Family company gets a global DNA

Amrita Nair Ghaswalla | Updated on: Dec 27, 2012


bl15 tata nano diesel (14 04 2012).jpg

bl15 tata nano diesel (14 04 2012).jpg

Twenty one years ago, a change of guard at one of India’s business groups, would have been of little consequence to the Western world. As Ratan Tata steps down on December 28, millions of employees across 80 countries that the Tata Group operates in, will be forced to sit up and take notice.

Though Tata has transformed the family company into a global brand since assuming control in 1991, the early days were not easy. The many challenges during Ratan Tata’s early tenure were fairly daunting, says an old-timer.

“As the group set out to define the businesses it should not be in, the prime target that emerged was the soaps and toiletry business that Tata had been in,” said an official, requesting anonymity.

In 1917, the Tatas had entered the consumer goods industry, with the establishment of the Tata Oil Mills Company to make soaps, detergents and cooking oils. Ratan Tata’s father had headed it for several years, but it did not seem to fit into anything else the group was doing. And so, the decision to do the “most dignified selloff that he could.”

The company was sold to Hindustan Lever (now Unilever) in 1984 and all the shareholders got a new share, with an explicit understanding that no employee would be touched for three years.

What unfolded was, “the whole world descended on Ratan Tata”, who then set about growing what the group had.

A number of measures were introduced under Tata’s leadership to create a brand that the Group as a whole could leverage on effectively.

The idea was to serve the domestic market more effectively. In addition to paying a fee for the use of the Tata name, the new arrangement also included a ‘brand pill’ on the lines of the famous ‘poison pill’ takeover clause employed by the American firms.

In the event of a hostile takeover, a company wrested from Tata control would no longer be permitted to use the Tata name. This was seen as crucial to maintaining the integrity of the brand, effectively reducing the value of the Tata companies to potential hostile takeovers.


Despite the restraints imposed by a controlled economy, the Tata Group decided to venture into new areas and build on the foundation.

As the official added, “The idea was never to be so heavily Western Europe oriented. That, perhaps, was a bit of an accident.”

Originally, the plan was to take the attributes of the Western companies and transport them to Asia, Indonesia, Malaysia, Africa, but several of these countries had internationalisation plans of their own and many of them were looking West.

“At the time”, continued the official, “the Tatas also did not fill in the prerequisites as a giver of technology or a provider of goods”.

The economic conditions of Western Europe came to Ratan Tata’s aid, with several companies scouting around for acquirers.


What followed was the Corus acquisition, India’s largest ever foreign takeover.

“The final price for one share for Corus was 608 pence, which was 33.6 per cent higher than the first offer which was 455 pence,” remarked the official.

The remark, tongue-in-cheek, was meant to showcase how Ratan Tata is not shy of chasing big bets, taking pivotal decisions when the stakes are high and upping the quotient whenever necessary. Case in point - the continued chase for US luxury chain, Orient Express Hotels.

Even Jaguar and Land Rover, which were larger than the company’s passenger car activity in India, was widely criticised both within and outside the country.

Jaguar Land Rover, which posted losses estimated around $10 billion, was put up for sale by Ford in June 2007. By June 2008, Ford Motor handed over the keys to its high class British Jaguar and Land Rover (JLR) brands to a company known for its heavy trucks.

The $2.3-billion JLR buy was not without its hiccups. Both Corus and JLR were hailed as good acquisitions that gave the group a place in global steel and in automobiles. However, even as the group was deliberating the cultural problems, which were a major challenge, the financial economies collapsed and Europe was badly hit. A fresh round of criticism followed, but Ratan Tata stoically fielded them. While steel continues to suffer because of the economic situation in Europe, JLR, after going through a dip, has emerged stronger than ever.


With the JLR buy, Ratan Tata acquired a new passion. Though scepticism and criticism had long dogged the Rs 1-lakh Nano car, Ratan Tata was eager to deliver on his promise.

Today, Tata Motors is hailed in building revolutionary small cars such as the Nano. The Jaguar makes luxury cars. “By keeping the two brands separate, he has managed to exploit the great number of synergies that exist in engineering and design,” said Hormazd Sorabjee, Editor at an automobile publication.

For Ratan Tata, the Nano experience was the most rewarding. On receiving the Rockefeller Foundation’s Lifetime Achievement Award in June 2012, for innovation in philanthropy, he spoke about how “ much of business is thinking about how do we evolve past corporate social responsibility...start thinking about stakeholders not just shareholders”.

The Tata group had innovated early, taking corporate profits and building trusts and using it for good, to give back to the citizens of the country.

Almost 4.5 per cent of the net profit of the Tata Group companies is distributed in philanthropy activities, “...not to hand out doles”, as Ratan Tata said, but “to bring life back to the people in the community”.

Building effortlessly, the architect has kept to his task for 21 years, in the knowledge that critics, who earlier opposed innovative designs, will later fight to protect that creative work, having realised its value.


Published on December 27, 2012
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