Question Lewis & Co, 2016) Founded in 1945,

Question 1

1.1 Background of Tata
Motors Group

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Figure
1: Logo of Tata Motors (Glass, Lewis & Co, 2016)

Founded
in 1945, the Tata Motors is India’s largest automobile company and was formerly
known as TELCO (Tata Engineering and Locomotive Company). It has grown rapidly
since it was founded by Jamsetji Tata in 1868 (Tata Motors, 2018). The Tata Motors are more focus on producing
and selling the commercial vehicles, passenger vehicles, midsize car and also
utility vehicle segments to the customers.

The
Tata Motors vision is “As a High-Performance Organisation, we are, by FY 2019,
among the top 3 in a Global CV and Domestic PV, achieving sustainable financial
performance and delivering exciting innovations” and the mission is “We
innovate, with passion, mobility solutions to enhance quality of life”.
Moreover, the values of Tata Motors are integrity, teamwork, accountability,
customer focus, excellence and speed (Tata Motors, 2016).

In
addition, the Tata Motors also offered its commercial vehicles and passenger
vehicles in others countries such as in Europe, Asia Pacific, Latin America,
Africa, the Middle East, Australia and Russia (refer to figure 2). In 1948, the Tata Motors introduced the first
steam roller in collaboration with Marshall Sons (UK), and in 1954 TELCO
started to manufacture medium commercial vehicles in a joint venture with
Daimler-Benz. After that, in 1971, the Tata Motors was ranked as the first
Indian carmaker company that able to produce direct injection engines
independently. The first India automobile manufacturer that independently
developed and designed a light commercial vehicle is the Tata 407 (Schuster & Holtbrugge, 2011).

Furthermore,
the company also has a leading market position in commercial vehicles in India
and continuously increases its market share in different passenger car
segments. In 2009-10, the Tata Motors domestic sales of heavy vehicle and buses
increased by 36.5% to a total of 155, 161. The sales of light commercial
vehicles grew by 44.2 % to 218, 681, and sales of passenger cars grew by 25.3%
to 260, 020 (Schuster & Holtbrugge, 2011). After a few years, the
Tata Motors commercial vehicles domestic sales was increased at 40, 447 units,
a growth of 62% compared to 24,998 units in December 2016. The Tata Motors passenger
vehicles sales performance was also increased at 14, 180 units, which growth of
31% over last year in December 2016 (Tata Motors, 2018).

Figure
2: Tata Motors Worldwide (Tata Motors, 2018)

 

 

 

1.2 Background of Jaguar
Land Rover

 

Figure
3: Logo of Jaguar Land Rover (Sur, 2016)

The
Jaguar Land Rover (JLR) is Britain’s largest automotive manufacturer which
designs, engineer and manufacture in the UK. The Jaguar is more focus on
producing and selling a range of luxury saloons, sports cars and luxury
performance SUVs and Land Rover, which encompasses a portfolio of the premium
all-terrain vehicle (Jaguar Land Rover, 2014). Tata Motors
acquired Jaguar Land Rover in 2008.

In
addition, the Jaguar vehicles comprise the F-TYPE Coupe and Convertible
two-seater sports cars, XJ saloons, the XF and XF Sportbrake, and the new XE
sports saloons. The Land Rover’s range of products comprises the Range Rover,
Range Rover Evoque, Range Rover Sport, the Land Rover Discovery, Discovery
Sport and Defender (Jaguar Land Rover, 2015)

The
Jaguar Land Rover vision is “We are entering the largest, fastest industrial
revolution ever, driven by decarbonisation, air quality, digitization,
connectivity, automation, and technology. Against this backdrop, we see endless
exciting opportunities to create a world in which we will live safer, better, more
connected and mobile lives” (Jaguar Land Rover, 2017). Moreover, the company
mission is “We want to deliver more great products, faster than we have ever
done before, we want to be leaders in the field of environmental innovation and
we want to be sure our customers always come first ” (Jaguar Land Lover, 2018).

 

Figure
4: Global Footprint Fiscal 2016/17 (Jaguar Land Rover, 2017)

Based
on figure 4, the Jaguar Land Rover has four principles automotive manufacturing
facilities in the United Kingdom such as Solihull, Castle Bromwich, Halewood
and the Engine Manufacturing Centre at Wolverhampton. It also has two
development facilities in the United Kingdom at Gaydon and Whitley. Moreover, the
company also owns a joint venture manufacturing plant under its China Joint
Venture, in Changshu, near Shanghai. Besides that, the Jaguar Land Rover was also
has vehicles manufacturing in several countries such as Nitra in Slovakia, Rio
de Janelro in Brazil, Graz in Australia and Pune, in India (Jaguar Land Rover, 2017).

In
Fiscal 2013/14, the Jaguar Land Rover has grown with revenues of almost 19.4
billion (up 23%) on retail sales of 434, 311 units (up 16%), EBITDA of 3.4
billion (up 45%) and profit before tax (PBT) of 2.5 billion (up 49%) (Jaguar Land Rover, 2014). After a few year,
the Jaguar Land Rover revenues was increased at 24.3 billion in Fiscal 2016/17,
up from the 22.3 billion in Fiscal 2015/16, on retail sales of 604, 009 units
(up 16%). The EBITDA of 3.0 billion (12.1%) in Fiscal 2016/17, down slightly
from the EBITDA of 3.1 billion (14.1 %) in the previous fiscal year and profit
before tax (PBT) of 1.3 billion in Fiscal 2016/17 (up 21.0%) compared to 15.7
percent last year (Jaguar Land Rover, 2017).

Question 2

2.1 Mechanism that Tata
Motor used to acquire the Jaguar Land Rover

In
a Tata Motors, the company refers existing assets of the target as takeover. In
June 2008, the Tata Motors acquired Jaguar Land Rover (JLR) for an amount of
$2.3 billion from Ford Motors Company (Collier, 2015). The Ford Motors is ranked as a largest
multinational corporation in the automobile industry. The company acquired
Jaguar and Land Rover, form British Leyland Limited in 1989 for US$ 2.5 billion
(Laddha, 2016). In facts, there are many reasons
behind Ford Motors decision to sell the Jaguar Land Rover.  One of the reasons is because the Jaguar Land
Rover was not performance wells as it was unable to provide any profit for Ford
especially due to high manufacturing costs in United Kingdom. Therefore, due to
this bad reputation and declined in profit, Ford Motors announced that it was
considering selling Jaguar Land Rover to Tata Motors at half of the price.

Tata
Motors was interested in acquiring Jaguar Land Rover and the USD 2.3b paid by
Tata Motors was an all-cash deal. The Tata Motors secured a $3 billion loan
from Citigroup and JPMorgan in order to finance the acquisition (Collier, 2015). The deal price
included the ownership of Jaguar Land Rover, global network of national sales
companies, royalty-free licenses of all intellectual property right, two design
centres in the United Kingdom and manufacturing plants. In addition, the Tata
Motors also stood to gain on several fronts form the deal (Laddha, 2016).

Ø  The
acquisition would help the Tata Motors to enter into the higher premier
segments of the global automobile market.

Ø  Tata
Motors also got two advance design studios and technology as part of the deal.

Ø  The
cost competitive advantages as Corus was the main supplier of automotive high
grade steel to Jaguar Land Rover and other automobile industry in US and
Europe.

Ø  In
the long run Tata Motors will surely diversify its present dependence on Indian
markets (which contributed to 90% of Tata revenue). Along with it due to Tata
footprints in South East Asia will help Jaguar Land Rover do diversify its
geographic dependence from US (30% of volumes) and Western Europe (55% of
volumes)

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