Case Study: Tata Motors JLR - a two-edged sword.

History was made in March 2008 when one of India’s top corporate entities, Tata
Motorsacquired luxury auto brands -- Jaguar and Land Rover (JLR) from Ford
Motor for $2.3 billion. Tata Motors marked their specialty as a takeover magnate.
Beating Mahindra and Mahindra for the prestigious brands, just a year after
acquiring steel giant Corus for $12.1 billion, the Tata signed the deal with Ford,
which on its part chipped in with $600 million towards JLR’s pension plan.
Acquisition of JLR by Tata was rarest of the cases as an Indian Company acquired
a luxury brands. It was a very risky acquisition since JLR had been wobbling in
the market and its survival was on the edge due to toughened market conditions.
Tata had to invest a lot in the brand to make it stand out once again. The biggest
reason behind Tata acquiring JLR was that it wanted to decrease their dependency
on the Indian market which accounted for more than 90 % of its sales.
Tata raised USD 3 billion (Rs 12000 crores) through bridge loans for 15 months
from different banks including JP Morgan and SBI as they were facing a cash
crisis due to Corus deal and heavy investments in TATA NANO Project back
home.

Benefits to TATA
1. Less dependency on the Indian Market and an increased share in the Global
Market.
2. Their range diversifying from India’s cheapest car to luxury brands.
3. Access to latest technology which came along with JLR.
4. Cost Competitive Advantage as Corus supplied steel to JLR as TATA had
already hit a deal with them.

TATA- JLR deal--- Profit or Loss?

As per Morgan Stanley’s report, this deal was a loss for TATA. They had to put in
extra USD 1 billion as capital expenditure in JLR to go with USD 2.3 billion they
had already given. Since they were investing a huge amount in TATA NANO
project too, it was adding up to their costs as well. Their worldwide car sales also
took a hit and decreased by 5 %. TATA lost USD 517 million in their Indian
operations in March 2009 and lost additional USD 510 million on JLR.
However, if TATA had not acquired JLR, they would not have been able to enter
the luxury cars segment and they would have lost on amazing technology of JLR
too. Moreover, sooner or later, global market would have risen from recession and
value of JLR would have increased.

Current situation
Initially JLR has performed strongly after the merger and was slowly and steadily
repaying TATA’s immense faith in its name and reputation.

On June 15, 2020 JLR reported a drop in its sale figure for fourth quarter and
financial year ended March 31st, 2020 due to corona virus pandemic. The luxury
carmaker said the pandemic "significantly impacted" its projections for 2019-20,
with fourth quarter retail sales down 30.9 per cent and full year sale lower 12.1
percent. Since year 2014-15, JLR is facing problems and its sales is reducing
throughout the globe.
Tata Motors suffered consolidated fourth quarter net loss of 98.94 billion rupees,
as coronavirus lockdown across its markets weakened sales. Its total sales of
passenger vehicles for financial year 2019-20 is 38% less than financial year 2018-
19 and total sales of commercial vehicles is 34% less in comparison to financial
year 2018-19.Tata Motors’ losses mount, with sluggish sales in China and Brexit
adding to its woes.
Tata Motors is reviewing all its businesses, revising its investments and working
capital and the company has also launched inventory correction programme.
During the time of corona virus pandemic, company has laid off 1100 employees
as it is focusing on cost cutting. JLR deal is not proving to be very good for the
company in year 2020. JLR is like two-edged sword for Tata Motors. If JLR
performs well, Tata Motors earn its profit nearer to 80% from JLR. When JLR
doesn’t perform well, in that situation most of the loss of Tata Motors is from JLR.
In the past, the company has launched few vehicles, but they did not perform well.
The company is struggling for profits in the last few years, in fact the company
suffered huge losses of 28,826 crores in year 2019. Apart from losses, the company
has taken huge debt nearing one lakh crore. The situation of the company was grim
till December 2020 however the situation has improved and global
wholesales of the company's commercial vehicles and Daewoo range
jumped 55 per cent to 1,09,428 units during the January-March quarter of
2020-21 as compared with fourth quarter of FY2020 Similarly, the company
reported a 39 per cent rise in its global passenger vehicle sales at 2,20,697
units in the fourth quarter as compared with the fourth quarter of 2019-20.
Global wholesales for Jaguar Land Rover were at 1,36,461 units in the
January-March quarter of 2020-21.

Similarly, the company reported a 39 per cent rise in its global passenger
vehicle sales at 2,20,697 units in the fourth quarter as compared with the
fourth quarter of 2019-20, it added.

