Will Luxury Brands Live to Regret Spurning Tata?

By Jason Simpkins
Associate Editor

Prominent Indian businessmen and government officials have taken exception to several implications from U.S. companies that Indian corporations are unworthy of acquiring American brands. Most of the complaints involve Tata Group, one of India's largest and most respected conglomerates. 

New York-listed Orient-Express Hotels Ltd. (OEH), a purveyor of luxury accommodations, has snubbed Tata twice. After Indian Hotels, a subsidiary of Tata Group, increased its stake in Orient-Express to 11.5%, Orient's Chief Executive Officer Paul White responded with what some interpreted as a very curt letter.

"We do not believe that there is a strategic fit between your predominantly domestic Indian hotel chain and our global portfolio of luxury hotels," White said in a letter to Indian Hotels Vice-Chairman R. K. Krishna Kumar.

The letter went on: "Any association of our luxury brands and properties with your brands and properties would result in a reduction in the value of our brands and of our business and would likely lead to erosion [of] RevPar (revenue per available room) premiums currently achieved by our properties."

A week prior, an attempt by Tata Motors Ltd. (TTM) to acquire luxury brands Jaguar and Land Rover from Ford Motor Co. (F) was met with similar resistance. Ken Gorin, Jaguar Business Operations Council's Chairman insinuated the U.S. public was not "ready for ownership out of India of a luxury car brand such as Jaguar." He also, reportedly used the phrase, "unique image issues" when referring what he perceives as hesitance in the U.S. marketplace.

That statement carried a certain amount of irony. When Ford first acquired Jaguar in 1989, many were skeptical that it would do the brand justice. Also like Ford in its early stages, Tata Motors has also shown a significant amount of market prowess.

It has capitalized on the Indian market lines of affordable cars and commercial trucks, ranging from $2,500 and $5,100 in price. The effort to exploit the need of India's burgeoning middle class can be likened to such popular campaigns as Volkswagen's Beetle and Ford's Model T.

Venugopal N. Dhoot, president of the Associated Chambers of Commerce and Industry of India, told the Press Trust of India that Orient-Express had displayed "arrogance toward one of India's most respected business houses."

An editorial titled "Racism Can't Halt Indian Takeovers" that ran in India's Economic Times said the Orient-Express' reaction was racism "barely camouflaged in the language of branding."

"It was not our intention to be racist in any way," an Orient-Express official responded, "Our letter was based solely on the business rationale."

The Financial Times pointed out that when Jamsetji Tata, the company's founder, proposed making steel for the British run Indian railways in 1907, Sir Frederick Upcott, a colonial administrator scoffed. "Do you mean to say that [the] Tatas propose to make steel rails to British specifications?" he asked. "I will undertake to eat every pound of steel rail they succeed in making."

A hundred years later, Tata paid $13.7 billion dollars for British Steel's successor, Corus.

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