TATA history

Introduction

     1919, the legacy transferred when the Chairman of the Tata group Mr. JRD Tata selected his heir from his own family – a visionary and enthusiastic and future leader of the Tata Group-Mr. Ratan N. Tata.  

     Mr. Ratan Tata joined Tata group in 1962 and appointed as director-in-charge of National Radio and Electronics Company (NELCO) in 1971. However the financially the NELCO was on ventilator and could not survived due to negligence of management of Tata group. In 1991, he selected as the Chairman of the Tata group (Tata.com).

     Under his leadership Tata group emerged globally and also shined among world’s most innovative companies (The Businessweek, 2010). Mr. Ratan Tata operates more than 90 companies under seven divisions that makes it India’s largest conglomerate. Under his strategic vision and effective leadership skill, Tata Motors launched world’s cheapest car say it’s a “peoples’ car” - Tata Nano. The concept of a cheap, affordable family car came in Mr. Tata’s mind when he saw a family of four riding two wheeler and wife holding a youngest child and the idea of a “family car or people’s car” born. Many milestones in Indian business industry set up by Mr. Ratan Tata including acquisitions of many foreign industries by Tata group and make it global conglomerate. Mr. R. N. Tata currently serves as advisory boards in companies like, JP Morgan Chase, Rolls Royce, the AIG group (USA), Mitsubishi Corporation, Bill and Melinda Gates Foundation India’s AIDS initiatives and more (tata.com). Even in his 70s he is successfully operating Tata group and listed as World’s most influential people of 2008 by the TIME (Robinson S., time.com).

Early Measures

     The reformation started when Mr. Tata became the Chairman of the Tata group. Challenges were on the doorsteps, the country had only two weeks of foreign exchange reserve, the license of production and business was limited by the government of India. Even in adverse conditions Ratan Tata articulated his vision in 3 phases for following 15 years (Kumar A.). The first phase was downsizing and removal of Augens.

     Mr. Tata limited the stake of conglomerates in all companies to minimum 26 %, he ordered each employee to meet performance standard and set target to be either to be first, second or in the industry or should be sold (Perry A.).

     Tata forced many aging directors to resign holding top positions in different companies when they resist changes and appointed himself as the Chairman of the entire Tata group. Thus he also introduced voluntary retirement scheme for those who made no changes.

The Steel Man

     One of the greatest achievements Tata gained by reformation f the steel industry with effective measures and long term actions. The strategy he developed to reform the steel industry while India was going through economic reform during 90s, globalization was about to begin and wireless communication market was not developed! The strategy included;

·         8 % cost reduction to avoid the loss in steel production.

·         Removal of barriers (Voluntary retirement scheme for those who resist changes)

·         Tata hired outside consultants to use international benchmarks. The consultants suggested removal of old equipments, development of new marketing strategies and downsizing to boost productivity and lower cost of production.

     Tata Steel’s shock therapy worked and became the Tata group norm (Meredith R., Forbes, 2005).

     Ratan Tata offered employees early retirement benefits and downsized the company by removing about 38,000 employees! However all employees were paid the whole retirement age salary. Positive results are seen within a decade when company boosted its production capacity from 78 tons to 264 tons per worker per year (Meredith R.).

     In 2007, Tata acquired Corus Group – UK based steel maker and became world’s fifth steel producer.

     The production capacity of Tata-Corus was expected to be about 27 million tons per annum. Recently Mr. Ratan Tata announced that the steel production capacity would be between 40-50 million tons per annum (The Economic Times, July 15, 2010).

     Hence under his long term vision and strong decision making power, Tata Steel emerged as world’s one of the leading steel production company.

Strategy

Mr. Tata’s vision distributed in three phases:

Phase I:

·         Voluntary Retirements for Augean stables

·         Cost cutting method for low cost production

·         Downsizing (Removal of unwanted labors)

·         Implication of new plant equipments

·         Appointed himself as the Chairman of entire Tata Group.

Phase II:

·         Appointed young blood in administrative and technical departments.

Phase III:

·         Distribution of leadership and empowerment of team members / employees.

     Mr. Tata’s strategy worked and the organization emerged as India’s largest conglomerate.