Tata Motors’ long-term strategy included consolidating its position in the domestic
Indian market and expanding its international footprint by leveraging on in-house
capabilities and products and also through acquisitions and strategic collaborations.

Tata Motors stood to gain on several fronts from the deal. One, the acquisition
would help the company acquire a global footprint and enter the high-end premier
segment of the global automobile market. After the acquisition, Tata Motors would
own the world’s cheapest car – the US$ 2,500 Nano, and luxury marquees like the
Jaguar and Land Rover. Two, Tata also got two advance design studios and
technology as part of the deal. This would provide Tata Motors access to latest
technology which would also allow Tata to improve their core products in India,
for eg, Indica and Safari suffered from internal noise and vibration problems.
Three, this deal provided Tata an instant recognition and credibility across globe
which would otherwise would have taken years. Four, the cost competitive
advantage as Corus was the main supplier of automotive high grade steel to JLR
and other automobile industry in US and Europe. This would have provided a
synergy for TATA Group on a whole. Five, in the long run TATA Motors will
surely diversify its present dependence on Indian markets (which contributed to
90% of TATA’s revenue). Along with it due to TATA’s footprints in South East
Asia will help JLR do diversify its geographic dependence from US (30% of
volumes) and Western Europe (55% of volumes).
Analysts were of the view that the acquisition of JLR, which had a global presence
and a repertoire of well established brands, would help Tata Motors become one of
the major players in the global automobile industry.

Generally in any acquisition there is an attraction to extract synergies as

quickly as possible, but the Tata Motors’ acquisition of JLR is an exception.
Though initially due to unanticipated market conditions the deal suffered
severe losses, Tata Motors carefully tackled short-term challenges while
continuing to invest in the core competencies of JLR. This strategy finally
reaped benefits for them over the long run. It was also fortunate for Tata
Motors that a number of external environment factors such as the recovery
of the markets and the booming Asian markets turned in their favour in the
eight years since the deal took place.

Another factor of success for Tata was the generation of trust with the JLR
management. Initially the JLR trade union leaders were not sure whether
jobs in UK would remain secure. So to ensure the success of such a cross
border acquisition interests of multiple stakeholders were to be kept in mind
and the leaders of the acquirer firm need to balance the short and long
term goals.

The Road Ahead

Morgan Stanley reported that JLR’s acquisition appeared negative for Tata Motors,
as it had increased the earnings volatility, given the difficult economic conditions
in the key markets of JLR including the US and Europe. Moreover, Tata Motors
had to incur a huge capital expenditure as it planned to invest another US$ 1 billion
in JLR. This was in addition to the US$ 2.3 billion it had spent on the acquisition.
Tata Motors had also incurred huge capital expenditure on the development and
launch of the small car Nano and on a joint venture with Fiat to manufacture some
of the company’s vehicles in India and Thailand. This, coupled with the downturn
in the global automobile industry, was expected to impact the profitability of the
company in the near future.

Tata Motors’ acquisition of JLR. is an example of a large, difficult cross-

border acquisition by an emerging market based company. While the
acquisition proved difficult in the short term, it has yielded excellent
dividends to the parent company over the long term.
Reputation Builder Strategy
The practice of Reputation Builder Strategy may well be seen in the case of Tata
Motors (India) which acquired the Jaguar Land Rover (UK), in 2008 and in 2004
had acquired the Daewoo business Vehicles Company, South Korea’s second
largest truck maker. In each these foreign markets, Tata Motors had low
acceptableness however acquired strategic resources that allowed it to
compete within the international market. In Asian country, the strategic
resources acquired, allowed Tata Daewoo to launch many new product within
the Korean market, and also exporting these product to many international
markets and nowadays simple fraction of serious business vehicle exports out of
Asian country area unit from Tata Daewoo. Similarly, the acquisition of cat Land
Rover allowed Tata Motors to push cat Land Rover luxury brands in Bharat,
China and Russia such cat Land Rover became the first driver of growth and
profit for Tata Motors.Even, Haier practiced this name builder strategy by
getting into developed countries, wherever Haier had low acceptableness, to
accumulate robust social control, technological and reputational competencies
through joint ventures and after applying these new noninheritable
competencies in developing countries (Ling, 2005).

