REAL LIFE APPLICATION Tata and Tetley Tea

[Vandana]

Expanding into new areas or other reasons for an acquisition?

Tetley tea is an iconic brand in the UK. However, after Tetley's profits started to tumble, Tata Tea from India, despite being half Tetley's size, acquired them for around £270 million.

For Tata, buying Tetley was not so much about having a foothold in the UK. According to Alan Rosling, an executive Board member of Tata Sons, the main reason for buying Tetley was to harness the technology that Tetley had, and bring it back to India to use in Tata Tea. This way they could obtain cutting edge technology and also cost savings from increased efficiency.

What other benefits do you think buying Tetley has given the Tata group?

[PRiYO]

Expanding into new areas or other reasons for an acquisition?

Tetley tea is an iconic brand in the UK. However, after Tetley's profits started to tumble, Tata Tea from India, despite being half Tetley's size, acquired them for around £270 million.

For Tata, buying Tetley was not so much about having a foothold in the UK. According to Alan Rosling, an executive Board member of Tata Sons, the main reason for buying Tetley was to harness the technology that Tetley had, and bring it back to India to use in Tata Tea. This way they could obtain cutting edge technology and also cost savings from increased efficiency.

What other benefits do you think buying Tetley has given the Tata group?


Goodwill.. Because if they wanted to invade uk market there is no better way then aquiring. Tetley allready holds the market, have a goodwill, well known brand, above all international exposer for tea business. while again tetleys technology as you say could be a big factor but i think the market was a bigger issue. rather then invading with there own brand its wiser to acuire so, you eliminate one big compititor , have a market percentage all ready, dont need to invest large scale on infastructure at the biggining.

[Vandana]

Very good point and yes that was a big factor. However, it was not just the UK market - remember that the UK is the gateway to the EU and Russia too. So by buying Tetley, Tata also bought a way into distributing their products (not just tea) into Europe, as Tetley was already doing this. it also bought all the other benefits - the marketing teams, the advertising teams etc etc - who knew the local market and therefore could be used to sell other Tata products to those same customers...

However, Alan (from the Tata Board, who is a good friend as well) told a group of us that the main benefit from the acquisition was the technology!

[alishaACCA]

i feel that tata wanted to increase his market share by going global instead of selling tea in one country only, he tried to go global!!
also tetley , apotential competitor is out from the market!!

[Vandana]

Hi Alisha,

Yes - Tata did want to increase their market share too. However, they were already selling in other countries too.

What you have to remember is that while buying a competitor gives you access to their customers, that is only 1 small part of what you are getting - remember you are also buying the distributor network, through which Tata can sell its other products (a distributor who is already selling Tetley Tea, will probably be able to sell a host of other Tata products - from sugar to mineral water!). You are also buying their technology etc etc, which you can bring back and use in your home country.

So there are many many other advantages to an acquisition. As part of ACCA and also as part of expanding your knowledge, try to start challenging your own thinking too!

[Taciturn Tyrant]

Well this way i think Tata is successfull in attaining a competitve advantage over rest of its competitors,since it has acquired a greater market share. It can expolit its unique Resources and the Core competences to influence the environment. The distribution Network, additional goodwill of Tetley, the tacit knowledge of the Marketing and the Advertising teams acquired and the Modern Technology all join up and contribute in increasing Tata's Bargaining Power...