What are the strengths of JLR that resonated with Chinese customers thereby driving its growth?

Please read the case study and aswer the folowing questions use
referances where applicable.
What were the drivers of JLR’s expansion in
China?
In what ways can the company profit from this move in
the short term as well as in the long term? What are the likely
risks that could derail JLR’s plans?
What are the strengths of JLR that resonated with
Chinese customers thereby driving its growth?
Identify the factors that influenced JLR’s choice of
entry mode. Outline the advantages and disadvantages (through a
SWOT analysis) of the JV with Chery Automobile Co Ltd.
What are the key challenges that JLR faced in the
implementation of the JV? Was it unique to JLR?
Research Exercise: Carry out further research on any of
the successful JVs of competitors mentioned in this case and apply
that knowledge to articulate how JLR should proceed to ensure
success of the JV.
Tata Motor’s Jaguar and Land Rover Brands: Competing In China In
2012
Gale Business Insights: Global Case Study Collection
Abstract
In June 2008, in one of the most significant deals in the auto
industry, Ford Motor’s premium British brands, Jaguar and Land
Rover (JLR), were acquired for US$2.3 billion by Tata Motors Ltd,
India’s largest automobile company. Contrary to industry
expectations, within two years Tata Motors succeeded in turning JLR
around and thereafter, JLR started driving growth of the parent
company. While the United States and Europe, JLR’s major markets,
were reeling under the effects of the global recession and Eurozone
crisis at the end of the first decade of the 2000s; the emerging
market of China became a key driver for the company. As part of a
broader strategy to capture greater market share of the world’s
fastest-growing market for luxury cars, in March 2012 JLR finalized
a Joint Venture (JV) agreement to manufacture and sell vehicles
with China’s Chery Automobile Company Ltd. However, JLR’s major
competitors–Audi, BMW and Mercedes enjoyed early-mover advantages
and had posted significant sales volumes.
This case explores JLR’s market expansion strategy, possible
implementation issues, competitive landscape, and human capital
challenges facing the British subsidiary of an Indian company, as
it was poised to implement a Joint Venture with its Chinese
partner.
This case was prepared for classroom discussion rather than to
illustrate either effective or ineffective handling of an
administrative, ethical, or legal decision by management.
Information was gathered from corporate as well as public
sources.
Learning Objectives
After analyzing this case study, students should be able to do
the following:
Understand what is meant by globalization in terms of (i)
globalization of markets and (ii) globalization of products
Outline how globalization creates opportunities and challenges
for a Multinational Enterprise (MNE)
Recognize the appropriate mode for entering a foreign country
through i) export, ii) licensing, iii) wholly owned subsidiary, or
iv) a Joint Venture
Understand the complexities in managing an international
business due to (i) different countries having different market
characteristics, (ii) wider range of problems confronted, and (iii)
requirements to work within the limits imposed by the eco-political
context
Introduction
In June 2008, Jaguar and Land Rover, two British marquee car
brands, were acquired by Tata Motors Ltd, India’s largest
automobile company with revenues of US$8.85 billion and net profit
of US$538 million for the fiscal year ended 31 March 2008
(FY2007-08). Tata Motors was the country’s market leader in
commercial vehicles and among the top three in passenger vehicles.
It also ranked as the world’s fourth-largest manufacturer of trucks
and the second-largest for buses.
Jaguar and Land Rover were under-performing vehicle units under
Ford Motor Company’s Premier Automotive Group (PAG 1) which
reported a loss of US$344 million in 2006. While Ford remained in
the red in 2007, 2 PAG was profitable recording a full-year pre-tax
profit of US$504 million. 3 Jaguar and Land Rover businesses were
seemingly on the threshold of recovery, with their combined
operations accounting for profits in the last quarter
(October-December) of 2007. Nevertheless, by then Ford had decided
to divest these two businesses in order to focus on its core Ford
brand.
The US$2.3 billion deal included acquisition of brands, plants,
and intellectual property rights. This gave Tata Motors access to
premium car brands with superior design and engineering
capabilities, resulting in a diversified product portfolio and
global footprint. However, industry experts questioned the fit as
the premium Jaguar and Land Rover (JLR) 4 brands were positioned
well above the Indian company’s utility vehicles, low to mid-range
passenger cars, and commercial vehicle offerings. Given that Tata
Motors had no experience with luxury brands, the key question then
was whether it could run JLR profitably.
