Reference no: EM133048888

Tata Group, a Mumbai based giant conglomerate was founded in 1868 and now consists of 90 companies focused on seven business segments that span, industrial products, consumer goods and high technology. 31 of the 90 companies are public listed and the rest are privately held. The Tata Group employs more than 450,000 people and generate revenue of USD100 billion almost every year. About 59% of this revenue is generated from outside India. Such diversified conglomerates are common in emerging markets.

Each Tata company operates as an independent entity, with its own management team, board of directors and shareholders. The Tata Group is proud of and is concerned about maintaining the integrity of the Tata brand. To be able to use the Tata name, the independent companies must act according to the Tata Business Excellence model which stresses the importance of unity, responsibility, integrity, understanding and excellence.

A key element in Tata's brand-strengthening strategy is to acquire foreign companies to aid the competitiveness of firms within the Tata Group. In 2000, Tata purchased Britain's Tetley Tea for USD432million; in 2004, it purchased the heavy vehicle unit of Daewoo Motors; in 2008 it purchased the land Rover and Jaguar brands from Ford Motor company for USD2.3 billion and in 2007, it purchased steel giant Corus, an Anglo-Dutch company for USD13 billion.

Unlike many other companies, Tata often leaves the management teams of its acquired business intact, but provides corporate support, investment capital or other needed resources. It usually sends Tata managers to learn from the new subsidiaries. In the case of Tetley, Tata was interested to learn about tea cultivation, product branding and export development. Tata Global Beverages is now the world's second largest seller of tea.

The Corus acquisition paved the way for the Tata to enter the UK steel sector. However, this acquisition saw a 20 percent decline in turnover which dragged down the Tata Group performance.

Tata decided to sell the UK steel business in 2010. Explaining the rationale behind the decision, Tata said in a statement: While the global steel demand, especially in developed markets like Europe, has remained muted following the financial crisis of 2008, trading conditions in the UK and Europe have rapidly deteriorated more recently, due to structural factors including global oversupply of steel, significant increase in third country exports into Europe, high manufacturing costs, continued weakness in domestic market demand in steel and a volatile currency.

Question

Among Tata's acquisition in UK were Corus Steel. The acquisition of Corus Steel eventually failed.

Based on your reading of the relevant section of the course material and the case study, analyse the causes of failure of the acquisition of Corus.