Financial and marketing analysis of Tata Group in India

INTRODUCTION

The Tata Group is a multinational company headquartered in Mumbai(Bombay), India. It is one of the leading business groups in India. The group includes over 90 companies in seven business sectors. They include engineering sector, information technology, chemical, energy, material, consumer products, and service sector. Tata group has its operation in more than 80 countries across six continents. The company also have export products and service to 80 countries. In this assignment I intend to explore the working strategy of the company . The focus of this will be based on the financial information obtained. A detailed internal analysis of the business on basis of innovation and acquisition would be expanded. The Strategic planning along with the aims and cultural value on basis of which the organisation runs is explored. Mathematical element of the assignment would include the financial information and its analysis.

HISTORY

The foundations of the Tata group was laid in 1868 by Jamsetji Nusserwanji Tata. A visionary entrepreneur, an avowed nationalist, and a committed philanthropist. Jamsetji Tata helped pave the path to industrialisation of India. In 1892 he established the JN Tata endowment to encourage the Indian scholars for higher studies. In 1903, the most shining part of Jamsetji Tata lifetime was the Taj Mahal Hotel in Bombay. Later on Jamsetji Tata’s death, his elder son Sir Dorab Tata who accomplished the task of turning his father’s ideas into reality. He set up the Tata iron and steel company, and after seven years India’s first iron and steel plant started production. By later on in 1910 the group broke a new path by generating hydroelectric power from a site near Bombay. In 1938 new chairman was appointed, JRD Tata. He was so fascinated by flying. In 1929 he was the first Indian to be granted a commercial pilot’s licence. Now the new beginnings to the Tata group by JRD Tata. The group expanded into new spheres of business. The more prominent of these ventures where Tata chemicals, Tata motors and Tata industries, voltas, Tata tea, Tata consultancy services and Titan industries. From 1990’s, it was the expansion time for the Tata group.In the beginning of 1990, there was a great change in Indian business. Economy improved and opened many sectors, increased competition and the arrival of foreign companies. In this era of business, Ratan Tata took over the chairman position who guided the Tata group during the challenges in this fast changing business environment. So he found this time to rejuvenate these existing businesses and to enter into new ones.

In 1996, Tata teleservices was set up to burgeon the telecom market. In 2004 the group acquired VSNL, India’s top telecom service provider. The India’s first indigenously made car was a successful launch in 2002 with the name Indica.

The groups is well integrated and united. This plays a main role in their success, outcome of a set of policies that has been put up by the chairman Ratan Tata and the Group Corporate centre. The way of business excellence became more standard and the focus on innovation was high. Tata industries looking beyond Indian shores for growth and for global footprint. Acquisitions of foreign enterprises have been one way of doing this.

The first big acquisition by the Tata group was the tetley in2000. Tata motors acquired the heavy vehicles unit of Daewoo motors, South Korea in 2005. The sigapore based NatSteel was acquired by the Tata Steel and Tata chemical secured a controlling stake in Burnner Mond Group in the UK. In 2007, it was the grandest of all, the Group acquired the Anglo-Dutch giant in a landmark deal. In 2008 Tata Group added Jaguar and Land Rover brands to its stable.

BUSINESS SECTORS

The group’s operation is according to seven business sectors.

Information technology and communication

It is a well-established enterprise in the field of information systems and software, industrial automation and industrial telecommunication.

CMC

Computational Research Laboratories

Nelco

Nelito Systems

Tata Business Support Service

Tata Consultancy Service Ltd

Tata Elxsi

Tata Interactive Systems

Tata Technologies Limited

Tata teleservices

Tata communication

TATANET

Engineering

The group have a key presence in engineering. They have a variety of engineering product and services, operation in automobiles.

TAL

TACO

Tata Motors

Tata Projects

Tata Consulting Engineering Limited

Telco Construction Equipment Company

TRF

Voltas

Energy

This sector is a significant player in power generation. Gas and oil are the new segments of this sector.

Tata Power

Tata BP solar

Tata petrodyne

Chemicals

The group is the largest producer of soda ash in the world.

Magadi Soda Company

Tata Chemicals

Advinus Therapeutics

Rallis India

Tata pigments

Services

The services sector of the Tata group includes a large chain of hospitality business. They are also involved in insurance, financial, and other services.

The Indian Hotel Company

TATA AIG General Insurance

TATA AIG Life Insurance

Tata Quality Management services

Tata Asset Management

Consumer Products

The group has enduring business in watches and jewellery. It is also the world’s second largest manufactures of packaged tea and tea products.

