TITLE OF THE PAPER: INDIAN GLOBAL BRAND THE ROLE OF TATA GROUP. AUTHORS NAME: DR.VINOD N.

SAMBRANI DESIGNATION: ASSISTANT PROFESSOR ADDRESS: INSTITUTE OF MANAGEMENT STUDIES, SHIVAGANGOTRI, DAVANGERE UNIVERSITY, DAVANGERE 577 002 KARNATAKA STATE, INDIA EMAIL: vnsambrani@yahoo.com

INDIAN GLOBAL BRAND THE ROLE OF TATA GROUP ABSTRACT Business environment, particularly the political and economic, has been changing all over the world. The economies of different countries are connected through international migration, creating an international human resource, and the international diffusion of technology. Technological innovation and trade liberlisation has contributed to globalization. Asian giants like India and China have been forerunners in the process of globalization. On the other side of the globe countries like Brazil, Mexico, Central and Eastern Europe are going global. These countries are known as RDEs (Rapidly Developing Economies). Many companies based in RDEs are going global fast. Companies in these kinds of economies are gaining global market share, making major acquisitions, and emerging as important customers, business partners, and competitors for the worlds largest companies. To go global companies must have the right kind of strategies to take care of different aspects of global market place like regionalism, inequality, financial flows, migration of labor and work, technological innovations, environmental sustainability, and cultural dynamics and many more. TATA group has taken advantage of globalization and have taken their brands global.In this paper an effort is made to understand the strategy of TATA Group to take their brand global. Key Words: Globalisation, Strategy, RDE, Tata Group. INTRODUCTION Globalization has become the major trend in business since the 1980s and during 1991 in India. It allows a firm to expand into new markets in order to seek higher profits and lower-cost resources. Further globalization allows a firm to increase economies of scale and lengthen the life cycle of its products.Globalization refers to the process of integration across societies and

economies. The process encompasses the flow of products, services, labor, finance, information, and ideas moving across national borders. Globalization entails both opportunities and threats for creating and sustaining competitive strategies. Emerging economies offer resources in terms of labor, as well as expanding market opportunities. However, geopolitical relationships and backlashes from cultural differences create challenges for business operations. Globalization allows a business firm to expand into larger and more profitable markets, exploit economies of scale, utilize foreign countries strength and the strength of an established brand. Companies in RDE countries have started assuming leadership positions in lucrative developed markets and have established strong brands in other RDEs. For example Bharat Forge (India) is now the worlds second largest forging company. BYD Company (China) is the worlds largest manufacturer of nickel-cadmium batteries and has a 23 percent share of the market for mobilehand set batteries. Johnson Electric (China) is the worlds leading manufacturer of small electric motors. Nemak (Mexico) is one of the worlds premier suppliers of cylinder head and block castings for the automotive industry. Ranbaxy Pharmaceuticals (India) is among the top ten generic-pharmaceutical players in the world. Techtronic Industries Company (China) is now the number-one supplier of power tools to Home Depot in the United States. Wipro (India) has become the worlds largest third-party engineering-services company. Organizational strategies for international operations involve two related demand viz. the need for local orientation and the need for integration. In addition to selecting a strategy for global competition, managers also need to make decisions regarding the internationalization process. Two processes are important. First, the development of innovations in a home market. Second, stages of internationalization with foreign entry modes that involve increasing resource

commitment and risks start with exporting to licensing or joint ventures to wholly owned subsidiaries. Developing a global strategy is complicated by the fact that there are at least five major dimensions of globalization such as playing big in major markets, standardizing the core product, concentrating value- adding activities in a few countries, adopting uniform market positioning and marketing mix and integrating competitive strategy across countries. The objective of globalization is to move towards becoming globally competitive and to expand the market. The globalization strategy itself could be asset-based, capability-based or opportunity-based. It also includes global employment i.e. employing people with no national barriers, colour, race and language like Tata Consultancy Services and Infosys
Playing big in major markets Standardizing the core product

