March 2004 | Sujata Agrawal
Tata International has emerged as the global face of the Tata group
The first thing that strikes you about the Tata International office at Mumbai is the big gleaming Tata logo at the reception. The respect it inspires is what the company aims to carry to all corners of the world.
From a humble beginning as an export company, selling Tata Motors trucks to Zambia, Tata International has evolved into a multi-business, multi-presence entity and the international fate of the Tata group.
"Earlier, we were the only group company to be involved in exports. Subsequently, it was expected that we leverage our presence abroad to not only buy and sell but also look for business development opportunities for the group companies. And that is exactly what the company has strived to do," says Sudhir Deoras, managing director, Tata International.
When it started, Tata International, then called Commercial and Industrial Exports Limited, was fashioned on the Japanese trading houses. Governments supported trading houses because of the foreign exchange earnings that they could bring in.
At that time, imports were difficult. Self-reliance was the credo of the Indian government. It was the regime of very high import duties and restrictions on imports. But exporting houses could trade the Special Import Licenses issued by the government and it soon became a big source of income for them. The larger the exports, the higher the benefits. Tata Steel and Tata Motors, the major exporters in the group, supported the company by routing their trade through Tata International. The company was able to open offices in many countries and became a Golden Super Star Trading House.
In the 1990s, India started participating in the world economy. As the country opened up, the import restrictions and need for licenses disappeared. The company realised that it would have to change its business model to keep up with the times. It did not make sense for Tata International to be a link in the cost chain any more. It was then that the company conscientiously started seeking to create value for group companies and other partners in trade. "The place to begin is with the value chain in order to identify what contributes to customer value," says Mr Deoras.
"It is no longer about just routing and collecting a percentage. With some companies we work on a commission and with others we take a position, we buy products and then sell them elsewhere. While some companies want us to explore markets for them, some want us to source raw materials and components for them, and we identify opportunities to form joint ventures for others," he says. Tata International’s role today is to identify opportunities for group companies in various trade blocs. The company does not confine itself to the interests of its own products and services only. It can thus be called the business gateway for the group.
For instance, Tata Steel had been exporting its products for many years when Tata International offered to take over this activity. Its rationale was that it could replace Tata Steel’s agents in some of the countries and also bring about cost reduction by increasing the business. It could also increase the steel trading business by sourcing not only Tata Steel products but also non-competing ones from other steel companies. The plan worked successfully. Last financial year, over Rs1,500 crore worth of steel products were traded and this year the company hopes to improve upon this substantially. Tata Steel does not have an exports department for steel and minerals now, as this activity is being done by Tata International. The company aims to bring similar advantages to other group companies.
For Tata Motors' spare parts, Tata International created an excise bonded warehouse facility in Pune so that the company could focus specifically on the export of spares. "This led to huge savings for Tata Motors, which the company can pass on to its customers. It has also led to improved service levels," says Vivek Tamhane, vice president, commercial, Tata International.
"Tata companies, which have their own export set up, work with us because of the value we add to their work," says Mr Deoras. This value lies in the many facilities that the company offers. It has a network of offices in 22 countries around the globe. Individual Tata companies use this network for products as varied as steel, minerals, automobiles, leather and IT, thus avoiding setting up of their own infrastructure.
The network comprises business entities that are subsidiaries and representative offices. This worldwide presence enables companies to avail of lines of credit that are cheaper than the credits available in India and leverage Tata International’s expertise in logistics management, documentation and incentive management. Tata International facilitates exports from India and seeks opportunities in new or emerging markets. The focus is at present on the Middle East, the West Asia North Africa Region (WANA), SAARC and the CIS countries, in addition to its traditional focus in Africa and South East Asia. Tata International has opened an office in Kabul in Afghanistan recently.
"It's no longer about exporting from India to Africa. Today we can trade between Africa and China or between Hong Kong and Dubai. We are finding inter-regional opportunities," says Mr Deoras. He views China more as an opportunity than a threat.
Mr Deoras says that a global company is one that examines each stage of the value chain and tries to identify how and where it can make full use of global opportunities. "It should examine the best places for research and development, procuring inputs, manufacturing, sourcing customers, raising, recruiting employees and so on."
For instance, in the case of Tata International’s leather business, the raw material is often sourced from countries like Saudi Arabia and Bangladesh and the financing can be from Hong Kong. The leather can be finished in India, the products can be designed at their design studio in Italy, converted into products in India or China and sold in Europe and the US. Deoras sees Tata Steel’s initiative in South Africa and Tata Motors' plans in Korea as great steps towards globalisation.
Mr Deoras believes that while the onus for globalisation rests on individual companies, Tata International can participate to help the Group achieve its globalisation goal. He lists the five capabilities required for rapid international growth: strategic thinking on a global basis, effective management of alliances, staffing capability through expatriation and localisation balancing, creation and transfer of knowledge and continual adaptation of an organisation structure to meet shifting needs. These capabilities can be provided or built by Tata International, based on their individual companies' requirements.
For Tata International, business growth is very important to keep it commercially viable worldwide. An active presence in 22 countries allows the company to be in touch with ground realities around the world, necessary to scout for business development opportunities for the Tata group.
Tata International worldwide is already a billion dollar company. "But our new vision does not talk about size. It talks about the bottomline," says Mr Deoras. The company’s vision is to generate a $25 million annual profit by 2008.
But in the midst of its growth plans, Tata International is taking care to ensure that the focus remains on the group as a whole. "Outside India, Tata is the brand," he points out. "Customers abroad don’t differentiate between Tata companies. The Tata name alone assures group companies a warm welcome."
Armed with the strength of the Tata brand and the value it can bring to its customers, Tata International is geared to help take the group further in the global arena.Other articles on the Tata group and globalisation: