iiml cross cultural leadership tdcv feb 2013

1

CROSS-CULTURAL LEADERSHIP TATA MOTORS’ EXPERIENCE IN

KOREATATA DAEWOO

C V Singh

IIM Lucknow- FEB 2013

2

CROSS-CULTURAL LEADERSHIP TATA MOTORS’ EXPERIENCE IN KOREA

• Part 1 – Introduction

• Part 2 – Acquisition of Tata Daewoo – Challenges and Tata Motors’ response.

• Part 3 – Integration

• Part 4 – Enterprise Excellence

• Part 5- Achievements and Growth

3

CROSS-CULTURAL LEADERSHIP KOREA

• 1910 – 1945 : Japanese Rule• 15th Aug 1945 Independence• 1945 – 1948 : US Military Rule • 1947 – UN Sponsored Elections• 1950-1953: Korean war, JUL 1953 -KOREA Split :

North Korea- DPRK ; South Korea- ROK• Descendants of Central Asian Mongols - one ethnic group.• Life expectancy – 75 Years• South Korea- Size of West Bengal• Buddhists- 45.6 % , Christians- 51.8, Others – 2.6%• Korean language for business, medium of education.• Sports and health culture

4

CROSS-CULTURAL LEADERSHIP KOREA- Financial Crisis of 1997 and Recovery

• 1960 – a crippling trade deficit, no natural resources • Since 1960 – remarkable economic growth and by 1997

– 11th largest economy of the World• Per capita GDP grew from $ 80 in ‘60 to $ 6,000 in ‘97.• Asian tiger along with Hong Kong, Taiwan and Singapore• Korea was worst hit country along with Indonesia &

Thailand during financial crisis of 1997.• Export - electronics, communication, ship and auto.• Competence to produce world class products • Export incentives from Government• High level of commitment to Quality, Cost and Delivery

5

CROSS-CULTURAL LEADERSHIP Korea - Current Scenario

• GDP growth 2012- 2.1%• Population 2012- 49.8 million• GDP per capita 2012- $ 32400• Inflation 2012- 2.2%• Exports 2012- USD 558 billion (Estimate) • Imports 2012- USD 525 billion (Estimate)• FXR 2012- USD 306 billion • World’s15th largest economy -2012/ 4th largest in Asia• Unemployment 2012- 3.4% (Estimate)• Ease of doing business -8th ( after Singapore, Hong

Kong, New Zealand, USA, Denmark, Norway)

6

CROSS-CULTURAL LEADERSHIP Culture uniqueness and impact on business

• High level of national pride and pride in culture.• Determination to succeed, grow and win World market.• Safe and secure place- women freely travel past midnight.• Buddhism major religion- respect for India- land of Buddha.• Survival Kit: Korean language, food, drinks and networking• Discipline work practices, Bottom up management system.• Low tolerance for uncertainty. Adherence to time.• A role oriented society, group driven culture, male dominant • Relationship based business transactions.• Network building through dancing and drinking.

7

CROSS-CULTURAL LEADERSHIP DAEWOO GROUP

• “Daewoo” means “Great Universe”• Founded by Mr. Kim in 1967 initial capital of US $ 18,000• At its peak, Daewoo was South Korea’s fourth largest

group.• Operations in motor vehicles, ship building, heavy

industry, electronics, telecom and financial services.• Daewoo had presence in over 100 countries worldwide. • Daewoo’s global ambitions eventually overextended the

company’s resources, and by 1997 was in deep debt.• In 1999 Govt. ordered to dismantle Daewoo and the

banks took control of assets.

8

CROSS-CULTURAL LEADERSHIP DAEWOO MOTOR COMPANY

• In mid-1980s Daewoo Group established a 50:50 joint venture with General Motors, called Daewoo Motor Co.