Globalisation Strategy

Competitive strategy

Concentrating value- adding

activities
Figure1: Five Dimensions of Globalisation Strategy

Adopting uniform market positioning and marketing mix

On the other side of the globalization coin there are global concerns revolving around terrorism, rapid transmission of pandemic diseases and viruses like AIDS, the rise of Dragon and Elephants economies, an aging population in wealthier northern countries versus younger growing populations in the southern hemisphere , and advances in biotechnology ,which are intricately embedded in globalization processes. Basically, globalization into the twenty-first century has created a fundamentally different competitive environment that has shifted from incremental internationalization processes to

almost simultaneous deployment of innovations. This internationalization process also shifts the work of global managers from managing a field of expatriates to collaborating with strategic partners across national borders and managing global off-shore outsourcing vendors in multiple geographical locations. TATAs have taken their brand global either through joint ventures or buying part of the organisation like in case of Daewoo motors or buying out the company like Tetley tea. OBJECTIVE OF THE STUDY The objective of the study is to understand the role and the strategy of TATA group to take their brand global. KNOWING TATA GROUP Ratan Tata current chairman of the Tata group who succeeded J.R.D. Tata in 1991, will step down as chairman of US$80 -billion TATA group in December 2012 and Cyrus Pallonji Mistry will take over as the new chairman of the TATA group. Started in 1868 by Jamsetji Nusserwanji Tata the group has come a long way. Tata group today constitutes 96 functioning companies in seven business sectors such as, Information systems and communications (TCS), Engineering (Tata Motors), Materials (Tata Steel, Tata advance materials), Services (Hotels, Insurance, Telecom), Energy (Tata electric company), Consumer products, and Chemicals (Tata Chemicals). Tata Group plays a central role in the Indian economy and is currently at the fore in the globalization of Indian companies. The groups operations span 85 countries on six continents and its companies export products and services to 120 nations. The Groups core values - integrity, understanding, excellence, unity and responsibility inspire and motivate the Group's operations. Leadership, culture, values and ethics are embodied in the well-recognized Tata brand.

Tata Group firmly believes in giving back to the society what they have earned. Within days of the 26/11 attack on Mumbai and the landmark Taj, the group set up the Taj Public Service Welfare Trust to help not only the families of the Taj groups employees and guests but also other victims of that fateful attack. The trust wants to make the affected families self- sustainable at the earliest. It has been offering support in the form of monthly sustenance, medical and hospitalization support, childrens education and help to pursue a livelihood and for setting up of micro-enterprises. TATA AS A GLOBAL CORPORATION A truly global corporation must have certain key attributes. It must have a global reach; it must be instantly recognizable in global markets like Coca-Cola, Unilever; it must have global finance at its disposal and it must be staffed by representatives of a global population. Its products should have global appeal and it should meet the aspirations of global communities. The stakeholders must be a global community. Further it is not enough for a few companies in the group to demonstrate global competitiveness. The whole corporation must display a global presence. Global companies are differentiated by their strong global position, global assets, capabilities, brands, and their relative resilience to shocks and even to the business cycle. A company does not become global by simply participating in a certain number of geographic markets. It is its ability to become globally competitive, leverage global opportunities and have the required global capabilities that make it global. Global corporate brands can cut costs to enter new markets and allow the company to attract good partnerships as well as talent for example Vodafone. Tatas are acquiring such a competitive position and global coordination capabilities, both at the individual company level, as well as at the group level. The Tata group has been expanding its