Tata Salts

Tata Swach

Tata ceramics

Tata Tea Limited

Titan Industries

Tata Sky

Trends

Tanishq

MANAGEMENT STRUCTURE

The management is divided into two bodies. These are Group Executive Officers (GEO) and The Group Corporate Centre (GCC).

Group Executive Officers (GEO)

The GEO fix and report the business activities of the group. They carry out the programs in the HR, corporate governance, industry environment, etc. The main role of GEO is to make an effort on characterising the group. It can be done by strengthening the relation between the group and companies. The GEO should understand current process, that is the strength and weakness. So possible to view the strategic issues that company should face. They have to review what more new unique value can put into the company.

The Group Executive Member’s comprises of

Ratan N Tata (Chairman)

R Gopalakrishnan

Ishaat Hussain

Kishor Chaukar

Arunkumar Gandhi

Group Corporate Centre (GCC)

The GCC discuss and review about the newly entered areas or entering areas of business. The key role for GCC is about the promotion of Tata brand in the home country and overseas. They also have a role of protecting the brand. The Legal, Finance, HR advisory service is controlled by the GCC. They also have to review the business portfolios in all the seven sectors.

The Group Corporate Centre member’s comprises of

Ratan N Tata (Chairman)

JJ Irani

RK kirshna Kumar

R Gopalakrishnan

Ishaat Hussian

Kishor Chaukar

Arunkumar Gandhi [TATA OFFICIAL WEBSITE 2011]

INNOVATIONS

The group has an Innovation forum, named TATA Group Innovation Forum (TGIF), lead by Gopala Krishnan. The objectives TGIF is to inspire, encourage the companies to create a culture which makes a faster innovation. [SUNIL SINHA, Chief Executive (TQMS) ]

The first step was to clarify about Innovation. So they invited experts in Innovation to speak with Managers. For more clarification, they looked into many companies in USA such as INTEL, Microsoft Etc and in Japan such as Fuji Films, Nissan etc.

The group focused to create an ambience for Innovation. So they concentrated about learning Innovation. They conducted Innovation programs, where people can share their ideas of Innovation. They also realise that the company is lacking in the risk taking culture. In order to this they have conducted a program named Innovista Program. They categorised this program into three segments,

Promising Innovation.

Experimentation which are failed (Dare to Try)- they want peoples be comfortable in sharing their failure.

Leading edge- about the Innovation that do not fall into Tata group business. [BUSINESS WEEK]

The Promising Innovation

One of the Promising Innovation by Tata Motors is ‘Painting the planet green’. A new paint shop at Tata motors based on nanotechnology with a pre-treatment process, implements cost savings and green benefits.

Sunshine in Slime, by Tata Motors is another Innovation. During the steel production, the waste slime is the highly harmful to environment and the underground water. This slime are normally buried under. As the production increased slime outcome increased. So the company looked forward and led some member as team to develop a methodology to neutralise the slime. The slime contains a large amount of iron, which are useful for the production of steel. The first Innovation in this was to separate the iron from the slime. After the above innovation still the waste remains. For the second process the company collaborated with national laboratory, for making tiles and bricks from the iron separated slime. This was one of the greatest innovation by the Tata steel. [TATA OFFICIAL WEBSITE 2011]

The production of Nano engine by Tata motors another challenging Innovation. A whole family travelling in a two-wheeler, this led Ratan Tata to think about a car priced around US$ 2500. This is affordable by a middle class family in India. This low-cost car manufacturing announcement exited ordinary people. This was a challenging action. Other automobile companies sniggered with this announcement. This made the chairman more challenging. On march 2009, the release of low-cost car ‘nano’ was announced.

” Global financial meltdown has left its adverse impact on business performances of companies’ world over. In order to mitigate the impact of global financial meltdown (GFM) the Indian automobile companies have come out with various innovative measures. So some of the innovative practices automobile companies have resorted to are flexible production schedule, launching fuel efficiency vehicles, focusing on rural market, value engineering strategy, European vision of small cars, etc ” said by Dr N.Maruti Rao and Iftikhar Ahmed Naikwadi.

The Experimentation which are failed- dare to try

Advinus Therapeutics, Succour in sight. To find a better treatment or discovering a drug that is more effective for the disease ‘kala-azar’. It was a new direction, they were about to develop oral drug that is more affordable to common person.

