3. FOUNDATION CONSOLIDATION EXPANSION
1868-1931 1932-89 1990 onwards
The Tata group ventured into The liberalization of the
The seeds of what would
new areas and built on the Indian economy unleashed a
mature and become today's
foundations, in spite of the period of remarkable growth
Tata group were laid long
restraints imposed by a for the Tata group, in India
years before India became
controlled economy. and worldwide. Tata
independent.
ventured in to numerous
1932- TATA Airlines mergers and acquisitions in
1874- Central India Spinning,
1939- TATA Chemicals the late 1990s.
Weaving & Mfng Company
1902– TAJ MAHAL PALACE 1945- TELCO
1952- LAKME 1995- TQM Services- JRD QV Award
1907- TESCO
1954- Voltas 1996- TATA Teleservices
1910– TATA Electricals
1962- TATA Finlay 1997- TATA Indica
1911–Indian Institute Of
1962- TATA Exports 2000- TATA Tea
Science
1968- TCS 2001- TATA AIG
1912- 8 hour working days
1977- TATA Electric 2006- TATA SKY
1917- TATA Oil Mills

7. 1. “THE TATA BRAND”:
Tata Sons to undertake the responsibility of centrally promoting a unified
Tata Brand which could be used by all the companies that subscribed to the
Tata Brand Equity scheme.
Implication:
Companies can operate synergistically with each other. Participating
companies would ensure uniformly high standards of quality and ethical
business practices. Companies can take advantages of the opportunities
and ward off the competitive threats that have emerged with the
liberalization of Indian economy. It would help them rectify lack of
coordination among Tata companies. Tata is perceived as a producer of
cheap products for the general welfare of the people and asking self-
established brands like Taj, FastTrack, Wills to shred off their premium
brand image and accept Tata’s brand image may hamper their market.

8. 2. RESTRUCTURING:
He wanted to focus their scope of businesses by chopping off businesses in
the unattractive sectors. He sold the loss making Tata Oil Mills Company Ltd
(Tomco) to HUL and also favored merger of Tata's three electrical
companies.
Implication:
It helped in converting the Tata group into a tighter and leaner
organization. The objectives were to make profits, to be among the top
three in whatever businesses they were in and produce world class
businesses. Side by side he looked for entering into sectors of high growth
potential like auto, retail, telecom, power and insurance. It was helpful in
avoiding capital and other resources from being used inefficiently in
unproductive businesses and concentrating them to those sectors which
could benefit both the society and the group.

9. 3. THE JARDINE MATHESON DEAL AND INCREASING TATA SONS INVESTMENT
CAPABILITIES:
Tata Sons determined that they would need to raise a total of Rs. 7 billion in
FY95 and FY96 to realize 1% stake increase in each of the major Tata
companies. They offloaded the stake of various charitable trusts at a
premium to the Tata Group affiliates. He also sold 20% stake in TIL to Hong
Kong based JM group for Rs. 1.26 billion.
Implication:
They can use the proceedings to fund venture startups promoted through
TIL and can use the expertise of JM in retailing and distribution, real estate,
hotels, engineering, construction and financial services. But excessive cross
holdings could reduce the autonomy that was earlier enjoyed of the
chairmen of the affiliates.

11. IN 1970: Semblance of unity was maintained by network of inter-corporate
holding, weekly cross-company directors' meeting, and J.R.D's dynamic
personality and moral force.
The chairman of larger Tata companies had grown accustomed to ruling their
empires without interference from the Tata’s for decades.
It will be easier for Ratan Tata to develop the group brand if the companies
are more closely held but it will defeat the vision of JRD Tata to foster the
entrepreneurial spirit with the belief that it was main ingredient in the
outstanding success of the Tata companies.

12. Some of the critics of the idea of developing “The Tata Brand” were:
a) Some resented Tata Sons' attempt to assert itself beyond the
limits of an ordinary shareholder.
b) Some were doubtful of the link between the brand subscription
and an immediate benefit to their individual companies.
c) Few claim that the Tata name had not necessarily been the reason
for the success of their companies.
The main purposes to encourage companies to develop Tata brand was to
maintain the entrepreneurships along with the Tata brand.

13. Equity interlock is the phenomenon where firms are frequently linked to
each other both directly and indirectly through equity holdings. In case of
Tata group, the ownership was of both pyramid and cross-holding
structures.

15. Some of the positive interpretations of the equity interlock in the Tata Group
and its affiliates are
1. It made the affiliated Tata group companies to work in a cohesive and
controlled manner and thereby eliminating the pre existing competition
between them in the same business lines. It also increased the debt
bearing capacity of the affiliates.
2. Cross holdings among group affiliates was used to sponsor new ventures
and to expand in the existing projects.
3. It brought a wide scope of knowledge into the table as the board of
directors of Tata Group came from diversified businesses.

16. 4. An indirect control exercised by Tata group through the pyramidal
structure helped them to take major decisions over the affiliates
without having a significant equity investment in them.
5. The increased complexity in the cross holdings among the group
companies is a classic counter strategy against hostile takeover bids.
6. It could help the affiliates to gain dividends from an out performing
stock of another affiliate.

17. The negative interpretations of equity interlocks are as follows:
1. When at first the shares were made available to Tata group affiliates they
were priced at a premium and were made out of dilution of the stakes of
the charitable trusts. The valuation was not fair and it was meant to serve
the purpose of the Tata group as a whole without much consideration for
the group companies.
2. From exhibit 8a, it is seen that Tata Group instead of investing the raised
capital into ways of multiplying them, has used it to increase its share in
the group companies.
3. If a affiliate would perform badly, its stock prices will suffer and this may
lead to capital losses of affiliates investing in it.

18. 4. It can lead to decreased competition between the two companies of
the same group which is sometimes essential to keep them on their
toes; the raw materials may be sourced at a cheaper rate thereby
causing losses to the producer of the raw materials and instead of
purchasing those through cash there may be illegal exchange of
group’s shares.
5. As the group directly or indirectly can control the decisions of its
affiliates, this would decrease the autonomy of the heads of these
affiliate companies.