The Last Rajan Essays

The Last Rajan Essays The Last Rajan Essay The Last Rajan Essay the maker of Glaceau VitaminWater. Not bad for a purchase made just nine months earlier. This is a transformed Tata, says Rajeev Gupta, managing director of private equity shop Carlyle Advisory Partners. The global push began four years ago. After a roc? biggest carrier of international phone calls. With its $91 million buyout of British engineering frm Incat International, Tiata Technologies now is a major supplier of outsourced industrial design for American auto and aerospace companies, with 3,300 engineers in India, the United States, and Europe. frst decade as chairman, Tata commissioned a sweeping The crowning deal to date has been Tata Steels review to plot strategy, including a study comparing India with China. He was struck by the sheer audacity of Chinese projects. Whether they built a port or ahighway, they did it big, the kind of scale that caused skepttcs is over the top, he saYs. Bu[ o it. lndia, he concluded, should should Tata Group. By levercgin9 into rurb $13 billion takeover in April of Dutch-British steel giant Corus Group, a target that would have been unthinkable just a few years ago. In one swoop, the move greatly expands Tata Steels range of finished products, secures access to automakers across the United States and Europe, ochargo ^n ; :1ii: r*ii: iffiitf:iij and boosts its capacity fivefold, with mills added in Pennsylvania and Ohio. leagues Now, a new gambit may catapult Tata into the big of global auto manufaCfu? ing: The company is said to be weighing a bid for Jagiar Cars and Land Rover, which Ford Motor Co. wants to sell. On top of all this, 372 Brief lntegratiwe Case 2 The Last Rajah: Ratan Tata and Tata,s Global Expansion 373 Building an oryanization with a coherent vision and major deals and pushed for acquisitions capable of succeeding in so many industries and so many such as Corus. The ventures lnto passenger markets, though, is a daunting cals and telecom are his task. Asia has wrtnessed babies. And Tata is rnstrumental the rise of many soup-to_nuts in hatching new busi_ behemoths that thrived nesses, bouncing ideas gleaned when economic tides were from his travels to manag_ high, such as Koreas Daewoo, ers for. follow_up Thailands Char. oen Pokphand, and Indonesias Salim Ratan Tata serves another Group. Most eventually fell vital function: While at ease apart. The leal test for Tata, with lawyers and inves tment too, is likely to come when bankers, he remains firmly Indias boom abates and bat_ planted in the developing tles for talent and market share world. He is a passlonate pl-o_ invol ving both aggr. essive motel of corporate social responsibilitv. Indian r. ivals and deep-pocketed a mission that multinationals intensify dates to the group,s founding But unlike most other Asian groups, ,Tata in the 1SZos by Tatas greatalready has grandfather, Jamsetji proved it can survrve turmoil Tata. The founder w as a proneering and constantly reinvent industrialist, philanthropist, itself, says Harvard Business and fervent nationalist who School professor. Tar. n traveled to the United States with Khanna, who has closely studied a swaml, meeting the the group for a decade. tycoons of the day. He opened AI the center of the emptre is India, s hrst textile mill, in Tata himself. An ar. chi_ large part to wean Indians tecture graduate from Cornell from their industrial dependUniversity in 1 962, he ence on Britain, which until then serves as the gr. oups chief dealmaker had miIed much of the vrstonar. y, and spir_ subcontinent,s cotton and then itu al cement. He joined the company, shipped the high-cost cloth after college, then back to the colonies. Tata offered steadily rose thr. ough the ranks. worker. benefits such as He took over 16 years child care and pensions long before ago-after the death of his gregarious most companies in uncle, J R. D. the West, and later one of Jamsetji s Tata-just as India began dismantling sons helpecl bankroil decades of socialista young Mahatma Gandhi while style business controls. Tata has he agitated in South overseen sharp downsizAfrica for the rIghts of immigrant ing, ris? plunges into auto Indians. manufacturing and telecom, To thjs day, the Tata Gloup and a transformation of the r. mains devoted to good conglomerate s insular and works: Charitable trusts own lethargic management culture. 