Mergers and Acquisitions

     Under Mr. Ratan Tata’s effective leadership and long term vision, the Tata group acquired number of foreign companies.  After buying British tea company Tetley Tea in February 2000, Tata became fond of buying British brands. The biggest Indian business acquisitions done when he bought Corus (January 2007)– British Steel Giant and became world’s fifth steel producer. Soon after a year he bought two of the British car brands Jaguar and Land Rover in US $ 2.3 billion (March 2008). His success not stopped here, he acquired many companies in more than ten countries including USA, UK, Australia, Morocco, South Africa, Germany and more (tata.com). Currently Tata group has the record to acquired more than 50 companies in India and worldwide! For example some of the mergers and acquisitions are as follows: (Tata.com).

[Chart 1. pg. 5]

Chart 1. Mergers & Acquisitions by Tata Group (Tata.com)

Tata Group Comp.	Acquired Company	Country	Value	Year
Indian Hotels	Campton Place Hotel	US	$ 58 million	April 2007
	Starwood Group (W Hotel)	Australia	$ 29 million	December 2005
Tata Autocomp System	Wündsch Weidinger	Germany	€ 7 million	September 2005
Tata Chemicals	General Chemical Industrial Products	US	------	January 2008
	Indo Maroc Phosphore SA (IMACID)	Morocco	$ 38 million	March 2005
Tata Coffee	Eight O' Clock Coffee Company	US	$ 220 million	June 2006
Tata Communications	Neotel	South Africa	-----	January 2010
	BT Group's (BT) Mosaic business	UK	£ 0.5 million	January 2010
	China Enterprise Communications Limited (CEC)	China	50 % equity interest	June 2008
Tata Consultancy Services	Citigroup Global Services	US	$ 512 million	December 2008
	Comicorm	Chile	-----	November 2005
Tata Motors	Jaguar and Land Rover brands	UK	£ 1.5 billion (approximately)	March 2008
	Daewoo Commercial Vehicle Company	Korea	$ 102 million	March 2004
Tata Steel	Corus	UK	$ 11.3 billion	January 2007
Tata Tea & Tata Sons	Tetley Group	UK	£ 271 million	February 2000

Legacy and Competitive Advantage:

     Tata group possesses the historical achievements and values that no other business sector in India has. The Tata group is more than a century old and expanding day by day.

     Tata group was established by visionary leader and entrepreneur of the century in India – the son of a Parsi trader from Bombay (Mumbai) -Jamshetji Tata during the British Raj (time) in1868. He setup India’s first steel plant, first hydroelectric plant, first textile mill, first shipping line, first cement factory, first science university and first world class hotel – The Taj. Also the first motor company and first chemical plant was established by Jamshetji Tata (19^th century). After his death in 1904, the city where he established the steel plant named as “Jamshedpur”. The predecessor of Ratan Tata, Mr. J.R.D Tata established first airline industry of India and became the first pilot of India.

     Tata group first established eight hour working day in 1912, maternity benefits in 1928 and profit sharing in 1934. Hence Tata group and its rulers brought the Renaissance for Indian Industrialization and globalization.

     Mr. Ratan Tata got many competitive advantages of the Tata group. First, it is the largest and first conglomerate sector in India. Tata group is most diversified group too. Another advantage is the cross cultural relationship due to global operations of the company. The firm’s century old relationship and trust among Indian people makes it more reliable brand. Under his leadership, Tata Group of companies acquired more than 50 companies worldwide and at home country. Even in his 70s, he manages India’s largest conglomerate.

Revolution to the Nanolution

     Ratan Tata’s business strategy worked like a philosopher’s stone for the empire. His dream to build a “people’s car” came true when he put young blood in motion. In India, to get a car for a family is every common man’s dream, car is still count as luxury for middle class people. He thought about people’s safety and transportation needs. Basically he satisfied the Abraham Maslow’s need theory (Draft R., L., 2008) which applies to a common man to acquire his dream.

     Ratan Tata put his efforts at excellence, served as a companion, showed a clear vision to billion people and gave then dream which could be satisfied. With arrows of criticisms and controversies, the team came up with the innovation, a people’s car – Tata Nano, and really the Nanolution done under the visionary leader’s leadership and motivation. During the unveiling ceremony of Tata Nano, Mr. Ratan Tata said: “A promise is a promise” (Robinson S., Time, 2009).For his remarkable revolution he is also named as “Henry Ford of India” (Sarkar J. and Vivek T., R., 2008).  Competitors and entire world amazed when world’s cheapest car launched.

