Posted at 10.03.2018
Keywords: jlr acquisition, tata jlr
In 2008 Tata Motors, an Indian automaker wanted to broaden its product portfolio and diversify its market bottom. It acquired both iconic British isles brands Jaguar and Land Rover from the North american automaker Ford Engine Firm. This acquisition provided the company usage of premium cars, an opportunity to add two iconic luxury brands to its steady and a worldwide footprint. It offered struggling Ford a chance to clear itself of two loss-making vehicle units.
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The deal was transformational. It catapulted Tata Motors from a commercial vehicle and small-car maker to a global player with marquee brands in its profile. The scale of the acquisition also was large in accordance with how big is Tata Motors
The purchase especially that of Jaguar, by an Indian company was considered toppling of the world order and many critics indicated doubts about Tata's capability to retain the quality and standard of Jaguar Land Rover. Tata Group Chairman Ratan Tata promised the entire world that "we have enormous admiration for both brands and will endeavour to maintain and build on their heritage and competitiveness, keeping their identities intact. ''
For the 12-month period concluded December 31, 2010, the automobile maker's earnings was more than 9. 2 billion pounds ($15 billion), and net income for your period was $1. 5 billion. The Tata Group, led by Mr. Ratan Tata, was decided to help make the offer work and put to utilize the group's management skills, money and trustworthiness. To staunch the haemorrhage at the United kingdom unit, Tata's management centered on reducing costs, bettering efficiencies and managing cash flow - lessons that Tata Motors acquired learned during the downturn in 2001. Tata also infused $1 billion to fund operations and new product launches. When the market turned, the top car manufacturer was well poised to reap the benefits and transformed profitable through the quarter ended December. 31, 2009, with a world wide web earnings of 55 million pounds ($90. 6 million).
HISTORY OF JAGUAR AND LANDROVER:
Jaguar and Land Rover are two iconic British isles brands that were bought by Ford Motor Corporation in 1989. Land Rover is a English car company that is experienced in four wheel drive vehicles. The name started from a single vehicle that was called by the Rover Company as Land Rover in the entire year 1948. After improvements, this became a porch of a number of four-wheel drive models such as Breakthrough, Defender, Range Rover and Freelander. In its history this company has already established lots of ownership (Holbeche, 2009). In 1967 Leyland Motor Corporation soaked up the Rover Company. Leyland then formed a merger with the Uk Engine Holdings and created British Leyland. The new company broke up in the 1980s however in 1988 the Land Rover (Rover Group) was purchased by English Aerospace. The Rover Group was bought by BMW in the entire year 1994 however the merger broke down in 2000 where The Rover Group was adopted by Ford Electric motor Company. It had been in the entire year 2008 that Land Rover was sold to Tata Motors as well as Jaguar cars (Johnson & Turner, 2009).
Jaguar Autos Ltd or Jaguar is a British luxury car manufacturer whose head office are situated in Coventry UK. In 1922 the company was founded as Swallow Sidecar Company that used to make motorbike sidecars and later passenger cars. Following the Second World War, the SS connotations were unfavourable and then the name evolved to Jaguar. The name modified to Leyland and eventually English Leyland in 1984 when it was posted in the London Stock Exchange.
In the entire year 2007, the Ford Electric motor Company, a extensively reputable company which also happened to be the world's third major automaker based on vehicle sales worldwide, reported the greatest annual loss in the history of establishment of the company since 1903. THE BUSINESS reported a lack of $12. 8 billion. It also stated that it would not go back to profitability until 2009. Ford stated that weak market is the primary reason to sell Jaguar and Land Rover. Both brands were however suffering losses often resulting in closure of few production crops and heavy slice in workforce
Tata Motors Small stood to get both tactical and economic benefits form the acquisition of both Jaguar and Land Rover. To start with, the offer would assist the business in acquiring a worldwide footprint as well as getting into the prestigious segment of the worldwide vehicle market. After this package, Tata Motors owned or operated the least expensive car on the planet (The Nano) going at around 2, 500 as well as some of the most expensive and luxurious vehicles such as Land Rover and the Jaguar. Although package solicited some skeptism based on the actual fact that Tata was an Indian company that was about to display the blissful luxury brands, ownership shouldn't be a major issue in conditions of the sales, service and marketing. Tata Motors will be advertised to become a major player in this industry after the acquisition of Jaguar and Land Rover both which have global existence and a good repertoire in terms of established brands, (Johnson & Turner, 2009).