66 percent of the shares in Now he wants to prove parent Tata Sons, and many of its Tata companies can c ompete companies fund gr-assin the rich West as well roots antipoverty plojects that seem as in the unpredictable but far lemoved from hugely promiOing markets of their core businesses. Ask the developi ng world. Whats the chairman to name mole, Tata wants to set gloups the biggest challenges and he quickly the group solidly on a path to achieving all this befo? cires two: Talent, and retaining he retires. our value system as we get bigger. and more diverse. We have The barrel-chested tycoon to rncrease the management hasn,t named a successor. or bandwidth, and with the same said when he plans to step ethical standards. ,, down. He,ll t* iO in Decem_ He also concedes that the gr. oup be? , but he still has a vicelike is much less focused handshake, and associates than he envisioned back in are amazed at his command 1991, when he pledged to pare of nomb. , and technical it from details of the various Tata scores of companies to companfr. fri_r. es his fail_ . just a dozen did dump marginal businesses-cosmetics or so. Tata ure to designate a successor all the more disconcerting. cement-but pants, and Some even quesrion entered letail, telecom, biotech, wherhe? hi. ,t;;:tuiriigtrt and others spur the Today, Tata Group . ,V/ho compnses nearly 100 companies will U tti 4uf,;rorries one i:ups breakup. with 300 subsidiaries in 40 businesses. veteran insider. ,,Will there even be u-. noul leader? ,, Slimming the group down is Tata to oversee the gr. oup. y at a company museum. rough gener. tions of parsi escended from persians. one ar. ea where set out to do,,,he admits. I have not succeeded in what I d childless_and his siblings. It His r-eclusive half_brother, tail chain, but it,s unclear Succession ,,is a problem,,, volved in more issues than does step down, Ratan Tata hough he and other family of shares in Tata Sons, the h controlling stakes in its three half_sister. s aren,t s key units including Tata inrimarely inr4plved in all nesses His hope is that Tata s unorthodox structurc will give individual companies the agility to respond to new opportunihes and ill. ats. The organization is a lot lighter than a Wester. n conglomerate, says Alan Rosling, a Bliton who s pearheads international expanston for Tata. There is no central sftategy. We don t even have consolidated finan_ cial statements, The group is bound together by the small staffs of Tata Sons and another holding company, Tata Industries. These two chaired , by Ratan, provide strategic vtslon, control the Tata brand, and lend a hand on big deals. And Tata Sons can raise cash to launch new busi_ or help fund purchases such as Corus. In 2004 ]t 344 Part 3 lnternational Strategic Management in pulled in $1. 3 billion by floating a 10 percent share the companYs home b time capsule of a more city of genteel coloni urld, hukd from the $40 million a Year sup even though it emPloYs residents. And in its agreed Iesembles a I age, a leafY wide boulesPends some to early retirement got full pay until age 60 and lifelong health care. Tata Steel also spends mlllions annually on education nearby health, and agricultural development plojects in 800 a dusty outpost villages. In Sidhma Kudhar, for instance, of whitewashed stone houses with thatched roofs the crop 32 families until two years ago subsisted on a single a nonintrusive manner. The chief steward, though, cleally is Ratan Tata He jatlopha bushes seedlings for future income, as well as now whose ieeds can be used for biofuel Most childlen village has attend classes in the reftrrbished school, and the tllee televisions, powered by Tata solar units that also supply clocks. strike at Tata Motors Pune plant, militant unionists of the assaulted Tata managers and occupied a section city. higher-cost operations u*stion will the test now that Tata loads the Indian steeland absorbing Corus weaken malgins One key If you Put a gun Tata is what to do with Cotus mills such as the one at port Talbot in Wales, which employs 3,000 workers Tata says had better take the gun Im not moving. uraman, But the u it, says Muthpeople Ive ever Tata Steel Talbot to have to cut jobs. and broke the strike aft and the milita nts. While he doesnt look hes one of the toughest A delegation of 20 Corus labol reps known. The transformation of Tata Steel illustrates his impact obal In the early ompetition, antiquated P entation . *itl or1- Leahy. But how will own We comichael they be able to translate those prin- calls Muthuraman. Over the yeats, Tata cut the workforce from 78,000 to 38,000 and spent $2. 5 billion on modernization A decade later, Tata Steel had become one of the worlds efficient and profitable producels and began to most acquire rivals. Ratan was the chief architect of the Coius deal, says Muthuraman. I was worried about the conmagnitude and the amount of money But he instilled Because Tata is one of the few big fidence. The strategy: ore steelmakers with its own abundant coal and iron produce raw steel at low cost in India and reserves, it can then ship it to Oorus first-rate mills in the Vyest to make finished products. But Tata Steel highlights the challenges of balancing Old World ways w ith New Economy realities Jamshedpur TheY ciples into the British and European context? couldnt answel that' A bid fol Jaguar and L even more daunting challe give Tata a luxurY bland an would be an uPhill climb to r which was damaged bY sha Tata executives, who wont c and Land Rover, have dow United States, citing the hig mitments in emerging m mall cars under the Rover years amid comPlaints abou once made onlY trucks, sur cess of the Indica, an