This was compounded by the timing of the acquisition, which
coincided with the global financial crisis at the end of the first
decade of the 2000s. Tata Motors had taken a 15-month US$3 billion
bridge loan to finance the acquisition, which was extremely
difficult to refinance due to the credit crunch at the time. Tata
Motors had to resort to rights issue, divest its stakes in group
companies, issue secured non-convertible credit enhanced
debentures, and roll over part of the loan by extending the final
maturity to December 2010.
The auto industry worldwide was severely impacted by the
subsequent global recession, dwindling vehicle financing, and high
fuel prices. JLR was particularly hard hit when its traditional
U.S. and European markets posted a sharp drop in demand. In the 10
months prior to March 2009, sales volumes plunged 32% compared same
period a year earlier) 5 as JLR led Tata Motors to its first loss
since FY2000-01. JLR reported a loss after tax of £306 million
(US$504 million) 6 bringing Tata Motors to a consolidated loss of
INR25.05 billion (US$520 million) for the year compared to net
profits of INR21.68 billion a year earlier. 7,8
Tata Motors focused on turning around JLR, while keeping
operations autonomous in order to retain JLR’s identity in the
marketplace, as well as maintain the company’s design and technical
independence. To reduce costs Tata undertook a comprehensive
exercise related to manufacturing, inventory, manpower and
sourcing; improve efficiencies in IT and support systems; and
exercise tight control over cash flow and improve working capital.
9 At the same time, Tata Motors invested £700-800 million annually
to fund capital expenditure, operations, and product development at
JLR. 10 To achieve higher returns, the time frame of new product
launches was compressed and high-margin models were launched. 11 As
the global economy improved, the auto industry also JLR became
profitable during the quarter ended December 31, 2009, with net
profits of £55 million–the first time in the black since the
takeover. 12 Over the following years, JLR embarked on a growth
trajectory by targeting emerging markets, with primary focus on
market expansion in China.
Jaguar Land Rover: Company Background
Headquartered at Whitley, United Kingdom, JLR’s business was
built around two worldwide acclaimed brands: Jaguar, which
manufactured premier manufacturer luxury saloons (sedans, in North
America) and sports cars and Land Rover, a renowned manufacturer of
premium 4-wheel drive vehicles. The company’s manufacturing
facilities were all located in the United Kingdom, including three
production plants 13 and two advanced product design and
engineering facilities. Sales were conducted principally through
franchised dealers and importers with 78% of Land Rovers exported
to 169 countries and 70% of Jaguars exported to 63 countries in
2012. 14 The company’s principal geographic markets (on retail
basis) were the United Kingdom, the United States, China, Europe
(excluding Russia), and the Asia Pacific. During FY2011-12, JLR
collectively received over 145 awards which bore testimony to JLR’s
corporate branding and value proposition driven by designing great
products, creating an outstanding customer experience, and
environmental innovation. 15
As of March 31 2012, JLR’s claimed a global workforce of 22,650,
including agency staff of 6,337. 16 As a wholly-owned subsidiary
and integrated business division of Tata Motors, JLR was thriving
as a result of heavy long-term investment by the parent company.
Tata Motors announced in early-2012 that it would increase
investment in JLR to some £1.5 billion annually over the next five
years. 17 This would support ambitious growth plans for strong
product lines with the launch of new models, new derivatives, and
new engines, along with investment in infrastructure, technology,
and human capital. JLR soon followed this with the announcement
that it would add 1,100 new jobs and establish a new engine plant
in the United Kingdom. See Table 1 for JLR’s retail volumes and key
financials (2008-2012).

JLR in China
JLR’s China operations were carried out under Jaguar Land Rover
Automotive Trading (Shanghai) Company, which imported and
distributed the company’s range of vehicles. In 2005 China
accounted for 1% of total JLR sales, but over the next three years
it grew rapidly to become the company’s fifth-largest market with
Jaguar sales of 2,000 units and Land Rovers sales of 11,000 units.
