A long time major force in India, the Tata Group is quickly establishing a global presence. Taken as a whole, the Tata Group is a global player with several of its’ companies important multinationals in their own right. Across the Tata conglomerate there appears to be a clear and common culture that has been marinating for 140 years. Tata Group argues that three things – loyalty, dignity, and corporate social responsibility – define this. To gain further into the Tata success story Growth Champions has focused on the largest business in the portfolio – Tata Steel.
Established in 1907 Tata Steel retains its headquarters in Mumbai. In recent years, the company has expanded through a host of acquisitions (including Corus in Europe), joint ventures, and associations and is now among the world’s most geographically diversified steel producers, with operations in 26 countries and a commercial presence in over 50 countries. Most notably, during a difficult period for the industry, Tata Steel has grown revenue income as well as market value, and through more efficient operations has also tripled its average revenue per employee.
Up until the late 1990s, Tata Steel was identified primarily with secure employment – ‘it had outdated processes, a large workforce and an inward looking mindset.’ Through a major re-engineering program the company transformed itself into a globally competitive, low-cost manufacturer of steel. Recognising that organic growth in India would be slow Tata Steel looked to use its financial strength and low cost operations to move onto the global stage.
The common view of M&A is that it frequently destroys value. By taking a different approach Tata have broken this paradigm – focusing on two aspects:
- Partnered M&A: As a conglomerate, Tata were able to share knowhow about effective M&A across significantly diversified operations and much of this was about how to manage the acquisition and integration by treating it as a true partnership rather than a takeover by a foreign power.
- Sustainable innovation: For Tata, acquisitions are also as much about raising the technological capability and innovation competence of the whole organization as about geographic scale. Tata recognises that it can learn as much from its partners as it brings to the new organization – reinforcing the partnering principle of their approach to M&A.
The Tata group is also known for its commitment to creating value for all stakeholders: ‘Tata Steel has always believed that the principle of mutual benefit – between countries, corporations, customers, employees and communities – is the most effective route to profitable and sustainable growth.’
Evidence of Tata’s role in the community can be seen in Jamshedpur, the home of Tata Steel and perhaps the world’s most successful company town. Tata Steel runs almost the entire city’s institutions including a hospital, zoo, sports stadium and the local utility company. The city is remarkably well run by Indian standards, with reliable power and water that you can drink. Tata Steel gently mocks all this corporate philanthropy with the slogan, ‘We also make steel’.