• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

Luxury Marques Look to India

Extracts from this document...


COMMENTARY COVERSHEET Economics Commentary Number: HL Number 1 Title of Extract: Luxury Marque's Look to India Source of Extract: The Financial Times Date of Extract: 07/12/2008 Word Count : 740 words Date the Commentary was written: 12/12/2008 Section of the Syllabus to which this commentary relates: Sections 2.1, 2.2, 2.3 Candidate Name: Abhishek Puri Luxury marques look to India By Joe Leahy in Mumbai Sunday Dec 7 2008 18:25 The moves come as Tata Motors faces increasing criticism over its $2.3bn takeover of the two luxury marques, which analysts say do not fit with its stable of lower-cost trucks, commercial vehicles and cars. The acquisition is also looking ill-timed. Tata Motors is struggling to refinance a $3bn bridge loan used for the takeover, leading to successive downgrades by credit ratings agencies. Analysts say the collapse in Tata Motors' domestic market is also a concern. Truck and car sales have fallen by up to 50 per cent in recent months, forcing Tata and its rivals to suspend production at various plants. ...read more.


As a result, there has been an increase in demand for luxury goods. Luxury good is a commodity for which demand increases as income rises. Income Elasticity of demand is the responsiveness of quantity demanded of a good through a change in income of the people demanding the good. These luxury cars are income elastic, and due to the fact that wages are rising in India thanks to the booming economy, demand for these luxury cars has increased. Therefore, this justifies its move to introduce its new luxury subsidiaries to the Indian market because good sales of these highly priced cars could make up for the sales slump seen for its low cost cars as these luxury cars could sell better. Most developed countries such as the United States and Western Europe have seen little economic growth and are going through an economic recession. From common knowledge, we know that thousands and millions of jobs are being cut or wages have been sliced because firms aren't able to generate enough revenue. ...read more.


Therefore, Tata Motors has correctly shifted the attention of its Luxury Marques to India where there is still an opportunity to create revenue from Jaguar and Land Rover. This might be supported by the fact that the majority of the Indian population is from the middle class who have seen an increase in standard of living and an increase in wages due to the economic boom, therefore increasing investments in luxury brands. However, the impact of a global recession will almost certainly be seen in India as well where job cuts have been seen as firms have been losing revenue. Therefore, Tata Motors has to be cautious about its sales strategies as Land Rover and Jaguar may not be long term successes in India and might face a similar fate as they did in the West even though they may make a respectable amount of revenue before the markets react extremely to the global economic meltdown. Adding to this, though the introduction of luxury marques in India is a positive indication of an increase in income and economic growth, at the same time, this creates a negative externality for the community through diseases and creates a burden on other sectors, especially the healthcare system. ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our International Baccalaureate Economics section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related International Baccalaureate Economics essays

  1. Economics HL - IA

    to (A). Nevertheless, the gains to producer are enough to exceed that of consumers. As mentioned in the article, the Swedish economy is in an expansionary phase, meaning that people have more money between their hands to spend. At the same time, the prices of various Swedish products are increasing.

  2. Economics Commentary on Foreign Capital Shuns India

    But it's New Delhi that has helped keep investors away. Consider this: A $12 billion project by South Korea's steelmaker Posco, the largest-ever foreign direct investment in India, was only recently approved after five years of government delay. The clearance comes with several riders, like mandating Posco to spend 2% of the steel plant's net profit on social welfare.

  1. Economics commentary. The article talks about the launching of the cheapest car ($2500 U.S ...

    As a result of this shocking price, it will have both positive as well as negative externalities. It will have a positive effect on Indian people (making cars accessible at all social levels), on policy makers, on Indian oil corporations and the suppliers of raw materials.

  2. Economics Commentary - Tax cuts make a cross-party comeback, thanks to economic woe

    But underlying the consensus on the need to cut taxes is profound disagreement on just how it should be done. Both opposition parties worry that extra borrowing could threaten an economic recovery by pushing up long-term interest rates and requiring sharp tax rises in later years.

  1. Role of ICT for "Make in India" government initiative.

    A latest research study has revealed that the Indian Companies having private cloud will help save up to 50% of their Infrastructure cost and it also creates more than 1 lakh jobs by the year 2015. With Corporate sectors taking effective measures in leveraging the power of cloud, it would

  2. The Benefits of Microcredit to Bangladesh

    The UN recognizes that micro credit programmers, in addition to their role in the eradication of poverty, have also been a contributing factor to the social and human development. Conclusion: Strengthening local government is one of the most desired institutional changes needed for poverty reduction.

  1. 15 Historical Economic Questions on Mercatilism and the Development of European Countries.

    In Marx?s opinion this didn?t end the struggle of classes but created a new one between the proletariat and the bourgeoisie or the working class and the landowning class respectively. One of Marx?s main criticisms of capitalism is the exploitation of the proletariat, which is constantly occurring through the bourgeoisie class.

  2. With India as an example we will discuss Malthus, the population growth theory and ...

    Therefore, the technological advancement that accompanies the growth of population and the expansion of population, allows for even more population to survive due to the rise in overall outputs by the business and the nation as a whole. Thus, it generates demands for goods and results in overall economic growth.

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work