• After the initial success, sale dropped substantially in 1990.• GM sold its share to Daewoo in 1992.• Commercial vehicle business established in 1995.• In 1999- banks took control of Daewoo Motor Co’s assets.• Daewoo Motor was split into three companies in 2002, put

under court receivership and then sold:1. Passenger cars – acquired by GM- GM Daewoo (2002)2. Bus – acquired by a Korean company, Daewoo Bus (2003)3. Commercial vehicles – acquired by Tata Motors- (March ‘04

9

CROSS-CULTURAL LEADERSHIP Tata Group

• Founded in 1868, India’s most respected Group• India’s largest Group by revenue• Total Revenue - $ 100 Billion (2011-12)• Total Assets- $78 Billion (2011-12)• International revenue- $ 58 billion (58%)• The Tata group comprises over 100 operating

companies in seven business sectors: communications

and information technology, engineering, materials,

services, energy, consumer products and chemicals.• Total manpower- 4,56,000 (2011-12)

10

CROSS-CULTURAL LEADERSHIP Tata Motors

• Tata Motors- India’s largest automobile company • Consolidated Revenue Rs 1,70,678 crores- 2011-12• Consolidated profit (PAT) of Rs 13,517crores -2011-12 • JLR- Revenue Rs 1,03,635 Crores- 2011-12• JLR - PAT Rs12,279 Crores- 2011-12• TML- Revenue Rs 59,220 crore 2011-12• TML – PAT Rs 1,242 crore 2011-12• Global presence of Tata Motors• Manufacturing plants of Tata Motors- India and

overseas

11






• Part 5 – Achievements and Growth

12

CROSS-CULTURAL LEADERSHIP Acquisition of DWCV: Growth Opportunities

• Revenue Growth• Product mix: CVBU - 210 HP; DWCV 230 – 420 HP• This creates an opportunity to: Sell these vehicles in international markets. Advance introduction of these vehicles in India.• Learn and gain experience in managing a commercial

vehicles business in a developed country.• Improve our vehicle development skills through joint

product development and transfer skills of operating a high quality manufacturing plant.

• DWCV represented one of the acquisition opportunities available at an affordable price.

13

CROSS-CULTURAL LEADERSHIP Acquisition of DWCV: Win- Win Situation

• Fitted well with Tata Motors’ strategy. • Growth both in scale and global reach to take Tata Motors

away from subordination to a single economy. • In DWCV, Tata Motors saw: 1. Excellent Product (High end HCV) with scope to increase

range having underutilized capacity2. Potential for growth – in international and domestic market.3. Organizational capability for design, high quality and

meeting customer’s needs with variety of applications.• Tata Motors could lend to DWCV the much needed:1. Market reach through Tata IB network2. Financial stability

14

CROSS-CULTURAL LEADERSHIP Acquisition OF DWCV……

• 14th July 2003: Information about DWCV on sale• 14th Aug 2003 TML submitted non binding bid and selected one of

the 10 firms from 15 bidders.• The new product development plan of DWCV matched with World

Truck of TML and saving design to launch time.• On Aug 23 2003 ED CVBU TML led the team for due diligence.

While waiting in bidding office young manager (interpreter) of DWCV informed that employees were looking for an European firm to acquire DWCV.

• Difference in hospitality- TML team was accommodated in moderate hotel compared to Europeans.

• This provided challenge to the team and was turning point in the deal.

15

CROSS-CULTURAL LEADERSHIP Acquisition Of DWCV- Selling ourselves

• "To me, this was the turning point in the deal. I realised it was not about bidding high. I immediately decided that the challenge was as much about selling and marketing Tata Group and TM to the Koreans as it was to buy DWCV. Even if we bought the company, it would not work out unless they accepted us. We were buying the company but at the same time we were selling ourselves. Clinching the deal was about winning the confidence of the Koreans managers and unions. Unless there was a two way process, the acquisition would not work.” …… TDCV Chairman

16

CROSS-CULTURAL LEADERSHIP Acquisition of DWCV- Communication

• India: Structured presentations about India, Buddhist connection, diversity and our heritage.

• Tata Group: History, holding pattern, coverage of industrial sectors, initiatives in education, employee’s welfare schemes, industrial relation and peace.

