Dr CR Rajan

TATA SONS – GLOBAL FOOTPRINTS

 Indian Brand

• Perception gaps
– Fakirs
– Elephants
• Like all Ems the only undisputed logic is cost
• Moving up the value curve ? (apple type)
 TATAs
• Placing Shared Values in the middle of the model
emphasizes that these values are central to the
development of all the other critical elements.
The company's structure, strategy, systems, style,
staff and skills all stem from why the organization
was originally created, and what it stands for. The
original vision of the company was formed from
the values of the creators. As the values change,
so do all the other elements.
 Old view vs New
• Comparative cost advantage
– Wine and butter approach
• Rooted in “natural endowment”
• Agrarian view point –either as output or input
to industry
• Old world –spice trade , silk road ,
• Does not explain successes like Japan ?
 Competitive advantage of nations
• Porter tried to answer the following questions:

• Why does a nation become the home base for successful international
competitors in an industry ? Germany is renowned for car manufacture;
• Why are firms based in a particular nation able to create and sustain competitive
advantage against the world's best competition in a particular field ?
• Why is one country often the home of so many of an industry's world leader ?
• Porter called the answers to these questions the determinants of national
competitive advantage. He suggested that there are four main factors which
determine national competitive advantage and expressed in the form of
diamond.
 Diamond

Factor Conditions: Include availability of raw materials

and suitable infrastructure.
Demand Conditions: The goods or services have to be
demanded at home: this starts international success.
Related and supporting industries: These allow easy
access to components and knowledge sharing.
Firm strategy, structure and rivalry: If the home market
is very competitive, a company is more likely to become
world class.
 Diamond
Context
5-Forces domain

Factor Condition
Demand
-Natural resources
Local context that encourages -Demanding
-HR
investments customers
-Infrastructure
Vigorous competition among Unusual Local
-Scientific and Tech
local rivals Demand in segments
Infrastrure
that can be met
globally
Related and Support
Industry
-local suppliers
-Presence of clusters
 Clusters
• Auto in germany
• Semiconductors of Japan
• Hosiery in Tirupur
• Films in Hollywood
• Stone cutting in Italy
• Detroit
Global Competitiveness Index

BASIC REQUIREMENTS
1. Institutions
Key for
2. Infrastructure
3. Macroeconomic environment
factor-driven
economies
4. Health and Primary Education

EFFICIENCY ENHANCERS
5. Higher Education and Training
6. Goods Market Efficiency , Key for
7. Labour Market Efficiency, efficiency-driven
8. Financial market Efficiency economies
9. Technological Readiness
10. Market Size
INNOVATION & SOPHISTICATIONS FACTORS
Key for
11.Business Sophistication
12Innovation
innovation-driven
economies
 Progression
• Factor Driven Economies

• Efficiency Driven

• Innovation driven
 Examples
Porter found that countries with factor disadvantages were
forced to innovate to overcome problems e.g. Japanese
companies experienced high energy costs and were forced to
develop energy efficient products and processes that were
subsequently demanded everywhere in the world.
Sweden's global superiority in its pulp and paper industries is
supported by a network of related industries including packaging,
chemicals, wood-processing, conveyor systems and truck
manufacture. Many of these supporting industries have also
achieved leading global positions. ( Indian IT companies and
Automotive - Tata Motors are in process of doing so.)
 Tata Group –
Global Footprints
Dr. CR Rajan
 Key questions
• Should Tata bid for Jaguar and Land Rover
• How else can Tata compete with Ford ,Toyota Honda and
other rivals to globalize ? .Can they think of being a global
Parts supplier
• How are the Tata group companies using M &A
– Tata Steel
– Indian Hotels
– Tata Tea
– TCS
• How does Tata as conglomerate manage globalization and
M&A
 Keepers of the flame
• https://www.youtube.com/watch?v=tKb-voAU
ww0&feature=
youtu.be
 Jaguar and Land Rover-1 Pasture st

Yes No
• Stretch Capabilities • Tata motors already
• Acquire Distbn Channels stretched ( $3 bn Capexes)
• Keep up with other low cost • High debt/equity, -ve FCF
players • Low cost resources can be
• Add low cost manufacturing contracted in India
and design to Land Rover • Premium car inconsistent
with Tata image
• Tata Beuracracy?
• How about China as a
emerging mkt. instead?
 Tata Motors competencies
• Deep insights of Indian market
– Ace –an innovation
– Lower end car
– Leveraging existing channels of distribution
• Understanding of social issues
• Political management –very mixed e.g Bengal
• Is there any arena they are not in?!!
 Routes to globalise

• Emerging market first like LG ?

• China as an exploding opportunity
• Focus on Heavy vehicles

• How does an Ansoff look?

Tata JLR acquisition – Bumpy Road?
• https://www.youtube.com/watch?v=
H8kSF_pv9uE
 Wharton
https://www.youtube.com/watch?v=
LYQ9OCItyyk
 Other Tata Companies-2 pasture nd

• Tata tea
– Prototyped global M &A
– Limits to Synergy
– Use platform for growth
• Indian Hotels
– Acquiring a chain?
– Can an Indian company own a premium chain?
Brands?
– Hostile take overs?
 Other Tata Companies
• TCS
– Born global?
– Capitalized on labor market asymmetry and created an Indian
MNC
• Tata Steel
– Lower costs
– Paternalism
– Are these transferable ? Especially cost advantage?
– Why did they buy Corus?
– Can we compare with Haier? Others?
 Third Pasture
• Group assets
– Brand name ,quality, ethics and transparency
• Tapping into Indian assets?
• Are there commonalities across global
strategy
– Not really –varying industries, structure and
conduct
• What is unique about group structure?
 Third Pasture
• What is unique about group structure?
– Equity ties cement group
– Tata Industries as holding company to launch new
initiatives
– Not conglomerate but a large clutch of companies
all independent –what do they share?
• Take a long term view
 Harbir Singh – Indian way
• https://www.youtube.com/watch?v=
LYQ9OCItyyk
Tata Sons Rationale for Gains Challenges
Experience Acquisition
Books are stressed
Taj Hotel’s Access to Developed Jaguar Brand, Land
understanding of Markets –US, Rover Brand Internal Capex ~ $3
Luxury customers Europe bn
Aspirational product
Tata Tea acquisition Access to high class in Emerging High leverage
of Tetley Technology Markets impact on stock
price
Tata Steel Leapfrog into high Potential high
Acquisition of Corus end segment growth in China Shareholders may
,India not support
House of Tata National Pride? wholeheartedly
credibility Price may be far less
Global Relevance than what it would Corus deal “ iffy “
Titan cost to build
Corporate Center Ford selling in something like JLR Perception of India
Competencies distress