Joint venture

In the business sector, a joint venture is a commercial undertaking that involves two or more businesses working together to conduct business but maintaining their separate and independent identities in other respects. Shared ownership, earnings, risks, and governance define the endeavor (Kumar, 2017: 28). Usually, one of the four primary factors influences a company's decision to pursue a venture. A few of these are gaining entry to a new market, maintaining and securing positions in developing markets, and achieving scale efficiencies by combining operations and assets. Additionally, businesses combine to acquire talents and some market capabilities, share risk associated with large projects and investments, and some market capabilities (Kumar, 2017: 28). On September 2017, ThyssenKrupp and Tata came up with a signed ‘Memorandum of Understanding' (MoU) to merge into a 50/50 commercial joint venture (JV) with the headquarters in Amsterdam. However, for the JV to proceed, approval from the pension regulator was required concerning the Tata’s separation from the inherent British steel (BS) pension scheme (Kumar, 2017: 29). Therefore, the following report is a systematised review of the Tata and ThyssenKrupp companies addressing some of the crucial components in their business environment.
Position of Tata and ThyssenKrupp in the European Market
Environment analysis
Currently, Tata is among the leading multinational automotive manufacturing company and has been stable in its operation since it was established as a subsidiary of the Tata group. The company leads in the production of passenger cars, trucks, coaches, military vehicles, buses and construction equipment (Tata, 2016: 24). The operation of the company in Europe has been over the years impacted by several external and internal factors. It is important to understand and have a wide knowledge of current industrial environment and position of the motor company in the Europe market. The operation of Tata is the European market has made the company earn more reputation as one of the most dynamic and trusted business group in the region. Through its combined deep ethical values in operation and proven business performance, Tata has been able to secure a huge heritage of deep social commitment. As a result, the company has earned more trust and respect from among its stakeholders (Tata, 2016: 27). The Limited company was established in Europe by 1907 to represent the group in the continent. Since then, it has grown to sustain operation of 19 companies, and a strong 60000 workforce spread evenly across the whole Industrial market of Europe.
Looking at the set laws and regulation in most of its target markets in Europe, Tata has always utilized the available opportunity of the free market to open up widespread stores in the industry. The European laws that govern commerce, investment, growth, and trade have had a positive influence in the operation of Tata in the market. For instance, reduced taxes to the permanently established companies in most of the regional market have made its cars affordable to many of its customers, thus increasing sales (Tata, 2016: 29). Due to the rapid growth of Tata motors in the automobile sector, the company has developed a global venture approach that makes it easy to adapt and learn from many industries across the European region. The company has also paid much attention to shift and fluctuation in the currency as compared to lower or higher demands in the market, as it affects the profit gains. Besides, Tata makes a great contribution to the economy of the Europe (Tata, 2016: 29). In the United Kingdom, Tata is among the top largest employer in the region, serving more than 40 town and cities in the UK market.
ThyssenKrupp Ferroglobus on another account has for the past decade been a successful material service business company in the Germany and other European markets. The company has achieved in the past few years by strengthening its market position on the Eastern Europe. Some of its expansions include the venture at Hungarian capital Budapest where the material experts made significant expansion in their services of cutting to length and plasma cutting, slitting, and opening up new productions shops in the region (Basu and Miroshnik, 2015: 139). Currently, the shop is about 4398 sq meters in size. The facility offers a total of 67,000 sq meters block for production and storage services.
ThyssenKrupp operates under a strategy of setting up more subsidiaries to keep up with the pattern of their business policy of following customers to wherever they need the services of the company. The strategy is also viewed as a proactive step to achieve full market penetration and expansions efforts in the entire world market (Basu and Miroshnik, 2015: 141). According to Stelan Klebet who is the head of Industrial business unit at ThyssenKrupp, the Russian company has its prime customers in automotive, mechanical and food processing factories. The lineup of the company, therefore, ranges from the technical cleansing through repair and maintenance to dismantling and reassembling the machinery (Basu and Miroshnik, 2015). The company is therefore committed to addressing all the concerns of the customers in the European markets to expand its service networks. Currently, the company has entered Czech and Poland. It has covered a wide portion of the European market, operating with a workforce of 23000 and sales of 0.8 billion dollars only in Europe.
