Tata Motors Going Global

TATA MOTORSGOING world-wide The wave of liberalization, privatization and globoseization, which started sweeping India since the early 1990s, gave Tata Motors (established in 1945) a new burster in the path of globalization. The Tata Motors firstly, realized that if it wants to grow past it cannot afford to go for its course connected solely to the fortunes of one outlandish. Secondly, with the dismantling of import restrictions in the near future or it the rupee begins to gain ground then India may not continue to wear the low-cost manufacturing advantage which it has enjoyed so far.In that scenario, a transnational armorial bearing across countries that could offer greater cost advantages for manufacturing, will pay off. Thirdly, the self-propelled business is highly competitive and the competitiveness depends on economies of scale, quality and efficiency which could directly improve if the ar cast offment enters the foreign grocery stores. The question that came in th e minds of the senior management at Tata Motors was Should we roost an exporter of vehicles, which we begin been doing since 1961 or should we venture into the international automobile market as a ships companionship that can match the best in the business? The answer was to widen its foreign campaign to more than just exports. As a result, recognizing the need to integrate its international strategy with its domestic one, the confederacy split its previously independent international business arm into the ii business unitsthe Passenger Car Business Unit (PCBU) and the mercantile vehicle Business Unit (CVBU). The connections passenger car range comprises the hatchback Indica, the Indigo Sedan and the Marina, its station wagon variant, in gas pedal and diesel versions.The Tata Sumo, its rural variant, the Spacio and the Tata Safari (the countrys first sports advantage vehicle) be the social clubs multi-utility offerings. The companys Commercial fomite Business Unit (CVBU ) has over 130 models of light, medium and heavy technicalized vehicles ranging from two tonnes to 40 tonnes, buses ranging from 12-seaters to 60-seaters, tippers, special purpose vehicles, oil-road vehicles and defence vehicles. Dr. V. Sumantran, Executive Director, PCBU, says, The company has now embarked on a road where we have made exports an inherent part of our business.We do not think of gross sales outside the country as a separate activity. It is now integrated within the accusation of each of its businesses. Ravi Kant, Executive Director, CVBU, says, In a cyclical business much(prenominal) as ours, it is important that we hedge against cyclicality. International business offers an opportunity as divergent countries go through peaks and troughs in demand at different points in time. Our capacity utilization is more effective and risks of downturns can be mitigated. The two units have classified different markets in terms of size, crop opportunities, return segment s and target volumes. After analysis of markets the company has decided to focusing on 15 to 20 key countries, where the company will have a earthshaking presence in terms of volumes and market shares, against be present as an exporter in 70 countries. Says Praveen Kadle, Tata Motors Executive Director of finance and Corporate Affairs, Tata Motors does not plan to be all over the world. emerge will follow demand and the company will need to take the markets tor different vehicles as stand-alone projects. For example, the compact- sized Indica will be marketed in countries where the company perceives a substantial market for it, like it did in Europe. The similar goes for our commercial vehicles business. The implementation of new business strategy involves three stagesproduct upgradation, sales and statistical distribution movees, and deeper penetration into foreign markets. Tata Motors has taken a crook of initiatives to strengthen both product reliability and durability.Th rough its subsidiaries and joint ventures, the company is engaged in engineering and automotive solutions, automotive vehicle components manufacturing and provision chain activities, machine tools and factory automation solutions, high-precision tooling and plastic and electronic components for automotive and computer applications, and automotive retailing and utility operations. The company also draws on the resources of leading international design and styling houses like the Institute of Development in Automotive Engineering, SPA, Italy and Stile Bertoni, Italy.The company has been successful in Sri Lanka and Malaysia where the installation of a sales process system and face-to-face customer meets through road shows and service workshops have started giving results. In order to enter foreign markets the company is following three routes. The first is the traditional method of exports, at which the company has been quite successful, notching up export revenue of Rs. 969 crores in the first social club months of FY 200405, recording a result of 41 per penny from sales in Europe, Africa, the Middle East and Asia.The second is the setting up of assembly operations in foreign markets. Tata Motors first used this strategy when it set up its first assembly operation in Malaysia in 1974. Since then, the company has successfully used it for expansion into Malaysia, Bangladesh, Senegal, South Africa and Ukraine by way of setting up assembly operations there through its distributors. The third is the route of acquirement and alliances. Tarn Motors entered into a tie-up with MG Rover, U. K. , to supply 1,00,000 Indica to be badged as metropolis Rover.Highlighting the importance of the tie-up, Dr. V. Sumantran, points out that the Rover agreement has been an important rate in helping Tata Motors to gain very quick access to a fairly large market. Working alone in this area would have taken us much longer to create a distribution network. The exposure that the compan y and the products have received through the agreement validates the whimsey that we have arrived at a significant milestone in promoting the Tata brand, elaborates Dr. Sumantran. It acquired Daewoo Commercial Vehicles, S.Korea, in 2004, keeping the synergies in mind which are quite significanta presence in the 250 to 400 HP range of trucks is what the Korean company brings to the table, as this complements the existing product range of Tata Motors which delivers vehicles up to 210 HP. The process gave not just a manufacturing asset base, but access to the market through an already strong brand identity. In 2005, it acquired a 21 per cent stake in Hispano Carrocera, a reputed Spanish bus and take aim manufacturer, with an option to acquire the remaining stake as well.Hispanos presence is being expanded in other markets. Today, Tata Motors is Indias largest automobile company, with revenues of Rs. 20, 483 crores (USD 4. 7 billion) in 200405, and is the worlds fifth largest medium and heavy commercial vehicle manufacturer. Its immediate goal is to achieve a 20 per cent contribution to its overall revenue from its international businesses by 2006. The leading global auto majors, for whom anywhere from 3050 per cent of their business accrues from oversea sales, Tata Motors is still a long way off, but Mr.Kadle believes that with its aggressive growth strategy a contribution of around 35 per cent mayhap achievable in the nigh five-six years. Questions 1. What are the objectives that drove Tata Motors towards globalization? 2. What are the entry strategies that are being followed by Tata Motors in order to buzz off the foreign markets? 3. Discuss the logic behind the entry strategies that are being followed by Tata Motors. 4. In your opinion to what extent Mr. Kadles belief of afield sales contributing 35 per cent of overall revenue, in the next five-six years, appears attainable?