Leadership Unveiled

     The journey from NELCO to Nano set many business landmarks in Indian and global business industry. Mr. Tata joined NELCO as a trainee and he trained many management gurus during the Nanolution in 2010 (The making of Nano). How the leadership potential unleashed is an interesting part of his leadership. Mr. Tata’s enormous courage to complete tasks that written off. His long term vision and risk-taking ability makes him visionary and courageous leader. “Mr. Tata has strong sense of what is right and what is wrong and he always encourages his managers to come forward and express their views rather than impose his decision,” said Alan Rosling - executive director of Tata Sons (Hindustan Times, 2007).

     Mr. Tata is also patriotic, for an example, even China is known for lowest labor cost, Mr. Tata preferred home producers and suppliers for making of Nano and he done it.

     Instead of acting as owner and chairman, Mr. Tata hardly draws a salary from Tata Sons (Perry A., Time, 2006).

     His brainchild – world’s cheapest family car put the industry in world’s most innovative companies (2010, June, The Businessweek). Thus his long term vision transformed the company and make it global conglomerate.

Conclusion

     The 74 year old non-executive chairman is known to remain as low profile. The Time listed Mr. Ratan Tata as Asia’s most influential businessman of the 2008. Even though his great achievements, he always remains as humble and low profile leader. After launch of Nano, he handed over day-to-day business to selected front line managers (Hindustan Times, 2007).

     Even after a partial retirement, he has vision to build “Nano Homes” – cheap, affordable homes outside Mumbai for commuter who commute everyday to Mumbai’s suburbs for earning. Mr. Tata also looking for his descendant who can handle the 140 years old empire. Tata said “it could be a man or female, may be within the company or outside the company or may be a foreigner”. Whoever the descendant would be, but Ratan’s Revolution continues…

                                                                                                                                 

References

Aiyar S., (2008, January 11). Ratan’s Revolution. India Today. Retrieved on June 16, 2010 from http://indiatoday.intoday.in/site/Story/3390/Cover%20Story/Ratan

Meredith R., (2005, January 1). Tempest In a Teapot. Forbes. Retrieved on June 16, 2010 from http://www.forbes.com/global/2005/0110/024.html

IST, PTI (2010, July 15). Tata Steel to take production capacity to 50 MTPA: Ratan Tata. The Economic Times. Retrieved on July 20, 2010 from http://economictimes.indiatimes.com /news/news-by-industry/indl-goods-/-svs/steel/Tata-Steel-to-take-production-capacity-to-50-MTPA-Ratan-Tata/articleshow/6173765.cms

Kumar A., (2007, February 23). The Bombay House biz wiz. Hindustan Times. Retrieved on June 16, 2010 from http://www.hindustantimes.com/News-Feed/newsmartimportedstories /The-Bombay-House-biz-wiz/Article1-203645.aspx

Perry A., (2006, October 22). Shaking The Foundations. Time. Retrieved on June 16, 2010 from http://www.time.com/time/magazine/article/0,9171,1549275,00.html

Robinson S. (2009, April 03). The 2008 Time 100. Builders and Titans. Retrieved on June 08, 2010 from http://205.188.238.181/time/specials/2007/article /0,28804,1733748_1733758_1735108,00.html

    

Sarkar J. and Vivek T., R. (2008, January 13). How Ratan Tata created the Nano like Henry Ford. Retrieved on June 09, 2010 from http://economictimes.indiatimes.com/news/news-by-industry/auto/automobiles /How-Ratan-Tata-created-the-Nano-like-Henry-Ford /articleshow /2695485.cms

Special Report, The most 50 innovative companies.  (2010, June 13). Retrieved on June 13, 2010 from http://www.businessweek.com/interactive_reports/innovative_50_2009.html? chan=magazine+channel_in%253A+inside+innovation

The Associated Press (2007, April 03). Tata Steel Completes Acquisition of Steelmaker Corus. Retrieved on June 09, 2010 from http://www.cnbc.com/id/17924880/