Tata Motors’ internationalization through strategic alliances
During the year of 2008, the India-based organisation Tata Motors Ltd. made the announcement of completing the acquisition of the two popular British tycoons including Jaguar and Land Rover (JLR). The strategy of merging and acquisition would bring a bright fortune in terms of increasing the universal footprint of the organisation within the automobile industry. Currently, the organisation would possess one of its cheapest vehicles – Nano (pricing US dollar 2,500) and the luxury vehicles including JLR. Despite their exclusive strategy of merger and acquisition, the company went for losses of this initiative at the initial section. The following section will critically analyse the strategy of merging and acquisition strategy by the organisation from a theoretical perception.
M&A or mergers and acquisition has been remaining a complete surge for business organisation for the past few decades. It is no exception for the Indian business organisations. According to Özcan, Mondragon and Harindranath (2018), almost 3400 business organisations joined in combined venture in the last few decades. It helps in rendering the advantages within the growth and development, competitive advantage, market expansion and synergies. The Tata group took the initiative of M&A as the strategy for internationalisation. In this regard, the outlook of Tata Motors for internationalisation are mentioned in the following section.
Tata Group has adopted the technique of Strategic alliances for mergers and acquisitions from its initial stage. The company is actively performing in different area of business including – engineering, communications, materials, services, consumer products, energy as well as chemicals. For their alliances, the company depends on five different values including – understanding, integrity, excellence, responsibility and unity. The company operates with the principle of Nation building. It is operated with different mechanisms of coordination. Tata group first allied with foreign partners Daimler Benz and World Bank. During the year of 2000, Tata Tea acquired the company or brand Tetley. And in 2008, the group acquired JLR which is the main focus of this study.
The Jaguar Land Rover Takeover opens an insight of the company’s international entry mode strategies. According to, the Electric Framework, the Entry Mode strategy introduces three fundamental techniques of Tata motors that helped in the taking over of JLR – Entry modes as well as control, resource commitment and entry modes, and disseminating the risks and entry modes.
Sharma (2019) mentioned the Tata Motors Limited was developed during the year of 1907. The trend of internationalisation was initiated during the year of 1950 when the company was able to cooperated with different foreign partners. First Tata international was developed during the year of 1962 with the year where the company focused in international leather as well as engineering. Singh and Das (2018) mentioned the corporate internationalisation became extent through gauging different indicators – proportion of entire assets, employment in the foreign countries and sales. Looking at the acquisition strategy of JLR through the following chart will also be able to visualise the gradual profit of the company.
Table : Data Structure of Tata Motors Ltd.
Entry mode strategies in taking over JLR
Source: (Buckley et al. 2016)
From the aforementioned table, it is predicted that there was a positive interrelation between EBIT of the Jaguar and Land Rover within the market. The market share of Tata Motors of JLR was positive which was 0.66. The aforementioned study observed that Tata Motors as a whole, was operating with significant correlation with JLPR. Financial synergy became the most desired outcome as reflected in the successful acquisition and merging by the organisation. And it resulted in failure for the those who combine their financial targets with the financial encumber and the target allies.
Table : Profit and Loss account with the increased interest rate after M&A with JLR 2008
Source: (Buckley et al. 2016)
According to Manda and Beatrice (2020), Tata Industries (TIL) and the Tata Sons are acknowledged as the promoting companies. The later one was established during the year of 1868 and was the operating body for majority of the Tata companies during that time. True to the nature of a conglomerate, the company started to cooperate with different independent businesses. The following diagram will be helpful to understand the conglomerate nature of TIL and Tata group entirely.
Figure: Tata Conglomerate
Source: (Jacob 2019)
The Tata Group is presently operated by the mindset of Ratan Tata. The GEO (Group executive office) and the GCC (Group Corporate Centre) are the two particular bodies to make the decision and direct the entire business. The following table will be analysing the strengths and weaknesses of internationalisation merging strategies adapted by Tata.
