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Okay. Yes Amar. Thank you very sir for giving me this chance to speak to the class and I
hope I will do some justice to this presentation. But as you can see this is the…You have
to hold it close Amar otherwise it won’t be recorded. Okay. So this is the group on
behalf of whom I am going make this presentation.
The House of Tata. But it is it is one wonderful case in the sense that it is you can understand
a lot of strategy through something like this because it has operated for about a hundred
years and it has had visionaries and excellent leaders, you have seen through the case. There
are many excellent leaders in the company with a certain clear-cut vision, which goes
with the interests of the nation. So it is more of an analysis, it is more of analyzing
advantages of this company-how did they build these advantages, how did they extend these
advantages and what problems did they face during the course of time and how did they
reorganize these advantages in the recent past. So let us look at the first point that
is how did they go about building advantages.
When I, when we say advantages, we mean resources, skills and networks-how did they build these
advantages. There are of course always two areas, that is, internal capabilities and
managing externality. In the internal capabilities, you will see that actually they had excellent
leaders, leadership with clear vision-all the three Jamshedji, JRD and Ratan Tata and
there are many of the leaders within the company. The internal financial back up, it was very
strong. They started by selling some of their assets in the beginning from nineteen seven
where they invested in Tata steel of which they have got some money from the market but
at least eleven percent was their own money. Of course they were very well supported by
the Parsi community as well. So, that was a very important resource strength-internal
capability.
They of course built, have access to mines, iron ore and coal; again, very rich resource.
They had huge assets they built over period of time, that is given in the case. They had
three hundred eighteen million dollars in nineteen fifty-one, eight seventy seven million
dollars in nineteen sixty-five and two thousand one hundred twenty five millions dollars in
nineteen eighty one-huge growth in the asset base which is again internal strength. Well,
they also went into very early investment in the core sectors and service sectors. Core
sectors, you know, hydroelectric power, they went into the steel industry; also into some
of the other core sectors. In the service sectors, airline was one of their early investments
and they also had early induction of professional managers. Unlike family run houses, business
houses in India, they were the first ones to induct professional managers from outside,
expertise from outside and they took hold of it. They were controlling the management
of the business.
They also introduced progressive industrial relationship with which again given in the
case that they the polices that they introduced in the company were were they had all and
the given steel industry but considering the case. Again very interesting: cross holding
among group companies. Again it is a very strong strength that they can derive from
each other by sharing their assets, their networks and they whenever they have a problem,
sister companies were obviously funded by the cash power cash rich companies.
Early entry to foreign market: that is not the case that they could establish network
in the foreign market, which they have used it in the recent past. You can see that this
year they have, this quarter they have made very huge profits, huge turnover in in the
export business and of course their technical tie-ups, very strong technical know-how which
is becoming the key of success in today’s business, your technology your technological
capabilities. Well this is the internal capabilities. Besides that the managing externality which
professor just mentioned in the beginning of the class, the corporate mission is very
important. Corporate mission is also important because it is aligned to that of the nation.
Whatever the nation was putting as this vision the corporates took this mission vision as
that, that is to build a strong nation; so, invest in core sectors.
Developed a highly respected corporate image: very very valuable that in the year ninety
seven they could generate money from the public because of this trust that they could build
with the public. Thus they could start the steel factory with that. Of course they had
proximity to power centers in the pre-independence period. You see that these are the are the
business plan that has, Bombay plant that was designed after the within the nineteen
fifties. They they could decide what should be the externality for themselves so they
they could impress the political power. Now building these advantages over some period
of a time they did extend these advantages. Then we have seen two different periods: regulated
period and and free market period.
So we have seen in two areas. Until nineteen eighty how did they extend these advantages?
Huge resource base and cross holdings was used to diversify into other businesses. Also
the license raj was also a reason for diversifying into other businesses. They extended financial
support to sister concerns which were having problems. They turned around many downstream
businesses by Tata steel. So all these issues are mentioned in the case. The progressive
industrial relations which which they implemented helped to build satisfied and motivated employees
and they didn’t lose employees because of that. So they could retain all the knowledge
base that employees learn within a company and that was it; that that is extending an
advantage. Foray to oversees market led to generation of huge amounts of forex for themselves
and which also had gained a good image with the government because that was a source,
to give foreign exchange for the government for country. Then they expanded through vertical
integrations, several examples are there. You can see the steel industry they have highly
invested along the vertical integration.
