TATA MOTORS IN UNITED ARAB EMIRATES
INTRODUCTION
This report enables us to look into International Business Management in a wider perspective. We have taken an Indian Vehicle producing company Tata Motors and we will try to assess how this company may perform in the U.A.E. This report will contain details about the history of the company, information regarding its work in its parent country i.e. India, we will look deeply into its methods of production, selling and distribution. This report will contain details on international management policies of the company etc. Tata has already set up a market in various countries in south east asia, in many countries in Africa, it has a base in South America, but somehow it is yet to develop a market for its motor vehicles in the United Arab Emirates. This will be the best time for Tata Motors to set up a base in the U.A.E. United Arab Emirates is on the path of development at the moment. It is welcoming industrialists from throughout the world to develop their industries on its land. It will surely welcome Tata Motors in the same manner too. If Tata motors can set up a base in the United Arab Emirates, can then later on develop its market in the rest of the Arab countries. As we all know that most arab countries are rich, hence these countries are a potential market for any industrialist. Moreover United Arab Emirates is employing vast numbers of Indian citizens on its soil, so if Tata can set up its Industry in United Arab Emirates it can easily target these Indians. And the Indians will be tempted to buy Tata Motors vehicles because of the companies Indian origin and because of the relatively cheap cost of these vehicles.
HISTORY OF TATA MOTORS
Tata motors is India’s largest automobile manufacture company. It has earned revenues over 14 billion US dollars in 2008-2009. It is leading the Indian market when it comes to commercial vehicles. Its commercial vehicles are the best in all segments; it has sold the most number of commercial vehicles in India. It is employing more than 2400 employees as of date. It is the world’s second largest bus manufacturer and it boasts of being world’s 4th largest truck manufacturer. It is relatively new in the car market, barely 12 years old and in so less time it has produced the world’s cheapest car the Tata Nano. Tata Motors was established back in 1945. Tata rolled out its first vehicle back in 1954. Tata motors is spread evenly through the length and breadth of India. More than 4 million Tata motors produced vehicles ply in India at present. Tata motors now also is the owner of the famous British company Jaguar and it also owns the company land rover. Tata is also the owner of South Korea’s famous truck manufacturing company Daewoo trucks. Now they are known as Tata Daewoo trucks. Tata motors is famous for producing environment friendly automotives. Tata motors recognises its responsibility towards the society. It has been engaged since its formation in development of the labour class. It provides huge benefits to its workers and works constantly in their overall development. It is making great efforts in providing education to all the family members of its employees especially to the children of its labour class workers. Tata motors has always believed in innovating by trying out new things, at present it is spending almost 5% of its turnover on research and development. The Jaguar Land Rover acquisitions by Tata have made them a big international player in the automobile industry. It has acquired the Jaguar Land Rover deal at a striking 2 billion dollars. Tata motors has also entered into a joint venture deal with Fiat motors Ltd. Tata Motors is responsible for selling of Fiat cars in India. It is also responsible for their after sales services and maintenance. Tata motors can now avail Fiat motors diesel engine technology, this deal is result of its joint venture with the company in India. (Motors)
REASONING BEHIND SELECTION OF TATA MOTORS IN U.A.E.
We all are aware that United Arab Emirates and India have gone along hand in hand since medieval times. At present over 40% of the total population of United Arab Emirates is Indian. An estimated of 1 million Indians are working in the United Arab Emirates as of now. Due to this large population of Indians residing in the United Arab Emirates we have decided to choose Tata Motors as the company in question. This company has particularly been chosen due to the fact that Tata group is the oldest group of industrialists in India, and they are one of the biggest automobile manufacturers in the world. The Tata’s are already supplying its trucks and buses to the United Arab Emirates. Tata motors is the only Indian company with engineering background to be listed in the New York Exchange. Setting up the Tata motors plant in United Arab Emirates has many benefits. It will help the Tata motors company to grab a hold on the automotive market in the Middle East. It will be a huge step in its international expansion agenda. Moreover it will fetch tremendous revenues to the Tata Motors. It will also help India as a nation. It will help in fetching more foreign exchange for India. Inflow of foreign exchange will increase tremendously for India if Tata successfully sets up a plant in the United Arab Emirates. It has many benefits for United Arab Emirates also. Tata if sets up a plant in U.A.E. it will bring in huge revenues to the government in form of various taxes (Kant). The people of the United Arab Emirates will also be directly benefitted by this step. Tata Motors will be able to provide middle range luxury cars to the people which will be easily affordable by the common man of United Arab Emirates. Moreover introduction of Tata trucks will also revolutionise the heavy load carrying automobile sector of the country. (Motors) Tata has always aimed at producing cars for the family and they have always strived to make cars available to the common man.