• Tata Motors: history, product range and R&D activities.• In 72 hrs entire material was made available in Korean

language for the communication.• The team made presentations to the employees, transport

operators, vendors, Government and opinion leaders. • Accepted Union demand that no worker would be laid off

within three years after acquisition.

17

CROSS-CULTURAL LEADERSHIP Acquisition - Impact

• The team’s strong communication effort were effective in gaining support for TML

• “The whole situation in the company had changed and these very people who were rather skeptical of us became very emotional and told our people that if the company was to be sold to anybody it must go to Tata.” ….. TDCV Chairman

• 22nd October 2003, TML selected as preferred bidder for DWCV and final bid price was $ 102 Million. The deal was agreed in Feb 2004 and completed on 29th March 2004. This was the fastest major acquisition in South Korea. TML used $ 51 million own fund and $ 51 million borrowed against assets of DWCV.

18







19

CROSS-CULTURAL LEADERSHIPIntegration - Challenges

• A developing country’s acquisition in a developed economy.• Korean employees were not expecting that an Indian company

could acquire DWCV. They were shocked as no Indian company had presence in Korea. TATA name was not known.

• Cultural gap• Korean is the only language used, for business with an

exception for international business.• Managing the expectations of stake holders - the Government,

employees, union, customers, suppliers and creditors.• Getting along with the complex structure of Korean labor

unions – National – Korean Metal workers Union, Provincial Union and Branch level ( company level).

20

CROSS-CULTURAL LEADERSHIPIntegration - Strategy

• Tata Motors keen to protect sense of pride of employees..• Koreans should run the company-Tata Motors to support.• TDCV as a “Touch, Feel and Face” of a Korean Co. • Integration meant integration of two equals.• Name - ‘Tata Daewoo Commercial Vehicle Company’ .• Excellent opportunity both for product improvement in the

short run and joint product development in future. • Sale in Korea with Daewoo brand, in international market

some countries under Daewoo and some under Tata brand.• Mr. Chae Kwang-Ok continued as President. He had spent

his entire career with Daewoo and bankruptcy court appointed CEO.

21

CROSS-CULTURAL LEADERSHIP Integration: Key Processes

• Communication Korean should continue to be the business language.

Employees were encouraged to learn English. Indian managers enrolled for Korean language classes.

Communication at various levels thru written material, reports and films made available to employees, union.

Permanent exhibition hall on Century of Trust- 2004 India week in Gunsan- Performance by Hari Prasad

Chaurasia, Sheo Kumar Sharma, Indian Movies, Indian Food.

Exchange of in-house news publications. Participation of Indian Auto vendors in Gunsan Auto Expo.

22


• Cross Cultural Management Training of senior management and acquisition team on Korean

culture, language and cross culture management. Provided employees, union and media an opportunity to compare

the new experience with their chaebol culture. Facilitated Twin city agreement between Gunsan and Pimpri; and

Jamshedpur for cultural exchange program. Participation of TDCV employees children in the painting

competitions organized by the Tata Group in India. Participation of TDCV employees in training programs, conferences,

of Tata Motors, Tata Group, national associations and Auto Expos. Provide Indian food in factory canteens. Similarly provide Korean

food to visiting Korean colleagues in India.

23


• HR Process Expose employees through exchange program. Tata Motors’ managers had to show commitment to TDCV -

to gain acceptance. Respect by achievement or value addition rather than by levels or designation.

Exchange of operatives and blue collar workers between Tata Motors’ plants in India and Gunsan.

TDCV sent a team of union leaders to visit Tata Motors’ plants in India, to see operations and share experiences.

The salaries and wages of TDCV employees were gradually raised to make up the loss the employees had suffered.

24

CROSS-CULTURAL LEADERSHIPIntegration: Key Processes….

• HR Process…. One key effort was to minimize TML personnel in TDCV Tata Motors’ CEO personally selected a team of nine high

performance managers to drive the integration. Two Vice Presidents in the areas of Finance & Business

Planning and Sales, Marketing, Service and Integration. Seven young managers for middle management specialist

positions – two for integrating financial systems, one each for HR Processes, Strategic Sourcing, New Product Introduction, Marketing and After Sales Service for sharing best practices between the two companies in their respective areas.

