TATA MOTORS

Financial Analysis: Tata Motors Ltd

Tata Motors Ltd

The company

Tata Motors Limited is India's is one of the largest automobile companies. The company is earning revenues of approximately USD 8.8 billion. Tata is considered to be the leader in the market of commercial vehicles. The company is considered to be the top three in passenger vehicles. The company has diverse winning products including midsize cars and utility vehicles.

Tata Motors is the world's fourth largest manufacturer of truck. In addition, the company is the second largest manufacturer of truck. According to the Chairman of Tata Group, Ratan Naval Tata, the innovation of Nano is not only for the people of India but the overall transport sector. Tata Nano has been created to provide customers with a safe mode of transportation (Vandome et al, 2010, pp. 18).

Business Review

Internal and External Environment of Tata Groups

Resources and capabilities we identified as providing competencies for Tata are its skilled workforce, brand equity, the entrepreneurial spirit and strong corporate culture, and the capability to create synergies between units. Tata's resources and capabilities and their implications for the company's competitiveness and economic performance are explained below (Kedia 2006: 41):

SWOT Analysis

Strengths

Strong Brand Equity

Unified Corporate Culture/ Entrepreneurial Spirit

Strength of TAS, Highly Skilled Workforce

Diversified business units

Weaknesses

Conflicts between Tata Sons and its various companies

Competition between units

Lack of integration and coordination

Weak corporate communication

Aging Leadership

Opportunities

Alliances with foreign firms

Liberalizing, emerging economy, with many new markets with decreasing barriers to entry

IPO to raise capital and reward shareholders

Threats

Government regulations

Low barriers to entry in many industries

Entry of foreign firms into UK markets

Uncertainty surrounding share repurchase plan

Environmental Analysis

In UK, the company has a strong brand image and recognition; therefore, the company has many opportunities to leverage its strong brand equity and financial resources to enter new markets and industries. In addition, the government has introduced a series of drastic reforms and liberalized its government owned and controlled economy. Therefore, it has become easier for the company to expand its products and enter into new markets in almost every sector of the economy. Further, it has given the company a significant and tremendous advantage over other companies in various industries. However, it is also observed that government reforms in the country have also lowered the barriers to entry for new companies that have increased competition for the Tata group of companies (Lala 2007: 70).

As more companies are flooding into the country, it threatens the market share of Tata companies. Therefore, the world is globalizing rapidly and the economy is liberalizing. For this purpose, Tat group of companies is forced to consider its strengths and weaknesses for analyzing its companies and subsidiaries and their related industries. Also, the company is evaluating its threats and opportunities because of the changing global economy (Fisman et al. 2004: 18).

Financial Performance

Rationale behind Ratio Analysis

In order to asses any company, financial statement analysis in general and ratio analysis in particular are the first step in the process. These ratios are calculated and compared to some benchmark figures which can be forecasted results, historical ...