Managerial and technical skills, diversification into chemical industry: because of just Mr.Seth,
Darbari Seth, they they went into specially the chemical industry, chemical business,
which is again cited in the case. The ethical practices helped develop revered corporate
images. That is what I said by saying that they could demand or they could have high
stock market value in the in the industry. Now in the post nineteen eighty period what
how did they go about?
The huge asset base, skilled manpower and technical tie-ups helped them to have high
quality in products and services; again a very good competitive advantage. And they
maintained leadership in many businesses because of such asset bases, such advantages. The
indigenous car, a passenger car INDICA, again this is very very very unlikely of an Indian
company to have a product which is completely, a product like a car to be completely indigenized.
Because of the because of their advantages in other areas they could achieve that. Growth
and expansion of TCS is another extension of their advantages. It is also said in the
case the strong distribution network brought high commercial, heavy commercial vehicle
was used to sell light commercial vehicles and in a year their sales was more then all
the competitors together. So you can see some advantage was again extended to benefit in
other businesses.
Early entry to foreign overseas markets, export earnings are high-that we have already discussed.
Again they they did this in the nineteen eighties and very very comes out very clearly in the
recent in in the last quarter where they have done extremely well in the export of steel.
Creative talent of employees were utilized in new ventures that is that is when when
there were so many people, so many talented people who who could be retained in a company
and they were well utilized after nineteen ninety one when they went into many other
new areas. Knowledge in service industry was extended to other service sectors. Obviously
if they are going into retailing now, which is of course not mentioned in the case, but
as we all know that is take Tata InfoTech, a popular case that you know and you see that
they are even extending these advantages in in the recent times and at least they have
been extending this over a long period of time. Are you watching the clock? One more
minute. You have one more minute. I will give you extra minute. Okay. So the the advantages
never remained as advantages sometimes become disadvantages with time because externality
keeps changing.
So Tata benevolent, too benevolent Tata philosophy like over-manning of the company and it had
problems post nineteen ninety-one. The company, the directors maintained they stayed in the
company for longer time and they then that kind of demotivated people down below. Weakening
of group ties: we have seen that. It happened before nineteen ninety one, Ratan Tata came
in and started saying that that they should have strong ties but that made the competition
between the group companies and also some of them violators some of the managers violated
Tata ethos, pride prevailed over profitability. When they want to shutdown textiles many of
the executive have that they shouldn’t and they they have the kind of gave more importance
to the pride of Tata group as a whole than looking at profitability part. And of course
they were slow to change, they were defensive in nineteen seventies, cement and passenger
cars-they were late, Voltas-when R Sarin came in he was not accepted in the company, there
was there were lot of problems, he had to leave finally, nineteen eighty three strategic
plan of Ratan Tata was also not accepted. It was kind of rejected which later on of
course, seeing the problems they had to reorganize their advantages and that is what they have
been doing as given in the case which Ratan Tata started on nineteen eighty three and
subsequently in nineteen ninety one his plans they started reorganizing these advantages
to again exploit the changing environment.
Corporate restructuring: in this to spin off non-core or matured assets like the textile
business and other non profitable business, improve group ties and leverage group strength,
again Ratan Tata emphasized on this and they have gone onto invest in certain areas like
high technology industries, financial services and insurance, service sectors and retailing.
And of course we also propose that they should expand their overseas market, just not export
but grow into manufacturing, they could use third country parameter as a means to expand
their international business.
For instance they can have they could have a plant in say Malaysia or or similar country
in Indonesia to target Japanese market or they have they can have plant in China and
target Japanese market. They can have plant in South America and target American markets.
So that is the third country parameter strategy, which they can use just for export but extend
a vertical integrate along this manufacturing activities. So that is about the case and
thank you very much.
We have five minutes for penetrating questions. To my mind the house of Tata is not just any
old case, it is inextricably tied up with the industrialization of this country, the
industrial development. So I expect you to ask good questions. It is not just any case.
