Strategic Direction

Tata Motors’ successful cross-border acquisition of Jaguar Land Rover: key take-aways
Atul Arun Pathak,
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Atul Arun Pathak, (2016) "Tata Motors’ successful cross-border acquisition of Jaguar Land Rover: key take-aways", Strategic
Direction, Vol. 32 Issue: 9, pp.15-18, https://doi.org/10.1108/SD-05-2016-0083
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 Tata Motors’ successful cross-border
acquisition of Jaguar Land Rover:
key take-aways
Atul Arun Pathak
Atul Arun Pathak is
Assistant Professor at
Department of Strategic
Management, XLRI
Downloaded by Universiti Teknologi Malaysia At 20:33 14 May 2018 (PT)
Xavier’s School of
Management,
Jamshedpur, India.
DOI 10.1108/SD-05-2016-0083
verseas acquisitions by emerging market-based firms, from countries such as
O India, are gaining an increasingly prominent share of the global cross-border
mergers and acquisition (M&A) deals.[1] However, achieving success in such
deals is a mixed bag and is often a combination of excellent management combined with
lucky breaks, such as a favorable external environment.
Tata Motors, an Indian automobile manufacturer, acquired the iconic Jaguar and Land
Rover (JLR) businesses from Ford Motor Co. at a price of US$2.3bn in the year 2007.[2]
After struggling initially, these two globally recognized marquee brands have now started
doing exceedingly well under Tata ownership. JLR’s revenues improved from GBP 4.9 bn
in 2008-2009 to GBP 21.8 bn in 2014-2015. Similarly, profit before tax has improved from
a loss of GBP 376 m in 2008-2009 to a profit of GBP 2.6 bn in 2014-2015.[3]
As a result, we have traced the evolution of the acquisition over the years to understand the
reasons for its success.
Rationale for the acquisition
Tata Motors wanted to enter the luxury cars and premium sports utility vehicles (SUV)
segments to complete its product portfolio, which hitherto was limited to commercial
vehicles, low-end passenger cars and relatively inexpensive utility vehicles. Also, in the
automobile sector, the Tata brand was largely limited to the Indian market. Acquisition of
JLR gave it an overnight global recognition. Tata Motors also hoped to benefit from JLR’s
strong product pipeline, manufacturing expertise, design capabilities, and an extremely
loyal global dealership network.[4]
Short-term outcomes
At first, the deal seemed like it was a mistake. The global financial crisis had affected sales
of luxury vehicles worldwide, and JLR was hemorrhaging cash. Tata Motors, with the help
of leading external consultants, focused on cost control and improving profitability and
liquidity. Reduction in number of employees and tighter operational control helped improve
things somewhat. In parallel, throughout the initial couple of rough years, the parent
company kept investing cash in the loss-making JLR to keep its product development
initiatives running.[5]
Learnings from the eight-year long journey
From the time the deal took place, Tata Motors understood that the JLR vehicles
succeeded worldwide because of their high quality design, engineering and
manufacturing. Therefore, JLR’s operations were allowed to remain in UK as before,
VOL. 32 NO. 9 2016, pp. 15-18, © Emerald Group Publishing Limited, ISSN 0258-0543 STRATEGIC DIRECTION PAGE 15
 whereas Tata Motors resisted the temptation to quickly move manufacturing to cheaper
locations such as India or China (“The Cars That Ate the World”, 2009). In fact, the
continued commitment to be based in UK is clearly evident. The firm invested GBP 230 m
in the JLR plant in Halewood from 2010 to 2013[6] and more recently GBP 500 m in a new
engine manufacturing plant at Wolverhampton.[7] Furthermore, the UK employee numbers
have doubled in the past four years.[8]

Culturally, JLR and Tata Motors are as different as chalk and cheese. Integration would
have been a huge challenge. Tata Motors remained clear from the very beginning that it
need not integrate JLR and its domestic Tata Motors operations to benefit from the deal.
Very few high level management changes were made and Tata Motors clearly did not try
to impose its culture on JLR in any significant manner.[9]

In fact keeping the two businesses apart on most aspects and only sharing knowledge on
a few selected aspects has been a conscious strategy throughout. Explaining how the
Indian unit of Tata Motors has benefited from JLR, Mayank Pareek, President – Passenger
Vehicles Division at Tata Motors, stated,[10] “We learnt processes from JLR but not shared
any technology”. Ralf Speth, CEO of JLR, also believes that the synergies are limited to
processes because JLR and Tata Motors address completely different product and
customer segments.[11] According to John Paul MacDuffie, Wharton management
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professor, “That appears to be their pattern with their acquisitions – that they by and large
allow the management to keep doing what it is doing and, as I said, look for opportunities
to learn from these foreign acquisitions”.[12]

On the other hand, Tata Motors remained patient through the initial troubled times and
continued to invest in the acquired entity. At the time of the JLR acquisition, Land Rover
was developing a model called Evoque. By 2012, this model became wildly successful
on a global scale and helped improve profitability significantly (“Get Used to Impatient
Newcomers”, 2013). Investments in product development which were US$1.2bn in
2010 increased to about US$4.2bn in 2014.[13] This led to a continued healthy pipeline
of new products that became global blockbusters in the coming years.

Luck too plays its part. According to Carl-Peter Foster,[14] the then Group CEO of Tata
Motors in 2011, “The recovery in the premium sector happened faster than expected and
JLR did well in the segment, not necessarily in terms of market share but profit-wise and
margin-wise. A lot had to do with a favorable country mix and with China pulling the
premium segment quite strongly”.

