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Sujata Agrawal
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 face 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 Rs 1,500 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:
Uploaded
on February 18, 2004
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