In recent years, policy makers of organizations are using different growth strategies to perform well in market. This research study intends to explore growth strategies of Tata Motors and Jaguar and Land Rover. The second part of research study explores the growth strategies of Wal-Mart, one of the biggest retail grocery stores of the world. We examined the acquisition of pink n pay and we critically analyzed these growth strategies in this research study. For this purpose we collected data from Tata Motors and Jaguar Land Rover. Data was collected from scholarly research papers, companies’ annual reports and official websites. The result of this research study shows that decision taken by Tata Motors to acquire Jaguar Land Rover was a wise decision because that time market was demanding it and after acquiring the Jaguar Land Rover, Tata Motors performed very well in industry. Results also show that the acquisition of pick n pay was very helpful to survive in market. This acquisition helps them to enter into new international market and effectively compete with competitors.
Keywords: Business Strategies, Mergers, Acquisitions
1. Introduction
These growth strategies include internal growth strategies, external growth strategies and combination of internal and external strategies. According to (Nieman et al, 2004) internal growth refers to core growth or internal base growth of business. Internal growth can be achieved by focusing on expansion in new markets, developing new products, time to time turnaround measure to prevent failure in market. Internal growth can also be achieved through distinctive strategy i.e. cost leadership, specialization and differentiation. (Nieman et al, 2004) suggested that external growth strategies include vertical and horizontal integration. In Vertical integration company acquires a business that is it’s above addition chain or below. Above addition chain means supplier and below addition chain means customer. In horizontal integration company acquires a business in same level or value addition itself. The second growth is external growth. In This strategy company formulate strategic actions and action plans. Companies move to one or more following methods while using external growth strategy. These methods are investment, agreement, franchising, licensing, strategic alliances mergers acquisition and joint ventures.
2. Objectives of the Study
The objectives of the research study as follows:
i. To study the growth strategy i.e. acquisition and merger of Tata Motors and Jaguar Land Rover.
ii. To evaluate the strategy either it was a wise decision or not and why.
3. Literature Review
There are many researches who conducted researches on company’s international business level and corporate level strategies. (Olivier Furrer, 2011) suggests defined corporate level strategy with reference to various researchers and scholars. He said that corporate level strategy is a way from company creates value through the coordination of its multimarket policies. (Nieman et al, 2004) also studied the different growth strategies in detail. He described that company adopt one or more strategy after analyzing its market condition. The strategies can be internal growth strategies or external growth strategies like mergers, acquisition, licensing or franchising.
4. Research Methodology
The data was collected from official websites of companies, past research papers and annual reports published by companies. A qualitative analysis is used in this research.
5. Merger and Acquisition
Companies use merger and acquisition growth strategy to combine resources to increase its market share by achieving economies of scale and diversification. In merger and acquisition company expands its operations, workforce and production. Normally firm makes international merger and acquisition strategy to spend its business internationally and to increase client base or market share in to different diversified market. (Saee, 2007) defined strategic merger as a merger is a combination of two or more organization into a single new firm. Merger and acquisition normally refers to long term strategic holding of acquired organization. The purpose of this type of merger is to make synergies in the long run by enhance market share, customers and corporate strength of firm. Usually strategic acquirer offers to pay a premium amount to target organization after synergy value created with merger and acquisition process.
6. Tata Group Acquired Jaguar Land Rover
In (June, 2008) Tata motors acquired Jaguar Land Rover. Tata Motors acquired Jaguar Land Rover in result of future collapse in international car market. Ford sold Jaguar Land Rover to Tata just over £1bn. After this acquisition a collapse takes place in global demand in the international automobile industry especially in car market. Tata had financed this strategic takeover with $3bn of new long-term loans. This take over was financially beneficial because Tata acquired Jaguar Land Rover by paying half price of what Ford had paid to buy Jaguar and Land Rover in past. From the start Ford had continued to intense suffered with losses when it acquire Jaguar Land Rover.
7. Reason for the Acquisition
Tata Motors wanted to enter into new markets such as in European countries. This desire leads Tata Motors to acquire Jaguar Land Rover. By acquiring Jaguar Land Rover provided significant potential to combine resources and make synergy with Jaguar Land Rover to enter into new international market. After acquisition process Tata gained these benefits:
i. Tata gained access to Top class engineering skills after acquiring Jaguar Land Rover.
ii. Tata also strengthens relationship between Tata’s steel and automobile businesses.
8. The Strategy that led to the Merger or Acquisition
Tata motors could easily arrange finance to acquire the Jaguar and Land Rover. It was having excellent fund of more than $1087 million and making cash more than $180 million during financial year of 2007. Tata Motors easily used these funds to increase more finances without endangering its finance.