affor grief lntegratiwe Gase 2 The Last Rajah: Ratan Tata and Tatas Global Expansion 375 from scratch and rolled out in the 1990s. The Indica is now Indias number-two car and is selling well in South Africa, Spain, and Italy. Tata also will soon stafi exporting cars and trucks through a venture with Fiat (FIA) and is eyeing a similar project in South America. The company had another big hit in 2006 with the Ace, a bare-bones truck for less than $6,000. Tata already is boosting its output from 75,000 minitrucks to 250,000. energy giant British Peffoleum (BP), supplies buildings in Germany with rooftop solar-electric systems. But in developing nations, the company sees a vast market in bringing affordable power to villages that are off the power grid. The company has introduced low-cost, solar-powered water pumps, refrigerators, and $30 lanterns that bum for two hours on a days charge. And it has fitted 50,000 homes with $300 systems that can power two lights, a hot plate, a fan, and a l4-inch TV. But this is a drop in the ocean, says Tata BP Solar CEO K. Subramanya. We ought to be touching millions. There is little question that the opportunities for Tata in India and abroad are staggering. But can the group succeed on all these fronts simultaneously? The interesting dilemmas will come when the Indian economy slows and some Tata affrliates inevitably stumble. Future managers could look at expensive burdens such as Jamshedpur and rural-development projects as tempting targets for cuts when times get tight. Tata companies could lose interest in low-cost goods for the masses without a passionate promoter as group chairman. And the group could take a tougher look at businesses to spin off. For the foreseeable future, though, these are nonissues. Though Tata vows that he wont carry this on endlessly, he says he will stay on at least two years beyond when he chooses a successor. So he seems likely to fulfrll the last big item on his agenda: building a network of companies capable of tluiving in 21st-century global competition while still adhering to traditional values long after the departure of Ratan Tata. Strrrnlrles Ratans big passion, though, is the one lakh car. (One lakh is 100,000 rupees. And that many rupees equals about $2,500. ) Since the mid-1990s, he has wanted to develop reliable but supercheap vehicles, a project he believes could ultimately revolutionize the auto industry and make India a major economic power. Tata personally supervised the project and traveled frequently to Tata Motors development center in Pune to check on progress. Originally he envisioned a fundamentally new kind of vehicle-one made of plastics, for example, that didnt even resemble what we think of today as a car. He concedes that the spartan, oval-shaped model to be launched n early 2008 doesnt meet his lofty aims. Its made of steel. And it looks like, well, a car. To get the price to $2,500, engineers shrunk the size and stlipped out frills such as reclining seats and a radio. There is not a lot of innovation, he says. We didnt reinvent the business. Tata has similar ambitions to reinvent solar energy. Tata BP Solar Ltd. , a $260 million venture with British Go-Go Tata Since beginning a global push four years ago, lndias once-plodding Tata Group has expanded aggressively at home and abroad in a wide range of industries. Some of its major holdings: Building a new car plant and sharply boosting output of its small truck, the Ace. A new venture with Fiat will co-produce 1 50,000 cars and 250,000 trucks annually. The biggest gamble: a $2,500 peoples carto be launched in 2008. s7. 2 $490 BILLION MILLION l+260/0l (+36%) TATA STEEL Bought mills in Singapore, Thailand, and Vietnam, and is now expanding in lndia. With its $13 billion purchase of Corus, Europes No. 2 steelmaker, capacity should reach 50 million tons by 2010, behind only Arcelor Mittal. $6. 6 $923 BILLION MILLION (+ee%) +33%) TATA CO N SU TTANCY SERVI CES Biding the software and tech services outsourcing boom, TCS has grown explosively in the past five years. Now its developing its own software for $4. 2 $930 = z BILLION MILLION transportation, retail, finance, and other industries. All figures for fiscal year N4ar 31, l+41%l l+43%l 2007 ) ,,, 37lo 0uestions for Review Part 3 lnternational Strategic Management l. How do the Tata Gr. oups strat egies in its home market differ from its international ventures? Do you think joint ventures are essential for Tatas future success? 2. What haye been Ratan Tatas most important strate_ gic initiatives for the company? Should his succes_ sor follow in his footsteps or pursue new paths for growth? 3. V/hat risks might Tata face in its global expansion? How might it manage their risks? Source: Reprinted with special permission from pete Engardio, . ,The Last Rajah: Indias Ratan Tata Aims to Transform His Once_Stodgy Conglomerate Into a Global Powerhouse. But Can It Thrive After He Steps Down? with Nandini Lakshman in Mumbai. BusinessWeek, August 2, 2007. Copyright @ 2007 by rhe McGraw-Hill Companies, Inc.