Strategic Alliance
Session 2 - Summary | Group 2
Case Discussion - Volkswagen and Tata Motors - A Strategic Alliance in India
Background of the Case
● VG and TA announced a Strategic alliance for Joint development projects in India in 2017
● Their initial plan was to exploit economies of scale and technical synergies by using the Tata AMP Platform.
● Roadblock- concerns about the use of AMP platform and the practicality of the business model
Class Discussion on Case - Team-wise
1. What are the Pros for an international player entering the Indian Automobile Market from a business
environment perspective?
● Low Vehicular penetration at around 15cars/1000 people
● Favourable Regulatory conditions
● Easier access to credit
2. Speak about the Cons of the above subject.
Industry Perspective-
● Stringent land identification clauses
● Productivity losses and cultural mismatch coupled with localized political movements
● Companies having Indian R&D centers but relying majorly on external centers for testing
Case perspective-
● VW vehicles did not deliver desired value to Indian customers. The vehicles were costly as per Indian
markets.
● Tata motors had a lot to gain by alliance. They received schematics for manufacturing high performance
vehicles at cheap cost. On the other hand, VW was just betting to increase production and nothing else
3. In the Indian Automobile market, it is possible to achieve business objectives independently, or is it advisable
to form an alliance - especially for an international player?
● Achieving business objectives independently by international players.
● Business ownership autonomy
● Better management
● Better & Efficient business communication.
● Less conflict.
4. Speak in Favor of achieving business objectives independently? About using an alliance to achieve the
business objectives.
● India presents a growth opportunity for Automobile manufacturers
● Car penetration in India is 15 cars per 1000 people
● Shared risk and capabilities in a vast market India's GDP expected to grow at 7% annually while global
growth 3.6% expected
● VW has a program "TOGETHER" Strategy-2025 aspiring to become a global leader in Sustainable mobility
● Consumers are also becoming more aware about sustainability and this requires the technical expertise of
VW and of the market understanding of Tata. In achieving all these objectives and tapping into the
untapped potential of the market, having a strategic alliance will benefit both the parties.
5. Discuss the criteria for partner fitment between VW & Tata Motors.
● Joint Venture Agreement
● VW is concerned to be in the Indian Market.
● VW having technology & Tata to provide AMP platform.
● Technology Transfer & sharing of cost.
6. What, according to you, are the risks of an international strategic alliance.
● Cross-Cultural issues and incompatibility
● Geo-political factors and Forex risk and can lead to a future competitor
● Sharing of profits and Lack of real commitment from one party
7. What are the terms and conditions that should be negotiated between Tata & VW for this to be successful?
● A Joint Venture would allow VW to tap growth opportunities in the Indian market, which is going to see
a boost in consumers' purchasing power in the next years
● Consensus about the cost advantage in using Tata's AMP
● Integrating VW's superior and electrical architecture in TATA'S AMP products.
● More Focus on mutual benefits should be made
Conclusion of VW & Vodafone.
1. Alliance started Between VW & Tata Motors to collaborate for making new products.
2. To aim for better market share and growth opportunities.
3. Joint consensus on work integration including choosing of platform did not finalize. Disagreement in
partnership structuring as well as deal finalisation.
4. JV is a doable approach since their cooperation can boost sales and market share of both companies. To do
so, they should clarify their scope and intentions. Moreover, the creation of a special international team would
allow more coordination, smoother communication and would shrink the cultural differences through better
formal and informal relationships. (CEO of Tata is German and thus cultural barriers could be mitigated)
5. Without the JV they would lose growth opportunities in the Indian market, which is going to see a boost in
consumers' purchasing power in the next few years.
Video Summary: 5 Steps to Partnership Success: Lessons from 30 years of research and practice
Alliance Strategy: The most important consideration before formation of an alliance should be to ask the right
questions. Reports suggest that 70-80% of Alliances do not perform well. This suggests that alliances are not well
thought as we saw in the case of IBM and Go Computers.
The Five Questions you must ask
1. Strategic value: When are partnerships helpful in strategy?
2. Partner fit: What makes a good partner?
3. Deal structure: What partnership designs work best, when?
4. Alliance management: How should the relationship be managed?
5. Return on investment: In the end, who earns what, and why?
Suggested Readings
• 6 Questions to Ask Before Developing Strategic Alliances (3rdeagle.com)
• Strategic Alliances: 8 Questions To Ask - The NonProfit Times
Thank You!