After JLR became profitable, Tata Motors began to change the JLR
leadership team. Ralf Speth was appointed CEO in February 2010, and
few months later Bob Grace 18 was appointed president of China
operations.
To support the projected rate of growth in China, a National
Sales Company (NSC) was established in mid-2010 and JLR’s
facilities were progressively developed. As of March 2012, these
included:
Headquarters in Shanghai and a corporate office in Beijing.
Nationwide dealer network with 104 Land Rover dealers and 97
Jaguar dealers (some dealers were common to both brands).
Five parts distribution centers to facilitate rapid response to
the dealers’ requirements.
Two technical training centers 19 providing professional
training to 5,000 dealership staff annually.
With these concentrated efforts supported by some 200 employees,
20 both brands demonstrated strong performance. Retail volume grew
from 13,000 units in FY2008-09 to 50,994 units in FY2011-12, and
China became the third-largest market for JLR (see Table 2 for key
statistics). 21

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According to Grace, getting the basics right and ability to
offer Chinese customers what they wanted were the dynamics that had
propelled JLR’s sales growth. 22
Tailored Product Range
While automakers elsewhere in the world were emphasizing the
driving experience by using more powerful engines for high-end
vehicles, in China an opposite trend prevailed. Luxury cars with
small engines were gaining popularity. To play to such market
trends, the tailor-made Jaguar XJ 3.0 featuring a smaller 3.0-liter
engine was launched at the Shanghai Auto Show in 2011, meeting with
great customer approval. This model achieved fuel efficiency
without compromising performance and had low import duties. In
addition, Jaguar unveiled extended-wheelbase versions of some
products, such as the long wheelbase Jaguar XJ L. This was again
well-received since affluent Chinese consumers, preferring to be
chauffeur-driven, liked long-wheelbase models with more rear room.
Further momentum was brought about by the rising sales of SUVs and
small engine, lightweight bestsellers like the Range Rover Evoque
(introduced in November 2011) and the Freelander 2.0.
Distinguished JLR Brand Experience
With the gradual maturation of the Chinese auto market, brand
broadcast, and recognition of high-class car brands was becoming
diversified as major auto makers injected more value-add into their
brands. The annual Auto Shows at Beijing and Shanghai served as
platforms to debut various models from JLR’s product line-up. At
the Beijing Motor Show in April 2012 Jaguar carried out the global
unveiling of the Jaguar XJ Ultimate, the most superior model of the
luxurious XJ range, featuring individually-tailored rear seats with
massage functions, an electrically-powered business table, embedded
iPads, and also concealed champagne flutes with a champagne
chiller. At the same time, Land Rover showcased its strongest ever
product portfolio including world debut of the Range Rover Evoque
Special Edition with Victoria Beckham 23, Asian premiere of Land
Rover Defender DC100 Concept Car as well as Range Rover Sport and
Land Rover Discovery 4 HSE Luxury Limited Editions. JLR had already
established two Land Rover Experience Centres to provide a better
service/brand experience and two more were planned by end-2012. In
addition, Jaguar’s new global brand campaign “ALIVE” was launched
in March 2012 which stressed innovation and performance, followed
by the inaugural Jaguar elite “J-Club,” aimed at providing a unique
brand experience.
Superior After-Sales Service
For high-end brands, competition in the Chinese auto market was
shifting from the original product to become more comprehensive,
including brands and services. By 2012 JLR had introduced its
entire model line-up to the Chinese market. With a long-term focus,
the company sought to supplement its sales success by guaranteeing
superior service quality and customer experience. It continued to
invest in building the network of local premier dealer partners
that it complemented with infrastructure development, such as a new
regional office and a third JLR Training Academy in Guangzhou by
the end-of 2012. Training at the existing two centers was carried
out under the “Excellence” system, a program that was designed to
guarantee the same service quality worldwide. As JLR improved its
after-sales service, additional training programs, such as the
“Tailored Service Program” and “Service Advisor Competency Grand
Prix” as well as spare parts logistics optimization systems were
initiated.
However, JLR remained one of few premium brands that did not
have a manufacturing base in China.
