1. House of Tata, 1995: The
Next Generation Case
Analysis
Presented By:
Group 8

2. REASONS FOR SUCCESS

“Ends never justifies the means” – Ethics

JRD’s personality, Complete authority, independence

Entrepreneurial spirit

Family held business, Tata sons holdings and investment
capability high

Diversification – British’s “Managing Agency”

Expanding business and phasing-out non-profit making divisions

“Warm relationship with the Indian Government”

Hand-picked managers

Trusted manager’s decision

Risk-taking ability and decisions, N.A. Soonawala excerpt

3. ANALYSIS OF STRATEGY

Scholarship to students – locking managers with TATA group

Raw material for 1 division produced by another division,
hence high intra-business contracting (Internal transaction
cost < External transaction cost)

Threat of hostile take-overs eliminated by holding substantial
shares

TAS Management development program, compensation among
top 10 percentile (currently below 35% percentile)

Extensive investment in the growth of managers (“Shaped
managers as TATA wants”

Divisions diverging, hence created TATA brand strategy to
integrate values and create single strong equity

4. COMMON BRAND?
•
Under the one
mutual benefits.
brand
the
companies
could
derive
•
A single brand name would give the companies a high
credibility and thus any new startup within the group would
benefit from this by attaining high initial.
•
Rotation of executives within the group companies.
•
A common code of conduct, a common set of rules and a
common set of guidance would facilitate high quality and
ethical practices.
•
By paying a nominal amount to the Tata Sons, the companies
under the group would cut down on their individual
advertising budgets.

5. New growth opportunities or enhancing
group control over companies

More emphasis should be given on enhancing the group control.

Lack of coordination could cause the companies to compete against
each other. Different companies will have their own growth plans
which would be conflicting in nature. E.g.- Tisco, Tata Chemicals and
ACC established huge cement plants which could lead to a conflict in
future.

With group control, the different companies can venture into separate
markets, focus on a particular segment thus decreasing competition
among themselves and benefitting as a whole.
• Minority shareholders:

There was no immediate benefit of adhering to a common brand for
the companies with short term investment goals.

Shareholders were concerned whether the contribution that they pay,
could justify the benefits that they will receive.

6. Effect of sale of one of the key companies

Sale will not compromise the effort to strengthen control.

Loss making Tata Oil Mills Company Ltd. was sold.

Reasons:
• By selling the companies in few sectors which weren’t profit
making, the group could rather stay focus than being diffused.
• Capital could be raised to invest in new ventures and also already
established industries could be expanded.
• Ratan Tata also sold a 20% stake in TIL to a HongKong based Jardine
Matheson group.
• This contributed to bring in expertise in different business
activities, explored potential synergy between their financial
businesses.
• Also it helped the company to gain exposure to global market and
helped Tata group in funding long-term plans.

7. Enhancing control or value creation through TAS

TAS recruits talented individuals (mostly MBAs) from the best
institutes.

By offering a lucrative compensation packages, highly competent
people would be attracted towards this job and thus benefitting
the organization as a whole.

Each recruit gets opportunity
industries,
through
within the Tata group of companies.

Building of strong ties among different TAS recruits and when
they are placed in different companies, over the long term it
would build lasting ties and the problem of lack of coordination
could be solved.

These networks of people could improve information flows and
could create mutually beneficial pacts among the Tata
to work
job
in
various
rotations