Strategic Management

Case Analysis:
Tata Tea Limited

Friday, 02 September 2011

Submitted by:
PGP/14/260 NITESH KUMAR GUPTA PGP/14/290 RAHUL MITTAL PGP/14/280 MAHTAAB KAJLA PGP/14/313 VINNY ARYA

Group V
PGP/14/287 PRACHI CHAWLA PGP/14/315 VISHAD DUBEY

Industry Analysis
Rivalry among competitors [High] The size of competitors is large and they have enough operational excellence and financial muscle. Product differentiation is low as most of competitors have portfolio of products on similar lines Presence of strong competitors like Unilever Industry growth rate is low Bargaining Power of Suppliers [Moderate] The industry being capital intensive the switching costs of suppliers is high Suppliers product differentiation is low Suppliers threat of forward integration is low as the capital investment required is very high and suppliers are small and but concentrated. Limited supply is there of suppliers product Importance of suppliers input is very high to buyer
Strategic Management Group V

Industry Analysis
Threat of New Entrants [Low] Due to the high initial capital investment required, its difficult for new entrants to enter the industry Difficulty in accessing the distribution channels Heavy marketing and advertising budgets Brand visibility is difficult to achieve Bargaining power of Buyers [Low - Moderate] Importance of the product to buyer is high some associate it with sophistication and some have it as everyday drink Buyers threat of backward integration is low as the capital investment required is very high and buyers are small and fragmented. Switching cost to use other product is low Threat of Substitutes [High] Consumers are health conscious Industry Unattractive Presence of carbonated drinks and coffee Switching costs to buyers is low Relative price and quality of the substitute is comparable
Strategic Management Group V

Analysing the candidature for acquisition

Resources Human Resources Intangibles Physical Resources Nature of Resources Extent of redundant Resources Synergies - Retaining intellectual capital of Tetley management team and workforce was not combined - Worlds second largest tea company - Brand visibility in more than 30 countries - Tetley had five manufacturing facilities in US, UK and Australia and a JV in India with Tata to produce tea bags Had both hard(physical) and soft(HR& intangibles) resources - Blending and Packing capacity

Reciprocal synergies

- Working together and executing the tasks would help in knowledge sharing process - Efficiency in supply chain management - Increase in sales due to tea bags and access to high technology

Strategic Management

Group V

Analysing the candidature for acquisition

Market Factors Market Uncertainty - The collaboration is risky due to uncertainty and different perception of different markets; in some markets it was viewed as everyday drink or in some relate the sophistication related to drink - Demand of tea in international market was increasing - Presence of strong competitor in domestic market(HLL) with a market share of 40% - Nestle, Sara Lee and Unilever were the main competitors in international arena - Branding became a major attribute thus the marketing expenditure increased

Forces of Competition

Collaboration Capabilities

Collaboration Capabilities

- Past experience to acquire Tetley was in vain due to its inability to raise the funds - The financial crunch can be overcome through issuing of debt instruments - Tata has the capacity of forward integration to supply raw tea to international distribution centers of Tetley though its tea gardens
Strategic Management Group V

Analysing the candidature for acquisition

Analysis of Factors Factor Types of Synergies Nature of Resources Extent of Redundant Resources Degree of Market Uncertainty Level of Competition Degree Reciprocal Low/Medium Medium Low/Medium High Strategy Acquisition Acquisition Equity alliances Acquisition Acquisition

Recommendation: the synergy generating resources are hard mostly, combining the resources would definitely be a plus, the degree of market uncertainty is low-Medium because of wide dimensions of market, and the level of competition both in domestic as well as international market is high; so its a good idea to go for acquisition than alliance.

Strategic Management

Group V

Q&A

Strategic Management

Group V