Tata Motors (TM) and Fiat Auto S.p.A (Fiat) are large auto manufactures. The case describe the transformation of TM from a commercial vehicle manufacturing company to a leading passenger car company in India, and it is forays into global markets. It also details the growth of Fiat, the problems that company faces, and the strategies it adopted to tackle these problems. The case then talks about the alliance between the two companies, and the benefits and costs from the alliance for each company. Most analysts were of the opinion that the joint venture would benefit both parties. Tata Motors would gain in terms of better accessibility to technology, design, and global market. However, Fiat Auto would mean a larger presence in India, one of the world’s fastest growing auto markets, without heavy investments. The case ends with a brief discussion on the future prospects of the alliances.
What is Fiat’s current situation in India?
Fiat is an Italian automobile manufacturer. Fiat India in Indian car market is facing the dilemma of poor sales. It had a very small market share in India comparing to other existing automobile competitors. Fiat was taking measures to make their business more profitable. They were looking into a joint venture with Tata Motors. There was a good and long relationship with Tata Motors in Indian so Fiat and Tata were going to have a joint venture to manufacture passenger cars, engines and transmissions for the Indian and overseas markets. These two companies began to seek for collaboration in early 2005. Base on the Exhibit 2: Production by Manufacturer, we can see that Fiat in 2006 was ranked 11 in worldwide auto industry while Tata stood in 21, which had merely Indian market. For Fiat this brand, it had a high brand awareness in India which is a good sign for them want to expend market there and also had the best diesel engine for small cars.
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What is the business opportunity in India? Do you think that Fiat needs a partner?
India is a diverse community having rich and poor individuals living in a dynamic community setting. Indian population has been on the rise and the need for more cars to satisfy their needs has been on the rise. India provides the motor industry with a unique taste of cars. India is a leading market that offers motor companies to acquire competitive advantage through diversification of its operations.
India has a growing motor industry. The ability to invest in India’s motor industry makes it possible for companies to acquire a unique position. The demand for new car models is increasing. However, this increase in demand for new car models needs to be complemented with models that are fuel-efficient. India possesses the ability for close collaboration within individual industries. The regulatory framework encourages collaboration making it easier for companies to form mergers or partnerships for better market positioning. This is made possible by the ever-increasing competition in the market. Companies that need to increase their market presence in India need to form strategic partnership for better market coverage through production and promotion of unique car brands. Current statistics indicate growth inclined towards inorganic route, which is an inimitable opportunity in the Indian Market.
In my opinion, Fiat needs a partner to make profit and stay longer in the market. The trend at that time was all manufacturers with production greater than one million vehicles were involved in one or more alliances with other producers. Automobile manufactures formed alliances for a variety of factors with the primary rationale being an attempt to reduce labor, energy, and raw material costs. Within combining same value-chain activities will gain efficiencies, merge talents and share risks as a good choice. Observers lauded the tie-in stating that Fiat had the potential for more sales in the burgeoning Indian market while Tata stood to gain technology and new export markets.
Do you think Fiat and Tata make for good partners? Compare the Fiat-GM relationship with the Fiat-Tata relationship.
Is the business case convincing for the joint venture? Back your answer up with a financial analysis.
How would you assess the negotiation process between Fiat and Tata?
What would you recommend for the alliance to be successful?