What is the genesis of Tata Group’s globalisation strategy?
The Tata group doesn’t have a single strategy. Individual companies within the Tata Group have their own strategy. So, the group doesn’t have one blue print. At the group level, we make sure that the individual companies move in the right direction. Each company consistently evaluates available opportunities and threats. However, we can point out some common threads across the globalisation strategy of various group companies.

Why is the Tata Group devoting so many resources to inorganic growth outside India, when there’s so much opportunity within India?
Many of the Tata Group companies are small and uncompetitive compared to their global industry peers. This is because we were hiding behind government regulations for more than 40 years. Though many Indian companies were successful in the domestic market, they lacked world-class quality and technology, as this was not demanded by the customers, who themselves had fewer options.
For example, 25 years ago, if one had to purchase a car, the only brand available was Ambassador. But the scene has changed entirely now. One can get the latest model of a Toyota or Ford within a month in India. Hence, Indian products now have to compete with products from the best companies from different parts of the world.
Our strategy is to focus on the Indian market, but globalise some of our select business lines, such as software, steel and cars, among others. We have a capex plan of $30 billion for our Indian operations and that shows our commitment to the domestic market. But we also want to be competitive in the above-mentioned global businesses. Currently, 90% of our international revenues come from five
business lines.

Will India lose its relative importance for the Tatas, since the group is becoming more global?
No, I don’t think so. But there will be a balance between India and the rest of the world. Our growth in India will come through the organic route. For that matter, most of our growth in emerging markets will be organic, because it is relatively difficult to acquire companies in emerging markets compared to the developed world.

What would have been the problems if Tatas had not gone global in all these business lines?
We may have survived in India, but internationally, we would have become a marginal player. The locational advantage that we enjoy currently will also wither, as the Indian economy gets increasingly integrated with the global economy and our foreign peers establish a foothold in India. Globalisation is no more a choice, but a necessity in many of the industries where the Tatas are present. The evolution in transport and communication technology in the past two decades has led to the emergence of a global supply chain in all kinds of industries. So, we need to be prepared to play the global game.

There is an apprehension in the market that Tata Steel is probably financially overstretched, post- Corus acquisition?
Nothing can be further from the truth. As a matter of philosophy, the Tata Group follows a conservative financing policy and we never over-leverage our balance sheet. Take a hard look at the financials of Tata Steel; I am sure that none of them have any excess financial risk. As far as the business risk is concerned, no one knows a priori how good an investment may turn out to be. However, we conduct thorough due diligence and ensure that the target assets have a strategic fit with the company’s long-term growth plans. In future, it may turn out that some of our investments are not profitable. But then, in business, one can’t grow without taking any risk.

Both your acquisitions — Corus and Jaguar-Land Rover — were made at a point when the global economy was at its peak. Now, since the economy has slowed down, how do you evaluate these acquisitions?
Most of the investments made by Tata Group in the past have turned out to be good. During the early part of the last century, when the Tatas decided to build India’s first integrated steel plant, most observers discouraged us. It was described as a highly risky bet. And initially, their apprehensions turned out to be true as Tata Steel (Tisco at that time) had to be rescued from near bankruptcy. But as time went by, our vision was vindicated and now the result is in front of you.
We are an industrial investor and our decisions are not based on financial gains or losses in the short or medium term. It’s always possible that we may have slightly ‘over-paid’ based on the current market situations, but opportunities don’t come every day in business. So, it becomes important to grab them. The acquisitions become part of our long-term strategy and availability of such assets, rather than the price, becomes important. You may say that we should have acquired Corus at the height of the bear run, but then, sellers don’t sell at the bottom of the market.

Other than the time delay, what are the other challenges that Tatas would have faced, had the group taken the organic route to globalise?
Organic growth looks attractive from the financial point of view, but as you said, it’s time-consuming and there’s no guarantee that we will achieve the global scale in the timeframe we want. In contrast, large acquisitions like that of Corus by Tata Steel, or Tetley by Tata Tea, directly catapult the companies into the global league and open up a large global market. The companies also get access to the latest technology, a globally recognised brand name and worldwide sales and distribution network. This is a valuable asset, if you know how to handle it correctly. For example, it may be surprising for you to know that tea bag is a complicated technology and we got it when we acquired Tetley. The acquisition not only helped us to become the largest tea marketer in the UK and North America, but also in India. Just imagine Tata Tea’s market position if it had remained restricted to India.

