March 2004 | Ratan Tata

Driving global strategy

Is globalisation an imperative in today's business? What are the challenges that define this path? Ratan Tata shares his views on the subject

What are the key facets that differentiate a truly global corporation? How would you define the Tata group within this context?
Global companies are differentiated by their strong global position, global assets, capabilities, brands, and their relative resilience to shocks and even to the business cycle. The Tata group has begun its journey towards globalisation.

Is the Tata group global as a whole or do its individual companies make it global?
A company does not become global by simply participating in a certain number of geographic markets. In that sense, it is not a sum of parts. It is its ability to become globally competitive, leverage global opportunities and have the required global capabilities that make it global. We are in the process of acquiring such a competitive position and global coordination capabilities, both at the individual company level, as well as at the group level.

A global company does not allow the legal and political environments of any country to affect its fortunes. Comment.
Understanding country risk and preparing for it is crucial for a globalising company. There is a portfolio of opportunities and related risks that will need rebalancing from time to time. So legal and political environments do affect the group fortunes but globalisation also offers new opportunities to diversify.

How does a global corporate leverage its brand across the markets it serves?
There is a major task in taking your national brand to the global stage but branding is surely a strong driver to globalise. Global corporate brands can cut costs to enter new markets and allow the company to attract good partnerships as well as talent. The Tata group has an opportunity to further expand its brand in sectors where it is increasingly recognised internationally, such as software and hotels, and to leverage its historical brand presence in various countries, especially those with strong Indian roots.

What are the critical elements that determine a global company's strategy?
The objective of globalisation is to move towards becoming globally competitive and to expand your market. The globalisation strategy itself could be asset-based, capability-based or opportunity-based. It also includes global employment. It implies an organisation, which employs people with no national barriers. Different Tata companies are in the process of developing their strategies with such factors in mind.

Do you think a transnational company's ability to leverage its financial strength is crucial for globalisation?
Financial strength is clearly important in sustaining entry into new markets abroad especially where strategy dictates investment in brands. At the same time, due importance should be given to good management capability that can lower the cost of succeeding in new markets.

What is the typical risk mitigation strategy of a global company and what are its key determinants?
Risk mitigation follows from becoming more competitive, and global companies have more tools that they can use to increase competitiveness and to protect current markets. As examples, global companies can attract stronger talent, enable cross-learning across markets, have greater opportunities to service and develop capabilities for global customers, and can invest more in R&D that can be spread over larger markets. Further, global companies can act in multiple markets to retaliate against increased competition from other large companies in any given market.

Other articles on globalisation:
Global corporation — JJ Irani
The challenge of growing — R Gopalakrishnan
Truly global — Kishor Chaukar
Empowering people — Satish Pradhan
Legal recourse — Bharat Vasani