International Business Essay: Tata Motors FDI in the UK

This essay examines Tata Motors' foreign direct investment (FDI) strategy in the United Kingdom, applying Dunning's eclectic paradigm (OLI framework) to analyze the company's approach. The essay begins with an introduction and literature review, providing context on Tata Motors and the OLI paradigm, which encompasses ownership, location, and internalization advantages. The ownership section explores Tata Motors' acquisitions and mergers, particularly the acquisition of Jaguar Land Rover, and the competitive advantages derived from these actions, including technological advancements and market access. The location analysis focuses on the UK as a strategic location, highlighting economic factors like GDP and tax systems, and cultural aspects such as skilled labor and consumer trends. Finally, the internalization section discusses Tata Motors' core competencies, such as the exploitation of the luxury vehicle segment and the Uppsala model, which informed its entry strategy, emphasizing the importance of acquiring existing firms to leverage knowledge and reduce risk. The essay concludes with a summary of the key findings and analysis of Tata Motors' FDI in the UK.

International Business
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4/17/2020
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Contents
Introduction................................................................................................................................2
Literature Review/Critiques.......................................................................................................3
Ownership..................................................................................................................................5
Location......................................................................................................................................7
Internalization............................................................................................................................9
Conclusion................................................................................................................................12
References................................................................................................................................13

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Introduction
Global economic changes have majorly reflected imperative contemporary study towards
augmentation in foreign direct investment from various economies and industrialised nations
that are currently being emerging. It has also considered being increasingly authoritative
purpose for multinational corporations, the reason being the requirements by the companies
in such emerging economies that has majorly been evidenced in developed nations. This
research essay will be focusing towards understanding of role of multinational enterprises.
Considering Tata motors case as agent of knowledge transfer and foreign direct investment
management in one of the developed nation that is United Kingdom would be discussed
further (tatamotors, 2020).

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Literature Review/Critiques
For the literature the background of Tata motors India reflect that it was founded in 1945
where the parent company under Tata group. This is considered to be one of the biggest auto
mobile companies in the nation that is in India.
Literature reflecting Dunning’s eclectic theory, describe that this framework was proposed in
1993 which is also known as OLI paradigm. The three categories from this framework reflect
ownership, location and internalisation. Taking into account the first Category that is
ownership advantage, the research reflected this include the advantages for a company that
could be possessed by the company over international market competition. This represents
the firm specific competitive advantage that could be possessed by the company. These are
generally being measured through factors like patents, resources, economies of scale,
trademarks, financial capital, technology created by the organisation considering international
experience. However these should be sustainable and unique and could not be imitated by the
competitors (Dunning, 2000).
The second category that is location advantages reflect market risk and market potential for
the organisation as this reflect country specific factors which could act as advantage for the
company. The measurement of location advantages are through qualitative as well as
quantitative factors like wages, production, cultural diversity, taxes, cost of transport, market
size, sales demand and economic policy (Robson & Zeriti, 2014).
The third category that is internalisation advantages reflected Ability of the organisation to
exploit and create the core competencies. For instance this may include selection of radical
mode while operating over and external mode that may impact a possible failure in market.

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The measurement could be done through companies own production instead of considering
outsourcing or partnership arrangement such as joint venture, licensing or contract out.
However Critique to this framework reflects inability to measure and understand emerging
economic realities like IT services and electronic business. The result is generally found it to
be cultural and the analysis is also insensitive. The reason being alliances are considered for
the analysis instead of intra-firm cooperation that will reflect the emerging market like the
practices across the Globe in various nations and business in other Asian nations
(Schlegelmilch, 2016).

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Ownership
As the literature reflect the ownership and wanted to check the results as the base for the
valuable competitive advantage for the company which it might consider as “competitive
advantage while competing international organisations. The major openings for Tata motors
which reflect the ownership over years specifically include numerous acquisition and joint
ventures with Asia truck manufacturers. Understanding the profitability of the company
which also Reflect the growth of the company is the gross profit of the company which was
approximately $2000 million in 2016 which was increased in 2017 $6574 million. The
company has been working towards expansion and growth has to be strategy similar to other
companies in the industry (Craig & Douglas, 2015). However, the method of expansion for
Tata motors has considered being the advantage for the business that is through acquisitions
and mergers. Since 2014 the company has been working towards acquiring and merging
completely or partially of three major companies in the industry which reflect the ownership
advantage. For instance the company merged with Land Rover companies and Ford motor
companies which acted as major advantage for Tata motors. Other than this the merger
strategy of the company has able to break into various international market like in case of
United Kingdom’s while also establishing a large market share as and when entering into the
international market in the automobile industry (Doole & Lowe, 2008).
Moreover, ownership advantage for Tata motors has also reflected through the attainment and
accomplishment of efficient knowledge in programmes and technology that has allowed the
company to succeed widely in various sectors of automobile industry along with specific
culture. For example the Land Rover Jaguar purchase by Tata motors has reflected inability
of the company to enter in international market considering the luxury sector in Automobile
industry. This also included the advantage of not essentially be establishing technology that is

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to be used in luxury sector additionally, market research and development and other various
important aspects were also not necessarily established that need to be required while
possessing luxury segment in this industry (Robson & Zeriti, 2014).
Moreover considering the ownership strategy of the company the company has been able to
gain highly desirable and competitive mature market in developed countries that is United
Kingdom which reflects capturing opportunity in European market. Another resource or
ownership advantage that has been possessed by Tata motors is innovation. Considering
innovation as one of the major strategy of the company, it has been excelled specifically
when it comes to market research and intensive development. Nevertheless the innovative
measures of the company have considered producing and developing large variety of
affordable, luxury and attractive cars to be offered to the market in national as well as
international market. Other than this one of the strong competitive advantages for the
company is diversity in the product range by the company. As discussed using innovation,
technological approach The Company has been able to fulfil customer needs and
requirements with large variety of products to be offered in international market (Jing, 2016).
Considering the resources that have considered as a valuable, imitable, rare and reflect
organisational capability is leadership team of the company as presented in below diagram.