9. Justifications for Acquiring Land Rover and Jaguar
There were lots of reasons why Tata acquired jaguar and Land Rover. These reasons are as follows:
i. Technological Advances
ii. Diversification of Markets
iii. Synergy with Other Group Firms
iv. Completing the Product Portfolio
10. Benefits of this Acquisition to Tata Motors
i. Helps in getting Technological advances
The transfer of technology ultimately facilitates the company’s products to effectively compete in the local, international and global markets. Jaguar land Rover has a competitive edge of superior technology in their luxury car segment. This competitive edge automatically transferred to Tata Motors. The transformation of this technology helped to improve manufacturing across different product segment and lines. As a result, it increased the competitiveness of Tata Motors in design and manufacturing of cars.
ii. Diversification of Markets
If Tata Motors had not acquired Land Rover and Jaguar and saves money in the short run, this would lead to the failure in diversification and Tata Motors bears undiversified economic risk. This decision would also lead to the Failure of the Thrust for Market Diversification. When Tata Motors acquired Land Rover and Jaguar it experienced short term cash outflow and increased debt and Company was able to use Jaguar and Land Rover to enter in American Market and Tata Motors risk gets diversified.
iii. Synergy with Other Tata Groups
There are the various segments in which Tata works like Tata steel, Tata motors, and Tata hotels provides synergy to each other with jaguar rand rover. Tata Steel provides lower cost of steel which is primary component for vehicle production and vise a versa jaguar provide its technology global network for its diversified market.
iv. Completing the Product Portfolio
Before this acquisition Tata motors normally was in heavy vehicle production segment. After doing this acquisition it got chance to complete its product portfolio heavy vehicle to luxury car.
i. Tata Motors was currently in passenger cars, light trucks, medium and heavy trucks as well as buses.
ii. For the passenger car segment, Tata Motors serves the low income to middle income market
iii. It was not having an existing luxury brand to compete with foreign counterparts such as Lexus, BMW, and Mercedes Benz etc.
iv. Creating a Luxury Brand from scratch was difficult and takes years. India was not having a good reputation for luxury car brands
This deal makes TATA MOTORS capable in luxury car segment also.
Acquiring jaguar was a wise decision because of the various reasons. These reasons are as follows:
i. Spread business all over world , North America, Europe and Asia
ii. Cost of Building network through organic growth: If Tata had not acquired the Jaguar then the cost of luxury car production and distribution would have been very high in North America and Europe. Even it would have taken a long time to build and establish the luxury car brand in India, America and other part of the world.
iii. Implication: It helps in a good entry strategy for Tata in North America, Europe and is able to exploit Asia’s emergence.
iv. Corporate level strategy of the firm It enhanced stakeholder value by emerging the organization and enhances the share price of the business. This deal proved successful in order to increase the share price. In 2012, Share price of Tata Motors makes it the-best performing major car maker (up 70%)
v. Business level strategy The main concern of business level strategies is to build up a sustainable competitive advantage, Pricing and product segregation and construction and maintaining better positioning within the industry in which the organization doing business.
11. How the deal helps firm in business level strategy Achievement
This acquisition not only gives Tata Motors a complete design portfolio in terms of having competitive edge in luxury and value-for-money cars. It also makes Tata Motors a completely different in terms of being a global passenger car production company.
Other success is Under Tata’s ownership JLR has also launched a killer product, the Range Rover Evoque, and cracked emerging markets. Both brand proved a real cash draw for the firm and gives height to the growth.
As it was the deal that Ford motors building will maintaining to supply power trains, stampings and other unnamed vehicle components to Tata for time to time, as well as Research and Development r, environmental, auditing, platform technologies, and accounting services, among others. TATA gets the advantage and it helps Tata group new brand emerge by using new technology and other services.
12. Pick and pay merger with Wal-Mart Supercenter
Wal-Mart’s international operations currently cover 4,263 stores and 660,000 workers in 15 countries all over the world, while Pick 'n Pay is the 2nd biggest grocery superstore chain in South Africa only. In 1984 a Pick 'n Pay Hypermarket was opened in different location including Aspley, Queensland and in Sunnybank Hills, Queensland, Australia in 1994. It was bought by Coles Myer in the 1990s.
Merger of Pick and pay with Wal-Mart will helps both the firm in various ways
i. It will get chance to pick and pay to diversified its business in various countries and also in product diversification .currently it’s not working in pharmaceuticals, health and beauty aids, photo developing services .
ii. As pick and pay is successful hypermarket brand, after merger Wal-Mart will get advantage in spreading market share and give it advantage over its competitors.
iii. This merger will help Wal-Mart maintaining superior positioning within the industry in which the organization does business.
iv. This deal proves successful in order to increase the share price. As pick and pay already running in profit. As the firm has no debt and loss.
v. Wal-Mart is the world's 18th largest public corporation, according to the Forbes Global 2000 list, and the largest public corporation when ranked by revenue. It will help pick and pay in Brand building.
Conclusion
The basic aim of this research was to critically analyze the international and corporate level strategies of firm working in automobile industry and grocery retail chain. After reviewing and critically analyze the literature, companies’ annual reports and business models we found that sometimes companies take strategic decisions such as acquisition of new firm, merger and strategic alliances. In this study Tata Motors acquired Jaguar Land Rover to create synergies and enter into new market. This step towards acquisition was very beneficial for Tata Motors because with acquisition of Jaguar Land Rover, It also acquired all competitive technologies of Jaguar Land Rover, that make combine the resources of two automobile firms and they succeed in the market. Tata Steel also became supplier of steel to its automobile sector. Due to become a supplier they manufactured low cost cars and increased their international market share. Same as the case of Wall- Mart and pay n’ pick store acquisition was beneficial for both grocery super stores. After acquisition they easily entered into new market with help of each other’s resources.
References
1. Gideon Nieman, Marius Pretorius, Gideon Nieman, (2004), “Managing Growth: A Guide for New Business Ventures”. Juta and Co Ltd. Cape town pp 110-116
2. Olivier Furrer, (2011), “Corporate Level Strategy: Theory and Applications”, Routledge, New York pp 1-3.
3. John Saee, 2007, “Contemporary Corporate Strategy: Global Perspectives”. Routledge, New York pp- 132-133