The deal would also assist Tata Motors in lowering the dependence of the company to the Indian market that was at 90% of the company's sales before the acquisition. It really is in this view that the company stands to gain a whole lot from the deal as its market would be spread out to other geographical regions throughout the world. The opportunities in conditions of the diverse customer sections would also be increased (Holbeche, 2009).
There was the opportunity of increased in terms of economies of level which promotes the cost efficiency. In real sense the deal will appear as an amalgamation of three different companies that contain already gone in to the market and for that reason, the new organization which will be formed after the acquisition will have some increased operation level. This will mean that the outcome production will surge and therefore the price per unit development will be greatly reduced (Johnson & Turner, 2009).
Tata Motors Small prospected that the acquisition of both Brands would allow it with an all-inclusive fall into line of products ranging from cheapest to the most expensive automobiles on the market. The business has proclaimed its presence in the neighborhood market (India) in the low as well as the mid-class market sections and following the acquisition; the company is likely to experience a few of the segmentation of the markets that it has never plunged into. Jaguar vehicles are renowned and luxurious and because of this the automobiles have a recognised market for most of the superstars especially in the music world. Alternatively the Land Rover is a heavy obligation vehicle and based on the fact that it is a four-wheel drive it is recommended by almost all of the governments to carry out different duties in the rural areas where the highway network is not developed, the vehicles are also famous among the affluent class of citizens and therefore the deal will allow Tata Motors to plunge into these market segmentations in which the company had not been famous in (Johnson & Turner, 2009).
It is also worthy of to notice that the apart from the product incorporation, the company was facing tight competition from a few of the principle opulence vehicles producers. This portion of the market brought a great deal of profits to the business it was highly competitive in conditions of the global market. It was the renowned brands that dominated the marketplace based on the actual fact that that they had the support of the big car companies. The German Porsche and the American Volkswagen companies guaranteed a few of the luxurious brands such as Audi and Porsche. Other brands that possessed the support of big companies included Mercedes, Lexus, Alfa Romeo, Ferrari and Fiat. Following the offer, Tata Motors Small would now be able to tackle these brands competitively (Holbeche, 2009).
2- What strengths of Jaguar and Land Rover were the most effective for Tata?
Through Tata Motor's acquisition of two of the most respectable and iconic United kingdom brands that is Land Rover and Jaguar from the Ford Motors located in america, Tata motors stands to take pleasure from some gain on several grounds from that package. This acquisition came in useful for Tata since it helped the business in acquiring a worldwide foundation hence ushering them into a more extended premier segment in regard to the global market of car mobile products. Through this acquisition Tata would slide into possession of the cheapest car on earth thus the Nano at $2, 500 in addition to known and well reputed luxurious brands like the Land Rover and the Jaguar.
Tata motors acquisition of these two top brands was that the acquisition of JRL would help it reduce its over dependence on India as it created its capital marker accounting for almost 90 percent of most of its sales. The company was convinced that this acquisition would present the company with a great deal of opportunities to venture its business across different segments that marked a great deal of probable in customer acquisition (Bhabatosh, 2010). In this regard Tata gained almost a 100 percent stakes in a few companies. For example it gained stakes in three U. K. jeans, approximately twenty six sales companies countrywide, two advanced engineering and design centres, IP right, allowances for taxes amounting to roughly $1. 1 B in addition to $600 worthwhile of pension.
