Tata Motors Financial Performance Analysis

This assignment examines the financial performance of TATA Motors between 2011 and 2014, highlighting improvements in current ratio, net profit ratio, and debt equity ratio. It also discusses the company's strategic focus on domestic and international business expansion through product innovation and acquisitions like Jaguar Land Rover.

Case Study

Table of Contents
INTRODUCTION...........................................................................................................................1
ANALYSATION OF GIVEN CASE..............................................................................................1
Industry analysis..........................................................................................................................1
Porter's five force model of TATA motors................................................................................1
SWOT analysis of TATA motors...............................................................................................2
Business strategy of TATA motors.............................................................................................2
Analysis of financial statements..................................................................................................3
CONCLUSION................................................................................................................................4
REFERENCES................................................................................................................................5
.........................................................................................................................................................5

INTRODUCTION
TATA motors is considered as a successful auto-mobile company of India. They are
running their business across the globe and they are operating in different segments like Luxury
cars, three wheeler vehicles etc. (Becker-Ritterspach and Bruche, 2012) . This report will cover
industry analysis along with evaluation of financial statements of TATA motors. Application of
porter's five force model and SWOT analysis of company will also become significant part of
this file. Strategies related to merger and acquisition will be explained in this assignment.
ANALYSIS OF GIVEN CASE
Industry analysis
Before adoption of LPG (Liberalisation, privatisation and globalisation) policy in India,
auto-mobile sector was almost zero in this country. But after 1991, this industry saw unexpected
growth. Many domestic companies started strategic partnership with foreign enterprise because
they knew manufacturing is not possible without investing huge amount of money and gaining
technology. This sector is continuously growing in India and at global level as well. In preset
scenario, auto-mobile industry is making great contribution in economic development of India
and competition in various segments of this sector is increasing with a high rate. Auto-mobile
industry is going through major changes, demand of electric cars are enhancing and government
of different nations are restricting sale of diesel vehicles (Chakravarthy and Coughlan, 2011).
The defining characteristics of auto-mobile industry are utilisation of modern technology
so that more vehicles can be manufactured. Moreover, 49 % of market share is adopted by
industry.
Porter's five force model of TATA motors
This model mainly concentrate on fives areas. Application of this model is mentioned below:
Threat of new entrant – It is low. Entering in auto-mobile sector require huge amount of
capital and sound technology, both of these factor restriction new entries in domestic market. At
global level, companies like Tesla can be considered as a threat in present situation, there are in
no position to impact revenue of TATA motors.
Bargaining power of suppliers – Suppliers do not have much power because company
has many vendor and switching suppliers would not cost much to this organisation.
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Bargaining power of buyers – Customer has high power. TATA group is operating in a
highly competitive market (domestic and international) and all of their products has many
competitors. Buyers can buy cars or any other vehicle from another company if they did not get
deal according to their expectation.
Threat of substitution – It is low. TATA group is selling a product which can see huge
development in upcoming time but the chances of substitution of auto-mobile vehicle is very low
in current scenario and near future.
Competitive rivalry – It is high. Maruti Suzuki, Hyundai, Honda, Mahindra are main
domestic competitors of TATA motor. These organisations are continuously increasing their
market share and injecting new features in their product. At global level, Jaguar and Land Rover
(JLR) is prime revenue generating vehicle of this company (Chakravarthy and Coughlan, 2011).
This brand has many competitors like Volvo, BMW, Audi etc.
Moreover, weapons used by rivals in order to capture market are decreasing cost base,
enhancing services to enlarge product portfolio.
Rivalry is becoming intense as competitors are implementing new models of cars so that
maximum market may be captured and that too at lower costs.
The drivers changing the industry are consumer preferences, government rules and
globalisation.
SWOT analysis of TATA motors
If an organisation understand their strength, weaknesses, opportunities and threats then
