How Tata Built India

 Tata: the industrial conglomerate that is at the heart of India's success in the global business arena. For almost two centuries, the Tata Group has been a pioneer in multiple industries in India and remains a market leader in most of them. You have probably heard of Tata Motors, its automobile division, but as you will soon discover, its reach extends far beyond that subsidiary. In this article, we will review three generations of Tata entrepreneurs to see how they created one of the most successful companies in India.

   Tata's story begins during the reign of the British Empire. India at the time was a major cotton exporter, but the brutal regime of the British East India Company left little room for the development of local entrepreneurs. The mistreatment of the British eventually resulted in a rebellion against them, in 1857, which ended the power of the British East India Company and replaced it with the British Raj. Now, compared to his ruthless predecessor, the Raj was much more focused on keeping the peace. The Raj did not exploit the Indian population as severely and also invested a lot of money in building the first Indian railways, for example. Of course, at the end of the day, the British Raj was still an oppressive colonial power, but at least it finally gave the local population an economic opportunity to develop. Since India was an exporting country, the first Indian entrepreneurs came from exactly that sector and one of them was Jamshedji Tata. The son of an exporter in Mumbai, he graduated in 1858, exactly the perfect time to take advantage of the economic reforms of the British Raj. Because his father's export business was growing, in 1859 Jamshedji went to Hong Kong to develop a subsidiary there, and seeing the large scale of British trade there, he realized that Tata's export business had potential. global real. Over the course of the next decade, he would travel to Japan, China, and Britain, establishing a distribution network for his father's business. He would eventually create his own export company in 1868 and, using the money he earned, he began to build his own textile factories, effectively creating a vertically integrated business.

  From the beginning, Jamshedji's philosophy was to find the best practices used around the world and bring them back to India. In his textile factories, he enacted policies that were virtually unknown to most of India, such as offering sickness benefits and pensions to his employees. But Jamshedji was not content with just the textile industry: he saw the wonders that the Industrial Revolution had created in Europe and wanted to recreate them at home. He started working at a steel production plant in 1901, inspired by what he had seen in Germany. Even more ambitious was his hydroelectric project, inspired by his visit to the Niagara Falls power plant in 1903. Jamshedji realized the incredible power of tourism and that's why he also created a hotel chain, starting with the Taj Mahal Palace Hotel It is still one of the most recognizable buildings in Mumbai today. Jamsedji was truly a man dedicated to business and helping people through him: he valued education to the point of donating land and buildings for the creation of the Indian Institute of Sciences, the eminent university in India. However, he would not live to see most of his projects accomplished, because he died on a business trip to Germany in 1904, leaving the already considerable company Tata to his two sons. Together, they consolidated their property into a single holding company, which in turn is owned by the charitable trusts that they created for future generations. Jamshedji's sons fulfilled many of their father's ambitions: they oversaw the creation of India's first steel mills in 1907, India's first cement plant in 1912, and the first indigenous insurance company in 1919.

  When the mantle of leadership passed to the next generation in 1938, Tata Sons was comprised of 14 different companies. This time, however, instead of turning to one of Jamshedji's grandchildren, the leadership passed to a distant cousin with a very interesting background. Jehangir Tata, better known as JRD, had been with the company since 1925, but had been raised in France and was a close friend of the man who made the first flight through the English Channel. In other words, JRD was a passionate aviator and in 1929 he got India's first pilot's license, so, unsurprisingly, his first big project at Tata was developing an airline. In 1932, he created the Tata Air Service, which originally only transported mail, but then, in 1938, began making passenger flights, even assisting the British in World War II. Now imagine that India's independence in 1947 would have been beneficial to the Tatas, but in reality the newly created government's socialist policies were at odds with private companies. India's first prime minister saw how successful JRD had been with his airline and in 1953 he unilaterally decided to nationalize it. He kept JRD as president of the airline until 1977, and, as you can imagine, the company only went downhill thereafter, drowning in mounting debt. Of course, JRD would not let politics get in the way of business, so he did his best to grow Tata while avoiding the wrath of the Socialists. He created Tata Motors in 1945, originally with the idea of ​​building locomotives, but in 1954 he branched out into commercial vehicles through a partnership with German automaker Daimler. Over the course of his 52 years of leadership, JRD expanded the Tata Group from 14 companies to 95, but to do that, he dramatically reduced the ownership Tata Sons had in each to appease the Socialists.

  In 1969, the Indian government introduced the Monopoly and Restrictive Business Practices Act, which was essentially aimed at Tata despite the fact that they were far from a monopoly by Western standards. But as JRD expanded the group and reduced its ownership in the individual subsidiaries, it began to lose control. Some of his companies just weren't working and the man he sent to fix them was this guy: Ratan Tata. He is one of Jamsedji's great-grandchildren and joined the Tata Group in 1962. His first major project came in 1971 and it was quite difficult: Ratan was commissioned by a struggling Tata company known as NELCO, which in the 1950s was the India. The largest radio producer, but only twenty years later it had fallen to a 3% market share. Ratan's focus was on technology and the future, so instead of trying to save radio, he funded the development of new products like satellite communications, which restored NELCO in the 1980s and made Ratan the apparent JRD's successor. Ratan claimed leadership of the Tata Group in 1991, just as a wave of economic liberalization swept across India. The Socialists lost power and India eventually joined the world capital market, but this posed a great threat to Tata. Until now, it had operated in a highly protected economy, which was suddenly open to competition from foreign companies. Worse yet, JRD had allowed Tata to become extremely decentralized, so it would be very slow to adapt to new competitors. Ratan had no choice but to re-establish ownership of all Tata subsidiaries and that was not cheap. He sold 20% of Tata Sons, the holding company, and used that money to buy shares in Tata's subsidiaries, especially Tata Steel and TataMotors. He then reorganized the hundred subsidiaries into seven sectors, establishing a framework within which he could control them. But simply exercising power is not enough to change a struggling business, and in the 1990s almost all of Tata's companies were losing ground to their international competitors. However, Ratan's response was brilliant: he began to acquire and absorb foreign competitors in the Tata Group, effectively buying all his talent and supply chains and experience to strengthen his business in India and at the same time expand internationally.

  Ratan's shopping spree began in 2000 when his beverage company, Tata Tea, acquired the Tetley company from Britain. Over the next decade, Ratan ended up acquiring hundreds of companies for almost all Tata Group subsidiaries. In particular, he bought Corus European steel titanium for $ 12 billion in 2007 and then Jaguar Land Rover for $ 2 billion in 2008. As you can imagine, the wave of international purchases has been paying dividends for Tata and today most of their income actually comes from outside India. What's even more beautiful is that the majority of Tata's subsidiaries are actually public companies whose shares you can buy on the Indian stock market.