Tata's main determination to make this acquirement was predicated on the actual fact that they might be now in a position to outsource their products to numerous countries globally. Apart from taking technology from these two brands Tata intended to use their strong market segments in order to present their other brands in those areas where both of these brands have already penetrated and proven in somewhat to broaden their market a bit more.
As outlined above Tata wanted to create a name outside India and therefore make its existence noticed in India. Most of it brands experienced only established a solid market in India and therefore not particularly popular in the global market. Tata therefore capitalized on its wish to establish a greatly diversified fall into line of auto mobiles as this acquisition helped it up grade since it now identifies among the manufactures that is the owner of the least expensive car for some of the world's most expensive models. Aside from this Tata gained in terms of new technical know-how and all the viable systems that can come as a log with is such a chance hence as prior stated it'll be able to penetrate the global market and therefore contend with other manufactures who have already embraced latest technology (Bhabatosh, 2010). On top of this Tata would also have the ability to update its old products that it's been offering in the blooming local or market. Furthermore to using the firms technology Tata will also use its facilities of production to make desirable improvements in its vehicles and cars. Though the acquisition will cost Tata Company an approximate of $1 Billion it would actualize Tata's fantasy to go international music group hence become one of the first brand in India to make global products hence its business will achieve diversity overseas.
Despite the huge benefits which have been recognized above Tata also underwent some major obstacles consequently of the acquisition of the Jaguar and the Land Rover. Among the major challenges that the Tata Company would face was nurturing these two brands and making them flourish in their own literature on the market. The jaguar and the Land Rover are luxurious and expensive autos and there fore Tata has the uphill process of preserving it requirements and also up grading them in order that they can compete with other luxurious brands who are updating day in day trip in a bet to fetch good market by appealing to more customers.
On the other palm the acquisition also would go to the negative for Tata since it increased Tata volatility in earnings since this occurred at an extremely difficult economic turmoil in the JRL's chief markets like the United States and also Europe. Tata motors were prone to incurring huge capital expenditures in its intend to make investments in another U. S $2. 3 billion it would spend on the acquisition (Aswathappa, 2008). Tata motors experienced also at the same period incurred huge capital expenses in regards to making developments using one of its cheapest cars the Nano in addition to a jv with fiat in order for them to make their developing of some of their vehicles in India.
The other problems will be that Tata will encounter complications in leveraging Jaguar and Land Rover dealers to market Tata's products. It is because Tata has no clear synergies between them and JLR and likewise to this Tata does not have any expertise in sets marketing sections especially at such at a time when a few of the market segments like the United States and Europe are at a low tide. Tata Motors will also need to contend with stiff competition from others that have a good command in selling luxurious car in market segments which have been highly profitable but have been facing strong global competition (Aswathappa, 2008). These sections have other prominent brands which receive a whole lot of support from big automobile companies. For instanced the Volkswagen which is a car producer of the North american decent have been very aggressively backing up their brands like Audi as well as other models like the Mercedes from Daimler and Toyota with it Lexus were putting a great deal of pressure on Tata.
The other major problem that Tata will have in regard to making sales in the Jaguar and the Land Rover is to sell them in a market that is so competitive and one that is not also growing. If stricter impositions on emission norms are made it could also be a very big challenge for Tata Motors Limited. Apart from these emission and competition norms Tata Motors Limited also face a significant obstacle in the financing as well as management.
To get back to the governments trend to make increments in marketplaces that are expanding to impose emission norms that are stricter the future of Tata Motors would be facing an uphill task. Though ford continues to support Tata Motors with engine supplies and technological support, Tata will eventually have to create their own functions in regards to building engines that are more complex, safer and transmission systems in order to be at par with other luxury vehicles produces (Aswathappa, 2008). Failure to establish such types of capabilities problems will come up in distinguishing Tata's brands from those of its competitors.