Yes? You have mentioned in the last slide about it is corporate restructuring and you
said that they could spin off some non-core or matured assets. They have not applied thus
that is. Now, in the case of Tata what exactly can we classify as non-core? Non-core in the
sense that their focus, Rata Tata has given in the case, they have been focusing on high
technology products. The products which are not high technology-oriented, which can be
duplicated, copied by competitors is a non-core product for them. Any other questions? Is
competition within group companies always a disadvantage? Competition between group
companies is not a disadvantage when the whole market is highly competitive. It gives lot
of channels to improve it but when the environment is not competitive, it is some kind of, you
can maintain a certain amount of stability on prices and reduce your managerial capabilities
into trying to solve problems between the companies. So it is an advantage and disadvantage
depending on the external environment. Probably today or maybe ten years down the line, group
competition is what would be required. In fact in the Japanese industry, going out of
the case, there is a huge amount of competition between middle level automakers, there is
a huge amount of competition within within Japan but when they go out, because of the
competition in-house they can compete very well outside. Any other questions?
This is regarding the present state of Tata group. Just for the addition a kind of addition
towards high technology is it hindering their growth? Like they are into particularly in
telecom sector, they are into different competing technologies, which are competing each other,
so is it really helpful? Like what? What is competing with each other?
In the in the mobile telephone market they have they have two technologies which are
competing worldwide. Tatas has the presence in both the technology in India so is it a
virtual strategy to follow? Yeah it is a, you could be reading in marketing that you
have you try to block the range of products. So if if you are not able to capture some
customers on this range you are able to customer from the other. So, it is it is a very well-practiced
strategy. Yeah, one last question. We can discuss that right at the end. Yes. You said
exporter in steel that you were talking about. I guess it is an industrial phenomena rather
than a company one because China’s demand has been so huge that even the sick industries
like ISPAT and ESSAR they have shown growth. From red they have come back to black. It
is not a I don’t think it is a company specific slant; it is just a cycle in the industry.
You are correct in the sense that both SAIL and Tata’s have done extremely well. It
may be industry phenomena but had they not been in this business, had they not been built
this capability they would not have used the advantage that the market offers to it. ISPAT
and…Well that is not in the news. Can we can wrap up this because otherwise it will
go on and on. We will reserve your questions till the end when we come back for general
discussion okay? So thank you very much.
May I have group two please. My suggestion was someone who hasn’t presented earlier
should be a given a chance to present. Are you following the same logic? Yes sir. Good.
Good evening sir. Good evening. Good evening friends. As Mr. Amar has nicely presented
the entire case I don’t think I have got… You have got a lot more you can present nicer.
Sir. Hold the hold the microphone. No he has presented lot of facts now let let us get
some logic. Yeah. As I said this is special case house of Tata. Yeah. So what I feel,
that there are two different Tatas: one in the time of JRD and other one, which is there
right now in the time of Ratan Tata. In the time of JRD Tata there were regional stickups
like Mr. Darbari Seth, Mr. Suman Malganvkar; all these people were having the one company,
which they were managing without any central control over them. The Tata group as such
was having Tata, Tata sons was having some eight to ten percent shares. It is said that
at one time Mr. JD Birla was having more shares than Tata sons in TISCO and all these companies
were in in the sort of not exactly but doing politics among the seniors as between Russi
Modi and Suman Moolgaokar and Darbari Seth, Nani Palkhivala with Ratan Tata.
What was that? At that time company was fragmented with regionalist people. Darbari side they
are Methapur and these people at Jamshedpur. Was it the company or the group? What sir?
You said company was fragmented. Are you referring to the group the house of Tata? The house
of Tata is fragmented with different companies with different heads. All right. Then. Either
fragmented or enriched is the way you look at it is it not? I think sir that the group
was not that cohesive. Group was not that cohesive. See the point I am making. Sir then
only thing was that the a one organization that the Tata Sons was having share in all
this that is why they are part of the group and they are using Tata brand. We will have
some questions on this. He says it was really not a group. It is just that a few financial
holdings. Now whether that is right or not we will debate it. And there were as such
the people who were hand picked by Mr. JRD Tata as Darbari Seth was there in nineteen
thirty nine, he was just came back from his study and he was instructed to put up a factory
of Tata chemicals and there he and Mr. JRD they have identified Suman Moolgaonkar and
he instructed him to put up a factory for a locomotives. Like all the people were hand
picked by Mr. JRD and they were reporting to him and as such Mr. JRD was himself very
much involved with the operation of Air India and as he it is it is said that he tried he
neglected all these companies in favor of Air India and Tata steel was Tata other Tata
companies were not said that they are very much aggressive compared to JD Birla group
of company or any other company which were there at that time.