Analysis of United Arab Emirates
MARKET CHARACTERSTICS
United Arab Emirates is a rich and developed one. United Arab Emirates hold vast oil and natural gas reserves. The abundant availability of oil and natural gas is the basic reason of prosperity of the country. U.A.E. is one of the fastest growing economies of the world. It has shown tremendous increase in its Net income, per capita income, purchasing power parity, gross and net domestic products and in various other fields. Recently the economy of U.A.E. is experiencing a massive construction boom.
MACROECONOMIC FACTORS
United Arab Emirates earns a major chunk of its revenue from exporting oil and natural gas. Although recently a positive trend is developing, the country’s dependence on natural resources is lowering. The company is expanding its manufacturing base. (Kant) Inviting Tata Motors to setup a plant on their land will be a big bonus in this area of development for the country. The country’s service sector is also developing day by day. The service sector is already contributing 30% to the total GDP. GDP growth rate is estimated to be around 8.5% annually. United Arab Emirates is also part of the Gulf Cooperation Council. It is taking regular part in activities of the GCC to develop the Gulf Countries. United Arab Emirates is also member of the World Trade Organisation. In all businesses that are being operated in the country, 51% ownership must be of the localities. This rule of the government is posing a grave threat in front of development. Such policies of the government of U.A.E. are preventing companies like Tata Motors from investing in their country. U.A.E. should keep in mind that foreign investment is necessary if the country wishes to develop itself. Moreover foreign direct investment shall also reduce the country’s dependency on its natural resources for generating revenue. Even the world trade organisation is pressurising United Arab Emirates to scrap out its policy of 51% local investment in all businesses operating in the country. It must be noticed that in the recent years, places like Dubai have turned into great tourism destinations. United Arab Emirates need to build up on such opportunities. (Kant) It must develop its tourism sector. Tourism sector can generate huge revenues every year for United Arab Emirates. Tourists from all over the world are getting attracted to Dubai for various reasons like cheap shopping, extravagant skyline, best facilities for the cheapest prices amongst other stuff. Dubai should be given special treatment by the government of United Arab Emirates and it should be developed into a tourist hub. More economy hotels should be opened up, and more facilities at economical rates should be made available. Dubai needs to be developed as a holiday destination not only for the rich and the mighty but also for the common man.
INFRASTRUCTURE CHARACTERSTICS
It must be noted that United Arab Emirates has one of the best infrastructures in the world. It has up to date production technologies, world class communication facilities, world class roads and highways, it has all the necessary amenities for the population residing in the country and even for all the tourists that pour in every year from around the world. When it comes to industry the country’s infrastructure is giving it full support to develop. Oil and Natural Gas extraction is being done by using the latest technology and machines, which is all possible due to availability of such world class infrastructure.
POLITICAL FACTORS
The political set up of United Arab Emirates is unique in itself. It works in a framework of federal, presidential and elected monarchy. United Arab Emirates is formed by seven absolute monarchies. It includes Abu Dhabi, Ajman, Dubai, Fujairah, Ras al-Khaimah, Sharjah and Umm al-Qaiwain. President of United Arab Emirates is the ruler of Abu Dhabi, while the prime minister is the ruler of Dubai. Each emirate is responsible for its day to day administration. The emirates of Dubai and Abu Dhabi are the most developed and advanced. They are also the most liberal emirates when compared to other emirates. Dubai will be the right place for Tata Motors to setup its manufacturing Plant. If Tata Motors install a manufacturing plant in Dubai, it will be the first of its kind and it will be the biggest automobile manufacturing plant of Dubai.
