International Business Case Study

The acquisition of JLR by TATA Motors is regarded as an important phenomenon when studying takeovers as well as mergers that occur among the companies. Many people saw TATA’s decision of acquisition to be ill-timed. Therefore, the majority of people ended up questioning strategic logic behind TATA’s decision to make such a move, especially at that time. The situation exacerbated especially due to the timing, since the merging processing completed immediately when the demand for cars, especially for the luxurious group, fell. The demand for luxury cars plummeted mainly due to the financial crisis that was experienced globally (Rhemrajani 2015). As a result, TATA had to refinance the newly acquired company once more as a way of sustaining its investment. Nonetheless, the takeover process appeared to have succeeded, which helped to generate a considerable value in terms of revenue for the Indian company, TATA. Moreover, this decision was very important, as it encouraged JLR’s shareholders to continue participating in decision-making of the company while still being in the United Kingdom.

It is worth looking at the history of Jaguar Land Rovers prior and after it was acquired by the Indian TATA. Jaguar Cars were first bought to the market in 1989 by a company known as Ford. Additionally, Ford bought Land Rover from another company that is referred to as BMW in 1989 for a total price of $1.4 billion (Rhemrajani 2015). Nonetheless, there was an arduous relationship between the owners in the United States and the UK. Due to the rapid globalization, the manufacturer had to suffer, because most of the time fast and painful decisions had to be made. As a result, Jaguar incurred heavy losses while it still was under the control of Ford. In fact, the debt hit an optimal of $ 600 million on an annual basis (Rhemrajani 2015). Nevertheless, a heavy investment in a new model of development was still made.

On the other hand, TATA, which is considered to be among India’s largest private corporations, had made some investment in the United Kingdom. Earlier on, it has bought companies like Tetley and Corus Steel in the years 2000 and 2007, respectively. Corus Steel is one of the biggest suppliers of raw materials to the Jaguar Land Rovers. The situation seemed to be doomed due to the fact that Ford had already made some very heavy investment.

At one point in time, TATA decided to come to rescue. Successful acquisition process occurred in 2008. The whole acquisition cost the company over one billion euros. Surprisingly, the international demand for cars was collapsing noticeably. Nevertheless, the takeover loan was to be financed with an approximate of $3 billion in the long run (Rhemrajani 2015). At this point, the company realized the importance of such financiers as the shareholders (Hill 2012). Rapid internationalization allowed to find these lender across national boundaries. However, the firm continued to incur huge losses, as the business did not pick up. The whole acquisition deal had to be completed in one year, and this phenomenon was associated with the success of post-merger integration. TATA acknowledged that Ford’s support was still requisite, as it was the main supplier of Jaguar’s in addition to Land Rover’s components. As a result, TATA Group did not announce any major business changes as it was usually expected in such deals. Trade unions, United Kingdom’s government, and employees were informed of the intended decision earlier, and most parties supported voiced their support. Therefore, it was endorsed by all trade unions that were involved. Therefore, the company has realized the importance of engaging trade unions and various governmental agents, because they are considered potential shareholders of any company. With the vast influence of globalization that swept across the world, even governmental agents of different countries had to be considered. TATA Group needed to reassure these shareholders that it would not interfere with the internal organization structure for a while.

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Initially, there were some motives behind the whole process. Firstly, TATA was optimistic believing that buying JLR was going to raise its revenue synergy. It was a startup company and it needed to become an already established player in order to realize more benefits. The anticipated benefits were going to come in the form of offering quality service to the customers, gaining international distribution, offering a broader product range, and boosting the relationship between motoring businesses and TATA (Ahlstrom & Bruton 2010). As a result, TATA would be able to reach an outstanding engineering capacity and enjoy the benefits of globalization and internationalization of the markets.

The TATA group seems to have an advanced knowledge pertaining to mergers, alliances, and acquisitions (Gottschalk 2007). The group realized that it was almost impossible to reach its major goals through organic development alone, as it would have required much time. For instance, TATA was considered an Indian company. Hence, it saw the acquisition of JLR as an opportunity that could help it realize the dream of becoming more internationalized. In addition, the merger had to enable the company to extend its scope of production (Daidj 2015). It could now be able to establish many business sub-units, unlike before (Collis 2014). As a matter of fact, extension functions as an important ingredient of improving image of a business’s market, geography, and product. On the other hand, the TATA Group had another aim of improving consolidation. Thus, it was capable of increasing its scale, market power, and efficiency (Gottschalk 2007). Definitely, JLR as an established company was expected to improve its technological proficiency (Inkpen & Ramaswamy 2006).