The follow of this strategy would achieve success for the MNCs operational in
additional technological advanced sectors e.g. cars, appliances, etc. wherever
specific firm specific resources (brand name, patent, technological capabilities)
area unit needed to vie effectively. MNC’s home country resources area unit
weak in these area unitas whereas these specific firm resources are situated in
developed countries. Therefore, it's very important for the MNCs to enter the
developed country to accumulate these strategic resources despite the fact that
the MNCs have low acceptableness in these markets.

Tata Motors, being a world carmaker, may be a firm with growing strategic
maturity, and thence flowing stream strategy is followed. Being one among the
biggest and oldest organization, it's at bay within the burden of continuity
forces that may cause the brink of extinction. However, Tata Motors has been
finding innovative ways in which to integrate the amendment forces with high
impact and very important continuity forces. This has assisted the firm to
leverage the strength of the continuity momentum with the amendment forces.
The essential strategic channels with methods of the firm area unit made public
below.
Divert
Momentum of continuity area unit pleased for brand spanking new
opportunities
• Tata Motors has noninheritable the 2 English brands Land Rover and cat
from Ford Motor to take advantage of the opportunities within the
international market.
• The firm has with success cannibalized the prevailing infrastructure of the
2 English brands with its new technology-based models.
Shift
Shift the burden of continuity
• The firm has reorganised its provide chain and expands its delivery
channels to multiple countries.

The practice of Reputation Builder Strategy could be seen in the case of Tata
Motors (India) which acquired the Jaguar Land Rover (UK), in 2008 and in 2004
had acquired the Daewoo Commercial Vehicles Company, South Korea’s second
largest truck maker. In both these foreign markets, Tata Motors had low
acceptability but acquired strategic resources that allowed it to compete in the
global market. In South Korea, the strategic resources acquired allowed Tata
Daewoo to launch several new products in the Korean market, while also
exporting these products to several international markets and today two-thirds of
heavy commercial vehicle exports out of South Korea are from Tata Daewoo.
Similarly, the acquisition of Jaguar Land Rover allowed Tata Motors to push Jaguar
Land Rover luxury brands in India, China and Russia such that Jaguar Land Rover
became the primary driver of growth and profit for Tata Motors.Even, Haier
practised this reputation builder strategy by entering developed countries, where
Haier had low acceptability, to acquire strong managerial, technological and
reputational competencies through joint ventures and subsequently applying
these newly acquired competencies in developing countries (Ling, 2005).

The practice of this strategy would be successful for the MNCs operating in more
technological advanced sectors e.g. automobiles, appliances, etc. where particular
firm specific resources (brand name, patent, technological capabilities) are
required to compete effectively. MNC’s home country resources are weak in
these areas while these particular firm resources are located in developed
countries. Therefore, it is vital for the MNCs to enter the developed country to
acquire these strategic resources even though the MNCs have low acceptability in
these markets.

Tata Motors, being a global automaker, is a firm with growing strategic maturity, and hence
flowing stream strategy is followed. Being one of the largest and oldest organization, it is
trapped in the burden of continuity forces that will lead to the brink of extinction. However, Tata
Motors has been finding innovative ways to integrate the change forces with high impact and
vital continuity forces. This has aided the firm to leverage the strength of the continuity
momentum with the change forces. The critical strategic channels with strategies of the firm are
outlined below.

Divert
Momentum of continuity are diverted for new opportunities

 Tata Motors has acquired the two English brands Land Rover and Jaguar from Ford
Motor to exploit the opportunities in the global market.
 The firm has successfully cannibalized the existing infrastructure of the two English
brands with its new technology-based models.
Shift
Shift the burden of continuity

 The firm has reorganized its supply chain and expands its delivery channels to multiple
countries.
 To remain competitive, Tata Motors created a new market space. The firm exploited new
opportunities by offering radically different variants.

Partition
With the impending business situations

 With changing business environment, Tata Motors has restructured itself as a bimodal
organization. The firm has an excellent approach to global standardization as well as
local operations.
 Using new technology for reducing rejection and rework has helped the firm to achieve
better quality.
 The firm concentrates on the domestic marketplace and simultaneously keeps an eye at
global markets of Europe, China, the United States, and others to expand its reach.
 The firm successfully remained competitive in the market by making appropriate
modifications in existing models.
 The promotion of e-business practices among all stakeholders is another strategy that
helped the firm in gaining success.

Integrate
Balance continuity with the change to leverage the available opportunities

 Expansion into a global market segment with new technology-based products.