As Tata, they could have diversified but they were basically in their shell and trying to
defend themselves from others. Then they tried to come come up with new technology product
like Tata IBM or Tata Unisys but most of the in these say Tata was just like portfolio
investor with just Tata brand name there to support the international technology
and Tata was not getting anything much from that. And all these things were changed with
the Ratan Tata. He tried he came up with first he came up with Telco and he tried to increase
the cross holding and then he made, tried to take on the all these regional bosses who
were there Mr. Ajit Kerkar, Mr. Rishi Modi and all people. And it made the group cohesive
with a Tata brand name and there was a allowance for every company has to pay some money to
use the Tata brand name to Tata sons.
And then he tried to get old people out and now new professionals were there in the organization.
And now the Tata was not no more involved with all these groups where they are just
for the namesake. Now Tata having all the companies which in which in which they were
having a greater share and in the meantime they increases the overseas exposure. Right
now Tata steel is coming with a coming with a chromium Ferro chrome plant in South Africa.
They have got mining contract in Australia also and likewise Tata International has been
formed and it is regularly exporting the Tata goods and Tata Tata Suit is is the major leather
exporter from India.
All these things changed with the Tata steel and the age of the average age of the management
also came down. This is what the and now the Tata is considered to be aggressive as well
as adhering to the old values of Mr. Jamshedji Tata. And the future prospects of Tata will
depend much on the successor of Mr. Ratan Tata, that is, if it is no one Tata it will
also it will depend on the how he functions whether he is going to change the philosophy
or he will go back to old philosophy of Mr. JRD or will restrict to the the way Mr. Ratan
Tata has evolved Tata’s in last ten or fifteen years. Old philosophy of JRD or JN Tata? Sir
JN Tata was there for only four-five years before he was before TISCO came up. Who was
the founder? Don’t talk of TISCO, talk of the house of Tata. Sir, house of Tata was
there but still during JN Tata’s time they were having only few textile mills and they
were investing in Tata steel.
I will read out to you something, all right, just to set the record in order. Sir, Mr.
JN Tata died in nineteen zero three. At that time Tata steel was coming up and they were
having a few plants like Swadesi Mill and he was basically a textile trader and he tried
to invest in textile and the new factory, which was coming up. So what was what was
the vision in terms of value? Sir, what he he said that the he was like he wanted to
invest in core industry to make India self-reliant. He was after business? He was after good businesses
to make money? What was the core value? Sir sir he is. Let let someone else say it. Nation
building. Was he in nation building? Yes yes. Not to make money. No sir. Someone is in business
they have to make money. So for him ‘the acquisition of wealth was’, then he is quoting
here in quotes, ‘always subordinate to constant desire in his heart to improve the industrial
and intellectual condition of the people of the country.’ I think it was a very noble
and lofty value that he held. But he was in the business sir and his primary interest
was to take his business forward. We will discuss that.
I think there is more to it because if you can pass on, today when you talk of Tatas,
what is the brand equities that comes in your mind? Sir, high quality. What else? Integrity
does it not come? It is not easy to get this value extended over a long period of time
through the thick and thin, the vicissitudes of business. There was a very tough period
that then went through all right. What did they do at that time? They went into a defensive
mode. Did they join the pack? No sir. There was a period here when what happened to the
basic values of the country? What happened? More materialistic. What how did they conduct
their business? It is all put here in the case. What did the Tatas do? They didn’t
do anything. They just tried to keep their assets intact. All right. They went into a
defensive mode that is to protect whatever they had. Why? Because they didn’t want
to do business in the way that the others were doing. Isn’t that a value or is not
a value? Maybe he is doing it on the shareholders’ money that is what I think. You have a refreshingly
different point of view for which I applaud you, all right. Now you wrap up your presentation.
