Author: Dheeraj, Facilitator, The CEO Insights
The TATA Group, one of India’s largest business conglomerates, was established by Jamshedji Tata in the second half of the 19th century. After Jamshedji, Jehangir Ratanji Dadabhai (JRD) TATA became the Chairman of the TATA group and played a significant role in continuing the vision of the group. In 1991, Ratan Naval Tata took over the Chairmanship from JRD Tata. Although he was initially criticized for poor performance, over the years, Rata TATA disapproved his critics. He restructured TATA group’s business operations and made the group compete globally. However, as the Tatas lack as heir who can succeed Ratan Tata, the group is at a crossroads to decide who will be the next chairman and would carry forward the vision of the group.
Growing has become very important in the era of globalization. Big corporate use various routes to grow which are based on cased based factors. But major growing routes can be classified into the following two types:
· Organic Growth
· Inorganic Growth
Organic growth is the rate of business expansion through a company’s own business activity while Inorganic growth means that the company has grown by acquiring or merging with some exiting company. Sometimes this kind of growth may take place due to government directives, leading to enhancement of business in some identified priority sector/area. The inorganic growth rate also factors in the impact of foreign exchange movements or performance of other economies. It is also a faster way for companies to grow compared with Organic growth (where main focus is productivity enhancement and cost reduction).
Growth Analysis of TATA Companies
TATA group is shining and contributing to the Indian growth in a significant way. On the basis of the analysis that has been done on 7 TATA group companies, the following table has been prepared. This gives complete information related to the growth strategy that the company is adopting, the financial trend (based on past data) and the future prospects including suggestions.
So, looking at the above table, it can be said that out the 7 TATA majors that have been selected, there is no company which has not taken inorganic route for growth. TCS started taking inorganic route in 2000 whereas TATA communications started it a bit late. But good news is that early or late, inorganic growth strategy has helped TATA group companies to look forward for a brighter future.
Individual Company Analysis
· TATA Motors
New product launches and the recent takeovers are the mantra of the success for the company. With TATA Nano in the pipeline, future looks great and promising to the investors
TCS has been involved in Acquisitions since long. In the past 7 years the company has acquired 13 companies worldwide which is obviously explains their financial graph
· TATA Power
The company is able to earn a stable growth trajectory with the help of joint ventures and acquisitions.
· TATA Steel
Inorganic growth seems to be the key for the company’s success.
· TATA Tea
This company has not seen any major acquisition after it acquired Tetlay in the year 2002 and after that the revenues are ever increasing. But as now the competition is increasing the company shall look out for new hangouts to for leverage.
· TATA Chemicals
Looking at the above factors this can be clearly concluded that TATA Chemicals Ltd. has got leverage through inorganic route. This is depicted in their financial performance also.
· TATA Communication
In spite of taking full advantage of the globalization the company is not able to take full leverage from that and its declining gradually. However, their business suggests that they should definitely acquire companies so as to achieve more penetration in the world market. Keeping in mind investments and the planning of the company, they are expected to shine in future
After 16 years as chairman, Ratan is thinking of retiring. During his tenure at the TATA group Ratan evolved to be one of the most respected corporate giant in India. The TATA’s family tree ends with Ratan who is single and childless. Now even Ratan tata acknowledged that “Secession is a problem”.
Ratan has said that he would stay for two more years till he chooses a successor. There is a lot of speculation as to who will be the successor after his planned retirement in 2012.
Details of the Author
Facilitator, The CEO Insights.
MBA Finance from IBS Hyderabad.
The author can be contacted on: email@example.com; 09951671790