25

Finance-TreasuryD.G.Mgr. R. D. Sarda

President & CEOChae Kwang-Ok

Planning/Finance G.Div.V.P. S. U. K. Menon Production/R&D G.Div.

E.M.D. Kim Kwan-Kju

Finance&Accounting Dept.G.Mgr. Kim J. Y.

Business Planning TeamG.Mgr. Lee S. J.

Production Dept.Dir. Lee S. W.

Quality Control Dept.D.G.Mgr. Jang S. H.

Production EngineeringDept.D.G.Mgr. Hong H. P.

Vehicle Engineering TeamD.G.Mgr. Hwang C. H.

Chassis Design TeamG.Mgr. Kim S. H.

Body Design TeamG.Mgr. Lee Y. G.

Prototype Build&Test TeamG.Mgr. Yu K. J.

Commercial G.Div.V.P. C. V. Singh

Material Control TeamG.Mgr. Kim J. H.

TDCV Organization Chart (June, 2007)

HR & GA G.Div.E.M.D. Won Ki-Hee

M.I.S TeamD.G.Mgr. Kim Y. S.

General Affairs TeamD.G.Mgr. Choi B. S.

Overseas Sales &Marketing 1 Team G.Mgr. Kim Y. G.

Plant OperationSupport TeamD.G.Mgr. Jeon S. M.

International Biz. Div.M.D. Jung Moon-Sung

Sales & Marketing TeamG.Mgr. A. Chatterjee

HR TeamDir. Kim Seong-Kook

Product Planning TeamG.Mgr. Cho J. W.

HR Div. Dir. Kim Seong-Kook

Overseas Sales &Marketing 2 Team D.G.Mgr. Choi B. B.

Technical ManagementTeamG.Mgr. Cho C. H.

SAP Project TeamD.G.Mgr. Kim Y. S. (Project Mgr.)

Purchasing TeamD.G.Mgr. Cho H. J.

Overseas Purchasing TeamD.G.Mgr. Lim S. W.

N.P.I. Process

G.Mgr. A. Kumar

Finance-AccountsD.G.Mgr. A. Biswas

ICR Project TeamD.G.Mgr. Ku K. M. (Implementation Tracking Mgr.)

Domestic CustomerService Dept.Dir. Lee J. S.

Domestic CustomerService Div.Dir. Lee Jae-Seok

Production Div. Dir. Lee Seung-Weon

Product Styling TeamG.Mgr. Kim J. H.

Strategic Sourcing TeamG.Mgr. Y.S. Kulkarni

After Sale ServiceProcessG.Mgr. R. Sharma

Business Excellence& HR Process TeamG.Mgr. S. Ganguly

Global Sourcing TeamD.G.Mgr. Lim S. W.

Overseas CustomerService TeamD.G.Mgr. Choi S. W.

26

CROSS-CULTURAL LEADERSHIPIntegration: Learning and Response

• Communication helped allay fears on ‘Daewoo’ being acquired by a company from a developing country.

• The company was acquired on 29th March, accounts were closed and consolidated with TML account as of 31st March

• TDCV accounts calendar year was changed to FY of TML

• Tata Motors’ IT systems were latest, TDCV’s design and

manufacturing processes were more advanced.

• FBV concept was in-built unlike TML.

• Communication, Credibility and Commitment -- key success

factor.

27







28

CROSS-CULTURAL LEADERSHIPEnterprise Excellence –Initiatives 04-05 to 08-09

• Process Improvements Initiatives IT Road Map and implementation plans for ERP ( SAP)

and PLM and network up-gradation. Initiation of joint product development plan between Tata

Motors and TDCV- NPI process. Expansion of AS network Domestic and International

Business. Partner relationship- Vendor and channel partners. Initiation of Early Vendor Involvement ( EVI) Process Integrated Cost Reduction (ICR) program Employee’s Training Center- Technical

29

CROSS-CULTURAL LEADERSHIPEnterprise Excellence –Initiatives 04-05 to 08-09

• Process Improvements Initiatives……… Up gradation of MES- Manufacturing Execution System Employees Training Center-Managerial Improvement in spare parts supply in International market Customer and Channel partner’s interaction improvements Implementation of other Business Suits modules- HR,

CRM, SRM Integrated Cost Reduction Program- JMAC Increasing warehousing capacity for both domestic and

international business, service training facility for customers and service center for maintenance.

