Complete strategic analysis of TATA Mptors showing how it went ahead with acquisition of JLR and future plans of TATA Motors

1. Strategic Analysis OfTATA
Motors with special emphasis
on Inorganic Growth Strategy
Sibasis Mohapatra UM15111

2. INDUSTRY ANALYSIS
Industry :- Automobile (PassengerVehicles & CommercialVehicles)
Size Of Industry:- Global – 900 billion dollars (2014-2015 data)
India- 150 billion dollars (2014-2015 data) which is 7.5 % of India’s GDP in 2014-2015
Stage in Growth Cycle – In transition towards maturity stage
Key Growth drivers Rationale
 Vehicle penetration
 Economic segment
Vehicle penetration is still low. Only 18/1000 people own a 4 wheeler vehicle in India. But, with the
changing economic scenario, the numbers have a great potential for improvement.
Indian population is likely to move up the income curve.There has been a mass exodus of population
from lower middle class group to upper middle class.Thus, implying that buying power has increased.
Critical Success Factor identified Rationale
CSF 1: operational efficiency Given the highly competitive landscape of the industry, operational efficiency is key for this industry.
Efficient operation translates into competitive advantage in the market, as can be seen from the
Japanese auto giant,Toyota.
CSF 2 :Constant innovation The consumer preference changes rapidly in this industry.Therefore, it’s imperative for the company to
constantly reinvent itself. Product development thus, is of prime importance and models need to be
renewed regularly.
CSF 3: StrategicAlliances, Flexibility, M&As In the emerging market, companies need to adapt to localization and flexibility to gain market share.
CSF 4: Distribution network As automobiles are not sold directly to customers, auto manufacturers rely on franchised dealerships to
provide local showrooms.These dealers must be knowledgeable and reputable to sell cars, which is
essential for the automaker.

3. MARKETANALYSIS BASEDON CSF
Contribution
<1.5 low
<=2 Medium
>2 High
41%
14%
12%
15%
Market share % ( No. of units sold)
Maruti suzuki Hyundai M&M TATA Motors
32%
27%
23%
18%
Market Share % ( Luxury)
Audi BMW Mercedez JLR

4. IndustryAverage ofTop 5 Firms or players serving
75-80% of the market
Market Leader
Category Indicator 2011-12 2012-13 2013-14
2014-15 (till
Q3)
2011-12 2012-13 2013-14
2014-15 (till
Q3)
Solvency
Ratios
Debt-to-
assets ratio
0.183333 0.163333 0.166667 0.156667 0.2 0.2 0.21 0.23
Debt-to-
equity ratio
0.973333 0.916667 0.733333 0.84 1.55 1.53 0.99 1.36
Interest
coverage
ratio
45.45667 71.28 81.89333 95.45333 1.99 1.58 1.39 5.32
Profitability
Ratios
Gross profit
margin
33.93667 35.50333 35.18333 36.19333 34.41 36.55 38.3 39.23
Operating
profit
margin
7.86 7.35 7.406667 9.183333 4.67 3.41 3.15 9.82
Net profit
margin
7.403333 6.52 6.736667 6.086667 6.86 4.68 5.58 5.31
Return on
assets
(ROA)
11.89667 10.65333 10.63 10.66 8.8 5.48 6.42 6.1
Return on
equity
(ROE)
40.73 29.99 27.66 24.93 40.54 24.46 25.09 23.74

6. KEYTRENDS AND POLICIES IN INDUSTRY
Indian luxury car segment is growing at a CAGR of 21% and SUV segment at 18%
India 12th largest in terms of HNI population which is growing at CAGR 20.2%
Gross turnover of industry rising at 6% CAGR
Growth trend in various segments
Government initiative to promote use of hybrid fuel
100% FDI via automatic route and reduction on excise duty from 12 to 8% under “Make in India”
Export volume rising at 17% CAGR
Under Union Budget 2015-16, the government has announced to provide credit of USD14100 to
farmers to boosts the tractor segment