We will come into questions okay come. Sir what I think that now Tata group is going
on a good direction and I think that Tata will again regain it is number position in
India. That is it. That is it? Thank you
Okay. Any question any questions? What does chapter six say? Can you bring framework of
chapter six into this presentation? Sir, vertical integration, diversification into related
and transmitted businesses. What they were getting to which was related? They went into
steel first. What else? They were in textiles. Did they extend did they extend the textiles?
No sir. No. No they persisted with it. It is all right. What else? Sir, from HCV to
LCV. Sir they went to into the…They went into the automotive industries. They could
not extend as per as…Now, let us extend this argument. We are talking of whether they
diversified in a integrated manner or in a haphazard unrelated manner. What did they
do? Unrelated. Why why? Why did why do you say it is unrelated? Okay. All right. If he
was mainly interested in those industries which which he felt that India had a lot to
learn from the West, for example, the steel where he says that his main aim initially
was to modernize India. In order to modernize you have to get into areas, which no one else
has ventured before. By those were infrastructure areas. So that way it was related. Okay. That
way it was related. And what else? He he wanted to get into areas, which later the government
of India got it because of a regulatory requirement. Isn’t it? Then he had to they had to exit
because infrastructure, steel these were all taken into the government sector. They went
into airlines also sir. They went into airlines right in the beginning. They pioneered the
airlines industry. Sure, that is what they, that is what the discussion is. They wanted
to make a strong economic India. They went into insurance okay? Doesn’t mention here
but they were in banking too. Central bank was theirs. Okay. Central bank, New India
insurance, all these things were theirs.
What else? What else? I am surprised both groups haven’t mentioned one thing. I wonder.
They were very much in charity, sir. They, yeah, their Tata memorial hospital, cancer
and then that IISCs and all these things these all were written by Mr. J N Tata only only
and his son all this all they have implemented it. The IIC concept was at that time unheard
of even. So they did they build any culture? I mean, a brand equity, you know, it is a
part of a culture also has a very very strong contribution to building a brand equity. When
you talk of Tatas, you talk of Birlas, there is a reference to Birlas also in this case,
was there a basic difference in their values and their way? Yes. The values translate into
strategies of doing business. Tell me what was the basic difference as given in the case
between house of Birlas, house of Tatas? Professionalism and family background. Birla is mostly run
by the family members. Well, what it says is, the management and the finance, these
are run by the extended family members, not operations, management and finance. That is
the jugular vein of the business, you know, what you control.
What about Tata’s? They were professional right from the day one. Fully professional
or they were? Professional management at most of the levels. They gave scope for each company
to grow individually independently. Sir, at the middle level there were professional managers.
Okay. At the board level most of the persons were from Parsi. All right. So but most of
them were. Okay. What what did it what does the case say about the Parsi community? What
did they think of Tata’s? Was it just a company or a business? More as a charity or
they took it as a pride-Apro Tata. They would never sell you know the Parsis, any share
of Tata steel through thick and thin. So it went beyond a business. Nowadays the modern
concept doesn’t justify this. You see when you if you invest and in any portfolio you
shouldn’t be emotionally involved. You should be only cerebrally involved-buy and sell.
But at the time when the nation was being built and you had this pioneers the concept
was different of business and even the whole community went and backed up this concept
okay. I think we end here. I expect the groups that
are coming to also touch upon the various phases which took place, you know, of the
environment and how when the environment changes, how you align your strategy with the environment.
I would expect some people to say that because it started off at the turn of the century
and right up to a few years ago, this case, there were distinct phases of radical change
in environment business environment. So how did the house of Tata’s at adapt to that?
And right now they seem to be on a successful path okay?
Thank you. Next group three. What is the time? Sir, six forty. You have till six fifty. Fifty-two.
Six fifty-two you have till. Good evening sir. Good evening. Good evening friends. Well,
we were discussing the house of Tata’s. In nineteen thirty-eight, Jamshed JRD Tata
took over the reins of took over the reins of Tata house, Tata’s and…Took over the
reins, r-e-i-n-s is rains as in r-a-i-n, the pronunciation is rains. Took over the ruins.