In search of thinness, the Tinplate company on three three years of innovation a different caps known as “twist-off lug caps”. These caps are commonly used for sealing bottles and other cans of processed food. [TATA OFFICIAL WEBSITE 2011]

The Leading Edge

A sunny idea, from CMC for using solar energy for illumination. By using fibre optics, the sunlight can be brought into indoors with an environment-friendly and efficient idea.

Another hope for CMC to agriculture. A wireless system that can collect datas about the agriculture form sensors in the field. This changes the view of all farming ways now farmer are following in India. As we know Indian farmers are in deficient of accurate information. So this helps the Indian farmer to know more about the yields, quality of soil. This can improve the quality of yield.

Sting in the tail gate, by Tata technologies. It is the design for the low-cost car ‘nano’ for more luggage space. . [TATA OFFICIAL WEBSITE 2011]

SOCIAL RESPONSIBILITIES

A number of initiatives has been taken by the group to develop the society. The group shows a nature in development if human welfare and advancement. A trust have been formed by the Tata Sons Limited with a 63 percent of equity capital and named Tata Trust. This is one of the unique feature of the group. They named as the Triple Bottom Line (TBL), by performing the environmental and social responsibilities the group also aimed on increasing the financial returns. The group initiated drives encouraging environment- friendly practices and tried to reduce the negative influences on commercial activities. The senior managers of the group where active in the social programs conducted in order to encourage all employees. This helped them to share employees skills with others. Social and moral responsibilities should show to all the consumers, society, shareholders and to employees. [ icmrindia(online)2005 ]

” The six major initiatives under which most social responsibilities- related activities fall. In this each initiatives is presented in more details, including typical programs. Potential benefits, potential concerns, key to success, when to consider the initiatives, and steps in development plans. They have divided in six initiatives.

Cause Promotions,

Cause-Related Marketing,

Corporate Social Marketing,

Corporate philanthropy,

Community Volunteering,

Socially Responsible Business Practice” .[ Kotler, P and Lee, N.,2005]

A globally recognised company Tata group was awarded several times for their fulfilment of social responsibilities. “TISCO was awarded THE ENERGY RESEARCH INSTITUTE (TERI) award Corporate Social Responsibility (CSR) for the fiscal year 2003-2003 in recognition if its corporate citizenship and sustainability initiatives.” [icmrindia(online)2005 ].

FINANCIAL ANALYSIS

Financial Analysis is a process that examines the past and current financial records for valuing the quality of performance and to find future risk of the company. This analysis normally used by investors, creditors, managers, governmental agencies, suppliers, etc for making correct economical decisions about the company they choose. Investors and creditors are always interested for getting into the financial statements. The required information’s regarding the company can be easily viewed by an investor. [Woelfel.C.J,1994]

Tata Group Revenue

Exchange Rates $= Rs 45.25

The analysis shows the companies income from all the business activities such as the sale of goods, services that are given to the customers, etc. The graph shows the group revenues from the year 1992-2009. In 1992, the groups revenue was Rs 14,092 crores ($5.8 billion). From this year the group started its expansion. By the year 2009, the shows 15.91% of increment on its total revenue, that is Rs 3,25,334 crores ( $70.8 billion).

The performance of the company year to year cannot be just viewed by the financial statement. This is because the company’s financial structure varies and it is very rarely shown the companies exact revenue. Normally the financial information are brought to compare with different companies. This also bring the identification of performance such as operation, finance and financial risk performance. Return of asset (ROA) comes under the segment Operating performance. This measure how management uses their assets as by given or published. The financial structure of the group are related with the financial performance of the group. The Return of equity (ROE) helps to show how the group utilize the shareholder’s equity. Now the Financial risk performance mostly deals with the bank, suppliers and the investors. By valuing this performance, the bank can view on the group’s current ratio and can address whether the company can pay the bills. [ Vance.D.E.,2003 ].

MARKET VALUE

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In Indian stock market, the performance of the group is relatively at its high extend for the last three years. The group has crossed a total market capitalisation of Rs 100,000 crore ( $22.1 billion) on August 25,2004 listed by TCS. Comparing the other business houses, the group has the highest in private and public sectors. The total market capitalisation of Bombay Stock Exchange (BSE) accounts Tata group. [ TATA OFFICIAL WEBSITE]

The wealthiest business group is the Tata group with market value of Rs 479,409 crore ($ 105.95 billion) [ Indianexpress,2010 ]