7. The firm should be aware
of governmental rules and
regulation governing the
production of cars, such as
fuel efficiency , vehicle
emissions, safety and
standard issues .
Economic factor, influence
the industry directly.The
fluctuations in inflation, and
growth directly affect the
purchasing power and thus,
the industry.
Automobile industry are a major
contribution to pollution, which
lead to respiratory and skin
related diseases . Apart from
this, traffic jams and road blocks
are also major effects.
The automobile industry
constantly looks for
technological advancements.
Cars manufactures are starting
to introduce Alternative Energy
Vehicles, which are using
electricity only (rechargeable
batteries), fuel cell, hydrogen,
solar or hybrid.
Environment pollution, is one
of challenging issues
threatening the world, car
manufactures should pay
attention in it issues, by
transforming their
technology into alternative
energy vehicles, reduce
emissions
The firm should comply
with all laws and
regulation with its
operations, such as gas
emission laws, safety and
standard issues, vehicles
regulations, compatibility
spares manufactures
PESTEL ANALYSIS

8. TIMELINEOFTATA MOTORS

9. CORE COMPETENCIES

10. MARKET EXPANSION
TATA MOTORS LIMITED JAGUAR LAND ROVER

11. 43.25925926
27.45679012
18.4691358
4.839506173
2.666666667
2.271604938 0.888888889
0.148148148
LuxuryGoods
Luxury Cars Personal Luxury goods
Hotels Food
Private Jets Furniture
Yachts Cruises
SECTOR PERFOMANCE IN NICHE MARKET SEGMENT

12. STRENGTHSTO COMPLEMENTTHE OTHERSOPERATIONS
JLR’s MAJOR DOMINANCE
TML MANAGEMENTS STRONG
EXPERIENCE

13. LOW
MEDIUM
HIGH
DISTRIBUTION CHANNEL IN EMERGING
ECONOMIES
HIGH
JLR
AUDI
BMW
TML
Maruti
suzuki
LOW
MEDIUM
HIGH
DISTRIBUTION CHANNEL IN EMERGING
ECONOMIES
HIGH
Maruti
suzuki
TML + JLR
AUDI
BMW
PRICE
STRATEGIC GROUP MAPPING

14. LOW
MEDIUM
HIGH
MARKET SHARE IN DEVELOPED ECONOMIES
HIGH
JLR
AUDI
BMW
TML
Maruti
suzuki
LOW
MEDIUM
HIGH
MARKET SHARE IN DEVELOPED ECONOMIES
HIGH
TML + JLR
AUDI
BMW
PRICE
Maruti
Suzuki
Country of
Investment
Category of Investment Industry Reward
to Risk Ratio (A)
Country Reward to
Risk Ratio (B)
Risk Adjusted
Rewards
( 0.65A + 0.35B)
Product Market Investment
Strategy
Investment
Rationale
United Kingdom LuxuryAutos 1.03 1.2 1.09
Score-69.45
Overall Ranking-2
Acquisition New market
creation
Product
diversification
into premium
segment
Heavy addition to
top line
PRICE

15. KEY ASSUMPTIONS Buying firm Target Firm
Expected Growth rate for
next 5 years
12% 20%
Expected Growth rate for
next 5 years
10% 7%
Risk premium 5.5%
Current risk 6%
FinalValuation 2.7 bn $
Cost Synergy 1.17 US bn $
VALUATION & FINANCING
Discounted Cash Flow Model was used for valuation & calculation of cost synergy
Amount paid 2.4 bn $ + 600 mn $ (towards JLR pension fumd)
Financing
2.4 bn $ through equity instruments
600mn $ was raised by issuing securities in foreign markets

16. 0
5
10
15
20
25
TATA MOTOR
(REVENUE)
JLR (REVENUE) TATA
MOTORS(PAT)
JLR(PAT)
9.1
0 0.5 0
20
21.2
0.6 1.31
JLR's Contribution
2007 2015 #REF!
IMPACT OF ACQUISITION

