Download - TATA Case on Unrelated Diversification
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BY GROUP 5, SECTION 1
HARSH KAMAL BHATNAGAR (FT151009)PRIYANKA MANOJ KUMAR (FT151012)
SREERAM K MOORTHY (FT151033)MAYANK MODH (FT151057)ANOOP KRISHNAKUMAR (FT151077)KUSHAL KISLAY (FT151093)DIKSHA MEHTA (FT151097)
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House of Tata:
Acquiring a Global Footprint
Group 5:
Amar Pratap Singh
Chandni Gupta
Jyoti kumar Rastogi
Vishal Drolia
Yash Sobti
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JamsetjiTata(183
9
1904)
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JRD
Tata(19
31
1991
)
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RatanTata
(1937T
illDate)
Graduated with a degree in Architecture andStructural Engineering from Cornell University.
Also completed advanced management programmeat Harvard Business School.
Appointed the Director-in-Charge of The NationalRadio & Electronics Company Limited (Nelco) in1971.
Became the Chairman of Tata Industries in 1981.
Took over as Tata Group Chairman in 1991
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Evolution and Trend
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Evolution and Trend
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Structure
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TATA Group
Globalization Strategy
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Basis for Globalization Strategy
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Why Globalization?
Resources andCapabilities
Technology
Superior Human
Resources
Innovation
Government Regulationand Taxation
Risk Diversification
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riousRou
testoGlobalization Export
TransportCosts
Tariff Barriers Free TradeAgreements
Set-up
SubsidiaryMarketing Manufacturing
Full Scale
OperationsJoint Venture or
Alliance
Independent
Operations
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TATA GroupGlobal Network
- Began
Relationship in
1977
- Over 100mn of
Investment
A
F
R
I
C
A
- Strong Base- Headquarter in
India- Buildingsignificant
presence in China
A
S
I
A
- Operating here for
over 30 Years
Australia
- Present for over 60years
- More than 24000employees
- More than 80 officesacross N. America
North America
- Presence since 1990s
- More than 8000
employees across S.
America and Latin
South America
- Started in UK in1907 as first
base
- Largest IndianEmployer in UK
- 45000 StrongWorkforce
E
U
R
O
P
E
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MergerandA
cquisition
s
Tata company Acquired company Country Stake acquired
2011
April Tata ChemicalsOlam International, Republic of
Gabon
Republic
of
Gabon
25.1 per cent
August Tata Chemicals EPM Mining Ventures Canada 30.6 per cent
2010
January Tata
Communications
BT Group's (BT) Mosaic
business
UK 100 per cent
April TRF Hewitt Robins International UK
December Rallis India
(through Tata
Chemicals)
Metahelix Life Sciences India 53.5 per cent
Tata Chemicals British Salt UK 100 per cent (wholly-owned)
Tata International Bachi Shoes India India 76 per cent
Tata International Euro Shoe Components India 76 per cent
2009
January Tata
Communications
Neotel South
Africa
30 per cent
March Tata Tea
(now Tata Global
Beverages)
Grand Russia 33.2 per cent
July TRF Dutch Lanka Trailer
Manufacturers
Sri
Lanka
51 per cent
October Tata Motors Hispano Carrocera SA Spain Remaining 79 per cent
2008
January Tata Chemicals General Chemical Industrial
Products (now Tata Chemicals
North America)
US 100 per cent stake
Tata Projects Artson Engineering India
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MergerandA
cquisition
s
March Tata Motors Jaguar and Land Rover brands UK
Telco Construction Equipment
Company (Telcon)
Serviplem SA Spain 79 per cent
Telco Construction Equipment
Company (Telcon)
Lebrero SA Spain 60 per cent
June Tata Communications China Enterprise
Communications Limited (CEC)
China 50 per cent equity
interest
August Voltas Rohini Industrial Electricals India 51 per cent
September Tata Power Geodynamics Australia 10 per cent
October Tata Motors European Technical
Centre Plc
Miljbil Grenland /
Innovasjon
Norway 50.3 per cent
December TCS Citigroup Global Services US 100 per cent
2007
January Tata Steel
Corus
UK 100 per cent
March Tata Steel Rawmet Industries India