Financial Information
Tata Company
Tata Steel is among the best financially performing companies around the globe. The company has an annual crude steel capacity of about 27.5MnTPA. In 2017 financial year, the company recorded a consolidated turnover score of 1, 17, and 420. The company in all its regional operations has an end to end value chain that helps in creating an extension from mining to finished steel goods, which cater for all market segment (Basu and Miroshnik, 2015: 142). This has given the company high sales turn over in most of the international market. According to the report that was given by the company in the 2nd quarter that ended on 30th September 2017, the companies in Europe contributed to 25% of the Group deliveries. In the statement, the production of liquid steel of 2.60 million tons in 2QFY was lower by 7% QoQ and by 3%YoY. The deliveries of the products were higher by 8% QoQ and by 15% YoY, in part as a result of one-off sales and improvement in the supply chain. The revenues of the company increase to about 32% YoY that gave a reflection of higher deliveries and an uplift in the sales of differentiated products. The rise was also noted by 5% QoQ. In addition, EBITDA was 89 million Euros which was 39 million Euros lower than the previous year and 83 million Euros lower than the sub-sequential basis. The result of the prediction is due to lower spread and higher prices of raw material. Below is Tatas group balance sheet.
Figure 1: A notice of Tata Group financial analysis: Retrieved from www.Tata.com

Note: A brief financial overview of Tata Group of the financial year 2016-2017 ended 30th Sept
ThyssenKrupp remains on the higher growth track financially in the engineering sector. The group in the financial year 2016-2017 that ended on 30 September adjusted EBIT was 19 billion euro, an increase from the prior 1.5 billion euro in the previous year. The companies in Poland and Czech have recorded a higher intake by 18% increase since the start of the strategic way forward. The net financial debt substantially reduced with a substantial increase in the equity share. By the end of the 2016-2017 financial year, the company had a debt of 2 billion euro, which is slightly lower than the previous 3.5 billion euro. The cash flow of the company has increased in the recent past with the liquidity level rising by 5% to 9.1 billion euro, making it solidly financed. The equity rose from 2.6 billion to 3.4 billion euro due to the rise in capital and higher interest levels, that has always called for the need of re-measurement of pension obligation.
Figure 2 and 3: Financial overview at ThyssenKrupp: Retrieved from https://www.thyssenkrupp-steel.com/en/company/profile/profile.html


Note: A table showing financial overview of the operation at ThyssenKrupp Group in 2015-17
Tata as a multinational and diversified company, its philosophy on the corporate governance is firmly based on a rich legacy of ethical, fair, and transparent governance practices. Many of its governance practices were already in practice even before the company was mandated to take on and adopt the highest standards of professionalism, integrity, honesty, and morality in behavior. As a major global organisation, the practices in the governance followed the company and its subsidiaries conform to the international standards and best world practices in corporate leadership. The board through it committee at Tata has over the years taken fiduciary responsibilities to all its stakeholders by keeping the concerns of transparency a priority to the company. Also, in inclusions are the fair-play and independence in the decision making.
The philosophy of governance at Tata is strengthened by the adherence to the company's Business Excellence Model as a mean to push for the betterment of performance and balanced scorecard methodology. The model applies to doing a follow up on the long-term goals of the whole group of companies. The code of conduct at Tata articulates to values, ethics, and business principles. These codes have always served as the guide to the company, its employees, and directors. It is supplemented by the appropriate mechanism in all the regional offices to report any concern relating to failure to adhere to the said code. On account of regulatory compliance, the all the companies under Tata respond to and comply with the requirement of the corporate governance as stated by the securities and exchange boards in India. Also, the company has developed and adopted governance guidelines on the board effectiveness based on the emerging and constantly changing trends in management practices from outside and within the Tata group. The guidelines 'inter alia' ” involves and goes beyond the governance requirements as prescribed under the companies’ act of 2013 (SEBI Listing Regulations).
On the other hand, ThyssenKrupp is constantly in progress to develop its understanding of better and responsible corporate governance. The Company is currently undertaking a project ‘governance@ThyssenKrupp,' where the corporate governance throughout the entire group of companies is harmonised and optimised. The guidelines from the project are expected to go beyond the already established understanding of the corporate governance as defined by the Governance code of the German Corporate society. The focus of the group is on strengthening reliability and transparency of the binding internal regulation and giving support to managers in the application of internal corporate governance instruments. On account of regulatory compliance, the company operates in the sense of all the GroupWide measures to ensure there is adherence to all the statutory requirements and the binding internal regulations, which is the key oversight and management oversight duty at the company. In the mission statement of the company, the management has addressed a strict compliance to the internal regulation of the company with no tolerance to corruption violation or any antitrust issues.
