The acquisition of Jaguar Land Rover by Tata Motor is very complex because here there is a requirement for integration of not just two corporate cultures but also two different national cultures.
Tata Motors went for this acquisition because they would enable them to launch Tata globally with better technology and wider product range. It was not easy for Tata to enter the market outside India because of the high barriers of entry in the automotive market. The acquisition of these two established brands would give Tata motors easy access to international markets. Moreover this acquisition would also benefit Tata in improving their technologically standards as both these brands were on par with Tata motors in technical know-how. Ford was willing…show more content… Tata gained access to global market. Tata was able to gain a cost advantage compared to its competitors because of Jaguar’s technology.
90% of the sales of Tata motors came from India. The acquisition helps Tata Motors to lower its dependence on Indian market.
It also helps in diversification of business portfolio both geographically and product wise. It would also gain access to new distribution channels.
Tata also has access to 26 companies along with their Intellectual Property rights.
There were many challenges that they had to face after the acquisition. The context related challenge was the economic slowdown in Europe and America. There was also a currency risk involved since it is a cross-border acquisition.
Tata required a lot of funding to make Jaguar profitable again and it could not handle more debt. Tata was planning to invest an extra $1 billion in Jaguar and there was a fear it would affect Tata negatively as it would increase the volatility of its…show more content… Soon after the acquisition the demand for the luxury car collapsed because of the financial crisis. As a result Tata was forced to refinance to support its investment. The acquisition resulted in a debt of Rs. 21,900 for Tata Motors, a company which had been virtually debt free. The recession brought down the value of Tata Motors to Rs. 6,503.2 crores. The market capitalization was less than what it had paid Ford for JLR.
The JLR group management was not used to working independently as they were a part of a big organization and it was being acquired by a not so big organization. Banks refused to give money when they needed it. So the parent company of Tata motors decided to invest capital in JLR with the faith that the acquisition will be successful. In fiscal year ending in March 2009 Tata Motors stated its first loss in seven years. The JLR unit made a pretax loss of Rs 1,800 crores. JLR did not have its own cash management system. Cash was managed on an hor to hour