House of Tata : Acquiring a Global Footprint.
In order for Tata Group to implement acquisition and/or restructuring strategies, it would be helpful to know existing scope of the group operating company structure, especially, profitability and financing activities. The following table shows the detail information of Tata group company structure. Additionally, the financing and profitability of each operating company under Tata group in year 2007 (FY07). [pic]
• The following table shows the Liquidity, Profitability, Efficiency and Financial Ratio of each Tata operating group companies in year 2007.
|Group company |Liquidity Ratio |Profitability Ratio |Efficiency Ratio |Financial Ratio | | |Current Ratio |Gross margin |EBIT margin |Net income |ROE |ROA |Debt to Equity | | | | | |margin | | | | |Indian hotel |0.8970 |31.1% |24.9% |14.2% |18.4% |8.5% |98% | |Tata Steel |2.4954 |49.0% |25.3% |16.6% |33.5% |11.4% |170.5% | |Tata Motors |0.8527 |28.2% |10.7% |6.7% |31.3% |10.1% |94.6% |
• Tata group SWOT analysis
|Strengths |Weaknesses | |Tata group is the one of India’s largest business houses. |Over Diversification in unrelated product lines from core business such as | |Nano, a passenger car of Tata was the world’s cheapest car and half the |Tata Tea, Titan which unrelated from Tata Motors. | |price of its closest competitors. |According to Tata motors target mostly low and middle income segment, the | |Resource and capabilities of the overall operating company. |image of Tata is not that high. | |Opportunities |Threats | |Indian companies were allowed to borrow from domestic bank at lower |The intensifying foreign competition entering in India. | |interest rate for foreign direct investment and acquisition. |Due to unique India culture, difficult for workforce to adapt through other | |High growth in automotive market. The sales of passenger car are |culture | |expected to increase. | |
Since the intensifying foreign competition in India market and the need to expand globally, therefore, how could Tata group expand itself to the Western market while generate the net profit to cover the cost transferring itself by using acquisition and/or restructure? Alternatives and Evaluation
1. Horizontal Acquisitions
The Tata Group is very success in commercial trucks and passenger cars primarily catering to middle-class consumers in India. Tata also want to expand its market to foreign countries especially in U.S. market which is the world’s largest car market. In addition, Tata has to compete with foreign companies in India. Hence Tata should do acquisition of Land Rover and Jaguar then use their know how to develop more advanced products and higher images. Finally company can compete in both of domestic market and international markets.
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