Expansion of Manufacturing Footprint: Joint Venture (JV) in
China
In March 2012, JLR announced a JV with Chinese auto manufacturer
Chery Automobile Company Ltd (Chery), to develop, manufacture, and
sell certain Jaguar and Land Rover models as well at least one
JV-branded vehicle in China. Both sides would have an equal stake
in the JV, and production facilities were projected to open in July
2014. It had been nearly two years since JLR first started to
explore JV possibilities because the government required all
foreign automakers to work with a Chinese partner for local
production. Initially, JLR only wanted to set up an assembly plant,
but the government preferred a more extensive transfer of
technology and production. This was in line with JLR’s long-term
goal to make China its largest market in the world. Grace
explained, “If you want to maintain a decent market share in a very
large market, you have no choice but to put down the infrastructure
and build vehicles here in China.” 24
As the world’s largest market, China was prominent in JLR’s
overall growth strategy. This move was expected to revive slipping
global sales of JLR, especially in Europe and the United States,
where economic turbulence continued to curtail consumer spending.
In contrast, demand for luxury vehicles remained robust in China.
This also made JLR the primary driver of growth and profits for
parent Tata Motors, which was faced with slowing demand in India.
25 In the April-June 2012 quarter, JLR accounted for 40% of Tata
Motors’ revenues 26 and 91% of profits. 27 In addition, shifting
production to China would help reduce costs by avoiding heavy
import tariffs, in addition to lower labor costs.
Chery Automobile Company Ltd: Background
Based in Wuhu, Anhui province, Chery Automobile Company Ltd was
founded in 1997 by five state-owned investment companies. Chery was
one of China’s leading passenger car manufacturers and the largest
exporter of vehicles for nine consecutive years through 2011 when
Chery sold about 643,000 units, Some 160,200 units were sold
overseas for a 73% increase in exports year-on-year. 28 Chery had
16 completely knock-down (CKD) 29 assembly factories worldwide in
80 countries. While Chery was better known for compact economy
cars, its product range comprised passenger vehicles, SUVs/MPVs,
and minivans, with more than 30 models on the market. It had
established complete production facilities, including engine
plants, transmission plants, assembly lines, an R&D unit
(Automotive Engineering and Research Institute), a Planning and
Design Institute, and a Testing Technology Center in the
country.
The company sent its first exports to Syria in 2001 and
continued aggressive overseas expansion, initially focusing on
developing markets in the Middle East, Russia, and Ukraine. By 2005
its accumulated overseas sales topped 10,000 units. Chery broke new
ground when it opened its first knocked down factory in Iran in
2006, followed by more in Russia, Egypt, and Indonesia, among
others. Over the following years, Chery entered discussions with
Fiat and Chrysler but plans were either put on hold or scrapped. In
2007 Chery registered a JV (Qoros Automotive) with Israel Corp, an
Israeli holding company, to produce cars and SUVs at a new
production facility in Changshu, China. Four years later, in 2011,
the JV unveiled its “Qoros” brand, a sedan prototype that was
expected to be introduced in 2013. Chery had marked another
milestone in 2010 when it invested US$400 million in Brazil 30 into
what would become its largest overseas localized manufacturing
base. The plant, based in Sao Paolo, was expected to start
production in late 2013 with an annual capacity of 150,000 units.
31
Competitive Landscape
Competition was intensifying in the market for luxury cars in
China, which was dominated by German players Audi, BMW, and Daimler
that combined to account for nearly 80% 32 of the premium auto
market (see Table 3 for comparative information). Ferrari, Aston
Martin, Rolls-Royce, Lamborghini, and Porsche were the other
players in the super-luxury segment.

Audi: Audi was the top luxury car brand with more than
80% cars manufactured in China. It made an early entry in 1988 with
a license agreement for setting up an assembly line from imported
knock-down kits at China’s First Automotive Works (FAW) plant. In
1993 Audi joined the JV of FAW-VW to produce the Audi 200 V6, a
model developed specifically for China that rolled off the
production line in 1996, making Audi the first foreign premier
brand to begin domestic production. Since its early years Audi had
been the sedan of choice for government officials. 33In 2007 Audi
reached the milestone of annual sales of more than 100,000 units.
