ISBInsight: What are the key management takeaways, in your opinion, from this case study on the Tata Group?
Raveendra Chittoor: I think this is an excellent question to begin with. The first point I want to highlight through the Tata Group case is its unique organisation structure. As you know, most large corporations venture into multiple businesses, take for example GE (General Electric) or Microsoft. This case highlights the important difference in the way a business group like Tata is structured, when compared to a typical conglomerate such as GE in the West. All the individual businesses of the Tata group are held in separate companies (legal entities), with Tata Sons, one of the key holding companies, controlling equity stakes in all the companies. Each of the companies has its own distinct Chief Executive Officer (CEO), management team, shareholders and board of directors.
The second important aspect of this case study is the way the headquarters of a multi-business conglomerate adds value to each of the individual businesses. This case describes in detail the various services offered to group companies by the Tata corporate centre, such as access to the Tata brand, quality management services, common procurement, centralised human resource, legal, finance, public affairs (lobbying), training and consultancy services. The Tata group leaves the choice of whether to use the available group services to the discretion of individual Tata companies. The parent organisation is kept on its toes with respect to offering competent and relevant services to group companies, because group companies have no compulsion to use them. Though group companies are under no compulsion to subscribe to any of the services, adherence to the Tata Code of Conduct and the quality/ excellence model is mandatory to gain access to the Tata brand. The corporate parenting strategy of the Tata Group thus is very unique compared to many Western multi-business corporations.
This case remains one of the most popular inhouse cases from the Indian School of Business. Tell us something about your experience teaching such a universally appealing and enduring case.
In my experience, this case has remained as interesting to teach as it was to write. Whether and how the corporate centre adds value in a multi-business organisation are important questions in corporate strategy and the Tata Group case helps us to understand this in a very interesting way. I normally teach it as an advanced topic in corporate strategy for business courses to undergraduate and MBA students after exposing them to the concept of diversification. I highlight the distinction between diversification through a divisional structure (also called M-form) and through a business group structure such as that of the Tata Group. We also discuss how this structure could enable management of unrelated diversification. Given that the Tata Group is very well recognised around the world, the case appeals to students from all over the world. I am very pleased to receive comments from teaching faculty from business schools from various parts of the world that they really enjoyed teaching this case.
Given the recent change in Tata’s leadership, what comment do you have regarding the relevance of this case in today’s context?
The current Chairman of the Tata Group, Mr. N. Chandrasekaran, has reinforced the core learnings from the case in his articulation of the Group’s strategy from time to time. For example, he has reiterated the need for better leveraging of synergies across the various individual businesses of the Tata Group. He has embarked on a strategy for increased coordination and integration between group companies. His mantra has been – Simplicity, Synergy and Scale – to leverage the advantages of a multi-business organisation such as the Tata Group.
Why do you think this case gained as much traction as it did? What is the most interesting aspect of this case study, in your opinion?
You need to remember that adding value through a diversification strategy is very challenging and very few companies in the world succeed to do that over a sustained period. Tata Group case presents to the world a unique way of adding corporate advantage and I think that is the primary reason why it appeals to teachers and students of corporate strategy around the world. Further, most multi-business organisations in the West focus on related diversification where the size of the synergies is larger. However, Tata Group represents a great example of how companies can create value even through unrelated diversification by means of a unique organisation structure viz., the business group structure. The parent organisation is kept lean and mean, and the scope for inefficiencies to creep in at the parent organisation is minimised. This insight on how to manage unrelated multi-business organisations is what probably keeps this case in the spotlight!
Tata is a mammoth company with so many different businesses. How did you gain access to the company, and how was your experience of writing the case?
I was writing an academic paper on business groups (which was later published in Strategic Management Journal) and I wanted to conduct some interviews for the study. I contacted Mr. Chetan Tolia who was heading the Tata Management Training Centre (TMTC) in Pune at the time and he graciously agreed to facilitate the process. As we were doing the interviews, Chetan suggested that we also write a teaching case study and that is how this case has come about. Of course, the people at the Tata Group, from top to bottom, were outstanding – both in terms of their knowledge and their willingness to go out of the way to help. I consider the Tata Group case study the best among the cases that I have written so far.
About the Writer:
Samriddhi Mukherjee is a Content Associate at the Centre for Learning and Management Practice at the Indian School of Business.
About the Case:
Chittoor, R., Narain, A., Vyas, R. and Tolia, C., 2013. Creating a Corporate Advantage: The Case of the Tata Group. Indian School of Business, pp.1-19.