brand in sectors where it is increasingly recognized internationally, such as software and hotels, and to leverage its historical brand presence in various countries, especially those with strong Indian roots. Several Tata companies are global. Tata Steel has become global with its steel exports and its new ferrochrome business and the acquisition of a USD 13 billion buyout of Corus, an AngloDutch steel firm which is four times bigger than Tata steel. Likewise, Tata Motors with its long standing initiatives in exports, the acquiring of truck plant of Daewoo Commercial Vehicle Company in Korea, the buying of premium vehicle brands such as Land Rover and Jaguar. Tata Chemicals soda ash business is getting into exports. Tata motors has designed pixel for the European market. Similar is the case with Indian Hotels and Tata Tea, particularly the Tetley acquisition. After the acquisition Tata Tea is now the second largest player in the branded tea segment globally and has a presence in 40 countries. Tata Consultancy Services (TCS) on the other hand is already global with its international business with a relatively low domestic base. TCS has scaled up the value chain and is delivering value globally. Today, 18% of Tata Motors revenues and 20% of Indian Hotels revenues comes from international operations, for Tata Tea, its 70%.
Tata Motor Hotels Tea

82%
National International

18%

80%
National International

20%

30 %
National International

70 %

Figure 2: International Revenue Generation

As a group, Tatas have taken several initiatives to enhance the global aspect in their peoples approach and thinking. They work along with thought leaders and faculty from top universities

such as Harvard Business School, INSEAD, CEDEP and Michigan Business School. With Michigan, the focus is on figuring out how to manage the challenges of managing a global business, defining and adopting a common set of principles, approaches and a global compensation policy when operating in a global way. The group is known for inculcating a comfort level of working with a multi-ethnic workforce in multi-geography settings. Tata with its successful operations in every major international market like Africa, Asia Pacific, China, Europe, Middle East, North America, South America, United Kingdoms has become a global brand and a global corporation.

Tata Co. Tata Steel Tata Motors

Acquired Co. Corus NatSteel Asia Hispano Carrocera SA Jaguar&Land Rover Daewoo Commercial Vehicle Company Eight O' Clock Coffee Co. Good Earth Corporation & FMali Herb Inc. Tetley group

Country UK Singapore Spain UK Korea

Stake Acquired 100 % 100% Remaining 79 %

Value S$468.1 million $2.3 billion $102 million

Year Jan 2007 Feb 2005 Oct 2009 March 2008 March 2004

100 %

Tata Global Beverages (Formerly Tata Tea Limited)

US US UK

100 per cent 100 per cent 100 per cent

$220 million $31 million GBP271 million

June 2006 Oct 2005 Feb 2000

Table 1: Tatas Acquisition of Various Global Companies

TAKING THE TATA BRAND GLOBAL Tata Steel is India's largest integrated private sector steel company but globally ranked at 56th position in terms of steel output. Tata steel has sales in various countries like USA, Srilanka, Nepal, Shanghai etc. but has lacked global identity or image. The company was aware of the

consolidation taking place in the global industry and desperately needed a global brand to enhance its global competitiveness. Global moves of competitor i.e. Mittal acquiring Arcelor and market factors pushed for globalization forced Tata steel to go for a global strategy to improve its presence in International scenario. The opportunity to go global came in the form of Corus, an Anglo Dutch Company. Coruss was finding European markets unsustainable given the increased competition from steelmakers in developing economies especially China. Higher raw material and energy costs were eating into companys profitability hence Corus management was on lookout for a suitable partner outside Western Europe to acquire Corus, and began negotiations with key players in the steel industry from India, Russia, and Brazil. Corus presented a fantastic opportunity for Tata Steel to have a low cost manufacturing with high value added products and customers in developed markets and gain global image. Tata Steel and Corus were interested in entering into an M&A deal but it was Ratan Tatas idea to takeover 100 percent of Corus. It had a capacity of 20 million tonne and it will add 20 million tonne to Tata steels capacity. Tata Steel would become 25 million tonne overnight. Tatas, initial motive behind the acquisition was not Corus revenue size, but rather its market value. The buy would instantly catapult Tata Steel to the position of 5th largest steel producer in the world, and provide access to the latest technology and strategic European markets as Corus had plants in Britain, Germany, France, the Netherlands and Belgium. Tata also expected to benefit from reduced production costs due to large volume, combined R&D operations and broader product range and a move up the value chain, as the former had built a reputation as an established supplier to the aviation and auto industries. Tata Steel has a strategy in terms of creating Greenfield capacities in India and one or two places internationally and also where the raw materials and energy sources are available. Tata steels