they can improve their performance in short and long run:
Strengths
 Distribution and service network of this company is wide and extensive.
 Research and development department of TATA motors is better than their rivals and
dedicated as well. This organisation has diversifies product portfolio.
Weaknesses
 Weak presence in international market. They are involved in many controversies in home country and this trend is not ending
(Lim, Han and Ito, 2013).
Opportunities
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 Growing auto-mobile sector can result in rapid expansion of TATA motors. They can acquire or merge with more companies in order to buy or develop new
technology.
Threats
 Continuous increment in cost of fuel is a major threat for them.
 Competitors of this enterprise offer almost similar products at lesser price.
Business strategy of TATA motors
TATA motors is currently focusing on attaining more share in BRICS (Brazil, Russia,
India, China and Africa) nations because these market are stable compared to other and
opportunity of long term growth is high in them (Kotabe and Helsen, 2014). Below are generic
strategies adopted by TATA motors:
Cost leadership – Launching a product like Nano is part of their strategy. This
organisation is using innovative techniques of production in order to reduce cost of
manufacturing. They are also trying to make a reasonable profit by lowering down price of some
of their vehicles. This is only possible by minimising cost of commodities (Singh and Srivastava,
2012).
Cost focus – Cost leadership is broad scope but on the other hand, cost focus is narrow.
Innovation is key for getting competitive advantage in terms of cost. TATA motors concentrated
on small things like putting three instead of four bolt in Nano car for reducing its price.
Differentiation – This is another effective strategy which TATA motors is using from a
long period. They are brought some new features in their offerings which are currently not
available to their competitors at same price. This organisation is giving the latest technology in
their cars and other products without charging much amount (Singh and Shalender, 2014). An
important part of their differentiation strategy is fine work in research and development area.
Differentiation focus – TATA motors is giving extra attention to their customer service
wing. They know getting competitive advantages on the basis of product differentiation is knot
an easy task. Products of every seller is almost same in auto-mobile industry. Better customer
service become deciding factor in this situation (Porter's Generic Strategies, 2018).
Analysis of financial statements
From 2011 to 2014, TATA motors saw many ups and downs. This was a difficult period
for them at that time because in year 2012, their profit was 13516.5 crore (1 crore = 116450
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pounds) which goes down to 9892.6 crores in next year. Their net profit got enhanced in 2012
compared to 2011 and it again saw a rise of around 4000 crores in 2014. This fluctuation in
revenue and profit was major concern for them. An important thing which should be noted under
these circumstances is that their total assets did not decrease (Shafiulla, 2014). In present time,
TATA motors is improving their financial performance and running a stable business.
Contribution of JLR was significant between 2011 to 2014.
Financial Growth of TATA motors
It can be analysed that performance of TATA motors is increasing which is evident from
financial ratios. Current ratio is increased from 0.88 in 2013 to 1.05 in 2014. On the other hand,
Net profit ratio also increased from 4.69 in 2013 to 5.58 in 2014 which implies it is able to
manage expenses. Debt equity ratio is decreased which means company uses inadequate mix of
debt and equity. Overall position of TATA motors is good.
CONCLUSION
From the above report, it can be concluded that TATA motor is focusing on both
domestic and international business by launch different kind of product on various market.
Innovation and acquisition like JLR is assisting them in strengthening their position in India and
other nations.
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REFERENCES
Books and Journals
Becker-Ritterspach, F. and Bruche, G., 2012. Capability creation and internationalization with
business group embeddedness–the case of TATA Motors in passenger cars. European
Management Journal. 30(3). pp.232-247.
Chakravarthy, B. and Coughlan, S., 2011. Emerging market strategy: innovating both products
and delivery systems. Strategy & Leadership. 40(1). pp.27-32.
Lim, C., Han, S. and Ito, H., 2013. Capability building through innovation for unserved lower
end mega markets. Technovation. 33(12). pp.391-404.
Chandra, P., 2017. Investment analysis and portfolio management. McGraw-Hill Education.
Kotabe, M. and Helsen, K., 2014. Global marketing management.
Singh, S. and Srivastava, P., 2012. The turnaround of TATA Nano: reinventing the
wheel. Vision. 16(1). pp.45-52.
Singh, N. and Shalender, K., 2014. Success of TATA Nano through marketing flexibility: A
SAP–LAP matrices and linkages approach. Global Journal of Flexible Systems
Management. 15(2). pp.145-160.
Shafiulla, B., 2014. TATA Nano to TATA no-no. IUP Journal of Marketing Management. 13(1).
p.78.
Online
Porter's Generic Strategies. 2018. [Online]. Available Through:
<https://www.mindtools.com/pages/article/newSTR_82.htm>
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