Ratan Tata

TATA the men who built India – How TATA group formed

Take any aspect of your life, you fill find some Tata company brand or the other. You might travel in cars, Tata Motors manufacture a wide range of them, You might take a flight, Tatas own the Vistara Airlines and Air India as well. You might stay at hotels, Tatas own the Taj Hotels. You definitely wear clothes, Tatas have a fashion brand Westside. For your jewellery needs, Tata’s Tanishq caters to you. For the tea you drink, Tata Tea. Even the salt that goes into your food, Tata Salt. In addition to it, Tata Steel, Tata Power, Tata Consultancy Services, you wouldn’t believe this friends, there are more than 100 companies in the Tata Group. So it’s no surprise that currently, Tata is India’s one of the most famous and successful companies. But do you know that this company didn’t turn into a giant overnight? It took them 200 years. That’s right, 200 years! Let’s get to know the interesting story about India’s oldest business family. The secrets of the Tatas. “The Tata Group has pioneered multiple industries in India and remains a market leader in most of it.” “Because of Tatas who introduced a number of firsts, the first 8-hour day, the first leave with pay.” “I would prefer to live with the knowledge that I have of upholding the values that we have, that we’ve tried to uphold through these years, rather than say that I have grown it three times the rate it has.” Friends, our story begins in the year 1822. Exactly 200 years ago. A boy was born in a village in Gujarat, to the family of Parsi priests. Nusserwanji Tata. He was a restless soul even as a child. He wanted to do something great. It’s said that he was the only person in his village, who strongly felt the need to move out of the village and do something great. He believed it to be his destiny, so when he was 20 years old, he left his village and moved to Mumbai. And tried to set up a new business. Still today, many young people do this, the move from villages to the cities to build a new future, but the difference was that he had a wife and a child. Back then child marriages were very common. He had become a father when he was about 17 or 18 years old. He moved to Mumbai with his family. He was attracted to the cotton trade there. And soon, he was running a cotton export business. The revenue from the business, he ensured that it was spent on his son’s education. He wanted no compromise in it. He provided his son Jamsetji with the best education of the time. Back then it meant an education in English. Nusserwanji’s cotton trading business took off really well. Later when Jamsetji reached adulthood, and finished his education, his father decided to send him to Hong Kong for business expansion. Today, it might seem very common, businessmen sending their children abroad for business expansions, but friends, do remember, this was in 1859.

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Air travel wouldn’t be invented for 55 more years. Back then, it was a long and arduous journey by ship. In 1859, when Jamsetji was 20 years old, his father sent him on the mission to set up an office in Hong Kong. Interestingly, Jamsetji wasn’t alone either. He was married and had a child. It was not an easy decision. To uproot the family and shift to another country. And try to set up business there. But Jamsetji was very ambitious. This led him to immense success. In his life of 65 years, Jamsetji worked on 3 continents. Started numerous cotton mills in India. Additionally, he laid the foundation for the construction of India’s first steel factory, and launched India’s first 5-star hotel. It was the first hotel in India to have electricity. To be fully electrified. Can you guess which hotel it was? The correct answer is Mumbai’s Taj Hotel. To date, it is among the most prestigious hotels in India. In 1904, when Jamsetji Tata passed away, he left behind a legacy that remains unmatched even now. And I’m not saying this from strictly a business point of view. Building a profitable business has become quite common nowadays. You will find many such businesses that work for profits. But Jamstji set a tremendous legacy of principles and ethics as well. Let’s see some examples to understand this. In 1874, Jamsetji set up his first cotton mill factory in Nagpur. This was his first experience of moving beyond cotton trading and entering the cotton production business. When you start a new business, you encounter new problems. He saw that the labourers working in this cotton mill in Nagpur, were very lazy. They would make up reasons for being absent. They wouldn’t come to work. A 100% attendance of the workers and labourers working at this mill had never happened. What would a superior do in such a situation? Threaten the workers with the termination of employment due to absenteeism. Reprimand the workers, But his actions were contrary to common practices. He assumed that there would be some reason for the laziness of the labourers. Since he wanted to motivate them, he wanted to look for a long-term humane solution. So he set up a General Provident Fund for them. To ensure that even after retirement, these labourers keep getting a pension. Additionally, he