Also, shortly after Tata Motors acquired JLR, the Chinese market for luxury cars and
premium SUVs started growing rapidly. In addition, the introduction of fuel efficient models
by JLR coincided with uptick in demand in key markets such as UK, USA, China and
Europe.[15]

Conclusion
Clearly, the JLR acquisition has been a great success for Tata Motors. In fact, JLR has
helped the parent company shore up its financial results when the Tata Motors
commercial vehicles segment was going through a cyclical downturn and its passenger
cars were also underperforming in the Indian market. According to Kenneth Gregor,
Chief Financial Officer of JLR, “Fiscal 2015 is the fifth consecutive year of growth for
Jaguar Land Rover with retail volumes, revenues and profits reaching record
volumes”.[16] JLR sold over 460,000 vehicles via 2,600 dealerships across 170
countries in the year 2014-2015. It is now the largest employer in the automobile sector
in UK. JLR employs over 35,000 people worldwide and has been ranked as the fifth best
employer to work for in the UK in 2014-2015.[17] JLR even recorded strong growth in
India in 2015-2016 and saw tremendous response for the new models of both JLR that
were launched recently.[18]

PAGE 16 STRATEGIC DIRECTION VOL. 32 NO. 9 2016

 A successful cross-border acquisition is a result of both internal factors that are under the
control of management and the good fortune of finding favorable external factors after the
deal. Organizations carrying out cross-border acquisitions can improve their chances of
success by:
 continuing to support and invest in the acquired entity;
Keywords:
India,  only integrating those aspects of business that make sense to integrate;
Strategy,
M&A,  managing cross-cultural issues;
Mergers and acquisition,  taking a long term perspective on the deal; and
Automobile industry,
Tata Motors Jaguar Land  keeping their fingers crossed and praying that the external environment turns out to be
Rover benevolent in the long run.

Notes
1. available at: http://thefirm.moneycontrol.com/story_page.php?autono⫽1053964 (accessed 23
May 2016).

2. Tata Motors Conference call on 2 April 2008, available at: www.tatamotors.com/investors/pdf/

Downloaded by Universiti Teknologi Malaysia At 20:33 14 May 2018 (PT)

TataMotors-JLRConferenceCall.pdf (accessed 23 May 2016).

3. available at: www.firstpost.com/business/a-tale-of-2-acquisitions-in-9-charts-tata-steels-failure-

with-corus-and-tata-motors-success-with-jlr-2704788.html (accessed 23 May 2016).

4. available at: www.livemint.com/Companies/UhROXPttBWa40lVOgtS6wL/How-Tata-Motors-

turned-JLR-around.html (accessed 23 May 2016).

5. Ibid., Section titled “Hard times”, (accessed 23 May 2016).

6. available at: www.jaguarlandrover.com/media/23076/jlr_company_information.pdf, p. 8, (accessed 23

May 2016).

7. Jaguar Land Rover Automobile PLC. Annual Report 2014-2015, p. 50.

8. available at: www.jaguarlandrover.com/media/23076/jlr_company_information.pdf, p. 6, (accessed 23

May 2016).

9. available at: www.tata.com/article/inside/Jaguar-Land-Rover-has-been-the-big-positive (accessed 23

May 2016).

10. available at: www.businesstoday.in/magazine/corporate/tata-motors-business-can-cyrus-mistry-

stage-a-recovery/story/221621.html

11. Ibid. (section titled “Reinventing Tata Motors”), (accessed 23 May 2016).

12. available at: http://knowledge.wharton.upenn.edu/article/tatas-takeover-of-jaguar-and-land-rover-

bumpy-road-or-smooth-ride/ (accessed 23 May 2016).

13. available at: www.ft.com/intl/cms/s/0/717dfd2c-dcad-11e2-b52b-00144feab7de.html#

axzz48yzwOynz (accessed 23 May 2016).

14. available at: www.tata.com/article/inside/Jaguar-Land-Rover-has-been-the-big-positive (accessed 23

May 2016).

15. available at: www.livemint.com/Companies/UhROXPttBWa40lVOgtS6wL/How-Tata-Motors-

turned-JLR-around.html (accessed 23 May 2016).

16. Jaguar Land Rover Automobile PLC. Annual Report 2014-2015, p. 66.

17. ibid, p. 2.

18. available at: www.tata.com/article/inside/jaguar-land-rover-india-q4-fy16

VOL. 32 NO. 9 2016 STRATEGIC DIRECTION PAGE 17

 References
(2009), “The cars that ate the world: new markets bring both fears and fresh challenges”, Strategic
Direction, Vol. 25 No. 8, pp. 13-16, available at: http://dx.doi.org/10.1108/02580540910968517

(2013), “Get used to impatient newcomers: emerging market firms rush to take on the world”, Strategic
Direction, Vol. 29 No. 4, pp. 13-15, available at: http://dx.doi.org/10.1108/02580541311311258

About the author

Atul Arun Pathak is Faculty Member in the Strategy Area at XLRI, Jamshedpur, India.
Atul has a Doctoral Degree in Strategy from the Indian Institute of Management
Ahmedabad and a PGDM from the Indian Institute of Management Calcutta. He has
previously worked for over 12 years in the banking, technology and management
consulting sectors. Atul Arun Pathak can be contacted at: atul@xlri.ac.in

Question:
1) Contrast the management strategy of JLR with Tata Motors.
2) JLR has improved sales worldwide because of quality, design and reputation. Discuss and contrast
with Tata Motors.
3) Discuss the success of Evoque and other new models introduced by JLR.
4) Explain the importance of product development for auto makers such as JLR to keep up with
Downloaded by Universiti Teknologi Malaysia At 20:33 14 May 2018 (PT)

competition such as BMW, Mercedes, Volvo, Audi, VW and the supercars (Lamborghini, Porsche etc).
5) Explain why collaboration of Tata and JLR is only limited to process but not technology.

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