The acquisition was considered to have a bunch of synergies. For example, from this offer Tata likely to endeavor into and high grade all ground vehicles and luxury vehicle segments (Bruner 2004). By combining the tool and the effectiveness of both companies Tata likely to undergo a major improvement in its international market position, something so it ultimately underwent after the successful consummation of the deal. This gave the company an entry point to the luxury car market a move that was likely to enhance their balance sheet and increase their occurrence in the global market. this is because the blissful luxury car market has a worldwide existence. Tata motors also likely to improve their global marketing by acquiring the brands that were already known all over the world by exploiting the markets that the attained company already possessed ventured into. The company also likely to tap the complex experience that the Land Rover and Jaguar employees experienced. Therefore the company expected to improve their sales and manufacturing tactics this is getting from the expertise that that they had attained while work for their former company. There have been also expectations that the abilities that they had acquired while working for the received company could be offered to the Tata company employees through their relationships which means company had expectations that their real human source capital would improve because of this of working and getting together with the employees of the bought brands. Thus their merged technological competence from both companies was also expected to give labor and birth to more superior products in future and new better practices that may lead to more market opportunities.
The acquisition was also expected to enhance the posting of industry's best practices and especially in manufacturing sector and also in the system and procedure for quality assurance. It is because the two companies had different guidelines that made them unique and because of this of their coming together new much better means of doing things was one of the expected final results. In 2007 the obtained company possessed 75% sales in the united kingdom, USA and Western european market while Tata was more reliant on the Asian market especially the Indian market therefore Tata motors likely to exploit these market that the received company acquired already busted to. quite simply if Tata motors experienced tried to get into these markets with only their own brands the marketing cost could have been extremely higher and for that reason increased their cost but with the brands that experienced already purchased consumer loyalty all over Europe and in the UK and USA market marketing their own brands alongside the bought ones was likely to be gainful and less cost prohibitive. The move was expected to decrease the Tata motors reliance on the Indian market and the business expected to improve their profits through this diversity.
It was also through this acquisition that Tata got a broader utility vans and SUV portfolio and therefore upgraded their range of brands. This improvement in their stock portfolio could have cost the Tata motors a lot in conditions of creating and market entrance not to mention the developing cost. This implies that they acquired the technological skills that already had been applied and would have increased their creation costs of the business to develop on their own and to add their products in to the market before earning the customers. Therefore through this acquisition Tata gained in conditions of cost reduction market, collection improvement. In the luxury car market Tata would have probably taken years to break right into the forex market and spent big money to design a product that would have grown to be widely satisfactory as a lavish model and contend with those already on the market and are extensively accepted in this course as the jaguar. Therefore by acquiring jaguar the company immediately gained a competitive advantages on the market and in the luxury car market because the brand had been greatly accepted (Carney 2009). In conditions of conserving time and costs which means company immediately gained after acquiring the jaguar brand. This sets Tata in an useful position in the luxury car market for the reason that should they choose to increase their portfolio in this sector they can market their new models alongside the jaguar model and therefore exploit the brand devotion that jaguar instructions on the market.
The company also gained from the supply chains that the bought brands already possessed this also takes on a part in their cost decrease strategies. Tata experienced the benefit of having lower development cost while their acquisition had higher development cost and therefore unprofitable. The acquisition therefore may help the jaguar and land rover models reduce their cost through the use of the cost conserving measures that made Tata enjoy lower creation cost. This would certainly help both brands return to profitability.
The acquisition of Jaguar and Land Rover was gainful to the Tata motors in that the company immediately gained competitive advantages in the industry since Jaguar and Land Rover in the SUV and luxury car market these brands were already greatly accepted. The business also gained cost lowering advantages because in the blissful luxury car market Tata could have probably taken years to break into the forex market and spent a lot of money to design a product that would have grown to be widely suitable as a luxurious model. Tata also gained in that they obtained the specialized skills that already have been applied. In addition they lowered their development costs since to build up independently brands and bring in their products in to the market and win their customers would have increased their costs.