest technology which would allow Tata to improve their

core products in India


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This deal provided Tata an instant recognition and credibility across globe

Challenges faced by Tata Motors

Buying over Land Rover and Jaguar for 2.3$ billions Tata was under tremendous pressure as there were mixed reactions from all Britain.

Plenty feared about devaluation by Indian brand and suggested government to take control of Jaguar brand, as it symbolizes best of British

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 only problem that the firm faces 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.

6.3. EUROPEAN OPERATIONS

TATA HISPANO is a prominent manufacturer of bus and coach bodywork in Spain and Morocco, with sales in several other countries of Europe. TATA HISPANO is a 100% subsidiary of TATA Motors, the largest automobile manufacturer of India, World‘s second largest bus manufacturer and World‘s fourth largest truck manufacturer.

Reason for entry

The labour market of Spain is moving from a system of temporary contracts to permanent contracts. It will provide long-term predictability to employers with respect to available employees.

Spain Market is technologically evolved market as compared to India

Spanish law permits foreign investment of up to 100% of equity, and capital movements are completely liberalized.

The authority of the Spanish competition commission has been widened to make enforcement more effective

The country's environmental policies have been developed along EU guidelines.

The strategy on sustainable development and on climate change has been approved to reduce GHG emissions by developing a technical construction code and a bonus system to encourage people to buy energy efficient vehicles

Challenges faced

Country fares poorly in terms of the number of patents received as compared to France and Germany.


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6.4. LATIN AMERICAN OPERATIONS

Tata Motors has taken its alliance with Fiat to produce a new one-tonne pick-up truck, for Latin American markets from Fiat's facility in Argentina. This arrangement will also see Tata Motors forming a joint venture with a subsidiary of Iveco, the commercial vehicle division on Fiat, to set up a distribution network.

TATA Tata Marcopolo Motors Limited (TMML) is a 51:49 joint venture company of Tata Motors Ltd. (TML) India and Marcopolo S.A. Brazil for manufacturing of buses in India.

Reason for entry

Tata Motors, through the joint venture, would benefit from Marcopolo's technology for mass production of buses along with its expertise in the mass rapid transport (MRT) systems.

The technology and expertise in chassis and aggregates will be provided by Tata Motors, and know-how in processes and systems for bodybuilding and bus body design will come from Marcopolo

The JV with Marcopolo, which is one of the largest bus body builders, will enable Tata Motors to successfully address the growing demand in India

Measuring Success

The joint venture of the state-of-the-art bus manufacturing by Tata Marcopolo Motors in the well-established plant at Dharwad (Karnataka) helped the company in achieving its goals in the commercial operations with the production of vehicles.

It was the understanding between the two companies at 51:49 shares in establishment. Both the companies Tata Motors and Marcopolo of Brazil have become successful in managing the higher profit range with better deals in sales

6.5. SOUTH AFRICAN MARKET

Tata Motors entered South African market in 2004 to open two production facilities to make small cars. The distribution and marketing of Tata cars in South Africa is handled by Accordian Investments (Pty) Ltd., JV between the Imperial Group, Ukhamba Holdings (Pty) Ltd. and Tata Africa.

Reason for Entry

The original intention was to take advantage of European Union’s Free Trade Agreement (FTA). Tata motors would use this to assemble and export its cars to European markets as its competitors like Toyota, Volkswagen and Ford were already doing.


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With the growing demand of cars among the country itself, the company targeted not only the local people but international markets as its targets as well.

6.6. THAILAND/ASEAN OPERATION

Tata Motors formed a joint venture with Thonburi Automotive Plant, a Thailand-based independent assembler of automobiles — to manufacture, assemble and market pickup trucks, to enter Thailand.

Reason for Entry

Tata Motors entry into the Thai auto market is targeted at leveraging Thailand's booming pick-up market, providing the company access to the established ancillary market as well as greater volumes for engines produced in India.

Apart from local market, this gives Tata Motors an entry into ASEAN countries, since the pick-ups were exported potentially using Thailand's membership in AFTA (ASEAN Free Trade Zone)

6.7. INDONESIA

Operations through wholly-owned Jakarta-based subsidiary PT Tata Motors Indonesia Commercial launch and local assembly in 2013 Countrywide dealer network being established for sales Service and spare parts Plans for development of components locally with Indonesian vendors.

Reason for Entry

Indonesia is a key market for Tata Motors, which has a wide range of products from small cars to buses in passenger vehicles and from 0.5T mini-trucks to 49T heavy trucks in commercial vehicles. The company will begin to launch its products in 2013, for which extensive preparations are now on.

6.8. MALAYSIA

As part of its plans, the company has plotted broadly three routes for international expansion:

Traditional method of export Setting up assembly operations abroad Third is JV & Acquisition

In order to that Malaysia played a very important role for Tata motors as far as international expansion is concerned.Tata Motors worked on setting up assembly operation strategy by setting up first assembly operation in Malaysia in 1974. Since then the company has similarly expanded into Malaysia, Bangladesh, Senegal, South Africa and Ukraine. All these assembly operations are set up by the distributors of Tata Motors for these countries.