Management Capability
The Business Excellence model at Tata has become an explicit and formal component of the Group towards driving their performance in business excellence. The capacity building programmes organized by the Tata business excellence model is aimed at preparing the corporate leaders of the company and improving their performance. The capability building programmes at Tata involves two significant areas.
Figure 3: Capability areas of management: retrieved from; https://www.tatabex.com/capability-building






Note: A model description of Business Excellence model at Tata
One set of the areas focuses on the developing assessor capabilities through experimental learning methodology, with the aim of achieving business excellence (Danzer, 2016: 35). The programmes are aimed at developing new assessor skills as well as improving the skills of original assessors. The second area gives focus to the building of practitioners capabilities based on the customised interventions. The programmes in the practitioner development are aimed at building champions to achieve business sustainability during the day to day functions of their respective organisations (Danzer, 2016: 36). In addition, the Tata Business Excellence model coordinates programmes that provide support to some specific areas related to the priorities of the group such as the corporate foresight, safety, knowledge management and customers’ centricity (Danzer, 2016: 36). To achieve this, a full support of the experts and facilitators in the company is essential. As a result, the services of all these trained and skilled personnel offers informed decisions that are essential both in the business performance, management practices, and other related domain areas. This has helped the company to reduce management related issues and risks related to customer –staff conflicts.
On the other hand, ThyssenKrupp Group of companies has made its management operations and business sustainability through diversifying their business. The company is composed of 158 000 colleagues from all parts of the continents. This has allowed them to come up with more open and committed workforce that can embrace acceptability in any environment. Also, it has helped in making the business more social, leading to additional knowledge and capabilities among the employees and management. As a result, the company has been more efficient and innovative in all its operation. ThyssenKrupp has embraced diversity in their management to help the company to solve business risk related to culture and regional boundaries.
Previous BS pension and the Corresponding Move in the Merger
The 15 billion Euros British Steel Pension Scheme (BSPS) brought in a business paradox in the United Kingdom business environment. The scheme in the previous five years of performance had won 10 IPE Awards in the industry (Bernstein, 2016: 1117). In 2014, The CIO Hugh Smart, together with his board understood the profits from a favorable, and a well-hedged position towards the past June 2014 referendum for the United Kingdom European Union membership. This made the company erase some of the records of the deficit in performance. During that period, Hugh reported a valuation of the British Steel scheme at about 13.6 billion euro for his company.
The final salaries and the defined benefit pension plans were significantly used by unions in the United Kingdom public sector to act as a bargaining point in a link to increase overall wages (Jain and Kondeti, 2016: 56). In 2012, a review of the Equity market was commissioned by the British government. The findings that were established at the Kay report attempted to allay fear on the market management of the long-term equity markets. Tata decision to opt out came as a result of the 2014 disclosure when the company signed a memorandum of association with the Klesh Group to help in sales divisions at Geneva-based groups (Jain and Kondeti, 2016: 57). That was a situation that led to the fear of 6000 steelworkers losing jobs in the UK with about 600 further losing their jobs in entire Europe. Some of the companies that have made decisions about closing the schemes include the Tesco of United Kingdom, which made the announcement on ending the operation of its scheme and affected almost 350, 000 workers. The scheme reported a deficit of about 3 billion Euros.
On the same account, The 15 billion British steel pension scheme has always been a significant barrier to the intended potential acquisition between the German company steel producer ThyssenKrupp and the Tata. The pension regulator in the United Kingdom approved the bid for Tata to separate pension scheme from its business operation (Disney, 2016: 14). The move, however, is expected to affect thousands of the former and current employees and the 13000 members of the scheme in the United Kingdom (Disney, 2016: 14). The members of the scheme will be forced to a new scheme. The move also will lower annual increase for the pensioners and deferred members that the British steel scheme. Tata steel scheme offered 550 million euro into the closed pension scheme, giving a 33 % of the stake to the operation into the United Kingdom business. However, the company is released from having any responsibility for any further pension scheme (Disney, 2016: 15). According to the executive director from Tata, the move was good, and a lot of work is needed to ensure that the business is competitive in future. This would involve setting up of other schemes that have lower risk profile in relation to the necessary consent from members and other leading trustees.