In 2011 Audi’s production capacity was 300,000 units and it had a
230 dealer network in 100 cities.
BMW: In 2003 a JV between BMW and Brilliance China Auto
started operations at its first plant in Shenyang. BMW began to
expand capacity in 2010 when it built a new RMB5 billion plant
(also in Shenyang) with annual capacity of 200,000
vehicles.Production was expected to begin in 2012. In 2011
production capacity was 98,000 units with about 290 dealer outlets.
BMW attributed its success to a balanced portfolio of locally
produced 3 Series and 5 Series cars and an import lineup of
flagship 7 Series saloon and X family of SUVs.
Mercedes-Benz (Daimler AG): Daimler AG formed a JV,
Beijing Benz-DaimlerChrysler Automotive Co Ltd (BBDC) 34 in 2005,
with the establishment of a plant in Beijing as the first step
towards domestic production of the Mercedes-Benz E-Class sedan.
Local production of C-Class cars followed in 2008. In early2011,
the company received final approval for a JV with BYD Auto to
produce electric cars for the China market expected to be launched
in 2013. Mercedes-Benz cars were sold by 210 dealerships in 90
cities.
General Motors (GM): was the largest foreign automaker
in China with 11 JVs and two wholly owned foreign enterprises
supported by 35,000 employees. GM offered the broadest lineup of
brands, including Baojun, Buick, Cadillac, Chevrolet, Opel, Wuling,
and Jiefang. Buick Excelle was the best-selling car in China. GM
started offering its Cadillac luxury brand in 2004 through a JV
(Shanghai GM) with Shanghai Automotive Industry Corporation (SAIC).
The Cadillac lineup included the CTS luxury sport sedan and coupe,
the SLS luxury business sedan manufactured in China, the SRX luxury
crossover SUV, and the Escalade Hybrid luxury SUVs. 35
Japanese brands, including Toyota’s Lexus and Nissan’s
Infiniti were also on the market, while some Chinese companies were
seeking to move up-market. For example, SAIC launched “Roewe,” a
brand based on intellectual property acquired from British MG Rover
and Geely, a private carmaker that acquired Sweden’s Volvo in 2010,
which gathered its high-end products together under one “Emgrand”
brand.
Context in 2012
Slowing Growth in Chinese Auto Industry
China overtook the United States as the world’s largest auto
market in 2009 in terms of sales volumes with 13.6 million vehicles
sold, maintaining this position in 2010 with sales of 18 million
vehicles. 36 The pace of sales growth was attributed to government
stimulus policies, such as cutting sales tax and offering
subsidies. However, China’s auto market slowed along with the
economy in 2011 as these incentives were phased out. The auto
industry grew just 2.5%, the slowest rate in a decade, reaching
sales volumes of 18.5 million, 37 which was a sharp decline from
the double-digit growth of prior years (45% in 2009 and 32% in
2010). Despite this, sales of high-end cars surged 32% due to
strong demand from the growing ranks of affluent Chinese. To tap
the next wave of demand, luxury car makers were expanding into tier
three to tier five cities–smaller, less developed urban areas with
increased wealth. Some observers believed that China’s luxury car
market had sufficient room for growth as it accounted for only 6-7%
of the total passenger vehicle market, whereas the same ratio in
developed countries amounted to 15-20%. 38 However, other industry
experts warned that a slowdown was inevitable.
Legal and Regulatory Environment
To steer China’s rapid economic growth to a more sustainable
level the government had been tightening lending and institutional
investment curbs. China’s central bank raised interest rates
several times to curb inflation. Stringent administrative quotas
were being set by financial authorities for new loans, and
state-owned banks were advised to place more than a fifth of their
assets at the central bank. This resulted in limiting the banks’
ability to lend and businesses’ ability to borrow. 39 Also relevant
to foreign auto makers were Chinese foreign exchange control rules.
There were restrictions on taking cash out of the country, limiting
the ability to utilize the cash held in China in other markets.