Ruins [Foreign Language], rains. He took over the reins. Yeah reins. He took over the reins
of Tata’s Tata house and he resolved ‘to dedicate myself and the firm to the task of
carrying on Jamshadeji Tata’s vision of a politically free and economically strong
India.’ This was his vision. Our group has trying tried to align with the concepts of
chapter six that is of that is on corporate strategies. Well the broad let me first define
the, what do we mean by corporate strategies. Corporate strategies are the plans and actions
that firms take to formulate and implement when managing the portfolio business. So there
were different, there are broad types of corporate strategies. They are vertical integration
and that includes forward and backward integration, related diversification and un related diversification.
Now I would like to touch down each of these points and how the Tata group involved themselves
in these strategies. In case of forward integration I would like to take up the case of Tata Boeing
which took up the steel from TISCO and brought about so that they made then self more near
to the customers getting more near to the to the suppliers taking the steel from TISCO.
Then in case of backward integration we have the case of Tata refractories and iron ore
mines. They own they came they own the iron ore mines. They got the hold of them and they
were getting the ores from there. And also the refractories, which were an integral part
of the TISCO manufacturing systems.
Now in case of related diversification we the company is focused on strategy, on synergy
and on internal development. What do I mean by synergy is they tried to they tried into
get into some fit be get time to may be like we can take the example of Tata going into
from high high commercial vehicle to LCVs to the cars. What they had they had in common?
The distribution channel and they exploited this distribution channel and even though
they entered entered the market six months late but they managed it quite well and keep
came ahead out of it. So this was like an, this was the, this is sort of first step in
building synergy in identifying the potential for close fit among firms in different or
similar businesses.
Then we have the case of making competence hard to imitate and durable. What we feel
is the brand value that Tata’s generated was was the prime factor in making Tata such
a big big success and this came about by the, this came about by the help of the culture
that the company developed over the period of time. The people were willing to work although
they didn’t pay well, although the salaries and perks for at the, at not so attractive
but people wanted to be in in the in the Tata industries just because of their need that
the culture that prevailed.
They involved themselves in several charity institutions like the Tata Endowments, the
medicine, the cancer research institute, the national council of performing arts; they
give funds to them and they had excellent labor policies that made to work in Tata a
really cherishing experience. Then that on building on the synergy they tried to focus
on the managerial fit, strong fit among different managers that run the underlying so that the
underlying developing the underlying business is successful. In this case we can take the
example of TASS. TASS as you know is a is a sort of company it is that are that was
formed into to make people to make the underlying companies and it developed highly professional
and talented players that to cover on different Tata industries and may made it a success.
Now on focusing on internal development I would like to just explain what does internal
development means. Firms could identify and exploit an underlying technology or skill
that defines the way a product is designed or manufactured. They can start up with new
products and or services by adding value to there key activities. They can develop and
commercialize new products that borrow from the phones brand name recognition manufacturing
powers on R and D capability capabilities and they acquire new businesses that closely
match and complement from it is existing strength. He just looking on these points we can say
that Tata’s involved themselves in these in these related diversification activities
where we can take the example of TCS which was initially owned by Tata companies but
it later got into handling the phases of different companies. And we can take the example of
Tata tele-ventures and BSNL. That that is not mentioned in the case. We can take the
example how they built on this and also the case of CMC and TCS.
Now I come into the unrelated diversification. The unrelated diversification or it is means
by buying out high performing companies or the that can high performing companies in
an attractive industry or it may even buying out buying of in generating a relationship
with cash poor company that would utilize there so that to utilize their additional
funds for a quick turnaround and it may. The examples that are brought forward in the case
are: in nineteen forty-four, nineteen fifty-four Tata engineer collaborated with Daimler Benz
to introduce modern commercial vehicles to Indian road. So this is a sort of activity
that comes under this side and Tata brought the share holdings of Forbes group of companies
from the industries, UK. I don’t have proper data on it but this was one of the activities.
They had collaboration and foreign technical tie-ups with different companies.
We can take the example of Tata engineering that is in collaboration with Hitachi japan,
Tata Unisys that became Tata Bros and it is now Tata InfoTech then Titan collaboration
with Casio and McGraw Tata McGraw Hill. So these are the strat, these are the points
under diversification. I would like to just go through the benefit is of diversification
that come through when when a company goes into it.