started an insurance scheme, in case any worker met with an accident, the medical costs related to the accident were to be borne by the company. Not only this, he started Family Days, Sports Days, so that the workers could bring their families and form a stronger bond among each other, to foster a sense of community. These might be quite common in today’s world, but keep in mind the era this was being done in. In the rest of the world, during the 1800s, the working conditions used to be terrible. Astoundingly, he was bearing these expenses out of his funds. Then in 1861, the American Civil War began. Indirectly, this was good news for Jamsetji’s business. Earlier, England used to import most of its cotton raw material from America, but due to the Civil War, the supply was discontinued. Jamsetji utilised this opportunity and doubled the rates of cotton supplied by him. Because England had no other option but to import cotton from India. During this time, he set up his office in London and worked from there. He raked in huge profits for the next four years. But after 4 years, the American Civil War ended, and the supplies from America resumed. This had an adverse impact on Tata’s business. and it started making losses. Investors started harrowing him for returns on their investment. But Jamsetji remained steadfast. He promised to ensure that all investors would get their returns. And simply asked for some time. Investors looked at his honesty, and permitted him to continue working. But the investors said that Jamsetji’s monthly salary would be a meagre £20 only. Even though he was the owner of the company. It was quite insulting for him, working in the company he owns as a fixed salaried employee. But he remained undeterred. It goes to show Jamsetji’s dedication to his business. Do you know what, friends, his father was the same. When Nusserwanji’s cotton business wasn’t doing well, and the investors were asking for their money back, he had sold his mansion to pay the investors. In both cases, the decisions proved successful. Nusserwanji and Jamsetji both could protect their businesses, and their reputations. This teaches us that if we have the passion, dedication, and skills, then the chances of your success grow manifold. Today, software engineering and data science, are among the highest-paid jobs in the world. 

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Many of Jamsetji’s dreams were revolutionary for his time. Setting up a hydroelectric power plant. Establishing world-class education institutions in India. Setting up a steel plant, Building a 5-star hotel which can be enjoyed by people irrespective of their race. Racism was quite rampant back then. During his lifetime, he could build the hotel. But the other 3 dream projects, before his death, work on them had already started. Later, his son Dorabji Tata ensured that the rest of his dreams would become a reality. By 1910, Tata’s steel plant was built. And they had started steel production. Around this time, World War I began. The British Empire required a lot of steel then. So Tata Steel became the largest steel supplier in the country. Tata’s steel was used to make the British tanks. As well as for the weapons and the railway tracks. In fact, a famous statement by a British politician during WWI holds that “Tata Steel saved us.” Because the quality of their steel was so good, that even when bombs were dropped on these tanks, they weren’t able to penetrate these tanks. Following this, the name Tata Steel gained even more popularity. After the end of WWI, Tata Steel had built a very strong reputation in Great Britain. By 1914, the Tata group had become so huge that it encompassed 14 different companies. But it was just the beginning. Dorabji Tata oversaw the activities of the Tatas till 1938. After that, a distant cousin, Jahangir Ratan Tata took over the reins of the company. We know him as JRD Tata. Another passionate young man with big dreams. JRD Tata grew up in France. He was a licensed pilot there. His passion for flying is widely known. And so he set up India’s first airline, the Tata Air Lines. Later renamed Air India. Air India has an elaborate and interesting story, The story till now was taking place before the Independence. India gained Independence in 1947. Socialism was the norm then. Our freedom fighters like Gandhi, Bhagat Singh, Swami Vivekanand, all believed in socialist principles. So quite obviously, when the country won Independence, Jawaharlal Nehru’s economic policies were socialist as well. He decided to nationalise the major businesses and institutions in the country. They would be under government control. This is seen as a positive decision given the circumstances, but for the Tatas, this was bad news. The Tata Air Lines was nationalised as well. JRD Tata was heartbroken by the news. But right from its inception, the Tatas believed that business is not only for profits, it is for nation-building as well. After the nationalisation, the Nehru government offered JRD Tata a position to lead Air India, that was gladly accepted by JRD Tata. This is why during the 1970s-1980s, Air India was considered to be one of the most prestigious airlines in the