strategy to acquire plants in countries where raw material is not available but there are markets either developed mature or growing markets. Tata groups strategy is to get more from steel in terms of branding and distribution and reduced logistics cost. Tata Motors produces vehicles both in the Light Commercial Vehicles (LCV) and the Medium and Heavy Commercial Vehicles (M and HCV) segments. Globalization forms a key component of Tata Motor's strategy and it has successfully entered countries having a demand similar to India like South Africa, Thailand and Argentina, mainly through acquisitions and joint ventures. Where possible Tata motors have launched their cars, for the European market they have developed next gen. Nano car and have branded it as Pixel As a part of the company's new internationalization strategy, the company has decided to focus on a narrow base of 15-20 countries where market conditions are similar to that of India and Tata motors will have a significant presence in terms of volumes and market shares. In these countries, Tata Motors now has dedicated manufacturing facilities, marketing teams and sales teams. The idea is to have self sustained operations in this narrow band of countries. The company evaluates locations on the basis of market opportunities and labour skills. The Rover agreement has been an important step in helping Tata Motors to gain very quick access to a fairly large market and a large distribution network. Buying premium vehicle brands such as Land Rover and Jaguar will bolster Tata Motors image as a global company and help it go upscale, which otherwise would have required Tata motors to invest a lot of time and capital. The company has had a successful alliance with Italian mass producer Fiat. This has enhanced the product portfolio for Tata and Fiat in terms of production and knowledge exchange. Two of the worlds luxury brand has been added to Tata motors portfolio with the buying of Land Rover and Jaguar brands from Ford Motors for UK 2.3 million, thus helping Tata motors to go global.

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In the 1990s, Tata Tea made a number of strategic decisions. To increase market share, it used innovative packaging to position its five brands in India Tata Tea, Agni, Kanan Devan, Chakra Gold and Gemini as garden fresh (taazgi is Hindi for freshness). This strategy delivered an increase in the share from 2 percent to 26 percent of a much larger market. Tata Teas strategy has been the quest for a brand with global appeal. Some tentative efforts were made in the direction of building the Tata name as a global brand, but realized that it was a very expensive and risky proposition, which needed large outlays of funds and time. To overcome the challenge of creating expensive distribution networks, management also preferred to leverage distribution either created by a partner, a joint venture or an alliance. So it became clear that the most effective option was growth through the inorganic route. Tetley had a reputation for extremely good innovation in packaging (the first company to introduce the tea bag (1953), the first to launch the round tea bag (1989), and the first to sell no drip, no mess drawstring bags (1997)). It also had a very special skill in buying teas worldwide, blending and packaging them, as well as extremely good logistics management skills. Tetley is a well-established premium brand in international markets. Tata Tea bought the loss-making Tetley Tea (Tatas first major global acquisition) outbidding the American conglomerate Sara Lee to get global appeal. Tata Tea is now the second largest player in the branded tea segment globally and has a presence in 40 countries. The international expansion has all been through Tetley, which is a Tata Tea subsidiary (see table 1). This gives the company a presence in both the emerging and developed markets, along with reducing dependency on any one geography. Growth is driven by new segments and new locations, proving the companys ability in integrating new brands in new countries into its portfolio