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TATA Group had made a unique observation whereby it identified that acquisition of a major car manufacturing company or a superior brand name would be important compared to the use of organic development. However, one of the factors that TATA seemed to have failed to consider was uncertainty mainly due to the expected cultural clash. This fact was the reason for the official announcement of the company, which declared that the acquisition of JLR did not translate into the cultural change. The company has been aware that cultural aspect is one of the main determinants of whether an organization will succeed or fail. Under internationalization, employees from different backgrounds exhibit varying cultural beliefs and practices, and thus they have to be considered as potential stakeholders, who can determine success or failure of the company (Inkpen & Ramaswamy 2006). Undoubtedly, these internationalizing practices could be appealing by creating dynamic innovation (Nobre, Walker & Harris 2012) and attracting a larger customer base. However, the cultural change may end up having adverse effects in terms of organizational performance and productivity. TATA tried to avoid some of the side effects that when it made a major decision of retaining the former employees of JLR. Keeping these employees meant that the initial cultural aspect was not distorted. Moreover, there was no need to lay off workers, since the main challenge was limited funding and liquidity as a result of poor marketing.

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2. Improving Relationships with the Stakeholders of TATA JLR to Globalize the Company and Reduce the Cost of Production through Better Management of the Personnel

TATA Group made a very strategic move by opting to acquire, and not to merge or integrate with the JLR. Therefore, the acquisition process did not lead to the cultural change and did not affect production of the company negatively. There was growing fear amongst the concerned parties in the UK that British workers risked losing their employment to Indians. Therefore, concentrating on not changing the JLR’s culture was the main aim of the company. Actually, it was one of the strategies TATA group capitalized on in order to create an appealing picture of itself as a multinational incorporation. It opted to exploit the concept of cultural awareness, which eventually led to success. Awareness creation in terms of employees’ culture is a requisite ingredient that helps attain goals. Indeed, the managing director was quick to point out that adjustment in the ownership of the company had nothing to do with its culture at all. Prominent management positions were left for British nationals.

On the other hand, TATA Group went ahead to motivate the existing managers. They were challenged on a continuous basis in addition to finding a common solution to different challenges. Here, TATA maintained minimal interference into the management of JLR despite having acquired it. TATA Group offered assistance only when the need arose. Nonetheless, managers could not afford to be idle, as they had targets as well as plans that they needed to implement.

Another strategy that TATA Group used was stimulating trust towards the JLR working team. This aspect was mainly demonstrated by the fact that TATA opted to retain most of JLR’s positions. It was believed that JLR had the capability and potential of handling challenges. There was the creation of trust, freedom, and transparency, and there aspects helped organizations achieve most of their objectives (De Pamphilis 2008). Nonetheless, TATA made a major commitment of never refusing to make more investment in case it saw the need. As such, the managerial team developed a positive perception towards TATA Group. Eventually, there was a positive contribution in terms of cooperation between the two companies (Gottschalk 2006).

In addition, TATA managed to keep being open-minded (Gottschalk 2006). Thus, it never hesitated in its decisions, but kept on listening to what feedback subordinates had to offer. Prominent officials of the TATA Group visited JLR’s factories as well as dealers regularly. Mostly they visited dealers that were outside India. Thereafter, they collected local employees’ feedback. This feedback is important, as it is used to develop various improvement strategies for the company. Valuing customers is also requisite, as they are important stakeholders. A failure to consider their tastes and preferences can lead to adverse effects of the general performance of the company.

3. Benefits of Improving Interrelationship between Various Stakeholders and Employment of Cost Saving Measures: Globalization and Employment Opportunities

The aggregate multinational strategies that TATA JLR Group used can be claimed to be a double sword. They have their merits as well as disadvantages. First, the move aimed to increase financial leverage of TATA, and this objective was easily accomplished. Despite an economic slowdown in the European as well as American markets, TATA Group went ahead to sign the deal of acquisition. The principle purpose of the group was to enable TATA to acquire a new status of an international company, and this objective was efficiently achieved. That is why TATA Group did not want to interfere with the organizational culture of the JLR Group. Despite acquiring JLR Group, the company never interfered with it in terms of restructuring the whole personnel. It retained the British employees despite it becoming an Indian company.

Apart from that, there were other objectives that were prioritized by the TATA Group. For instance, it wanted to manage the cost of JLR’s production. In fact, reducing the cost of production was one of the major objectives of TATA Group. One sector that experienced a major shakeup was the IT department. TATA Group decided to introduce its own IT expert, and this idea brought about effective cost-cutting measures. In addition, TATA developed new products as a part of innovation. This innovation is also important, as it derives curiosity among potential customers (De Pamphilis 2008). This approach improved the quality of TATA’s products. The management of manpower was another aspect that TATA Group needed to manage. Immediately after the acquisition, it had to be reduced from an initial size of 27,000 to an approximate size of 10,000.

