Question Three3.1 Factors that contribute to the success of a mergerA merger is defined as “a combination of two or more companies in which the assets and liabilities of the selling firm are absorbed by the buying firm. Although the buying firm may be a different organisation after the merger, it retains its original identity” (Sherman, 2010).3.1.1 Internal FactorsFirstly, the internal factor to the success of a merger is the strategic management. The strategic management refers to the management of organisation resources to achieve its goals and objectives.
According to Weber, Tarba, & Oberg, (2014), the strategic management approach address a large number of measure of success, including the increase of the market share, the improvement of competitive abilities, the size of sales, and also the change in profitability. Based on the analysis, the strategy of Tata Motors was to enter into the global car markets, and therefore the acquisition of Jaguar Land Rover (JLR) enables Tata Motors to achieve their goals as well as the opportunity to involve in the global market of producing cars. The Tata Motors acquired Jaguar Land Rover for an amount of $23.3 billion form the Ford Motor Company in June 2008 (Jaguar Land Rover, 2014).
During acquisitions with JLR, the company was work hard in order to re-establish their company products design and business operations by concentrating on products innovation and modernizing. In order to be successful, the company started investment huge amount of money in research and development areas, engineering and manufacturing to produce more quality products in terms of design, innovation and technology as well as to reach the needs of current and future customers (Collier, 2015). For examples, the Tata Motors have invested in a new engine manufacturing centre that produce specific advanced engines like the 4 cylinder low emission diesel and petrol engines and lightweight. Moreover, the company also has invested in diesel hybrid and hybrid technology in order to lower the environmental impacts across the life cycle of their car. As a result, this acquisition would help the Tata Motors in to enter into a global automobile market as well as increase the company profit.
Furthermore, the success factor of a merger is the organizational strengths. The organizational strenght refers to the management of an organisation strengths and to achieve its goals and objective. According to study done by Crawford (2016) found that the Tata Motors has a strong domestic player in the market. The Tata Motors is India’s largest automobile company was formely as TELCO (Tata Motors and Locomotive Company). It more focus on producing and selling the commercial vehicles, passenger vehicles, midsize car and also utility vehicle segments to the customers. Througout the years, the company has maintained among the top automobile manufacturer as being a top commercial vehicle manufacturer. In addition, the strength for Tata Motors is the ability to produce a low price product.
Tata Motors through low-cost localization has developed a foothold in emerging market like India. Their main manufacturing facility located at Ranjangaon, Pune. The Tata Motors also has assembly plants and auto manufacturing units in different cities of India, including Sanand, Lucknow, Pantnagar, Jamshedpur and Dharwad (Tata Motors, 2018). The first model cars that introduced by Tata Motors is the Nano. The Nano is the mini car segments which enable millions of people of the bottom of the pyramid to posses their own car and its was officially launched in the Indian market in April 2009 (Freiberg et al. 2010).
The selling price of the Nano is one lakh (equal to USD 2,500 or EUR, 1500) (Schuster & Holtbrugge, 2011). Below figure is the cost-efficient innovations for the Nano.Figure 6: Cost-Efficient Innovations for the Nano (Schuster & Holtbrugge, 2011)3.1.
2 External FactorsThe external factor to the succes of a merger is the cultural differences between the companies. As suggested by the Iankova (2013), in his research on the success factors of a merger, his said that in accordance with the hypothesis of cultural difference, that in its most general from suggest the difficulties, the cost and the risks associated with the cross-cultural contact increase with the increase of the cultural differences between two individual, group or organisations by Hofstede (1980). From that statement, it clearly shows that the control mechanism is related to the behavioral and performance of the acquired company. Hence, the companies should decrease the formal control on operational decision-making level in order to improve the cultural differences. Based on the analysis, Tata Motors cultures is differ deeply from Jaguar Land Rover. For examples, the primary language of Tata Motors is Hindi and the most popular religion is Hindu at rough 80% Hinduism (Crawford, 2016). While the primary language of Jaguar Land Rover is English, and the most popular religion is Christian. Moreover, the values and beliefs of Tata Motors also different with Jaguar Land Rover.
To accomplish this desired requirement, communication will be very important, and Tata Motors will have to maintain clear and open channels with all layers of the newly acquired company (Matr, 2013). This is where, both companies has to explain to their co-workers about the new objectives and the acquisitions between the companies. During this time, cooperation between managers and co-workers is very important in order to make sure all the process is run smoothly and effectively. Other than that, the external factor to the success of a merger is due diligence. Due diligence is defined as the investigative process of collecting and analyzing adequate, relevant data before making a decision, with the aim of understanding advantages, disadvantages and risks associated with a decision (Arslan, 2009). According to Savovic & Pokrajcic (2013), due diligence involves deep scanning and reviewing all aspects of a company, including production, technology, marketing, sales, finance, regulatory framework, human resources and others. In facts, acquiring companies can make the decision whether to choose between broad due diligence review or narrow due diligence investigation.
In broad due diligence review, its required higher costs but it yield better insight. The narrow due diligence review required lower costs but it yield less detailed review.In Tata Motors, the company was follows the SEC’ rules for disclosures on conflict minerals. The main objectives of this rules is to conducts diligence as to whether or not such minerals originated from the Democratic Republic of Congo or adjoining countries and also to further require companies to file certain information with the SEC about the use of these due diligence and disclosure requirements (Tata Motors, 2016). Through this process, the Tata Motors can identify and then take the action if the findings about the source of any possible may be used in any products manufactures for the company by third parties.Last but not least, the government participation also plays a critical role in succeeding with a merger. Moreover, the government can also impose its political or social consideration directly or indirectly even after the deal has taken place (Iankova, 2014).