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Strengths |
Weaknesses |
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· Internationalisation helps in business expansion throughout the entire globe. As an example, Tata started to expand the business in the foreign countries through merging and acquisition of JLR during the year of 2008. Chattopadhyay and Bhawsar (2016) mentioned, additionally, internationalisation is a strategy that provide a business more untapped position within the market. · It provides easier access to the local talent. According to Balmer (2017), finding talents within the target market beside the home country is tough. Expansion in the foreign countries provide an access to pool potentiality out of own comfort zone. · It helps in enhancing the business growth. Entering into the foreign market allows the business organisation to foster development and growth easily. It increases global footprint and fetch new target audiences. · It enhances competitive advantages of the business organisation. Rahman and Singh (2019) mentioned it helps in accessing unique consumers and enhance visibility for the consumers. It helps to avoid saturation of market in domestic marketplace. · Satapathy and Paltasingh (2019) mentioned, foreign trading also leads towards specialisation and it encourages product differentiation. Products can be manufactured with comparatively low cost and gain higher prices from the foreign countries. · Along with this, Rahman and Singh (2019) mentioned due to the competition in the international market, the organisation attempts to provide better products within the minimal cost. It enhances the benefits and efficiency of the company for the consumer world. |
· As an adverse effect or weakness, internationalisation always posed a threat to Tata. The threat includes foreign competition, new industries, and unrestricted imports Satapathy and Paltasingh 2019). · Considering the foreign countries, India is still now acknowledged as the developing countries. Hence, it contains a dependency relationship from the financial perspective. · Mehta and Chandani (2020) mentioned, apart from the economic dependency, internationalisation often endangers a political dependency also. As an example, as history of the Tata organisation, they always remember that Britishers appeared India as the form of traders and they have ultimately ruled in India for a longer run. · Tata group acquired the internationalisation strategy before merging with JLR. Chattopadhyay and Bhawsar (2016) mentioned, entering into the foreign market is a complex phase. It requires operation of the business according to the rules and regulations of the host country. For example, Tata group needed to be oriented with the British rules and regulations before acquiring or merging with JLR. · As mentioned, internationalisation often introduces economic and political dependency. Hence, it introduces cultural barriers for the business organisations. In each of the countries, the strategy introduces new challenges. The directory body of the Tata also had limited members from the foreign countries. · According to the case study, the Tata Group has successfully operated in mor than 54 countries over almost six continents. However, the company cannot deny the fact that internationalisation become a dangerous element during the war times Balmer (2017). The company was also suffered the bad luck after the Industrial revolution hit the British countries. |
Before analysing the corporate social responsibility (CSR) and Tata’s value, it is important to understand the concept of CSR. According to Rahman and Singh (2019), the notion of CSR was curated during the year of 1950s in the United States of America. It can be defined as – ‘the obligations of businessperson for pursuing various principles for making decisions considering different relative entities desiring to get benefits by the company values. Along with this, Kadambala and Chalmeti (2016) defined the term social responsibility where the businessmen need to oversee the operational as well as economic system in combination. CSR contains different types of social responsibilities including –
Responsibility towards the company itself
It contains the responsibility of every organisation to operate the business towards achieving common growth, stability and expansion as well as earning desirable profit.
Responsibility towards the employees
- Timely salary or payment
- Creating hygienic environment
- Promoting impartial and Good behaviour
- Introducing recreational activities
- Encouraging and motivating employees to participate in managerial decisions.
Responsibilities towards the stakeholders
According to Chattopadhyay and Bhawsar (2016) corporate industry needs to safeguard the stakeholders and their investment to provide them complete return of investment.
Responsibility towards the consumers
Consumers are the most important external asset of the organisation. The corporation should not be infused into any malpractice for example black-marketing and hoarding.
Responsibility towards the environment
It is the most important responsibility of an organisation to support the activities for protecting the environment. An organisation needs to produce eco-friendly products to consider the corporate waste management.
Satapathy and Paltasingh (2019) mentioned CSR is remaining is one of the most important organisational values for Tata Group. Mr. Jamshedji Tata, (founder), was the firm believer of Gandhiji’s principles. The company had provided the first atomic and science research centre to the country. The Tata industry’s corporate social responsibility and values can be measured through the following activities –
Strengths and weaknesses of Tata Motors’ internationalization merging strategies
Tata steel
Tata Steel is acknowledged as adopting the Index of Corporate Citizenship. Along with this, it adapted the Business Excellence Model as well as the Index for Developing Sustainability. Baroth and Mathur (2019) mentioned almost 5-7 percent of its profit obviously after the tax are used for CSR activities.
The SHG (Self-help group)
Tata Group has developed almost 500 self-help groups performing on the alleviation activities or poverty. Among these 500 groups, approximately 200 groups are performing activities and generating revenue with micro-organisations. These groups also include activities including women empowerment almost within 700 villages. These groups are working on maternal and infant surviving campaigns in between the years of 2003 and 2006.
Supporting the social welfare organisations
There are numerous social welfare organisations getting support from the Tata group. The list of the organisations is as follows –
- Tata Steel Rural Development Society
- Tribal Cultural society
- National Association for the Blind
- Tata Steel Foundation for Family Initiatives
- Shishu Niketan School of Hope
- Indian Red Cross Society, East Singhbhum
- Centre for Hearing Impaired Children
Projects related to Healthcare
Tata Steel, on completing its 100 year, the company announced Centenary Project. It is a healthcare project include facilities for immunisation of children, child education, awareness creation, planation related activities and AIDS related healthcare projects.
Tata Motors
It is the first Indian company to launch vehicles considering the Euro Norms. The company started a combined journey with Cummins Engine Company during 1992, in the United States of America. It introduced a major control on emission technology for India. Along with this, Kadambala and Chalmeti (2016) mentioned, the company took initiative to restore the ecological balance with planting more 2.4 million trees in the Jamshedpur locality.
Tata Chemicals Ltd.
The values of tata Chemicals also include the notion of sustainability. Sustainability for the organisation include the means of honesty as well as transparency towards all the stakeholders. It was the first organisation organise an Impact Camp at Mithapur during the year of 1982 including eyecare for more than hundred patients
Tata Tea
Tata Tea is working on the CSR values for more than a decade. The company provides educational, rehabilitation and training to children as well as adults with special requirements through the project – Shrishti Welfare Centre, Kerala, Munnar. The projects of the welfare centre are – The Dare School, The Dare strawberry preserve unit, Athulya and Aranya.
Conclusion
In conclusion, it can be said that, Tata Group is remaining a revolutionary business industry for over a decade. From luxurious needs to the basic needs of the consumers, the company is dealing with great excellence and value. The company has victimised huge ups and downs and incorporating different new strategies and technologies with their business performance. The Tata Group is itself an industry that set examples for many upcoming businesses covering the entire world.
References
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Chattopadhyay, U. and Bhawsar, P., 2016. Instabilities in international joint ventures: a study of the Tata DoCoMo case. International Journal of Entrepreneurship and Innovation Management, 20(5-6), pp.300-319.
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