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Figure 1: VRIO table of Tata motors resources
Location
Tata motors have found to be leader in the automobile sector where the company has entered
into various international markets and manage foreign direct investment. Considering United
Kingdom, The Company has work towards Tata motors European technical Centre set up to
be working towards designing engineering and development of the product in Warwick for
this industry. The company’s focus while entering into United Kingdom is through acquiring
United Kingdom-based automobile companies that is one of the company from Ford motor
that is Jaguar Land Rover in 2008. As in while entering into United Kingdom the locational
advantage is that the company has gained while entry into United Kingdom reflects through
various economic and cultural measures of the Country (Calboli, 2015).
The location of Tata motors considering United Kingdom has allowed the company to
implore and execute the advantages gaining technological advancement of this industry from
Accessibility of automotive aspects. While analysing the economic factor of United Kingdom
it can be said that the gross domestic profit of this nation was quite strong, which has found

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to be increasing since years by now. The increase in gross domestic profit of the Country
indicates the high purchasing power of the customers and reflects opportunity for the
company to gain advantage by increasing the market share and sale of the product to the
consumer in this nation (presented in figure 2). Other than this another factor that has
considered being competitive advantage for the company while managing foreign direct
investment in United Kingdom is simple tax system. It has been analysed that the tax system
of the nation is quite simple and manageable which reflect efficient locational advantage for
Tata motors (presented below, figure3). The third factor that has also reflected advantage of
location what Tata motors while investing in United Kingdom is availability of resources like
cultural amenities, skilled labourers, skilled workforce, and good transportation links which
all are relevant factors for a manufacturing company to enter and invest in this location (Puck
& Mudambi, 2016)
Other than this the cultural or social factors will also majorly in fact the locational advantages
for the company. For instance cultural diversity may reflect opportunity for the company to
target large number of consumer in the nation. For instance the demographic factors reflect
increasing what population along with changing consumer trends towards spending power,
rest ever since behaviour and value per consumer. The demographic trends Reflect
Investment in luxury which could also include investment in affordable cars as well. This
reflects the lifestyle factors to be fashion ability and preference towards luxury which reflect
positive locational advantage for Tata motors in United Kingdom (Oke & Prajogo, 2016).

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Figure 2: (Source: (theglobaleconomy, 2020)
Figure 3: (Source: (theglobaleconomy, 2020)
Internalization
The third category that reflects the internationalisation advantages, which reflect
understanding the core competency of the company while operating in international market.

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Considering the operations or entering into United Kingdom market by Tata motors the
analysis reflect various factors that influence Tata motors internationalisation while acting as
a gateway through various exploitation and opportunities in European market. With the
strategy of Entry into high and premium segment the company work towards global
automobile market and considered the exploitation of luxury vehicles I am taking advantage
or considered as the core competency by the company in this segment of automobile market.
Understanding the United Kingdom industry of automobile Jaguar was considered to be one
of the brands that have efficiently been able to offer customers’ needs and requirements
however wife is suffering financially (Oh, 2015). This reflect an opportunity for the company
to turn the success factor for the company and diversify its market when the company
purchase or acquire Jaguar, which reflect core competency for the company to also acquire
new customers in international market. Other than this this also enhances the reputation of the
brand which was one of the core competencies in the home nation.
In order to gain international isolation advantage the company Apple light of particular model
while going internationalisation that was Uppsala model which reflect to you strategy of
acquiring and merger of existing firm rather than considering greenfield investment. The
reason being the company needs to gay major knowledge, technology, research and
development in the formation in case of Greenfield investment which was not implied in case
of acquiring. Other than this the advantages also reflected through enquiring Ford Company
and Jaguar to exploit the luxury segment of automobile sector. While using this model the
company has been able to sell the products in international market while moving towards
distant nation’s geographically. The model reflect that the Tata motors company would work
towards more profitable strategy in long run and also decrease the risk by not establishing
greenfield investment. Moreover this model also reflects opportunity and risk that may affect

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the availability which will eventually reflect the decision making of the company to what’s
the commitment in the sector (Saunila, 2016).
Other than this understanding the internationalisation advantage to be gained by the company
the company initiate with examination of the location that would reflect availability of
various resources opportunities labour skills in order to consider operation base in such
international markets (Schlegelmilch, 2016).
Therefore from the analysis it can be said that the cost of finding for the company has been
decreased by understanding the Uppsala model which reflected internationalisation advantage
for Tata motors. Along with this maintaining external relationship with other companies
within the industry, like in case of acquiring Ford and Jaguar reflected the relation with this
company is considering functioning in international market to more experience and
knowledgeable extent. Other than this the company has also able to gain internationalisation
advantage while decreasing the production cost of the automobile products, which eventually
act as a profit margin increase for the company and gain core competencies while operating
in international market (Whitaker et al., 2017)