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CONCLUSION Year 1991 Indian economy was opened for LPG and most of the Indian companies were subjected to global competition. Tata companies looked overseas markets and companies to gain scale, reduce their exposure to the cyclicality of Indias economy, survive, and achieve a sustainable competitive position in industries that are globalizing. Expending globally is the main strategy of Tatas. Currently the group is acting rapidly and acquiring, going for joint ventures (ex. Tata Motors and Fiat) buyout other companies in different countries. Tata Steel gambled on a strategy based on anticipation of global consolidation of the steel industry. Along with Arcelor- Mittal, it is poised to emerge as one the few global steel producers. Potential customers like Toyota want to buy steel in different countries in Europe as well as in India, would give global steel producers (like Tata Steel) a competitive advantage. Tata steel had the ability to implement globalization because of its rich experience of 100 years of running a business successfully in India. Hence it had the ability to acquire and manage big steel company like Corus. Further to build a premium brand like Jaguar and Land Rover from scratch requires a lot of time and investment. Mergers and acquisitions as a strategy is perhaps the only quick way to build a brand. Tata acquired two of the worlds luxury brand Land Rover and Jaguar brands. Tata motors portfolio now has a premium segment, which gives it the global image and reach. Tetley is a well-established premium brand in international markets and it would have taken much more effort and much more money to create the same level of awareness for the Tata Tea brand overseas. Acquisition is a vital element of Tata growth strategy. Secondly the most important strategy Tatas have followed is retaining the people and management of the acquired company for example Corus Board of Directors was reconstituted to

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include representatives of Tata Steel. At the same time, in a spirit of partnership, an invitation was extended to some senior members of Corus to join the Tata Steel board. Tata followed this strategy in all most all the companies they acquired. Tata Group has never engaged in any hostile takeover bid so far. Specifically speaking of Tata Steel Ratan Tata had categorically declared that he would not go in for acquisitions or partnerships if the value system of the target company or its management grossly differed from that of the Tata group. Probably this strategy of fair approach (ethical, which is more intangible in nature, assuring the employees that their jobs are safe) have also helped the Tatas to beat most of the competitors. Overall the strategy of the group is to maintain the cost of raw materials as lowest as possible and to achieve the lowest cost of final products. The group also invested a huge amount in research and development in order to achieve the highest degree of quality at the lowest price.

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REFERENCES 1. www.ftpress.com/articles/article.aspx?p=101588 International Markets" 2. hbswk.hbs.edu/item/3773.html 3. www.referenceforbusiness.com/management/Ex-Gov/Globalization.html" Globalization" 4. http://iisb.stanford.edu/evnts/4326/Organizing_for_Global_Advantage_in_China_India_a nd_Other_Rapidly_Developing_Economies_Mar06.pdf 5. http://iis-db.stanford.edu/evnts/4326/New_Global_Challengers_May06.pdf 6. http://www.tata.com/company/Articles/inside.aspx?artid=Y012M7gb5x0 7. http://www.tata.com/article.aspx?artid=5B6W0B5ZcLo 8. http://www.tata.com/article.aspx?artid=RZMDxjGlK9Y 9. http://www.articlesbase.com/international-business-articles/global-strategy-frameworkan-illustration-of-tata-steels-441441.html 10. http://www.tata.com/company/Articles/inside.aspx?artid=d0Kc/1aftfw 11. http://www.aabri.com/manuscripts/09198.pdf 12. http://organisationalexcellence.files.wordpress.com/2008/03/microsoft-word-tatagroup.pdf 13. http://www.ximb.ac.in/~jcr/tata.pdf 14. http://marketingteacher.com/swot/tata-motors-swot.html 15. http://economictimes.indiatimes.com/tata/Tata-Teas-strategies-for-that-global-cup-oftea/articleshow/2673792.cms 16. http://www.moneycontrol.com/news/management/strategies-transformed-tata-steelintoglobal-behemoth_300865.html 17. http://www.livemint.com/2007/11/07000733/Land-Rover-Jaguar-bid-fits-in.html 18. http://www.hindustantimes.com/Land-Rover-Jaguar-bid-fits-into-Tata-strategy/Article1256884.aspx

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