30

CROSS-CULTURAL LEADERSHIPEnterprise Excellence – Initiatives 04-05 to 08-09

• Enterprise Transformation Initiatives:

Implementation plan of BSC methodology for strategy

management at Company level and Team level.

Workshop on BSC by Prof Robert Kaplan co-founder of BSC

approach for Executive Management Team.

BEBP agreement with Tata Sons for using TATA brand and

adherence to guidelines of TBEM, TCOC, MBE.

Organization structure for driving BE – EMT, Plant Management

Team- Team Jang, and BE Group

Workshop to finalize Vision, Mission, Value and Strategy Map and

BSC.

31

CROSS-CULTURAL LEADERSHIP Enterprise Excellence – Initiatives 04-05 Y1

Vision of Tata Daewoo

To be the most admired commercial vehicle company of Korea

32

EVA positive company

Responsible for society and environment friendly

Fin

an

cia

lC

us

tom

er

Inte

rna

l

Le

arn

ing

& G

row

th

Revenue growth Productivity improvement

Consistent mutual growth and profits

Identify products and services appropriate to market

Encourage education & training to develop key competencies

Develop IT infrastructure consistent with company’s strategy

Human Capital Organisation Capital

Corporate Citizenship

Channel PartnerEnd Customer

Harmonious labor and management relationship

Information Capital

Improve productivity

TD

CV

Str

ateg

y M

ap

A Unique Value Proposition from Tata Daewoo

Value creation

STRATEGIC OBJECTIVES – Strategy Map

Continuous cost reduction

Robust processes

Enhance quality of products and service

Improve revenue from non vehicle business

Increase export sales volume

Enhance KD business

Increase domestic sales volume

Ensure new products adhere to Cost, Time & Quality targets

Strategy Map of Tata Daewoo- Balanced Score Card

Best products and services suitable for customer’s needs

Value for shareholder

Enhance employees’ satisfaction

Empower employees

Excel in the journey to excellence (TBEM)

33

CROSS-CULTURAL LEADERSHIP Enterprise Excellence – Initiatives 04-05 to 08-09

• Enterprise Transformation Initiatives….. Awareness program on TBEM. Ethics counselor appointed in Jul 2005. Translation of TCOC in Korean language and program for Team

Jangs and Team members. Dipstick TBEM assessment of TDCV in Dec 2005 (Score 300-

350). Improvement plan based on OFI Opportunities for improvements)

indicated in assessment Certification of TDCV- TS 16949. TDCV achieved the serious adoption award Score Band of 450-

500 in external assessment – First company to achieve in the first year of assessment.

Expansion plan – facilities and infrastructure.

34

Business Excellence Journey

Best Practices Benchmarking & Innovation practice roll-out, Initiative to improve capacity uti-lization.

Best Practices Benchmarking & Innovation practice roll-out, Initiative to improve capacity uti-lization.

New Process Improvement Initiatives, External & Internal TBEM assessment, Initiate Knowledge Mgmt. practices.

New Process Improvement Initiatives, External & Internal TBEM assessment, Initiate Knowledge Mgmt. practices.

Reestablishing VMV and Rigorous Performance review process through Company/Team BSC, Satisfaction surveys for all stakeholders, Signing of BEBP and commitment to TBEM and MBE practices.

Reestablishing VMV and Rigorous Performance review process through Company/Team BSC, Satisfaction surveys for all stakeholders, Signing of BEBP and commitment to TBEM and MBE practices.

Dip Stick Assessment and Improvement planning based on OFIs. Developing BE Champions to drive Business Excellence Processes Communication on TBEM and MBE, Benchmarking of Processes, Products.