April Indian Hotels Campton Place Hotel US
Tata Power Acquired Coastal Gujarat Power India
Tata Teathrough Tetley group
(now Tata Global Beverages)
Vitax and Flosana
trademarks
Poland
Tata Communications Transtel Telecoms (TT) South
Africa
June Tata Power PT Kaltim Prima Coal
and PT Arutmin Indonesia
Indonesia 30 per cent equity
stake
October TRF York Transport Equipment (Asia) Singapore 51 per cent stake
2006
January Tata Metaliks Usha Ispat, Redi Unit India 100 per cent
(wholly-owned)
Tata Interactive Tertia Edusoft Gmbh Germany 90 per cent
Tertia Edusoft AG Switzerland 90.38 per cent
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MergerandA
cquisition
s
October Tata Teathrough Tata Tea
(GB)
(now Tata Global
Beverages)
Good Earth Corporation & FMali
Herb Inc
US 100 per cent (wholly-
owned)
TCS Financial Network Services Australia
TCS Pearl Group UK Structured deal
November TCS Comicrom Chile
December Indian Hotels Starwood group (W Hotel) Sydney 100 per cent (wholly-
owned)
Tata Chemicals Brunner Mond (now Tata Chemicals
Europe)
UK 63.5 per cent (December
2005)
2004
January TCS Airline Financial Support Services
India (AFS)
India 100 per cent (wholly-
owned)
March Tata Motors Daewoo Commercial
Vehicle Company
Korea 100 per cent (wholly-
owned)
June Tata Chemicals Hind Lever Chemicals India Amalgamation
November Tata Communications Tyco Global Network US
2003
July Tata Communications Gemplex US
2002
February Tata Sons Tata Communications
(formerly VSNL)
India 100 per cent (wholly-
owned)
September Indian Hotels Regent Hotel India Effective 100 % stake
2001
November Tata Sons (TCS) Computer Maintenance Corporation
(CMC)
India
2000
February Tata Teaand
Tata Sons
Tetley group UK 100 per cent
(wholly-owned)
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M&A Analysis
St
rategi
cOb
je
ctives
Tea Industry India Hotels
(IHC)
Steel Industy Automotive Software/Servic
es
Tetley (UK) Regeant Hotels,
The Pierre, W
Hotel, Ritz
Carlton Boston,
Innovative Foods
Corus (UK),
NatSteel (Spore)
and Millennium
Steel (Thailand)
Daewoo
Commercial
JaguarLand
Rover (Under
Consideration)
CMS, Phoenix,
Hughes Telecom,
Aviation
Software, TKS-
Teknosoft, Total
Communication
Solutions
M&A
Companies
Access to
developed Markets
complementing
Tata tea brands
Chain of hotels
seamless
support internal
and external
guests
Yes
disintegrated
strategy
Yes
complementing
exciting
product
portfolio
Yes
frontrunner for
Global market in
IndiaFirst
Moveradvantage
Strategic Fit
for the TATA
Group
In line with
management vision
of global expansion
Yesaccess to
gateway markets
Yes Yesreach
middle class
and bottom of
pyramid
markets
Yesachieve
global presence
and brand
building
Alignment
with
ManagementVision?
Addition of value
added tea brands
New premium
properties
Diversified
Product Mix
Diversification
of product
portfoliotrucks, buses,
cars (low to
premium)
Diverse
Product
Portfolio
Access to new
markets
YesNew
international
markets
Access to new
strategic
markets
Access to new
markets
specifically in
Europe and
USA
Mature and
emerging
Markets
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M&A Analysis
St
rategi
cOb
je
ctives
Market Reach N/A N/A Access to niche,
advanced
technology
Yesaccess to
advanced
technology
Complimenting
and synergistic
with existing
portfolio
Technology YesComplimenting
TATA tea with
Tetley
Yesleveragingthe Taj brand
Yesleverageeach others
strengths and
achieve
backward
integration
Yescomplementing
the already
existing
products of the
TATA stable
Yes -complementing
the already
existing products
of the TATA
stable
Synergies
with TATA
Group
Companies
Yes Yes Yes Not yet Yes
EVA Positive Yes Yes Yes Yes Yes
Achieve
Economies of
Scope
Yes N/A Yeskey value
proposition
Yesachieve
synergies
across the
supply chain in
diverse markets
N/A
Supply Chain Yes N/A Yeskey value
proposition Yesachieve
synergies
across the
supply chain
in diverse
markets
N/A
&A A i C i
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M&A Analysis Conclusion
One hundred years from now, I expect the Tata to be much bigger than it
is now. More importantly, I hope the group comes to be regarded as being
the best in India best in the manner in which we operate, best in theproducts we deliver, and best in our value systems and ethics. Having said
that, I hope that a hundred years from now we will spread our wings far
beyond India..