These are the company diversifies because of because the terrain may be very attractive
or they want they get into they get to get to access the resources of the companies.
It may be because of sharing of activities. In case of attractive terrain there may be,
the reasons may be faster growth, higher profitability, greater stability. TCS immediately comes to
our mind. Then we have TISCO and TELCO. They operate on low margins and and the demand
is cyclical in terms. They have ventured into exports and they are doing very good. That
is the reason for that it that may be reason and higher profitability will be is one of
the aspects. Then, access to resources. The case of BSNL is not mentioned but as we throw
it it is like getting into the physical assets and access to markets of the telecom industry.
Then we have when we try to get technologies, skills or expertise we can take the example
of CMC. Sharing of activities like systems of integrated and outsourcing is done at TCS.
This this is this will form a very good example. Then there are some demerit is of the diversification
or costs involved in diversification. These are costs of ignorance. We can I can take
go into example of Tata Indica which was the Indica. The first model was a not very good
success because they didn’t have proper know-how about the marketing channels that
go through. Later on the Indica V two has come up very nicely after the initial hiccups.
Then we have cost of cooperation that that gets that involves I will like to take the
example.
TASS is supposed to be for all Tata companies but and the executives from TASS go into different
other companies but this feeling creeps in they they would like to go into better companies
or profit profitable companies. So this may be one of the demerits. So what should what
should the Tata’s do or what have they done to just counter these negative points? So
you have to end now. Yeah. You finished your time. The two alternatives are selective focus
on diversity diversity divestitures spin off. Selective focus means Tata’s have come up
they have come out of textile business and oil mills. They have also got out of non-core
business like cement of Tomco, Lacmay etcetera. So these these formed out the corporate strategies
of Tata and the weaknesses that we have underlined are the Tata philosophy that is is that that
was one of the reason they involved in the family was seeing the vision of JRD Tata.
They were involved in charity and trusteeship and the low turnover rate. The second rung
management they were frustrated because the key management people at the top they were
not replaced till the very old age. And it is a slow to take a change we can take the
example of Voltas. We can also take the example of two decades there there was lot of there
was sort of inactive inactivity in the Tata Tata stories. This is all I like to say sir.
Good. Thank you. Questions.
Sir. Yeah. I would like to ask him one question that at what point of time the perks and benefit
is and salaries of Tatas were not that excellent from their industry side? This is this I just
wanted to to say that they have developed the sort of company culture even they are
not as that good. I am not saying that it is it is very bad. How is it how is a related
to strategy, this question? They they have developed a a culture. No I am asking the
questioner how is your question is related to strategy? Sir. Perks and salaries and composition
is it related strategy? Yes. Yes. What kind of strategy? So answer. This is a class on
strategy. How is it related? To retain talent to attract talent, right? So…Sir, I thought
it is a little bit related to get the employee motivation also. Motivation. Motivation for
what end? So that they remain with you. Job satisfaction. They work hard they are satisfied.
Yes sir. Isn’t it? Yes sir. Now say you have competitors all around who are paying
much more than you are paying. What can be a strategy to still retain your talent? Work
culture and environment sir. Work culture and environment. So you have to work at it
and in case of Tata’s were they successful? Did they work at it? Yeah. They were because
all though they were not the pay masters, even today they are not highest pay masters,
they are not even in the high bracket they are in the middle but still they retain talent.
So, obviously as a strategy and a policy they have been able to institutionalize a good
work culture, a learning environment, which attracts, retains and grows people. That is
the strategy point. Tell me. I want to ask a question. Who was Jamshedji Tata and who
was JRD Tata? Anyone wants to answer that? Son of cousin sir. Son of a cousin was JRD.
Yes sir. So the way this case is written the first part is the Tata heritage, second part
so it is during the founders who set the heritage right? That is founder was who? Jamshedji.
Jamshedji Tata and then the next part is JRD Tata. So JRD Tata took over the reins okay?
What did Jamshedji say about his values? ‘Always sub ordinate the constant desire in his heart
to improve the industrial and intellectual condition of the people of this country’.
So and he put forward some strategies to enter into core industry core sectors. When JRD
was handing over the reins, it starts the case starts with this. What did he say? ‘Even
as I am forcing myself to slowly disappear from the Tata companies.’ What does this
connote? He was a, no doesn’t at all connote that, he is reflecting, he is ruminating,
he is sitting there. He was a man larger in size that any one else in the house of Tata’s.