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Reason for Entry

Malaysia is very lucrative market in ASEAN due to its world class infrastructure & demand. Malaysia’s membership of AFTA & its bilateral agreement with Japan made it more attractive for Tata motors

7. FUTURE INTERNATIONAL STRATEGY FOR SUSTAINABLE BUSINESS

Now that Tata Motors has established a sustainable model in some countries, its main challenge is to replicate this model in other countries as well.

How to replicate this strategy for other markets?

Sustainable competitive advantage lies not in one, but a combination of multiple resources, each of which individually need not necessarily be the best, but in overall weighted average terms, presents the best solution. For Tata Motors, the combination of resources providing it competitive superiority on a weighted average basis includes:

1. Product Reliability

2. Service Network

3. Channel Reach

Three-way Resource Based View

In terms of product reliability, Tata Motors offers products of reasonably high standards. However, foreign players like Volvo and even local competitors like Ashok Leyland arguably offer products that are far more refined. But this is more than compensated by a dependable service network and extensive channel reach. Tata's service and distributor network is by far the most extensive of any player in the trucks industry. Hence in overall weighted average terms, Tata Motors still has a winning proposition.

7.1. RECOMMENDATION MATRIX

Based on a close scrutiny of the resource based view of Tata Motors and the challenges it faces, we propose a recommendation matrix arranged along three broad dimensions - Tangible, Intangible and Capabilities


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Three Dimensional Recommendation Matrix

Tangible

The strategies in this domain are primarily directed at sustaining Tata Motors' first mover advantage with respect to its offering in the Small Commercial Vehicle segment - ACE.

Strategy Sustaining the First Mover's Advantage of ACE

National

Footprint

Tata Motors has an unparalleled network of dealers and service stations across the

country for Medium and Heavy Commercial Vehicles (M and HCV). However most of

these service stations are along inter-city routes. It would need to replicate this

network at intra-city level for its hugely successful SCV - the Tata ACE. For this Tata

Motors can liaise with small garages, train them and certify them as 'Tata Authorized


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Service Station'.

Product

Portfolio

Tata Motors has positioned ACE as a multipurpose vehicle (MPV). This is where Tata

Motors can learn from the Maruti small car strategy that posits that 'there is no such

thing as a small car buyer'. Hence Tata Motors should endeavour to move form a

multi-purpose positioning to a mass customization positioning for ACE, wherein

multiple variants are offered on the ACE platform, each uniquely suited for a specific

application - such as tippers, long base trawlers, and milk carriers.

Intangible

In intangible terms, Tata Motors needs to bolster its brand loyalty, by providing a unique customer experience.

Strategy Intangible Assets

Unique

Customer

Experience

In commercial vehicles industry, the uniqueness of customer experience is largely

driven by the efficacy of the 'Support' framework. If your car breaks down, you can

take a taxi to office. But that's not so for a transport operator. For him, his vehicle is at

the heart of his business and hence responsive after-sales support is critical.

Minimizing downtime calls for a service network that is highly responsive and easily

accessible. Besides, Tata Motors should also

1. Consider introducing mobile service units for Tata ACE that can respond to

customer calls anywhere within a given city.

2. Start treating "Services" as a dedicated profit center. Towards this end, the

company should "productize" annual maintenance contracts.

Brand

Reputation

Building a reputation will help sustain sales, without having to engage in discount

sales.

Capabilities

There are two broad capabilities that Tata Motors should seek to acquire.

Strategy Capability Acquisition

Technology

Appropriation

Technology Appropriation is the key to Tata Motor's ambitions to offer products with

engines larger than 210 HP. As the share of ultra heavy commercial vehicles

grows, the company will need to face up to technologically superior players like


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Volvo. Here, Tata will have to carefully spearhead its 'World Truck' program by

carefully coordinating technology appropriation from its numerous international

technology partners, notably Daewoo, Fiat and Hispano.

Robust

Supply Chain

Tata Motors has made significant investments in IT systems to network its

countrywide service network. This helps them maintain very high spares parts

availability at their service stations and minimize downtime. In the years to come, it

would need to include their SCV service station within this framework. This will

however be a big challenge, since these service stations would largely be managed

by illiterate and not-so-tech-savvy repairmen.

7.2. CONTINGENCY PLANS

1. Mass customization has its own shortcomings. Firstly, it puts a disproportionate amount of strain on the company's supply chain. And this is a wasted effort in case the demand patterns aren't properly understood. Hence we propose that the sales of the customized vehicles be closely tracked and in case sales achieved within a reasonable timeframe do not merit the additional resource outlay, then the company should revert to the original multipurpose positioning.

2. In the background of rupee appreciation, exports will become costly. Hence it is prudent to open integrated production plants in other countries rather than just concentrating on exports.

3. A few pointers on what Tata Motors ought not to do are captured below: 4. Compete on price because proportion of individual players is low. Instead differentiate through

service. 5. Engage in rapid capital expansion given the high debt to equity ratio. Use ring fencing

judiciously. 6. Focus on rapid acquisitions and instead focus on consolidation in the foreign market. 7. Lose focus on the 'Value for Money' positioning, especially in the soon to be launched offering

in the Ultra Heavy Commercial Vehicle segment.


2013TATA MOTORS


2013TATA MOTORS

Tata motors rev 2

Business

Transcript of Tata motors rev 2