Ratan Tata and his enterprising skills

Bipasha Bardhan

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Introduction

This paper will discuss an exceptionally enterprising individual Ratan Tata (RT) and his unquestionable
entrepreneur skills , who has piloted TATA Group into a corporate giant today.

The Indian economy is now the fourth largest and the second fastest growing in the world, while in
2007, 36 Indian business leaders recounted among the world’s emergent group of billionaires
(Economic Times,2007).Entrepreneurship is an inherent part of the India , born of historical economic
necessity. Whilst in the 19th century, Indian enterprise had consisted “almost exclusively *of+
mercantile, small scale, family firms” (Misra, 2000, p.334), by the latter half of the 20 th century, some
of these enterprises had been transformed into large business conglomerates with global reach. Tata,
India’s largest private-sector employer, and now a widely recognised industrial giant in the global
economy, whose contribution to India’s Gross Domestic Product (GDP) in 2004–05 amounted to 2.8%
(US$17.8 billion),presents a “most outstanding example of the entrepreneurial dynamism present
among indigenous business groups” (Misra, 2000). Founded by Jamshedji Tata in 1868, at a time
when the nationalist struggle was in its infancy, the group’s mission was infused at an early stage
with the ethos of nation building(tata.com).

The Tata Group is almost 150 years old. It currently comprises 96 operating companies,3 which
together employed some 330,000 people and had revenues of US$28.8 billion in 2006-07, the
equivalent of about 2.9% of India‘s GDP. Tata is active in seven major business lines: information

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systems and communications, engineering, materials, services, energy, consumer products and
chemicals. Its 28 publicly listed companies have a combined market capitalisation of US$47.6 billion
that is the highest among Indian business houses in the private sector, and a shareholder base of over
2 million. The Group has operations in more than 54 countries and its companies export products and
services to 120 nations (tata.com).

Ratan Tata, the son of one of JRDs cousins was a candid man and a shy, soft spoken individual. He
graduated in Architecture and Structural Engineering from Cornell University in 1962. On his return to
India and he joined Tata Steel and was sent to work on the shop floor in Tata Steel for 3 yrs. He was
nominated as chairman of undersized Tata Industries Ltd (TIL) in 1981, which he transformed into a
group strategy think tank. When Ratan Tata took over as chairman, the Tata Group seemed on its
way to disintegration, with powerful CEOs running some of the Group companies like their personal
fiefdoms and challenging the core structure of the Group. Ratan Tata implemented a number of
strategies to unite, refocus, and modernize the group. Ratan Tata is widely recognized as the person
responsible for transforming the Tata Group, a large India-based conglomerate, from an
unmanageable group of businesses into a relatively more agile group of companies better prepared
to take advantage of opportunities. This paper discusses and analyses his attempts to change the
processes, people and work culture at the Group companies keeping in mind the different cultures in
India.. It explains the steps that he took in order to bring in professionalism in the Group. It briefly
examines the two directions for growth – Corporate Entrepreneurship and innovation and - that he
opted for the Group companies (Lala, Dutta, Piramal).

Analysing Ratan Tata (RT): His Corporate Entrepreneurship and Innovation

Entrepreneurship has been described as the key component under pinning innovation by many
authors.(Amit et al., 1993; Drucker, 1985b; McGrath, 1996; Stevenson and Jarillo, 1990), which also
reverberates with Schumpeter’s (1961) vision of entrepreneurship, as the primary catalyst for
innovation. Most of these perceptions are, however, concerned almost absolutely with
entrepreneurial activity as a fundamental change mechanism. Some of the evidence suggests that
there are many exceptions (Afuah, 2003; Tidd et al., 2001). Kirton (2003) suggests that problem
solving and developing solutions differs from person to person . He recommends a continuum of
thinking styles ranging from adaption to innovation. On the contrary, corporate entrepreneurship is
believed to uphold entrepreneurial behaviours within an organisation (Echols and Neck,

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1998).Corporate entrepreneurship can be described as the endeavour of promoting encouraging
innovation from an internal organisational viewpoint, through the evaluation of budding
opportunities, alignment of resources, utilization and commercialisation of said opportunities. Ratan
Tata can be defined as a complete corporate entrepreneur and innovator and this paper is going to
establish that through description and evaluation of his range of strategic moves and decision
making.

