ratan tata

In the mid 1990s, Tata Tea had tried and failed to acquire British tea maker Tetley. In 2000, it tried again and succeeded. The acquisition was meant to harness Tata Tea and Tetleys synergies. Tetley had a well established distribution network and experience of selling tea bags in markets such as the US, UK, Canada and Europe. Tata Tea was strong in countries like India and in the Middle East, according to Tata Log Eight Modern Stories From a Timeless Institution, a book by Harish Bhat, managing director and chief executive of Tata Global Beverages Ltd (earlier Tata Tea). The groups biggest acquisition to date is Tata Steels purchase of Anglo Dutch steel maker Corus Group Plc in 2007.

The company has since been renamed Tata Steel Europe. The acquisition of Corus, which was Europes second largest steel maker, catapulted the company into becoming the worlds seventh largest steel producer, although it hasnt been as financially remunerative as stock market analysts would have liked. Another acquisition, and more fruitful than the Corus purchase to date, was Tata Motors acquisition of the iconic British car maker Jaguar Land Rover. The acquisition provided a hedge against the weakness faced by the companys domestic passenger car business. There have been several other acquisitions TCS bought CMC Ltd; Tata Sons acquired a controlling stake in state run Videsh Sanchar Nigam Ltd (now known as Tata Communications Ltd); Tata Motors bought the heavy vehicles unit of Daewoo Motors in Korea; Tata Steel acquired Singapores NatSteel; and Indian Hotels Co. Ltd took over management of The Pierre in New York. But if globalization reflects the buy side of the Tata story, then efforts to innovate indicate the make side of it.

In many ways, the Indica started a trend in the Tata group. Every year since, Ratan Tata has feted individuals or teams that have worked on an interesting project even if it didnt succeed, under a programme called Dare to Fail. The Nano is, of course, the pinnacle of this innovation journey, but there have been other successes as well. Among them is Swach, a low cost water purifier aimed at making clean drinking water hard to find in rural areas available to the economically weak. Swach began as a corporate social responsibility initiative by TCS and soon became a business idea, commercially viable on its own. He (Tata) has played a strong role in encouraging innovation, but he has not been alone in this, Witzel says. Tatas leadership style is to suggest ideas, offer encouragement and motivation, not to lead the charge.

Its clearly an approach that has paid off. The groups aggregate sales at the end of 2011 12, at Rs.4.51 trillion, are 43 times the turnover in 1992 93, the first full fiscal after Tata took over as chairman. Net profit growth in the same period has been even more spectacular, rising 51 times to Rs.33,664 crore. The aggregate market capitalization of the group at Rs.4.54 trillion in fiscal 2012 is 33 times higher than it was in 1992 93. In the same period, the Sensex, the benchmark equity index of BSE, grew nearly eight times. The Tata groups closest competitor, in terms of turnover, is the oil to yarn and retail conglomerate Reliance Industries Ltd (RIL). RILs net sales in fiscal 2012 were Rs.3.58 trillion and it had a net profit of Rs.19,747 crore. Though RILs revenue growth in these two decades has been much higher than the Tatas, having grown 90 times, its net profit growth is lower. The result of Tatas strategic thinking reflects in the groups market capitalization, Piramal said. What Tata did after taking over wasnt very different from what Kumar Mangalam Birla did with the Aditya Birla Group after his fathers death. Kumar Birla took over as chairman of the group in 1995 at the age of 28 after his fathers sudden death and is credited with transforming the Indian business group into a multinational conglomerate.

It hasnt always been smooth sailing for Ratan Tata or the Tata group. A case in point is the Corus acquisition of 2007, which isnt panning out too well for the company. Sales and profitability at Tata Steels European operations have taken a hit, due to the 2008 09 financial meltdown and the subsequent euro zone crisis. Company executives do not expect the situation to improve any time soon. The Nano isnt a huge success either. Tata, in his interview on the group website, said the Nano was marketed like other cars, but as a minimal automobile at a low price.

I would love to have a chance to implement a new marketing plan for the product, if that were possible, Tata said. The emergence of a strong rival to Tata Motors in the passenger car segment, Mahindra and Mahindra Ltd (M&M), is another cause of concern articulated by Tata at the companys last shareholders meeting in August. We should do a great deal of introspection as to why M&M is ahead of us. I have great respect for the company. But we should look at this in sadness that we let that happen, Tata remarked. The conglomerate is also sitting on a debt pile of $26 billion (around Rs.1.42 trillion), a number that is causing concern among some investors. This needs to be seen in the context of the 29 listed group companies combined net worth of Rs.1.43 trillion, and cash and cash equivalents of Rs.36,289.38 crore, according to data from Capitaline.

The same retirement rule that saw some of JRDs satraps leave the group will mandate Tatas retirement as well. Some people have suggested that the retirement policy should not apply to the chairman, Tata said in his interview on the website. I have always believed that you dont make exceptions for yourself. So I took the view that the rule should apply to me too. I realize that I have to live by the rules that I have set and step down when the time comes. And that time has come. Cyrus Mistry has been working with Tata for a year now, and Tata says the Tata Sons chairman designate has the analytical skills to steer the business forward and the integrity to uphold the Tata ethos. On Monday, Tata Sons formally announced that Mistry would take over on 28 December and Ratan Tata would become chairman emeritus. Some of the challenges that lie ahead of Mistry are akin to those Tata faced when he ascended to the top job.

The succession this time round may not be as acrimonious as it was during Tatas time, but with many of Tatas chieftains nearing retirement, Mistry will have to scout for young talent from within the group and outside to fill the void. He has already started doing that. Madhu Kannan, a former chief executive officer of BSE, was his first hire. You can live in a house, drive a car, make a phone call, season your food, insure yourself, wear a watch, walk in shoes, cool yourself with air conditioning, and stay in a hotel all courtesy of Tata firms, said an article dated 1 December in The Economist. The dilemma is that the group may not necessarily be making money doing all of this. Tatas telecom business, for instance, is under severe strain following the upheaval in the sector in the wake of the 2G scam, and its future is uncertain. Elsewhere, though Taj is still one of the most respected names in the Indian hospitality industry, Indian Hotels isnt too profitable, with acquisitions weighing on the firm. Problems with Tata Steels European operations persist and the current dynamics of the steel business at home arent too exciting either.