17. TATA MOTORS’S KEY PRODUCTAND SERVICE PORTFOLIO

18. VOLUME
To sell 0.5 million units by 2020 Monthly wholesale sells in units 46000 Jaguar XE and Land rover discovery
launch
TATA Nexon series in SUV
TATA Kite sedan & Hatch back series
Internationalisation of Commercial
Vehicles segment
MARKET SHARE To consolidate the pole position in
Commercial vehicle segment
To be within top three passenger vehicle
player by 2020
To be the leader in defence sector
Percentage share of market segment 75%
10%
60%
Customisation of HCV, LCV sector.
Increased focus on better designs & fuel
efficiency. Investment on ULTRA &
PRIMA segment
Launch of new products, improved
dealership network, AMP Architecture
Cumulative investment of 2000cr/year
into the prospective 100bn$ industry in
terms of R&D and manufacturing facilities
CUSTOMERS To top the automobile industry in terms of
customer satisfaction
Understand product/service feedback;
redress complaints; suggestions on product
development
Customer Satisfaction Index
JD work survey
920/1000 Online common CRM platform for real
time feedback from customers & channel
partners
To triple sales/service network
DEALERS Building capacity and technical know-how;
improving and delivering better response to
customers
To do better than industry avg. of 827/1000
Dealer satisfaction Index Improve from 756 to 900/100 To integrate all dealers into CRM-
DMS.Better support from TDCL
Better support from TML staff, training
facilities, improved warranty and after
sales services
FINANCIAL To reduce trade receivables
ROCE
Profitability
Asset utilization
Operating profit per share
Inventory turnover
% decrease
Percentage
Operating Margin
Total Asset turnover ratio
INR/share
Inventory turnover ratio
10%
30%
15%
4.5
300
10
VAVE programme to cut down cost of
500cr in FY 2016 and 900cr in FY2017
Application of lean systems in SCM and
process engineering
Cost reduction via proper sourcing of
materials & economies of scale
Proper quality management system
Strategy Objectives Measures Targets Initiatives
BALANCED SCORECARD (VMCDF Model ofTATA MOTORS)

19. STRENGTH  Tata’s strong management
capability
 Strong monetary base to
invest
 Synergy due to Corus,
TACO andTCS
 Experience in growing
market like India
 New product
 JLR would giveTAMO an
in-house R&D and
designing capabilities
 Better utilization of cash
reserves available with
TAMO
 Reduce production cost of
 Acquisitions like JLR will
helpTAMO in competing
with brands like Merc. etc.
 Proven Management and
brand building capabilities
would facilitate faster JLR
turnaround
 Strong financial muscle will
helpTAMO to invest in
R&D and produce new
better products
 Improve risk profile of
WEAKNESS Weakness
 Inexperience in Handling
luxury automobile brand
 Inexperience in turning
around loss making
company
 R & D and designing
capabilities
 JLR experience and
designing capability would
helpTAMO in improving
their existing products in
Indian markets.
 JLR’s strong brand image
will ease acceptance of
TAMO in international
markets
 Keeping the existing
management team of JLR
make turning around
easier
 Leverage experience
gained withTetley and
Corus in allaying market
apprehensions about
acquisition
 Make Jaguar design center
as their global design HQ
 Use Jaguar channel to
SWOT ANALYSIS

20. OPPORTUNITIES •Rising appetite for luxury automobiles in
growing markets like India and China
•Established European brands available
at affordable investment
•Support from Jaguar inTechnology,
Engine, IT, Accounting
•Complete product line with addition of
luxury brands
•Access to European & American market
THREAT •Volatility in market driven by new
products
•Strong presence of competitors like
Mercedes, BMW, Lexus and Infinity
•Receding sales and brand image
•Downturn making Investment riskier
and costlier
•90% ofTAMO revenues comes from one
market alone-India

21. 42
15
10
8
Market Share %(PassengerVehicles)
Maruti Suzuki Hyundai M&M TATA Motors Ltd
42%
23%
17%
6% 3%
Market Share % ( CommercialVehicles)
TATA MOTORS M&M Ashok Leyaland
Volvo Eicher Force
COMPETITORANALYSIS
0
10
20
30
40
50
60
TML (CV) M&M(CV) TML(PV) M&M(PV)
TML vs M&M % Market Share
2013 2014 2015

22. TATA MOTORS MAHINDRA & MAHINDRA
CSF MEASURE SCORE WEIGHTAGE CSF MEASURE SCORE WEIGHTAGE
Operational
Efficiency
Operating
Margin
0.16 0.25 Operational
Efficiency
Operational
Efficiency
0.19 0.25
Constant
Innovation
New Product
Launches
0.12 0.3 Constant
Innovation
New Product
Launches
0.21 0.3
Flexibility &
Strategic
Alliances
No. of JVs ,
alliances
,acquisitions
for strategic
competitive
advantage
0.14 0.2 Flexibility &
Strategic
Alliances
No. of JVs ,
alliances
,acquisitions
for strategic
competitive
advantage
0.12 0.2
Dealership CSI , DSI, SCM 0.17 0.25 Dealership CSI , DSI, SCM 0.2 0.25
Total Score 0.59 1 Total Score 0.72 1
COMPETITORANALYSIS ON BASISOF CSF