According to the economists, the move by Tata to close the pension scheme was the best option to the British steel pension scheme (Clark, 2016: 54). The withdrawal of the Tata group would cause a deficit of about 300 million to 400 million euro to the BS. The amount was much lower than the cost that would have been incurred by bailing out the Tata group after the collapse, which would cause about 1 billion to 2 billion euro (Clark, 2016: 54). Even though the withdrawal of Tata would affect its members, such as the community, the GMB, and the Unite, the deal between the Tata and the RAA acted as a stepping stone to provide a solution to some member and benefit in newly established ‘albeit less generous’ scheme.
Analysis of Stock Market Based Information
From the systematised review of the performance of the two companies, the new venture is expected to generate sales of 15 billion euro and create about 48, 000 people in almost 34 locations across the whole world. The venture will also ship 21 million tones of the steel in every year (Woods, 2015: 181). However, up to 4000 jobs will be lost in both the administration and production sector, and will be shared evenly among the two groups. According to the Tata group chairman, Natarajan Chandrasekaran, the venture in the Europe market is based on the strong fundamentals and market confidence (Woods, 2015: 181). The performance of the companies will be that of due diligence since both the management of these companies will be able to examine each other’s accounts.
During the merger, The Indian ThyssenKrupp closed up its shares at 2.4 % which was equivalent to 25.86 euro. However, after the merger, the shares had a shoot up to 26.58 euro, with expected rise by 5% in the next five years of operation. On the other hand, shares in Tata steel was at 1.7% during the closing period at 687.65 rupees that had a hit high to 691.80 rupees after the merger. The merger is expected to record a 10% increase in the sales revenue in the next financial year, due to the strong market share that both the companies have. Tata and ThyssenKrupp have been able to maintain its stable prices despite the arriving cheap China steel products.
Earnings per share in the company are expected to rise by 2% in the next 2 years of operation, thus increasing the investors earning. It is therefore important for the investors to purchase shares at the moment when the business is merger is still securing sustainable market position. Shares are expected to rise in prices with the rise in earnings per share and sales, which is advantageous to the existing and potential investors who intend to buy the share. In conclusion, it is evident that Tata-ThyssenKrupp merger is a growing and potential investment site for investors as a result of its promising sustainable growth in the market.
















Reference
Tata, R.N. and Matten, D., 2016. Corporate Community Involvement in the 21st century.
Kumar, S.H., 2017. Impact of Brexit on Tata Groups. DHARANA-Bhavan's International Journal of Business, 11(1), pp.29-32.
Moeller, S., Appadu, N. and Sudarsanam, S., 2017. Pensions: Now something more to worry about (for dealmakers).
Bernstein, S., Lerner, J., Sorensen, M. and Strömberg, P., 2016. Private equity and industry performance. Management Science, 63(4), pp.1198-1213.
Basu, D. and Miroshnik, V., 2015. Privatized Pension. In International Business and Political Economy (pp. 141-143). Palgrave Macmillan UK.
Jain, D. and Kondeti, R., 2016. Tata Corus Deal-Where Did They Go Wrong?.
Danzer, A.M., Dolton, P. and Bondibene, C.R., 2016. Who wins? Evaluating the impact of UK public sector pension scheme reforms. National Institute Economic Review, 237(1), pp.R38-R46.
Woods, J.E., 2015. On the political economy of UK pension scheme regulation. Cambridge Journal of Economics, 41(1), pp.147-180.
Disney, R., 2016. Pension reform in the United Kingdom: an economic perspective. National Institute Economic Review, 237(1), pp.R6-R14.
Clark, G.L., 2016. Behaviour, choice, and British pension policy. Social Policy Review 28: Analysis and Debate in Social Policy, 2016, 28, p.3.

Appendixes
Appendix A
The figure showing financial overview of TATA Group for Financial year 2016-17 ended 30th Sept.
Appendix B
The figures Showing Financial Overview of ThessynKupp fro year b2015 to 2017
Appendix C
A Model showing Business excellence structure at Tata