Tata Motors' Acquisition of South Korea's Daewoo

Pages: 1 (282 words) Published: October 3, 2011
Tata Motors (TM) of India, a company with no experience of acquisitions outside of India, succeeded in acquiring South Korea’s Daewoo Commercial Vehicle Company (DCVC). TM faced major challenges in integrating and managing DCVC, thus focused their practises by allowing DCVC to retain their own image and autonomy, emphasising on equal integration. TM changed the name of DCVC to Tata Daewoo Commercial Vehicle company (TDCV). However, on their road to success TM encountered many challenges such as different management systems, cultural differences, union issues and operational issues. The justifications behind TM in acquiring a competitor within the same industry, such as DCVC, were to increase their market power, product and service range and gain new tangible and intangible capabilities and resources. The acquisition provided TM with a complete product range of trucks and enabled the entering into new markets, and increased their competitiveness in developed countries.

To be a successful bidder, a company must have a ‘winning’ purchase price and a strong global reputation. Consequently, a company can then, influence purchase price, negotiate terms of agreement(s) and increase the validity of their purchase claim. TM was successful in their bid, because they fulfilled the above criteria but also respected the values, culture and systems of DWCV. Firstly, they translated all their literature such as company policies and organisational processes into Korean, for easier understanding. Impressed by this, DWCV accepted TM’s bid. TM’s philosophy was to be a Korean company in Korea and as a result, the local management was retained. TM spent the first few months after acquisition observing and learning. Both companies’ concerted efforts developed a healthy respect for each other, their respective culture and employees.
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