JRD was a patriarch. He was the grand old man and he was absolute father figure. If
he wanted to stay he could as well have stayed and people would have been happy. But what
did he do? He forced himself to slowly disappear from the seat. Was it a part of strategy?
Yes sir yeah. Yeah what was the strategy? Because they have mentioned because lower
second rung professionals were frustrated. Right. That was a professional strategy and
is a value-based strategy. The value is what? Allow this people. Allow it to grow. Allow
the values of the founder that is his uncle, to perpetuate okay? And what does he say?
‘I am content’, he is not unhappy, ‘I am content that throughout my tenure at the
top we have maintained a clean reputation.’ Remember he could have changed that into a
dirty reputation because the man at the top decides the direction. So he says I am content
that through out my tenure we maintained a clean reputation and this is very very much
to be noticed and yet managed to succeed in business. So he has demonstrated to the world
that you can succeed in business even by ethical practices and that is why he is content. This
is part of value being translated into a business strategy, the way you do business okay?
And I am confident that though things will change after me, he knows there will be change,
but what is his confidence that our basic value will not change, will remain unchanged.
So, this is this is the core of the the value dictating strategy, you know and the strategy
dictating business plans. When he took over the reins what did he say? What did he say?
‘Dedicate myself and the firm to the task of carrying on Jamshedji Tata’s vision of
a politically free and economically strong India.’ Right. So he could he could have
inspired, Jamshedji inspired in his people to carry on the strategy. They could well
have said, ‘look, when the old man was here things were different.’ Don’t we all say
that? Ab toh now things have changed. So we will have a different strategy. Now I have
to go and give bribes and do all sorts of things. Everyone is doing it. If you don’t
do it you will disappear but they did not do it. I think this is a great example of
how values can be institutionalized and it will be carried on by another generation.
Okay?
So yes? Sir does this mean that when there is a leader and he is leading an organization
should he also keep at the back up is main the number or the people who will take his
place and views? Yes that is known as succession planning. Sir, we also discussed that case
in the class about somebody whose educational institution in Ahmedabad, when there is a
flood, I don’t remember the name of the case. There also I mentioned that we should
he has no successor in mind. That was a disadvantage. But I guess the class said that it is too
early for him to think about the success. So just want to know that what time what point
of time should a leader think of his successor or it should always be there in the back of
his mind? Well, there are two answers to it. If it is a family promoted company then someone,
as he gets older, he must think. Well if he is still capable like Mohansingh Oberoy, you
see, at age seventy well then he may think of succession planning but in a professional
run company like Hindustan lever or L and T you can’t do it. It is not founded; it
is not owner driven company. It is a professional company. Then you have to set in motion an
institutionalized steps which will automatically, the mechanisms will choose a successor like
in Lever. There is an unwritten rule in Lever that the chairman will retire at sixty. That
is rule number one. Rule number two: that the chairman must stay at least for five years
minimum preferably seven eight years as chairman because if he doesn’t is too short a time
to bring in any significant contributions to the company. Rule number three: in order
for you to get someone and promote him to chairman at age fifty-three let us say, all
right, you have to do selection, potential development of younger people to fit into
that position. Rule number four: don’t bring people from outside. Try and get your own
talent from inside. Why? Because the culture we have built as the professional company
of excellence will be maintained if you have people from the top.
So how the thread runs though? Therefore when they start, they start right from the recruitment.
They have an elite cadre, they have management trainees, they have engineering trainees.
Management trainees are rotated so that they at least know three major areas of business
before they can be selected. Along the way the screening process goes on. It is done
very efficiently. Very few companies that I know of do this process but the result seems
to have worked because you have illustrious chairman. One after the other who come, you
know, and retire from Hindustan lever at sixty only and many are picked up by their parent
Unilever for higher positions on the global scale. Yeah? So here is another example how
human resources you know, the strategy of your human resources, can be translated into
a plan and implementation of the same, okay? We will end now and after five minutes break
we will have the three other presentations okay? We will do a bit of discussion as we
go along because we may not be left with much time and the end for.