In addition, the government launched an auto curbing policy in
2011 in cities with a population of more than 10 million. To ease
congestion and improve air quality, new car ownership was curtailed
in Beijing by setting a monthly quota of 20,000 new vehicle
licenses (effective January 2011). Major cities such as Shanghai,
Guiyang and Guangzhou 40 followed suit with similar measures. The
government also passed a new law for vehicle taxation according to
engine size. To encourage the use of smaller engines that would
reduce pollution and fuel consumption) effective 1 January 2012,
vehicles with larger engines were required to pay more taxes.
41
Attraction for Western Luxury Car Brands
Affluent Chinese car buyers typically favored blue-chip European
or U.S. luxury brands compared to domestic cars due to the
importance of “face,” which signified prestige, position, and
respect. Since a premium car represented a milestone and uplifted
social standing, Chinese buyers often made purchase decisions based
on a car’s ability to exhibit status. In the 2010s, China was noted
for a rapid rate of economic development, urbanization, and a
higher growth rate of personal wealth among a younger age group
than in other developed countries. Global exposure and education
contributed to a greater awareness of premium cars and
differentiation from the mass segment. Some industry watchers
expected the market to grow disproportionately with the rise of
Chinese elite. 42
Future Implementation of the JV
As of July 2012, the JLR-Chery JV had not received regulatory
approval from the National Development and Reform Committee of
China. Meanwhile Tata Motors’ leadership and the JLR management had
to chart a roadmap for successful implementation of the JV. To set
up systems and processes in line with their U.K.-based best
practices, the first step was to understand the business culture,
including local protocols and modes of operation in China.
Sustainable localized production
The scope of the proposed JLR-Chery JV included manufacture of
JLR cars and JV branded vehicles; establishment of a R&D
facility; engine manufacture; and sale of vehicles, which comprised
JLR’s first production base outside the United Kingdom. According
to Chery Chairman and President Yin Tongyue and JLR’s CEO Speth in
a joint statement, “We aim to give play to the two companies’
advantages in such aspects as brand shaping, product R&D,
technical innovation, manufacturing process and local resources, to
provide Chinese customers with the most advanced, efficient and
cutting-edge products.” 43
As China’s expectations of MNCs and foreign investors moved to
the next level, requirements for foreign automotive companies were
increased with increased focus on high-end manufacturing,
low-carbon emission, and energy-saving technology. The government
sought quality rather than quantity of foreign investment through
collaboration with organizations that were ready for knowledge
transfer in areas of technological innovation and business
management. However, both JLR’s and Tata group’s learning
experience in China had been limited. This was because JLR was a
late entrant into the China market and only 10 Tata companies 44
were established in the country, albeit for a relatively short
time. Group Chief Representative James Zhan of Tata Sons said,
“There are not enough Chinese nationals in the various Tata
companies in China and very few in senior management positions. The
problem, at least partly, has been a high attrition rate that has
resulted in key local managers leaving. This has interrupted the
accumulation of China experience and institutional knowledge for
the Tatas.” 45 Therefore, JLR would initially have to rely
primarily upon Chery’s resources for the development of products
and subsequent sales by tapping Chery’s networks.
Development of a joint sub-brand
An additional important regulatory requirement for JV was to
establish a new sub-brand selling entirely separate vehicles. The
challenge was being taken very seriously by Speth, who said, “We
are treading very carefully as we have to meet a lot of
requirements. It’s harder for western brands to get into China now
as we are late to the party. The sub-brand needs new product with
new names, and sales channels. You have to make it profitable.”
46
One key concern was the extent to which Chery would be able to
support the development for the JV sub-brand. Domestic car makers
had not been able to acquire the technology and expertise necessary
to build their own strong luxury brands, despite the government’s
push over two decades to open China’s auto industry to foreign
investment. All domestic car makers combined to capture only about
30% of the market, which was the lowest proportion for any major
economy. While local car makers were eager to close the gap by
moving their brands upmarket, building a luxury brand was difficult
and time-consuming. Analysts also found that many Chinese companies
faced operational issues even if they did manage to master advanced
technologies. An additional challenge was to design a car as a
complete package that was a good fit within a portfolio of products
supported by a strategic business model. 47
Human Capital
Building a capable and cohesive JV management team by drawing on
the ranks of JLR China, Chery, along with the auto industry, Tata
Motors was overseen by parent Tata Motors’ as its first priority.