 Building a brand and managing better customer relationships is another integrating
strategy of Tata Motors.
 Tata Motors has created novel technological solutions to meet changing customer
requirements. The firm invests heavily in research and development to provide improved
variants continuously over time.
 The latest drive of the firm is to “go green”. The organization has synergized financial
performance along with environmental concerns. It is promoting the use of environment-
friendly e- vehicles.

From the analysis of continuity forces, it can be stated that the continuity forces of the firm have
increased in the last 10 years. The firm has increased its expenditure on R&D, and this has
helped the firm to meet changing needs of customers. The firm’s spending on advertisements and
promotion has helped the firm to increase its sales in the past decade. The firm spending on
employee welfare also shows an upward trend. After acquisition of Jaguar and Land Rover the
firm incurred losses after FY-2015, but soon it resumed its profit in FY 2019-20. Profits dipped
in FY-2020 due to pandemic. Its total sales of passenger vehicles for financial year
2019-20 is 38% less than financial year 2018-19 and total sales of commercial
vehicles is 34% less in comparison to financial year 2018-19. 9 (Source
moneycontrol.com as on 14.4.2021)
Tata Motors Group global wholesales in Q4 FY21, including Jaguar Land Rover (JLR), stood at 3,30,125 units, higher
by 43%, compared with Q4 FY20.

Global wholesales of Tata Motors' commercial vehicles and Tata Daewoo range in Q4 FY21 were at 1,09,428, higher
by 55% over Q4 FY20. Global wholesales of all passenger vehicles in Q4 FY21 stood at 2,20,697 as against Q4
FY20, registering a growth of 39% year-on-year (Y-o-Y).

Global wholesales for Jaguar Land Rover (JLR) were at 1,36,461 vehicles (JLR number for Q4 FY21 includes CJLR
volumes of 13,772 units). Jaguar wholesales for the quarter were 31,814 vehicles, while Land Rover wholesales for
the quarter were 1,04,647 vehicles. The luxury brand JLR brings in most of Tata Motor's revenue.

On a consolidated basis, Tata Motors' net profit surged 64.9% to Rs 3,222.21 crore on 5.4% rise in net sales to Rs
74,878.98 crore in Q3 FY21 over Q3 FY20.(Source

Conclusion
Hence, it can be stated that the ability of Tata Motors to leverage the continuity and change
forces expertly has made the firm competitive in the market. Tata Motors is continuously trying
to integrate the conflicting forces of continuity and change upfront. The organization is
continually doing innovations to keep itself ahead of the competition. Technology continuity and
changing needs of customer interaction is a crucial reason for its increase in sales and net profit.
The ability of the firm to improve product features, sales and service offerings, flexibility in
operations, and customer satisfaction has increased its competitiveness in the international
market. Tata Motors succeeded by exploiting international opportunities and has evolved
to gain its international presence in the automotive manufacturing industry

Performance
For decades, Tata Motors has been the leading player in the auto manufacturing industry. Tata
Motors focuses on designing innovative strategies to gain maximum domestic share and enter the
global business. The firm has incurred a loss of 1034.85 crores in FY 2017–2018, while the firm
attained the standalone profit after tax of 2020.60 crores in FY 2018–2019 (Tata Motors, annual
report, 2019). Hence, the firm managed to increase its profit share along with the market share.
Despite the slowdown in the industry and cut-throat competition, Tata Motor’s performance
improved in last few years. The 10-year analysis of profit after tax for the firm is shown in
Appendix B, Fig. 14. The firm suffered a loss in the year 2015, 2017, and 2018, but soon, in
2019, the firm had profit of 2020.60 crores (in rupees).

Change Forces
Change forces that have an impact on the business environment of the Auto Industry include
globalization, an increase in competition, emergence of novel technology, e-business, merger
and acquisitions, and government policies. Some of the selected factors are assessed over 5 years
using surrogate measures. Some of the change forces of auto industry are analysed for 5 years
and are depicted in Appendix B (the identified determinants of change elements in case of auto
Industry as applicable to Tata Motors are stated below).

Globalization
The word globalization means increasing the integration of nations across the world. Global
integration has strengthened trade among countries with fewer trade barriers. Commercial
integration has brought down the trade barriers, increased the rate of technological shift, and
lower the production cost. It looks as if the entire world has grown up as one nation due to global
integration. With global integration, export in the auto industry has increased. The export of auto
vehicles in 2019 is 4,629,054 units. The impact of global integration on the export of the Indian
auto industry is exhibited in Appendix B, Fig. 15.