But Tata is still a relatively new name in the rest of the world, in contrast to its brand equity in India. Is there a group strategy to build the Tata brand globally?
If you have Siemens’ global campaign kind of strategy in mind, then the answer is no. Our brand building is more subtle and indirect. We don’t think it’s worthwhile to launch a formal strategy. It’s better to practice our values in the group and let the stakeholders in the respective markets recognise this. We are also trying to communicate with different stakeholders like customers and vendors through one-to-one meetings, and the general public through media.
For example, when we go out and say that Tata Group is not a family-run business, but two-thirds owned by charitable trusts and run by professionals, it resonates with the stakeholders. This understanding has also helped us to attract new talent. Nearly two-thirds of the group’s dividend goes to different charitable trusts, which in turn, spend this money on education and water projects, among others. But unlike many other organisations, we don’t believe in a global advertising campaign for brand building. We believe it comes through more interaction and good business practices.

Has the Tata Group become global in terms of human resource (HR) practices?
Of course. Currently, many of our employees in Tata Steel, TCS and Tata Motors are global. Half of the board members of Tata Steel are non-Indian. Moreover, our R&D capabilities are generated by employees located in R&D centres in different parts of the world. For example, though Nano will be assembled in India, some of its technology has come from our Korean colleagues. Going forward, more and more employees will be from different geographies of the world.

Are you planning to be among the top global players in all business lines?
There are two ways through which you can remain competitive — either you should have large size and scale, or if you are not big, you should be a niche player. Accordingly, we are trying to be bigger in some business lines. But in some other cases, we will focus on a niche segment of that particular industry.
For instance, in the hotel business, we would not like to take on a major international hotel chain. Similarly, Tata Chemicals is a smaller company compared to its global peers. We don’t operate it as a chemical company, but as a soda ash producer. We are No 2 in soda ash production and have access to two of the world’s largest sources of natural soda ash deposits. So, one needs to look at a particular industry within its competitive set of parameters.

How do you decide between the options of liquidating stake in a group company vis-à-vis borrowing, while financing an acquisition?
First of all, at the group level, we (Tata Sons) don’t actively take part in the financing decisions of individual companies, except in a few cases like Corus for Tata Steel, and JLR deal for Tata Motors. At the group level, we try to balance the ownership portfolio. We also support our companies when new business initiatives like retail, infrastructure and financial services are taken.

Is there any metric to measure the success of your globalisation strategy?
Most of our acquisitions should be judged on a long-term basis, mainly based on three parameters — strategic objective, financial objective and time. The first two parameters should be achieved in a particular time period. One can’t stand still when the world is changing so fast. Many of the big companies in the world, like General Electric and ExxonMobil among others, have adjusted themselves according to changes in the world. We also benchmark our success against the best in the class.

How will your international businesses influence the Indian operations?
The overseas management can change the way the business operates in India, if that means improvement in performance. For example, 10 years ago, Tata Tea was a tea plantation company. But today, it isn’t into the plantation business; rather it is a packaged branded tea company. This change has come from the Tetley acquisition. Thus, overseas business can come in, change the ideas and bring in new business plans.

You have worked in many global companies. How different is your experience at Tata Sons?
I have a long relationship with India. I have worked for many foreign companies in India and am now working for an Indian company. Long ago, I had the aspiration to meet one person — Ratan Tata. And I got that opportunity only after five years. He is a truly unique individual with a strategic vision. It has been a great experience working with him. Each business house has its own culture. Tata is a great combination of Indian heart and international professionalism.

Research shows that most of the mergers and acquisitions in the world have failed. How is Tatas’ value system useful in making its acquisitions successful?
Whenever a company buys something, it should know what it is buying. So, the due diligence process is very important. Once the acquisition is complete, one has to manage the newly acquired company. This is where the value system comes in. In not a single case, have we changed the management team. We have inducted the team into our eco-system and the integration process is jointly developed.

Krishna Kant & Santanu Mishra

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