Streamlining The Strategy and Mission Statement

RT initiated the restructuring of TATA shortly after he took over because he felt the vast diversity of
TATA Group was diluting the market responses . He elucidated the needs of remaining focused
rather than diffused, and he insisted on more aggressive attitude towards the growth and market
share .

The aspiration which triggered off restructuring has been described as (a) Returns must be greater
than cost of capital; (b) Each company must be the industry leader occupying one of the top three
positions; and (c) The business identified must have potential for high growth and should be globally
competitive (From the Internal Company Journal) . Once the goal has been set, strategies were put
together for exits and entries . A new scientific and rational approach has been introduced in the
company. This perfectly describes how an able entrepreneurs exercise their vision to motivate
employees, inspire them to meet the challenges and to “facilitate their attempts to achieve more
than they thought possible as they strive to help the firm reach its vision” (Kuratko et al., 2001, p. 62).
Ratan Tata chosen to shake off the businesses of soaps and toiletries, cosmetics, consumer
electronics, pharmaceuticals, computer and telecom hardware, branded white goods, paints, oil
exploration services, cement, textiles ... likewise enthusiastic on his spreading out into lucrative
businesses like passenger cars, auto components, retailing, telecom, power and
insurance(Lala,2004).

Umbrella Branding

When Ratan Tata took over the chairmanship of Tata Steel he realised that the group need a stronger
brand identity and he decided to endorse Tata Brand as an umbrella brand for the entire group
which eventually subscribed to the Tata Brand equity scheme. This decision reflects a strong
corporate innovation and entrepreneurship as it is also accountable for motivating innovation within
the organisation after assessing potential new opportunities, resource acquisition, implementation
,exploitation and commercialisation of the new products or services (Guth andGinsberg, 1990;
Kuratko et al., 1990; Sathe, 1989; Stopford and Baden-Fuller, 1994; Thornberry, 2003). Each

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company that subscribed to the scheme would derive the benefits of the centrally promoted Tata
brand. RT recommended that the subscribing Tata companies expected to contribute , and the
contribution would depend upon each company’s association with the brand(Lala,2004). Tata Sons
considered to use the contributed amount to build a national and later international group brand
image by accentuating the core values and ethics, mostly through advertising. The cost estimated
by Tata Sons for significant domestic brand promotion was Rs 300 million per annum, much more
than the commission collected. A resolution has been passed the board of directors of various Tata
companies in 1995 in accordance with this arrangement. However the scheme engender debate in
the media but The Tata Brand transpired into a seal of trust .

The resurgence of Tata Administrative Services (TAS)

TAS, a department of Tata Services Ltd is recognised as one of the most distinct management
recruitment consultancy since 1950. TAS had been successful in recruiting and retaining the
endowed individuals who had been employed for management career acceleration in group affiliates
,but the reputation got weakened in due course of time. RT take a turn for the betterment of TAS
and projected it as a ‘premium career’ among budding business leaders by making extensive use of
media(Kakani, Joshi, 2008). He gave a face lift to TAS by expanding opportunities, enhancing work
culture and remuneration package .TAS has been acclaimed by the individuals, corporate and the
group. Zahra (1991, 1995) explains that corporate entrepreneurship also incorporates diverse
approaches and actions that heighten a company’s ability to take risks, take hold of opportunities and
innovate.

Tata Sons went Public

Tata acquired marginal shares in group companies ranging from 0.01% to 15% through its primary
holding company Tata Sons. Tata Sons decided to raise a total of Rs. 7 billion in 1995-96, to increase
1% in stake in each of the major Tata companies. In order to increase the funds, they encourage
subscriptions to a Rs. 3 billion rights issue on September 1995(Khanna, Palepu,1998). The shares
were obtainable by Tata group affiliates (at a premium) The surplus money generated internally and
through various approach. Legally TATA Group was entitled to purchase TATA Son’s share ,but
exchange of shares between two companies under one group was not legal. The deal was not
encouraged by the financial analysts as a potential investments but RT asserted that the investment
will be worth and appreciated once the TATA Son’s share go public, and he proved accurate in due
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course of time. This decision emphasised Mr Tata as a strong innovator , because according to
(Bessant, 2003; Kirby, 2003; Zahra, 1996). Leibenstein (1968, p. 73), corporate entrepreneurship and
innovation is “The activities necessary to create or carry on an enterprise where not all the markets
are well established or clearly defined and/or in which the relevant parts of the production function
are not completely known” .