Increase in Competition
With the advent of global integration and technological developments, the auto industry has seen
many new entrants and old entrants coming with new models. Hence, this manufacturing
industry is facing stiff competition in the market. The revival of old brands like Tata Motors,
TVS, and entry of new auto manufacturing brands like Honda, and Suzuki, has increased the
competition in the industry. To be competitive in the market, Tata Motors came with variants
like Tiago, Bolt, Tigor, Zest, and Nexon Sumo Gold in passenger segments.

Changing Needs of Customer

Fast-changing customer needs are a significant change force in the auto industry. With the digital
revolution, the customers are nowadays becoming more aware of quality, brand choice,
performance, and other factors. The needs of the customer are changing at a fast rate, and the
auto firms have to fuel those needs to remain competitive in the industry. With the growing
middle-income class, people of India are shifting from two-wheelers to four-wheeler segment.
The rise of commercial vehicles is also growing at a fast rate, and its growth is shown in
Appendix B Fig. 16. The growing passenger vehicle requirement is exhibited in Appendix B,
Fig. 17.

The Emergence of Novel Technology

Technology has ushered the international business to a great extent. Advancement in information
technology, transportation, and communication have been the driving forces leading to
internationalization in trade. There are certain factors like environmental sustainability, cost, and
brand credibility that decide the acceptability of customers towards the new technology and
value additions in the products.

E-Business
Revolution in information technology has led to a change in a business scenario. The emergence
of e-commerce has led to an increase in accuracy and speed, reduction in cost, and a more
extensive customer base. The auto industry uses e-business to reach its global customer base.
With the use of e-commerce, the automaker has become transparent in its operations and
dealings. The implementation of ERP in auto industry has reduced the spending of firms to a
great extent. Further, online connectivity program has helped in improving its connections with
vendors and dealers.

Mergers and Acquisitions

Auto Industry has seen many mergers and acquisitions in the last few decades. The automaker’s
goal is to acquire complementary capabilities. Tata Motors acquires a firm if it gives them a new
customer base, improved products, and novel technology (Lessard et al. 2013). In 2008 Tata
Motors has acquired the two English brands Land Rover and Jaguar from Ford Motor to compete
globally in the industry. This acquisition has helped Tata Motors to gain production scale and
technology and to become the world’s growing car maker (Goldstein 2008). The firm also
purchased a Spanish bus manufacturing unit, Hispano Carrocera. Similarly, in 2004 Tata’s
acquired the commercial vehicle unit of Daewoo to develop world-class capabilities in truck
manufacturing.

Government Policies
The government has the power to decide all the monetary policies, fiscal policies, and taxation
modules (Okhmatovskiy 2010). So the policies of the government in power have a massive
impact on the economy and the operation of firms in the marketplace. According to Mecklinga
and Nahm (2019), the government should take strict initiatives to ban environmentally harmful
technologies (e.g. nuclear) and resources (e.g. coal)   to acheive green goals in auto industry.
Upadhyayula et al. (2019) mention that Indian government is emphasizing on electrification and
lightweighting strategies for enhancing environmental performance of passenger vehicles in the
country. Also efforts like Make in India initiative will encourage production in manufacturing
sector including auto industry.

Stringent rules and regulations over ecological concerns have been passed by the government in
the last few years. In response to it, Tata Motors has taken several initiatives concerning the
environment in the past. The company believes that electric vehicle is an essential initiative to
reduce pollution in India. The firm is dedicated to leading this transition and started working in
collaboration with other companies to create a viable environment required for adoption of
electric vehicles. The all-electric Jaguar I-Pace has received 2019 World Green Car award (Tata
Motors, annual report, 2019).

Mapping of Tata Motors on Continuity–Change Matrix

After analysing of continuity and change forces of Tata Motors, it has been observed that the
firm is having high level of both continuity and change forces. Hence, the flowing stream
strategy is suggested as a preferred approach for the firm. To map the continuity forces of the
firm, each continuity force is normalized, and then the average of each continuity force for each
year is calculated. Here, surrogate measures of revenue from net sales, expenditure on research
and development, expenditure on advertisements and promotions, expenditure on employees,
and profit and loss incurred are taken to map continuity forces. Similarly, the change forces are
normalized and the average of change forces for every year is computed. In case of change
forces, surrogate measures of number of vehicles (export) and growth in commercial and
increase in passenger vehicles are considered for analysis. The overall status of continuity forces
is shown in Fig. 2 and mapping of change forces is depicted in Fig. 3. Dynamic mapping of
continuity and change forces for Tata Motors is presented in Fig. 4.

Fig. 2