LABOUR FACTORS
The labour force of United Arab Emirates consists of more than 60% Indians. The labour is accustomed to using the latest technology. Most of this labour is involved in the construction industry; some of it is also involved in other manufacturing industries. If Tata sets up its manufacturing unit in Dubai there will be abundant Indian labour for it to employee. It can also hire Indian Entrepreneurs and managers in Dubai itself. All Tata products whether buses, trucks or consumer vehicles are aimed at the cheaper side, since United Arab Emirates is a Rich country, Tata motors will not face any issue in selling its product in the market of the country.
FINANCIAL AND FISCAL CONSIDERATIONS
Tata Motors will find a huge market in the Indians who are situated in U.A.E. The Indians residing in U.A.E. will prefer to buy cars from Tata Motors as it is an Indian Company and its automobiles are affordable for the common Indian man residing in United Arab Emirates. United Arab Emirates is pre-dominantly an Islamic country.
CULTURAL CONSIDERATIONS
Most of the population living in United Arab Emirates in following Islam. But cultures and religions like Hinduism and Christianity are also present in United Arab Emirates. This is so because of the huge immigrant population working in the United Arab Emirates. Followers of religions other than Islam are allowed to follow their religions quietly but they are not given the permission to openly show their religion in United Arab Emirates. United Arab Emirates has a very modern culture prevailing in the country. There are people of many religions who are living side by side in the country, all citizens are allowed to follow whatever culture they wish to follow, pre-dominantly the Arab and Indian culture prevail in United Arab Emirates, this is due to the fact that the natives are of Arab origin and after the natives Indians are the next dominant society in the country.
Strategies to be followed by Tata Motors in the process of setting up their manufacturing unit in United Arab Emirates
Tata Motors may not face too many difficulties in setting up its manufacturing plant in the U.A.E. U.A.E. is developing rapidly and it will welcome the setting up of such a huge plant of automobile manufacture on its land. Moreover the country is undergoing a construction boom, Tata Motors produces vehicles which are specially designed for carrying raw materials used on construction sites. It will be great if Tata can provide the country with its strong and sturdy material carrying vehicles as these vehicles will be as good as vehicles of any other country but they have the advantage of being cheaper. Moreover Tata should not face a problem in finding employees in the United Arab Emirates. There are almost a million Indians who are working in the United Arab Emirates at present. These Indians will provide the man power needed by Tata to set up its plant in the united Arab emirates and then later they will help in managing the show there. Moreover these Indians can be the target customer for tata. The migrant Indians are not that rich. They usually are not able to afford the top end four wheelers. By setting up a plant in United Arab Emirates, Tata will give an opportunity to these Indians to own their personal four wheelers. Moreover the not so rich citizens of United Arab Emirates will also be able to buy Tata motor vehicles due to the fact that they are relatively cheaper than vehicles of other companies.
Conclusion
We come to a conclusion that the Indian vehicle manufacturers Tata Motors should expand its international bases and they should develop a motor vehicle manufacturing unit in the United Arab Emirates. United Arab Emirates should welcome such a step by this company and they should overlook their rule of 51% local ownership for the long term benefit of the government and for the benefit of the general population of the country. Tata Motors should keep in mind the ongoing construction boom that the United Arab Emirates is going through and they should make sure that they make the best out of it. Providing the country with its heavy load trucks will be the best way of making the best of this construction boom. Moreover Tata motors needs to capitalise on the Indian population living in the United Arab Emirates. There are almost a million Indians living in united arab emirates at present, Tata motors needs to coax them into buying its vehicles. Setting up a manufacturing unit in the United Arab Emirates will also add another star to the already expanding industrial base of the country and it will further reduce the country’s dependence on its natural resources.
References
Tata Motors is looking at a good global Presence. (n.d.). Retrieved on April 17, from http://www.financialexpress.com/news/ravi-kant-tata-motors-is-looking-at-a-good-global-presence/585948/
Presence of Tata Dealers in U.A.E. (n.d.). Retrieved on April 17, from http://www.alhamid-group.com/dalmaAbout/index.aspx?t=4&m=4a