House of Tata: Acquiring a Global Footprint

Over the years as Tata grew and developed it could be observed as one the most transformed company of its kind. Over the 16 year tenure as a chairman of Tata Sons, Rata Tata had sought to transform the Tata group from a sprawling portfolio companies tenuously tied together by the Tata name and ethos into a more focused, competitive and unified business group. There was a time when about 65% of its expected revenues were expected from outside India due to its Tata-Corus deal. The Tata Group companies had long been present in the international marketplace before they made any acquisitions headlines. However, this growth was rather exclusively organic to the company. Over the years Tata Group companies developed more international profiles in terms of where they procured, produced and sold goods and services. The most sought out opportunities were to disaggregate their value chains, connect their global operations, and reap some advantage of being multinational organizations.

Tata Consultancy Services (TCS)

TCS as one of the Tata Group companies which evolved globally at a mug faster pace than the other companies, it was one of the companies that were born global. Due to the limited need for TCS products in the domestic markets, the choice for TCS was to go global to expand and capture. It initially started with exporting its services to North America and Europe. It had developed into a global service provider of IT, BPO, and consulting services with delivery centres in various countries. In addition, to expand its technological capabilities it made use of M & A as a mode of going global. As per the company products and delivery system goes, the steps adopted by TCS seem to be the most suited to its operations. They started small with exporting options and later to widen it scope took up the M & A route. TCS has already established a global footprint with operations in major developed countries like US, Europe etc. Also it has expanded to other promising countries like Brazil, China etc. In the next 5 years TCS should look at increasing their footprint by entering new markets. They can look at the other developing countries they did not target and also some of the underdeveloped countries like the African countries as growing importance of I.T. has been recognized world over.

Titan

Titan was a leading watch and jewellery brand in India. However, when Titan ventured in the international markets like Europe, it incurred losses. On the other hand, when this same brand was launched I the Middle East it was an instant success due to its vast non-resident Indian population. Titan primarily used export as an option to venture overseas. probably the right tactic used as labour and operational costs in much lower than in developed countries like Europe. However, have thoroughly studied the market trends to identify the need ventured the markets to have avoided loses. This was India are it should and then

As mentioned Titan was successful when it targeted the NRIs in the Middle East which shows that the brand had an emotional connect with Indians. Titan can leverage this by entering markets with significant Indian population. The number of immigrant Indians has increased around the world since the post liberalization era. Titan can look to re-enter certain markets where it failed initially depending on the population of Indians. Also there are certain international regions which are focused with Indian communities. Titan can also focus on identifying such locations world over and open stores in such locations. Also acquiring a relatively well known brand in a certain country may help Titan enter those markets. India Hotels

The Indian Hotel Company (IHC) was Tata Groups hospitability industry which also included the Taj Hotels amongst it. This was one of the pioneering companies to begin globalization. It experimented with a lot of entry options including, outright purchase of hotels, franchisee agreements extended and strategic alliances with various partners. Although, it purchased hotels worldwide, it later decided that management contracts were the most feasible options with small equity positions rather than outright purchases. They built a global presence with seamless connectivity. To continue its global incremental approach, Tata is contemplating a possibility of acquiring a chain of hotels to ensure geographic spread. For the hotel business to go global and deliver the right services and customer satisfaction, my suggestion to IHC would be to acquire or induce outright purchases instead of other options, as this would largely give the autonomy of running business in their own terms and thereby maintain the Taj hotel legacy and identity.

Tata Teas

The groups first use of M & A as a tool to go global came with Tata Teas acquisition of UK Based Tetley in Feb, 2000. This step prompted as a result of the slow paced growth of the Indian tea industry. This was a leverage buyout, as Tetley tea was 3 times the size of Tata teas at that time. Tata tea contributed 70% in equity, 45 million which was raised through GDR and the balance was funded through non-recourse debt financing. A key decision post this acquisition that was made was to maintain the management team of both Tata and Tetley. This acquisition was the beginning, post this Tata made several others acquisitions which included, Good Earth (US), Czech tea, Eight O Clock coffee, and most significantly bought a stake in US based Energy Brands Inc. In a commodity market as tea, Tatas only option to go global and make a presence felt would have been to acquire an already established brand which had its roots in the market. Thus this was the right strategy adopted by Tata. Tata Steel

Tata steel was Indias first and the countrys largest private sector steel company. However, due to government liberalization policies Tata found itself in trouble and they were contemplating an option to altogether sell the steel business. However, they decided otherwise and tried to improve its efficiencies through waste reduction and new technology, and revamped sales and marketing, and also by benchmarking costs against leaders. Tata steel planned to grow in India and abroad through 6 connectors. For global expansions, Tata Steel developed the de-integration strategy to source raw materials and semi finished goods. It also made several acquisitions in the steel business which included Millennium steel, Thailand, NatSteel, Singapore, this acquisition also gave Tata steel presence in countries like Australia, Malaysia, and China etc. It made one of its largest acquisitions when it acquires Corus which made Tata the 6th largest steelmaker in the world. Tata Motors

Tata Motors expanded its commercial vehicle business to foreign markets with a different phasing of cycles compared to the Indian markets. This was primarily to reduce its risk arising out of the Indian markets. After the loss in 2000-01 Tata motors decided to withdraw from some countries and focused on key markets such as South Africa, Middle East & Korea where it could have a certain level of market share to support investments in brand building and developing networks for service and spare parts. Partnered with UK based MG rover to introduce Indica in the European markets as City Rover. They acquired companies that complemented its current business. Also, acquired Daewoo Commercial Vehicla Company of Korea to stretch Tata motors capabilities as Daewoo produced heavier

trucks. It was done to fasten the product development and produce higher level products overseas. Entered into JVs with Brazilian Marcopolo to enter Brazil and a JV with Thonburi Automotive Assembly Plant to build pickups in Thailand. Established technical center in UK to contribute product development. Tata motors can use its JLR brand to enter markets like China that Tata had not entered. Tata can use its low cost products like Tata Ace to enter developing countries like Sri Lanka, Bangladesh, Nepal, South Africa, etc. Tata should invest more in R&D to increase its product portfolio of passenger cars.