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Tata Group’s Growth Strategy Through M&A
- 1. TATA Group’s Growth Strategy A study on By Shivangi Gohri
- 2. “We have two guiding arrows. One points overseas, where we want to expand markets for our existing products. The other points right here, to India, where we want to explore the large mass market that is emerging not by following but by breaking new ground in product development and seeing how we can do something that hasn’t been done before.”
- 3. Case Question Q. M&A has been a major strategic pursuit for Tata Group’s growth strategy. Discuss. Organic Inorganic • Internal growth • Cost Reduction • Productivity maximization • Slow process • Cheap • Long time • Better control & coordination • All risks in one company • External Growth Merger & Acquisitions • Fast process • Expansion of customer base • Larger pool of skill & experience • Multiplication of revenues
- 4. Key Acquisitions Period Acquirer Target Value (in Rs crore) Feb 2000 1870 Feb 2002 1439 Mar 2004 459 Aug 2004 1313 Dec 2005 1818 June 2006 1015 April 2007 1210 2000 $ 2.7 Bn 1989 $ 2.5 Bn 2008 $ 2.3 Bn
- 5. Benefits • Vertical integration • Geographical broadening • Corporate portfolio • Access to • New market • Technology • R&D capacities • Companies acquired by target companies • Complementary product range Mergers & Acquisitions Challenges • High maintenance cost for existing infrastructure • Limited expertise • Lack of synergies • Failure in culture integration • Difference in visions • Diseconomies of scale
- 6. • Need for “Quick and dirty Due Diligence” • Strong technical and manufacturing capability • Complimentary product range • Beyond the bid price • Winning acceptance of DWCV employees • Structured program to educate about India • Communication (in Korean) to management, unions and employees emphasizing Tata Motors capabilities and Tata Group’s reputation for good corporate governance • Managing the Korean culture • Respecting hierarchy and values • Managing Unions Lessons Learnt Daewoo Commercial Vehicles has been its biggest success: it has regained lost market share, and grew its sales by 35% last year
- 7. • Overall international revenues for year ending 2015-16 = US $ 69.69 Bn • Global presence by way of Jaguar • Position among top players in automobile industry • Strong synergies – R&D capacities and expansion of product line • Risk avoidance by countering domestic market cyclicality through overseas markets • Corporate India is impressed with Tata’s strategy • “The Tatas make a strategic investment, and then back it up with the right financing so that the business becomes viable.They have taken calculated risks, and have gone all-out, and tried to deliver. M&A is a mix of business (operational support), the right type of financing and very good HR”, said Nimesh Kampani, CEO, JM Financial. Conclusion