Tata should become an entity of the world
Ratan Tata speaks his mind on the Rs 1-lakh car,  globalisation and succession
Business Today — February 15, 2004

In many ways, 2003, was a momentous year for the Tata group. Its IT services arm, Tata Consultancy Services, crossed the $1 billion (Rs.4,600 crore) mark in terms of revenues. Tata Motors put the first batch of its small car, Indica, on European roads, the steel company, Tata Steel, turned EVA positive — quite a feat for a steel company; Tata Tea put to rest doubts over its ability to manage the global tea bag brand Tetley by successfully integrating operations; even Indian Hotels acquired a global face - American, actually — in Raymond Bickson, its new CEO, Orchestrating the moves has been the group Chairman Ratan Tata himself. Ever since he succeeded uncle J.R.D. Tata as the group Chairman in 1991, Tata has spent all his energies in trying to make the diversified Rs.50,000-crore group think and move like one. Systematically, he has ousted over-ambitious satraps, restructured the group into seven key businesses, got rid of unviable and non-core businesses and entered new economy industries like telecom, besides recently joining bands with News Crop’s Rupert Murdoch for a direct to home TV joint venture. Tata’s decade-long labour has paid off. In February 2002, when BT last interviewed Tata, the stocks of his automotive and steel companies were languishing at Rs.133 and Rs.104, respectively. Today, Tata Steel is quoting at Rs.438 and Tata Motors at Rs.486 — and not just because of the stock market boom. Rather, it’s because investors now realise that the two companies aren’t anymore the stodgy behemoths of the past, but outward-looking global corporations in the making. Tata, who intends to step down in another three years when he turns 70, has a bigger and far more tricky challenge coming up; that of finding a capable successor. On a recent Thursday afternoon at his Mumbai headquarters, Tata spent an hour-and-a half with BT’s R. Sridharan to talk about his globalisation plans, the dream small car, and succession, among other things. Excerpts:

In the last two years, there has been a very visible push to the group in terms of trying to take it global. Is it a part of a larger plan that was already in play and this is perhaps phase two or phase three of that?
The globalisation issue, or less pompously, the international issue, is something that featured in the 1980s plan (that Ratan Tata penned for the group), but was never done. Strangely enough, when I was posted in Australia in 1970, I had come forward saying that our hotel company should go abroad. At that time we had only one hotel, the Taj Mahal in Mumbai. And I remember the management saying that there was no point in having a chain of hotels. So there’s always been a view from my side that we should go abroad, and that we have not done enough. We revived it in the 90s when we started to restructure and said that we should look at going abroad, but again we were overtaken by the downturn in the economy and our preoccupations in India.

If that hadn’t happened, would you have started globalisation earlier?
Oh yes, And what the downturn did was to accentuate the need to have a market outside India, so that you didn’t have all your eggs in one basket.

A lot of people tend to define globalisation pretty loosely. What is your definition of globalisation, or internationalisation as you said? Is there a threshold that would mark the Tata group having become global?
No, if you are looking for a quantified definition. A qualitative definition would be when the Tata group as a whole is an Indian company but doesn’t have a definition of being in India, in the sense when it has operations in different countries of the world, some maybe different from what they do in India, where manpower and management has a Chinese face, an American face, an Indian face that signifies that company, and we no longer are saying they are expats. We would be truly global when we are an international company operating in many geographies or several geographies, becoming an entity of the world, if you like, rather than be an Indian company located in different countries.

How easy is that going to be, considering that two of your biggest companies are in the manufacturing sector? For example, unless you start acquiring plants abroad, how do you think Tata Steel can become global?
I think we have to look at acquisitions and JVs as the two ways to go in steel and for that matter in automotive and auto components. As far as companies like TCS are concerned, again acquisitions and increasing entities in those countries that have the face of that country will be needed. If we are going to China, we should have a Chinese face, not necessarily an Indian face in China; we should be like a Chinese company. If we are in the US we should be like a US company, but owned in India. That in my view is the path we need to take.

Tata Motors is making some big moves. It has signed an MoU to acquire Daewoo Heavy Commercial and it has a tie up with Rover to export Indicas, besides an assembly line in south Africa for commercial vehicles. When BT last interviewed you, (in February 2002) you said you would be happy if Tata Motors managed to get a niche for itself in the global market. Do you think these are indications of that happening?
Yes, I do. I think we have a lot more to do, but yes we have planted the seed of having that happen. Initially when we went into the car business, I thought we would have products in each of the segments-the low end to the high end. But the way consolidation is taking place internationally and the kind of economies of scale that exist, I realised that we could never match that. That we could never be as fast in bringing out new products in all those segments as I had visualised. So we have to confine ourselves to being leaders in niche areas where we have the greatest edge and that edge is the ability to design and develop products at the low end and produce good value for money products at lower volumes.

Your dream has been to give India a one lakh-rupee car. How close are you now to realising that dream?
We wouldn’t like to say whether we are close or not close. We have a team working on it. It’s an exciting project because it is a clean-sheet-of-paper project. It’s going to be a new car in terms of material and in terms of the structure of the car. We are looking at things like, do we need to weld the body or can we use adhesives? We cannot look at it as taking a conventional car, striping it down and getting it down to that level. It really has to be "let’s do it differently". I would imagine in another six to eight months, we would have figured out which way we are going and then it would be an issue of proving the concept.

I read a news report today about Tata Motors becoming the number two car company in terms of sales. Two questions: What are your chances of becoming No.1 by replacing Maruti Suzuki, and by 2008 where would you like Tata Motors to be?

BecomingNo.1 would depend on our really breaking new ground. We’ll have to grow in the segment. Today, we have 20-odd per cent market share. So how much will we grow? It will have to come out of our eating into somebody else’s piece of cake. I think the real possibility of becoming No. 1 is if we break new ground. Are we able to do what I hope we can do and that is to introduce a vehicle that is between the lowest-priced car and the motorcycle and address that market, which I think is huge, and support it with the right kind of credit, to enable the young Indian and the family to migrate from the scooter or motorcycle to a four-to-five-seat car, which will give him an all-weather transport with a certain degree of safety and meet emission standards. If we can do that, I think we can definitely be No. 1. I mean, you can coast up from the goal of rs.1 lakh and end up with Rs.2 lakh, but then you don’t achieve what you set out to do. We could have had a car at that level much earlier. Then you are just below Maruti or something…you are just another car company. Here we really need to push ourselves to be different