Mritiunjoy Mohanty, Assistant Professor at IIM, Calcutta and a visiting scholar at Institut D’études Internationales De Montréal (IEIM) of the Université du Québec à Montréal (UQAM) sends us this guest post, in response to the debate raised by Kiran’s post on the Tata’s LandRover/ Jaguar acquisition.
I don’t agree with Chaitan Kansal that joint ventures are a particularly good way organising technology transfers. Unless the JV partners in question are roughly similarly situated in terms of market power and have technology profiles that are complementary, JVs as vehicles of technology transfers do not work. Outright purchase is a much better mechanism if, and this is a very BIG if, integration issues can be sorted out. And one of the key reasons is that control issues that normally bedevil a JV are absent in an outright purchase.
In my earlier postings on this blog, I’ve pointed out that the Tata group has been very strategic in its purchases, which form part of a big picture. Equally importantly, the group takes integration issues very seriously and technology and business practice innovation are at the heart of their acquisitions strategy.
Two recent news articles that talk about these issues might be useful. The BBC had a piece about the integration of Corus into the Tata group while the Business Week article spoke about the nature of innovation in the Tata Nano.
In the BBC story, notice how carefully the Tatas have thought about the big picture. Corus which the Tatas bought a year ago is the major supplier of steel to Jaguar and Landrover that they bought recently! The big picture is NOT about low cost production. Simply focusing on low cost production is a dead-end. Cost-saving and low cost production are not the same thing.
The Business Week story is about innovation in the Tata Nano. Not only has Tata Motors innovated, but it has brought its SUPPLIERS on board in this process of innovation and forced them to innovate. This is why the the Nano is a low cost but high quality product.
And that is is precisely why I had argued in my Rediff.com piece of 4th January, before the launch of the Nano, that Tata Motors had the potential of being a disruptive innovator.
The Tatas understand that successful integration is a vital element of their M&A push. However, what is really driving their M&A strategy is the same focus on quality, technology and innovation. They may yet stumble, but they have certainly given that strategy some thought.