world. Apart from this, JRD expanded the business in many other sectors. In 1945, the very first Tata Motors product was made. Locomotive engines to be run on tracks. In 1968, the Tata Consultancy Services (TCS) was founded, providing electronic data processing services. Today, TCS is the second-largest employer in the country. Following the Indian Railways. Additionally, Cancer Research and Treatment Center, their Salt business, Electronics manufacturing, JRD Tata remained the Chairperson of the Tatas for 52 years. During his tenure, there were 95 companies in the Tata group. In 1969, the Monopolies and Restrictive Trade Practices Act was passed. The Tata group was the most affected by this law. The government aimed to ensure that no company could grow so big that it creates a monopoly in every sector. Despite such rules being passed, under JRD Tata’s supervision, the Tata Group continued to grow. How? With the growing number of subsidiaries under the Tata Group, he diluted the ownership of Tata Sons in the companies. By doing so, the new companies weren’t considered monopolies. But over the course of many years, this approach proved wrong for the business when other people started handling Tata’s businesses, it couldn’t be successful always. For example their electronics arm, Nelco, used to manufacture radios, By 1971, the market share of Nelco had fallen to 2%. Where it used to be at 20% once. If we talk about Nelco specifically, Jamsetji Tata’s grandson was called to bring Nelco back on track. This was none other than Mr Ratan Tata. He was working for the family business since 1962, but in 1971, Nelco was assigned to him. Ratan Tata decided to stop manufacturing radios, and wanted to invest in new technologies to revive Nelco. Such as satellite communications. Within 3 years, the business turned around. By 1975, Nelco’s market share was back at 20%. Unfortunately, during this time, the Emergency was declared, causing adverse impact on Nelco’s business yet again. Eventually, it had to be shut down because of this. But do you know what, the cotton mill set up in Nagpur by Jamsetji Tata has a similar story. Ratan Tata was given the responsibility to revive it, but this mission failed short of being successful by a hairbreadth. But by this point, the senior management had taken notice of Ratan Tata’s capabilities. This is why in 1991, he was announced as the successor of JRD Tata, and he became the chairperson of the Tata group. 1991 was the year when India’s Finance Minister Dr Manmohan Singh, announced the liberalisation of India. Opening of the Indian market to the rest of the world. Suddenly, India let go of the socialist model and started moving towards a Capitalist model. It’s said that it was the only way to protect India’s economy. From Tata Group’s perspective, seeing it play out, Ratan Tata decided to do the exact opposite of what JRD Tata had done. He started raising Tata Sons’ ownership in all Tata Group subsidiaries. This was done so that the Tata group companies could not be taken over by any international companies. This decision proved immensely successful. Not only could the Tata Group survive this period, but the Tata Group started acquiring foreign companies. The Tetley Tea company in England was acquired by the Tata Group for $12 billion. Europe’s steel giant Corus, was acquired by the Tata Group. In another interesting instance, the Jaguar Land Rover company, a car manufacturing company in UK, was in the talks of being sold off. The workers of this company wanted that Tata Group to take over the company. Jaguar Land Rover had received offers from 3-4 companies. Among those prospective acquirers, Tata Group was chosen by the workers. This was a luxury brand but it didn’t mean that Tata overlooked its grassroots-level customers. In November 2003 it’s said that Ratan Tata saw a family travelling on a scooter. Four people were squeezed into a scooter. And it was raining. They were barely managing. Five years later, Ratan Tata launched the Nano Car. While launching it, he told a story. The Tata Group believes that the core philosophy of their business is Social Upliftment. They wanted to give the lower middle class the chance to own a car. Only ₹100,000. World’s cheapest car. It’s another thing that the marketing strategy of this car was terrible. They marketed it as the most affordable car, its price of ₹100,000, they didn’t consider people’s perception to this fact. Who would want to buy this car? If someone bought this car, wouldn’t they be considered cheap people? For buying the cheapest car. This was a marketing flaw. But Tatas never focused much on branding strategies. You can see this based on the fact that the Tatas set up many institutions and businesses, which weren’t named after the Tatas. Such as the Indian Institute of Science. The cotton mill in Nagpur that I told you about. It was named the Empress Mill. It was named so to commemorate the coronation of Queen Victoria. The brand Taj Hotel. Tatas aren’t named in it. The city of Jamshedpur, named after Jamsetji Tata, wasn’t named so by the Tatas, rather, the British Viceroy of India at the time, gave the city its name. This was the exciting story of the Tata Group.