-- Ratan Tata
Despite of all pits and falls, it is moving its wing Over India. The way TATA isgrowing, definitely we can not neglect its role in Globalization.
S h f T O i i S
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Strengths of Tatas Organization Structure:
A strong integrated corporate identity
Share of Tata Sons was 29% which servedtwo purposes Gave them veto rights and hence a
protection from any potential takeover. Ensured a centralized operational control
over the group. Establishment of GEO and GCC to oversee
group operating companies and ensurebetter coordination amongst them.
Strong leaders across all divisions.
T T i i i f T l
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Tata Teas acquisition of Tetly:
Challenges in taking it to global platform:
Building a vision, structuring it and making it relevant so that it canbe implemented. Raising capital by way of debt from the future earnings of the large
global organisation which was yet to be acquired was difficult. The strategic direction which may lead to building synergies in
future was missing.
Tactics Used: The financial tools used ensured that other business were
unaffected by the debt so raised. Tetlysstrong management was retained. Task forces were created for successful integration.
Identification of areas where it was possible to synergize better anddevelop efficiencies.
SWOT A l i f T t G
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SWOT Analysis of Tata Group:
Strengths
Experience
Resource
capabilities(People and
raw material)
Business modelculture
Weakness
Distribution
Macro environment
Opportunities
Exports
New products
New markets
Acquisitions and
mergers
Threats
Free market
Low barriers
Globalization of
economy
Sit ti l A l i
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Situational Analysis:
Hold significant share of countrys passenger carsand dominates Indias commercial truck market.
Brand targeting low and middle income economiesand the middle of the market segment
Targeting low end auto segment through Nano
VEHICLE MARKET SHARE
Cars 17%
Light trucks 34.82%
Medium/heavytrucks
64.74%
Buses 51.12%
A l i f JLR
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Analysis of JLR:
Ford acquired Jaguar ,a British luxury and sports carbrand in 1989 which has been unprofitable underFords ownership
Ford acquired Land Rover ,mid-range and luxury
sports-utility vehicles in 2000 which was reported tobe profitable under Fords ownership
Ford made losses of $12.6 bn in 2006 which wasmostly due to Jaguar
Jaguar sales growth in 2006 was 32% less than theprevious year in US.
Ad t f A i iti
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Advantages of Acquisition:
Access to the high end of the auto business
Customer having various options to choose the product, with increasedportfolio
Strategic opportunity to acquire brands with global presence and arepertoire of well established brand (opportunities to become one ofthe major players)
Reduced dependence on the Indian market which accounted for
majority of sale(help mitigate risk) Access to latest technology, robust designing and R&D capabilities
which can help in improving their core products in India Synergy creation
Cost competitive advantage and opportunities of synergy by usingSteel supplied by Corus
Established brand available at affordable investment ($1 bn-2bn) Strong brand image of JLR can facilitate the acceptance of Tata product
in the international market. Using JLR distribution channel for their product to enter in US market
which seems unlikely without the acquisitions
R d Ah d
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Road Ahead:
Tata Motors should go ahead with the deal as it givesaccess to Global market
They should be able to leverage the existingdistribution network
Should be able to instill confidence that the premium
brand is in safe hands They should handle the union judiciously and
employee productively Integration of the culture of the two companies as a
part of their corporate strategy.