Dip Stick Assessment and Improvement planning based on OFIs. Developing BE Champions to drive Business Excellence Processes Communication on TBEM and MBE, Benchmarking of Processes, Products.

Most results out-performing the competitors, Some world-class processes, Action for en-suring industry leadership

Most results out-performing the competitors, Some world-class processes, Action for en-suring industry leadership

05-0605-06

06-0706-07

07-0807-08

08-0908-09

09-Onwards

09-Onwards


35

Global Image

Excellent

Average

Beginning


0 – 250: Early Development

251 – 350: Early Results

351 – 450: Early Improvements

451 – 550: Good Performance

551 – 650: Emerging Industry Leader

651 – 750: Industry Leader

751 – 875: Benchmark Leader

876 – 1000: World Class Leader

36

CROSS-CULTURAL LEADERSHIPTATA MOTORS’ EXPERIENCE IN KOREA






37

CROSS-CULTURAL LEADERSHIP Tata Daewoo- Achievements

• 100% growth in volume and capacity utilization improved from 23% to 60%.

• Domestic sale improved by almost 100%.• Growth in overseas business by 10 times. • Zero debt and dividend paying company in three years • Workforce increased by 50% in five years.• Tax contribution to Government increased by 250%.• Growing as a member of the Tata Group and yet with the

“Touch, Feel and Face” of a Korean Company• Largest Korean exporter of Heavy Commercial Vehicles• Increasing product range.

38

CROSS-CULTURAL LEADERSHIPGrowth and way forward

• Products being jointly developed by the engineers of Tata Motors (India) and Tata Daewoo (Korea)

• Tata Daewoo as full range commercial vehicle producing company- low volume and high variety.

• Growth by diversification of product portfolio and access to newer markets.

• Strengthen the R&D activity in evolving new and niche products, through its competitiveness for Product design, Product development , Quality and Timeliness.

39

TATA DAEWOO Growth – Business Results

Production (Units)- HCV/MCV/KD 4,672 5,639

Sales - Incl Exports (Units)

- HCV/MCV/KD 4,505 5,734

Exports (Units) - HCV 369 2,480

Market Share (Domestic)

HCV 25.7% 28.0%

MCV 0.0% 3.7%

Sales Revenue (KRW billion) 265 365

Profit Before Taxes (KRW bln) 10 18

Particulars 2003 2005-06 2006-07

8,543

8,588

3,016

24.3%

28.2%

494

29

11,821

11,899

3,312

32.3%

34.8%

714

53

2007-08

100%

103%

1060%

154%

380%

Growth on 2003

9,341

9,137

4,280

31.4%

33.5%

673

48

Taxes (KRW billion) 4 5 8 15 250%14

Profit After Taxes (KRW bln) 6 13 21 38 467%34

2008-09

40

TATA DAEWOO – International Business

Export growth of over 1000% since 2003

Exports – Trend (No. of Units)

369

874

2480

30163312

4280

2003 2004-05 2005-06 2006-07 2007-08 2008-09

41

TATA DAEWOO Growth - Employment

Creation of more employment opportunities

853907

1096

1233 1272

2004-05 2005-06 2006-07 2007-08 2008-09

Employee Strength

Workforce increase by 50%

42

①

②③

⑧

④⑤

⑥

⑨

⑦

① Head Office / Technical Center

② Pilot Build & Test ③ Styling Shop ④ Body Shop ⑤ Paint Shop ⑥ Assembly Shop ⑦ Frame Shop ⑧ Final Shop ⑨ Test Track

Total premises : 317,257㎡

43

The Plant- Expansion

Area of Original site 317,258 m2

Additional Land acquired 474,616 m2

Total 791,874 m2

44

Thank You

C V [email protected]

M: +919839069769

mailto:[email protected]

iiml cross cultural leadership tdcv feb 2013

Documents

cultural leadership

cultural leadership

joint product

tata motors

overseas sales

tata daewoo

tata motors

tata group