Study of product portfolio of TATA

The Tata Group is India¶s largest business group accounting for 5.2% of India¶s GDP and operates in over 80 countries with group revenue amounting to a whopping USD 62.5 billion in 2008. The group operates in seven broad sectors ranging from steel, automobiles, energy, chemicals, hotels and consumer goods to communication systems with Tata Steel, Tata Motors, Tata Consulting Services and Tata Power accounting for nearly 50% of the group revenue. The group profit has grown at a CAGR of 19.4% over the last decade and a half and the group revenue has grown at a CAGR of 16% over the same time period. Over the last decade, 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 Group comprises 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 growth was considered the primary channel of progress. This is exemplified in the case of the Tata¶s where inorganic growth, through leveraged buyouts and sometimes audacious deals, has driven expansion over the last decade. With accelerated growth comes the challenge of integration and proper management of the portfolio of companies. The top management has to often answer the question mark over the business house¶s role in keeping all these companies under one roof. The following sections contain a look at Tata¶s inorganic expansion, 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 be answered on a regular basis. These questions have become extremely important for the Tata Group as they have used the inorganic growth route extensively to scale up their international operations. This article looks at Tata¶s inorganic expansion and performs a portfolio analysis for the group identifying potential divestment targets. The analysis leads to the conclusion that it is in the interest of the newer companies to be a part of the Tata Group to leverage on the Group¶s brand equity.

Portfolio Analysis of the Tata Group: The BCG Growth Share matrix uses the dimensions of relative market share and the market growth rate to establish a 2*2 matrix containing 4 main quadrants ³ Stars (high market growth, high market share), Cash Cows (low market growth, high market share), Question marks (high market growth, low market share) and Dogs (low market growth, low market share). The ideal strategy is to hold on to the Stars and the Cash Cows, divest the Dogs and take a call on the Question Marks (hold/divest).

Analysis of the Tata Group using the BCG Matrix

Stars: Tata steel Tata motor Tata power Indian hotels Titan

Question mark: Tata communications Voltas Tata teleservices Tata AIG

Cash cows: Tata tea Tata chemicals TCS


We have conducted a detailed analysis (using the BCG Matrix) of the portfolio of companies in the Tata Group. This involved analyzing the sectors in which the Tata group operates as

well as the companies in the Tata Group within each sector. We studied the operational and financial performances of each company to understand their growth stories. Special emphasis was laid on identifying the organic and inorganic growth routes pursued by each of these companies under the Tata umbrella. The conclusions drawn about these companies are based on analysis of the global strategy of the Tata group and on detailed conversations with top executives in the Tata Group. The analysis reveals that Tata Steel, Tata Power, Tata Motors and Indian Hotels emerge as clear Stars (high market growth, high market share). Hence, they should be retained and the investment in these companies should be increased. Tata Chemicals and Tata Tea emerge as the 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 Tata Teleservices, 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 consistent decline from 10% in 2003 to 4% in 2006 -07. Despite the telecom boom in India, the question on 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 the top 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 the segment through Voltas. Moreover, the growth registered by Voltas over the past few years has 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 be looked 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. With close to 100 companies under one roof, the question arises whether all of them should be under 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

growth strategy. Ansoff product/market growth matrix suggests that a business¶ attempts to grow depend on whether it markets new or existing products in new or existing markets.

Existing product Market penetration: Existing Market

New product Product development:

Market development: New Markets


TOWS matrix: The strategic manager has to evaluate a multiplicity of possible strategies. Clearly, such a manager has to take into consideration both external realities and internal capabilities. Unfortunately, environments are not static, but are dynamic and subject to constant change. Thus, the strategist has to make predictions of changes about the future. In making strategic choices, opportunities must be evaluated in the light of risks. There may indeed be profit

opportunities for a new product, but the company may not be able to afford the risks involved in the new venture. At other times, however, a firm cannot afford not taking a calculated risk. To suggest that companies identify their strengths and weaknesses, and the opportunities and threats in the external environment. But what is often overlooked is that combining these factors may require distinct strategic choices. To systematize these choices, the TOWS Matrix is proposed in which 'T' stands for threats, 'O' for opportunities, 'W' for weaknesses and 'S' for strengths. Before describing this matrix, however, one should be aware of other 'tools' that have been used effectively in strategy formulation.

Internal strengths:

Internal weakness:

External opportunities:

External threats:

Strategies Tata should adopt on the basis of study and analysis made through various matrix and TOWS matrix of Tata:

As the Tata Group continues to follow the inorganic route to growth, the challenges of integration need to be carefully dealt with. It is necessary for the group to take a look at some of their question marks like Voltas, Tata Teleservices and Tata Communications. Finally, given the brand equity of the â¼×Tata⼌ name, it is in the interest of newer companies to remain under the Tata Group. In the course of time, the group is expected to make many more acquisitions across the sectors it currently operates in, particularly in South East Asia, Europe and the United States. Given the relatively brighter prospects about the Indian economy compared to other developed economies, the future strategy also calls for a definite focus on the Indian market in sectors like steel, automobiles and infrastructure.

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