Case Based Study of TATA and Daewoo Motors

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organizational structure is visible in CISCO implementation of integration strategy of TATA & Daewoo.

Text of Case Based Study of TATA and Daewoo Motors

Jaipuria Institute of Management, Lucknow SMGT II ASSIGNMENT TATA DAEWOO Cisco systems SUBMITTED TO: Prof. V.V. Ratna Faculty JIML SUBMITTED BY: Prashant Saxena Cft08_102 PGDM 2008-2010

Write a note on the implementation of integration strategy of TATA & Daewoo. Tata Daewoo Commercial Vehicle CompanyThe Tata Daewoo Commercial Vehicle Company (TDCV) is South Korea's second largest manufacturer of medium and heavy-duty trucks. Formerly part of the Daewoo Group, the company was acquired by Tata Motors in 2004. With the acquisition of TDCV, Tata Motors has grown to become the world's fifth largest manufacturer of heavy commercial vehicles. Established in 1983 as the Daewoo Motor Company, the business was spun off as Daewoo Commercial Vehicle Company in 2002. TDCV trucks are distributed locally through Daewoo Motor Sales Company and are exported to over 60 countries worldwide, including South Africa and China and countries in the Middle East, Southeast Asia and Eastern Europe. Areas of business TDCV has a product portfolio of over 75 types of trucks in the commercial vehicles segment. Its product range includes flat beds, dumpers, mixers, tractors, arm-roll trucks, refrigeration trucks and special-purpose trucks. Location The companys headquarters and plant are in Gunsan, South Korea. It has an office in Incheon and sales offices across the country

TATA MOTORS:The Tata Group's history can be traced back to 1868 when Jamsetji Tata, established a textile mill at Nagpur in Maharashtra. The Group set up the first steel mill in the country, as also the first luxury hotel and the first airlines service in India. By 2004, Tata Group's turnover was $14.25 billion, contributing 2.6% of the country's gross domestic product. The Group has 91 companies under its fold with operations spanning varied sectors like Engineering, Materials, Energy, Chemicals, Consumer Products & Services to Communications and Information Systems. Tata Motors is the biggest company of the group and ranks as the fifth largest commercial vehicle manufacturer in the world. The history of Tata Motors, earlier Tata Engineering & Locomotive Company Ltd. (Telco), can be traced back to the early 1920s. The Telco plant at Jamshedpur, originally belonged to Peninsular Locomotive Company (Peninsular), which was established in 1923. In 1927, Peninsular was taken over by East India Railway to manufacture passenger carriage underframes for the Indian Railways. In 1945, Tata Sons purchased the plant from the Government of India and used it to manufacture steam locomotive boilers and other engineering products, under the name Telco. The company also entered into collaborations with Marshal Sons (UK) to manufacture steam road rollers, and with Krauss Maffei (West Germany) to manufacture steam locomotives. In 1954, the company entered into a technical collaboration with Daimler-Benz to manufacture automotive vehicles. The association with Daimler-Benz helped the company build up a strong in-house R&D center (Engineering Research Center-ERC) at Pune, Maharashtra. By 1961, it was manufacturing construction equipment. Over the years, the company acquired up-to-date technology from several collaborations and co-operation agreements with international companies. In 1961, Telco produced its first crane in collaboration with M/s Pawling & Harnischfeger (P&H), USA. In 1966, it acquired Investa Machine Tools Co and set up a machine tools division at Pune. In the same year, it started its Press Tool Division and vehicle manufacture facilities at Pimpri and Chinchwad (pune).

Cultural due diligenceThe matching of the core values is an important aspect of the post-acquisition due diligence. The Tatas do something called a cultural due diligence, which is nothing but a lot of applied common sense. The idea is to ensure that the chemistry is right between the company that is sought to be acquired and the company acquiring it. For example, when Tata Steel acquired NatSteel in Singapore, the code of conduct of the Tatas and NatSteel were put together and several sessions held to communicate what was acceptable behaviour. "As you go into emerging markets, the world ceases to be black and white. And in those shades of grey, acquisition principles can be lost," Mr Gopalakrishnan said.