Disadvantages of the Acquisition Process

Unfortunately, the strategic approach can be considered inappropriate, as it does not make sense at all if viewed from another angle. For instance, the emphasis had been put on the maintenance of the organizational culture at the expense of providing employment to the Britons. TATA is an Indian company, and, as such, it ought to create more employment opportunities to Indians under any natural circumstances. So far, approximately 9,000 jobs have been created where all the opportunities have been allocated to Britons (Saunders 2015). This situation can be considered unfair, especially due to the fact that the company is Indian. Apart from Indians, the company could have considered potential applicants from the neighboring countries.

4. TATA’s Performance Analysis Using Data Over the Last Five Years

TATA JLR Motors have recorded exemplary performance. Some of the aspects that have been used as indicators in this analysis include increment in revenue, rise in total turnover, and access to new markets.

China has been identified as one of the most promising markets for TATA JLR’s motor vehicles. In the year 2011, 51,000 out of 274,280 cars that were sold globally, were purchased in China (Saunders 2015). During the year 2014, 95,000 cars were sold in China, which was recorded as incredible performance (Saunders 2015). It was indeed a huge chunk considering that a total of 425,006 cars were sold globally (Saunders 2015). In addition, the profits for the Q1 shot up by incredible 25%, registering a total increase in revenue of 415 million euros (Saunders 2015).

According to 2012 TATA JLR’s data, the following sales were recorded based on the number of different brands of its products sold globally: Audi cars registered a total sale of 1,455,100 units, Mercedes - 1,423,835, BMW (Inc Mini) registered total sales of 1,841,000, Jaguar Land Rover made 357,773 sales, Volvo - 421,951, and Lexus made a total of 476,566 sales (Saunders 2015).

The average price of each car that JLR sold in different parts of the globe was also recorded during the 2012/13cfinancial year. China registered the highest sales, as each car cost an approximate of 67,000 Euros compared to UK’s 36,100 Euros, while the use trailed with an average price of 33,900 per car. These sales translated into the total revenue increase of 32.7%, 16.5%, and 13.5% in the aforementioned countries (Saunders 2015). The rest of the revenue, which constituted 15.9%, was recorded in the rest of Europe. On the other hand, the profit made from the sale of each car was also recorded, where China led with a total of 16,000 Euros, followed by UK and US, which tied at a profit margin of 3,500 Euros (Saunders 2015). Europe recorded a profit margin of 2,400 Euros, while the rest of the world registered a profit margin of 6,400 Euros (Saunders 2015).

TATA JLR Motors Succeeded in Globalizing the Company and Creating More Employment Opportunities

There is clear indication that TATA JLR Motor’s decision to embrace the idea of going global was an informed thought. Looking way back at 2002, JLR Motors registered dismal sales only (Saunders 2015). During that year, it only recorded a total sale of 304,925 units, and less than 400 of them were bought in China (Saunders 2015). By the time JLR was acquired by TATA Motors in 2008, there was a global recession and many financial analysts perceived the company to be at its last phase. It only recorded a total sale of 252,036 cars, and the situation worsened during the following year, when total sales reduced to a minimum of 196,226 units, prompting the company to take drastic cost-saving actions (Saunders 2015). Thus, there was massive laying off of workers (Saunders 2015).

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Comparing this scenario with the one five years later, it was a completely different reflection. The company attained huge success in unlikely quarters, especially in China. This change can be attributed to the decision of TATA to go global. It demonstrated the willingness to adopt an organizational culture, consulting UK’s government and holding talks with its workers’ unions. Moreover, several cost saving measures adopted by the company, such as the initial step of laying off some of the employees, was sound during the recovery process. In addition, the decision to manufacture cars for reasonable prices also helped a lot to boost the sales of the company. The total revenue collected continued to improve on an annual basis as a result of the global surge in sales. Additionally, exemplary performance enabled TATA GLR create more job opportunities. Over 9,000 jobs have been created in Britain alone (Saunders 2015). It is still predicted that 24,000 more jobs will be created in the company’s supply chain due to its success (Saunders 2015).

5. Better Staffing Strategies Improve the Image of the Company

Generally, the approach that TATA Jaguar Land Rover case study represents is a kind of skewed staffing of employees. Even though TATA is an Indian company, it decided to retain workers that initially worked in the Jaguar Land Rover Group. Most of these workers were of British nationality. Definitely, one of the wider plans that TATA Group had was gaining an upper hand in terms of creating international appeal. First, TATA decided to leave British nationals in the top managerial position of the JLR, as it was initially, before the acquisition process. In fact, the company never attempted to create any form of reshuffle by replacing them with Indians despite being in a position to do so. Therefore, TATA JLR Group can be considered to lack proportionality in terms of making the company carry an international face. Almost every employee in the company is a Briton, giving it a British rather than an international face. Nevertheless, TATA perceived the acquisition as an avenue that would help redeem it by giving it an international appeal. At least, it acted as a clear indication that TATA Group was open to embracing ideas from employees of other countries and incorporating them into the governance structure.

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