#61 Tata and Land Rover
Inspired by the recently announced sale of Volvo to Zhejiang Geely by Ford Motor, I tried to find out what’s happening to British Jaguar Land Rover that has been acquired by Tata Motors of India in 2008. Well, the news has been mixed. In fall 2009, Tata Motors has announced plans to close one of two Jaguar Land Rover factories in England by 2014. This didn’t seem surprising for ailing car brands. It made even more sense when the year-end results showed a loss of $565 million. Most recently however, in March 2010, the US magazine BusinessWeek reported that sales are picking up and Tata’s luxury division has even turned a profit of $141 million in the most recent quarter. New executives have been hired away from GM and BMW, so everything looks good. This will certainly be a transnational acquisition that continues to be of interest.
November 23, 2013 @ 9:36 pm
more than 3 years later to the written blogpost above, it can be said that the M&A of Jaguar Land Rover by the Indian company TATA Motors has been a great success in many dimensions. Financed through a leveraged buy-out TATA acquired the high deficient world-famous british car brands in June 2008 form the US car manufacturer Ford. In the middle of the worldwide financial crisis TATA achieved to integrate Jaguar Land Rover and to combine two different corporate cultures in a perfect way. Unlike in other M&A’s TATA trusted in the capabilities of the existing managers. At the time this blogpost is written, Jaguar Land Rover achieved a 66 % increase on profits (source: bit.ly/1gA0abg) and offset the losses of TATA which struggles with a decline on sales on its domestic Indian market.
In the following I want to discuss this M&A and the combination of the two different corporate cultures under the perspective of Geert Hofstede’s cultural dimensions theory. To begin with I want to list the scores Hofstede attributed to India and United Kingdom:
Power Distance (PDI): India 77, United Kingdom 35
Individualism (IDV): India 48, United Kingdom 89
Uncertainty Avoidance (UAI): India 56, United Kingdom 66
Masculinity / Feminity (MAS): India 40, United Kingdom 35
Longterm orientation (LTO): India 61, United Kingdom 25
As seen above there are major differences in the PDI, IDV and LTO. The low IDV level of India, which means that India is a collectivistic country, can be the reason why Indian managers aimed to cooperate with the managers of Jaguar Land Rover instead of replacing them. In collectivistic countries the “we” is more important than the “I”, which means that people like to belong to groups that take care of them in exchange for loyalty. TATA managers trusted in their British counterparts in doing business and can now gain from their success.
Furthermore, I want to highlight the big difference in longterm orientation. Indians which do believe in “Karma” and Hinduism are very tolerant to different views and attitudes. In addition to that, Indians are more future-orientated. However people from the United Kingdom are more short-term orientated and focused on quick results. I assume that TATA’s setting of long-term goals and the commitment to invest further money have a large share on the success of the British company.