Bringing revolution in Automobile Industry

RT was the first Indian entrepreneur who pioneered and revolutionized the Indian Automobile
industry. The critic was not in favour of TATA Indica when it was launched on Indian roads in 1998
due to its start up technical problems .The credit goes to RT that due to his thrive for excellence the
car has been accepted unquestionably by everybody in a very short period. This was followed by the
unbeatably champion TATA Indigo which is maintaining its supremacy till date . Indigo XL was next
luxurious version of this car brought in by TATA Group. Under the leadership of RT TATA made it to
Korea and acquired Daewoo motors heavy vehicles division. While acquiring the Jaguar or Land Rover
he declared that he’s not planning to overhaul senior management, close factories in Britain, or cut
workers(The Guardian). He doesn’t seem all that concerned for immediate profits – just as he doesn’t
anticipate immediate returns from the tiny Nano car he hopes to launch by year’s end. Instead, he is
expected to use the brands and their U.K. plants, executives and labour to help build Tata Motors,
which had $7.2 billion sales in fiscal 2007, into a global car company. Like the 24,000 people who
worked for Corus, acquired last year by Tata Steel for £6.7bn, Britain has become an "in sourcing"
hub for Ratan Tata a base for foreign operations of an Indian multinational(The Guardian. The Times,
Bloomberg). One of his most historical entrepreneurial move is to launch world’s cheapest car
NANO on Indian road shortly which he has branded as a ‘People’s Car’. His strategic reasoning behind
the launch is to take hold of a large market at the bottom of the pyramid, in India. The other
important reasons behind launching NANO is highly praised and talked about throughout the world ,
which is his genuine concern about the Society and his social responsibility. He wants to ensure the
safety of million Indian families who are presently riding two wheeler in a group of four or more at a
time which is extremely unsafe. He wants to provide them an alternate vehicle which is safe and
affordable and that inspired him to launch NANO. He has launched NANO keeping the Indian culture
in mind. The product are also extremely important for the organisations to measure their success or
failure and (Bessant, 2003; Tidd et al., 2001; von Stamm, 2003) and innovation is much extensive
than the process (Amabile,1996; Couger, 1995; Rhodes, 1961). These statements describes the
perfect innovator Mr Ratan Tata and his historical move to launch ‘NANO.’
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Conclusion

Ratan Tata is well known and highly praised for his extraordinary vision, risk-taking ability and high
ethical standards. Many of the Global leaders highly praised Ratan Tata as one of the most successful
and adorable entrepreneur and innovator .. A range of definitions tried to explain innovation, which
resulted to a greater ambiguity (Garcia and Calantone, 2002). A variety of theory and models have
been created in the literature suggesting that innovation is made up of diverse phases: creation of
ideas, research design and development, prototype production, manufacturing, marketing and sales
(Dooley and O’Sullivan, 2001; Knox, 2002; Poolton and Ismail, 2000; Rothwell, 1994) which is clearly
reflected in Ratan Tata’s decision making and implementation. USC President Steven B. Sample said ,
“Ratan Tata is highly esteemed, certainly in India, but in the rest of the world as well for his
extraordinary talents as a business leader and his dedication to humanitarianism,” said. Mukesh
Ambani, Chairman and Managing Director of Reliance Industries praised : “He [Ratan Tata] comes
across as an individual with clarity and conviction, a business leader with vision. Ratan Tata has
steered the Tata ship in turbulent times. ...above all, I have an immense admiration for Ratan Tata,
the man, for his unassuming and warm nature, an outstanding business leader imbued with social
concerns and committed to uphold ethics and values." Henry Schacht, former chairman of Cummins
Engine, USA , complimented "[Ratan] Tata understood what needed to be done and how it needed to
be done."

A philanthropist all his life, he created a trust fund for the advancement of learning and for the relief
of human suffering and other works of public utility. Ratan Tata is a visionary entrepreneur and
leader who has excelled in every component of innovation to pass benefits to mankind, in addition
to business and industry .

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