23. M&M TATA MOTORS
Operating Margin % 12.1 14.9
Net Working Capital to Sales % 8.4 0.6
Debt to equity ratio x 0.9 1
Sales to assets ratio x 0.8 1.1
Return on assets % 6.6 7.9
Return on equity % 12.1 24.9
Return on capital % 16.6 23.6
Exports to sales % 3.1 1.5
COMPETITORANALYSIS (FINANCIAL)

24. COMPETITORANALYSIS OF JLR
32%
27%
23%
18%
Market Share % ( Emerging Economies)
Audi BMW Mercedez JLR

25. JLR AUDI
CSF MEASURE SCORE WEIGHTAGE CSF MEASURE SCORE WEIGHTAGE
Operational
Efficiency
Operating
Margin
0.22 0.25 Operational
Efficiency
Operational
Efficiency
0.2 0.25
Constant
Innovation
New Product
Launches
0.24 0.3 Constant
Innovation
New Product
Launches
0.24 0.3
Flexibility &
Strategic
Alliances
No. of JVs ,
alliances
,acquisitions
for strategic
competitive
advantage
0.15 0.2 Flexibility &
Strategic
Alliances
No. of JVs ,
alliances
,acquisitions
for strategic
competitive
advantage
0.16 0.2
Dealership CSI , DSI, SCM 0.24 0.25 Dealership CSI , DSI, SCM 0.24 0.25
Total Score 0.85 1 Total Score 0.84 1
COMPETITORANALYSIS ON BASISOF CSF

26. • Nano• HCV
• MHCV
• LCV
• Trucks & Buses
• Passenger
Vehicles
• Defence Purpose
Vehicles
• Jaguar Land
Rover
• Municipal
PurposeVehicles
STAR ?
DOG
CASH
COW
BCG MATRIX

27. Near Term (<- 2 years) Mid Term (2-5 years) Long Term (5-10 years)
Growth Areas Passenger Vehicle segment
Commercial Vehicle Segment
Defence/Municipal purpose Vehicles Hybrid fuel powered Vehicles
High Level Tasks Design & launch of NEXUS series SUVs and
KITE series Hatchbacks and cars
Customisation & Internationalisation of
MHCV & LCV brands
Jaguar XE and Land Rover Discovery launch
Capex investment of 900 cr INR /Year
Target order bookings of 6000cr INR/year
3.5bn$ investment in JLR
Launch of JLR’s Global Fleet Strategy
AMP & VAVE Strategy
Design of phase 2 of oneCAT Vehicle
Final design and launch of SIGNA range of
commercial vehicles
Potential Benefits to be achieved Increase in sells of Passenger & Commercial
Vehicles
Increase in export of Commercial Vehicles
Market share growth of JLR
TML will tap into 100bn$ defence sector in
India
Increased production and improvement
marketing channel for JLR
Cost reduction(Operations)
More investment towards sustainable
development
Rewards Increase of market share in passenger
vehicle segment from 5.7 to 10%
Consolidation of top position in Passenger
vehicle segment at 75%
Increase of JLR sales by 17%
30-40% revenue from defence segment
JLR sale will increase from 17% to 25%
Cost reduction to the tune of 900cr INR
First mover advantage in this sector
1st ever company to launch a vehicle
powered by Air
Risks Increased competition
Economic slowdown in Brazil, China and
Europe
Increased competition
Economic slowdown in Brazil, China and
Europe
Investments are huge
Exact timeline of market need not
guaranteed
Key Success Factors Improved dealership and services network
to push sales of new products
Agile product strategy team
Improved design & service in defence
sector
Robust supply network to cater to global
fleet demand of JLR
Collaborative R&D b/w TML & JLR
ROAD MAP FOR FUTURE

28. STRATEGIC ROAD MAP FOR FUTURE