TATA Group on BCG Matrix-

Acquisition challengesThe Tata group with revenues in 2005-06 of Rs 97,000 crore has operations in over 40 countries. The group companies have been acquiring firms overseas in fields as diverse as automobiles to steel to information technology to hotels. Each overseas venture, be it an acquisition or a greenfield plant, brings with it challenges that of integrating the operations with the parent company's goals, communicating the vision to the employees of the acquired company, making the local population comfortable with the intentions of the company doing the acquisition and getting the employees to become part of the society they are in. The challenges are not just managerial, but cultural too. That is why a group like the Tatas conducts what it calls a cultural due diligence different from the financial due diligence that precedes any acquisition to ensure that the company to be acquired fits in with the group's overall goal. This was the thrust of Mr Gopalakrishnan's speech at the "Captains of Industry" conference at the Global Entrepolis at Singapore recently. Dealing with the theme "Entering new markets and becoming international the Tata experience," he summed up the lessons the Tata group had learned from its overseas operations into five. They are: The connection between the domestic core business and the overseas expansion should be clear, defined and pursued with persistence; the post-merger integration and processes must be consistent with the strategic intent of the acquisition; the absolute core and non-negotiable values of the acquiring company should be made explicit to the acquired company; the positioning of the business of the host country, positioning into society, the economy and with decision makers should be harmonious with the actual action on the ground; and, it is important to engage with the society in which the business is located, irrespective of whether it is a rich country or a poor nation. Tata Motors, a group company, acquired Daewoo Commercial Vehicles Company, Korea's second largest truck manufacturer, in 2004. Any acquisition must look for an equation beyond the obvious. The fit between the two companies seemed perfect. India was a market for low horsepower trucks because of the way its highways had

developed. Korea, on the other hand, was a market that demanded high horsepower trucks due to the built-up infrastructure. "One of the advantages was we could give something to the acquired company and take something from it as well," pointed out Mr Gopalakrishnan. Heavy commercial vehicles designed by Tata Daewoo Commercial Vehicles Company, as the Korean company has been renamed, have been introduced in India while medium commercial vehicles a segment in which Daewoo did not have any product on its own designed by Tata Motors have been launched by the Korean subsidiary. "It is the self-evident things that one tends to miss while doing crossborder acquisitions." There are two broad models of acquisition the prescriptive and the adaptive. In the former, more an Anglo-Saxon way of dealing with acquisitions, the acquiring company takes all the decisions where to have outlets and how many to have, for example. The latter model - the adaptive approach is not one that the Western world is used to. "In an adaptive model, you have entered the market with an idea and you have to develop that idea and figure out how is that you can make the idea deliver economic value." For example, Tata Chemicals took over a British company Brunner Mond. The two companies sat together and discussed how the best practices could be shared. Among other things, this resulted in cost savings for the two companies, which, more or less, paid for the acquisition itself a bonus as far as the original intent of the acquisition was concerned.

Levels of engagementThere are four levels of engagement when a company enters a foreign country explore, pioneer, settle down and cultivate, and harvest. In some instances, a company can jump stages depending on the kind of entry, especially if it is an acquisition. The positioning of the business in the host country should be harmonious with the actions of the company on the ground. The Tata group has gone through these four stages in its international operations, which started more than four decades back. But, it has also been able to avoid the pioneer stage completely, thanks to acquisitions. Again, when Tata Chemicals acquired Brunner Mond, the acquisition gave it a company that had a 60 per cent market share and access to customers, something that would have taken Tata Chemicals a long time to acquire. Tata Chemicals, therefore, had to behave simultaneously in different modes in different countries, which is complicated and difficult, but the right thing to do. Engaging with society the last of the lessons that Mr Gopalakrishnan cited as the Tatas' learning experience is something that the Tata group companies have been quite used to. The involvement can be at different levels interacting with society on specific issues or a much deeper engagement. Tata Consultancy Services, the information technology company in the Tata group, has several hundred employees working in the US. When Hurricane Katrina struck the US, the TCS employees working in and around the Louisiana area collected about $100,000 which the company matched.

Strategy implementation:1. Building trust and credibility 2. Integration via use of the BEBP compliance plan, the balanced scorecard (BSC) and the Tata Business Excellence Model (TBEM). IT related processes such