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Study of Product Portfolio of TATA

Study of Product Portfolio of TATA

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06/04/2013

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Study of product portfolio of TATA:
The Tata Group is India¶s largest business group accounting for 5.2% of India¶s GDP andoperates in over 80 countries with group revenue amounting to a whopping USD 62.5 billionin 2008. The group operates in seven broad sectors ranging from steel, automobiles, energy,chemicals, hotels and consumer goods to communication systems with Tata Steel, TataMotors, Tata Consulting Services and Tata Power accounting for nearly 50% of the grouprevenue. The group profit has grown at a CAGR of 19.4% over the last decade and a half andthe group revenue has grown at a CAGR of 16% over the same time period. Over the lastdecade, the Tata Group has had a clear focus on internationalization with contribution of international operations to the revenues having gone upto 61%. Today, the Tata Groupcomprises of 96 companies, operates in 6 continents and employs approximately 350,000 people. Inorganic route has played a major role in this fast growth story.The definition of growth has changed quite dramatically from the days when organic growthwas considered the primary channel of progress. This is exemplified in the case of the Tata¶swhere inorganic growth, through leveraged buyouts and sometimes audacious deals, hasdriven expansion over the last decade. With accelerated growth comes the challenge of integration and proper management of the portfolio of companies. The top management hasto often answer the question mark over the business house¶s role in keeping all thesecompanies under one roof. The following sections contain a look at Tata¶s inorganicexpansion, a portfolio analysis for the group and an assessment of whether the newer companies should be part of the Tata Group.Managing a portfolio of close to 100 companies is a mammoth task for any business house.Questions over acquiring newer firms and divesting non-performing firms need to beanswered on a regular basis. These questions have become extremely important for the TataGroup as they have used the inorganic growth route extensively to scale up their internationaloperations. This article looks at Tata¶s inorganic expansion and performs a portfolio analysisfor the group identifying potential divestment targets. The analysis leads to the conclusionthat it is in the interest of the newer companies to be a part of the Tata Group to leverage onthe Group¶s brand equity.
 
P
ortfolio Analysis of the Tata Group:
The BCG Growth Share matrix uses the dimensions of relative market share and the marketgrowth rate to establish a 2*2 matrix containing 4 main quadrants ³ Stars (high marketgrowth, high market share), Cash Cows (low market growth, high market share), Questionmarks (high market growth, low market share) and Dogs (low market growth, low marketshare). The ideal strategy is to hold on to the Stars and the Cash Cows, divest the Dogs andtake a call on the Question Marks (hold/divest).
Analysis of the Tata Group using the BCG Matrix
We have conducted a detailed analysis (using the BCG Matrix) of the portfolio of companiesin the Tata Group. This involved analyzing the sectors in which the Tata group operates as
Stars:
Tata steelTata motor Tata power Indian hotelsTitan
Question mark:
Tata communicationsVoltasTata teleservicesTata AIG
Cash cows:
Tata teaTata chemicalsTCS
Dogs:
 
well as the companies in the Tata Group within each sector. We studied the operational andfinancial performances of each company to understand their growth stories. Special emphasiswas laid on identifying the organic and inorganic growth routes pursued by each of thesecompanies under the Tata umbrella. The conclusions drawn about these companies are basedon analysis of the global strategy of the Tata group and on detailed conversations with topexecutives in the Tata Group.The analysis reveals that Tata Steel, Tata Power, Tata Motors and Indian Hotels emerge asclear Stars (high market growth, high market share). Hence, they should be retained and theinvestment in these companies should be increased. Tata Chemicals and Tata Tea emerge asthe Cash Cows (low market growth, high market share) and should be held on to for the time being. Some of the Question Marks (high market growth, low market share) are TataTeleservices, Voltas and Tata Communications. These results are shown in Exhibit 1 below.The profitability of the Tata Group in the telecommunication sector has shown a consistentdecline from 10% in 2003 to 4% in 2006-07. Despite the telecom boom in India, the questionon the presence of the Tata Group in the telecommunications sector warrants further discussion. For the Tata¶s, the broad objective behind entering any sector is to be among thetop 3 in that sector. Despite having had a presence for many decades in the consumer durables segment, the Tata¶s have been unable to capture the leadership position in thesegment through Voltas. Moreover, the growth registered by Voltas over the past few yearshas also been far from impressive which necessitates the need to critically evaluate its performance in this segment.In addition, the question of operating so many companies under the Tata Group needs to belooked into. Does it make sense to have so many companies in the first place? Should there be a relook into the question marks like Voltas, Tata Communications and Tata Teleservices?These are hard questions that need to be answered as the group keeps going forward. Withclose to 100 companies under one roof, the question arises whether all of them should beunder the Tata Group or should some be spun off.
Ansoff matrix for Tata to decide product and market growth strategy:
The Ansoff Growth matrix is a tool that helps businesses decides their product and market

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