Initially, the new JV would have to strike a balance between
experienced expatriates and local talent. For the expatriates, lack
of general awareness of China as an employment destination,
knowledge of the Chinese language, and culture would be a major
obstacles. The next step would require locating premier engineers
and a workforce to create the desired knowledge transfer. A
business climate survey of British companies in China in 2012
highlighted difficulties in the operating environment, especially
in terms of rising labor costs, as well as in the ability to
attract and retain staff. 48 In small cities, finding employees
with a working knowledge of English was difficult. In addition, the
Chinese auto industry did not have a deep bench of native-born
designers and often drew on the ranks of experienced western
designers. For example, when Chery established the JV with Israel
Corp, the company appointed a management team comprising senior
western automotive company experts. 49 As such, the rapid growth of
JLR’s Chinese business had prompted the company to learn and grow
quickly, making recruiting and developing local talent being a high
priority. Grace was well aware that next challenge pertained to
training local people,explaining that, “Taking root in China and
cultivating local talent is one of our goals for long-term
sustainable development.”50
Going Forward
From January to June 2012, total Chinese auto sales exceeded 9.5
million units (increase of 2.93% compared to same period in the
previous year); passenger car sales increased 7.08% to about 7.6
million units while commercial vehicle sales dropped 10.40% to 1.9
million units. This somewhat reflected the macro-environment in
China that was becoming more challenging as economic growth dropped
to its lowest level since the 2008 crisis. The country’s huge
manufacturing sector was starting to slow as inflation remained
stubbornly high due to weak export demand and domestic slowdown.
China’s targeted economic growth of 7.5% in 2012 was its weakest in
more than two decades. 51 This caused concern for JLR as it sought
strong growth in the country to achieve its primary goal of
securing its position in the highly competitive German-dominated
market. Following a 70% year-on-year growth for FY2011-12, JLR had
successfully sustained its momentum into the first quarter of FY
2012-13. However, Grace noted, “Every car manufacturer is seeing
explosive growth (in China), so it’s not a unique phenomenon to
Jaguar Land Rover. The (Chinese) market is exploding and we just
happened to be in a situation where we caught the tide at the right
time.” 52
The two issues JLR management had to tackle were to sustain
growth and remain profitable in the face of competition from
entrenched international players, and work out an implementation
plan for the successful launch of the JV (post-approval). Speth
explained, “It is important to note, however, that growth is not
just about volumes; it is about improved margins, revenues and a
richer market mix. Ultimately, our future depends on delivering
daring, seductive and incredibly capable products, driven by great
design and technological innovation.” 53
Questions
What were the drivers of JLR’s expansion in China?
In what ways can the company profit from this move in the short
term as well as in the long term? What are the likely risks that
could derail JLR’s plans?
What are the strengths of JLR that resonated with Chinese
customers thereby driving its growth?
Identify the factors that influenced JLR’s choice of entry mode.
Outline the advantages and disadvantages (through a SWOT analysis)
of the JV with Chery Automobile Co Ltd.
What are the key challenges that JLR faced in the implementation
of the JV? Was it unique to JLR?
Research Exercise: Carry out further research on any of the
successful JVs of competitors mentioned in this case and apply that
knowledge to articulate how JLR should proceed to ensure success of
the JV.

Table 1: Jaguar and Land Rover’s Retail Volumes and Key Financials FY 2010-11 51,818 189,087 240,905 9,871 million £1,036 million £1,502 mllion FY 2011-12 54,227 251,632 305,859 £13,512 million 148lion £2,027 million FY 2008-09 Jaguar Land Rover Total Retail Volume Consolidated Revenue Consolidated Profit after tax/(Loss) EBITDA N.A. N.A. 167,000 £4,974 million (2306 million) (241 million) FY 2009-10 51,020 157,177 208,197 £6,527 million £23 million £350 million * 10 months from June 2008 to March 2009, #-wholesale Volume. N.A.-Not Available SOURCE: Compiled from Jaguar Land Rover Annual Reports and Tata Motors Results Presentation FY 2009-10.

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