India's Tata group is among several Indian conglomerates that have acquired foreign companies in recent years, leading a new trend in industries that had been insulated from the global economy for decades. Tata is one of many Asian conglomerates that have become forces in global business. Anjana Pasricha in New Delhi brings us this segment of a series looking at five Asian corporate giants.
When Tata Tea took over the British Tetley group five years ago, corporate India hailed it as a huge milestone - it was an Indian company's first buyout of a foreign group.
The Tata group began life as a trading firm more than 130 years ago, and now is one of India's oldest and biggest conglomerates. Tata Sons, a holding company, is at the center of the group's more than 80 businesses, ranging from steel and software to automobiles and hotels.
Such old industrial houses thrived for decades in a protected domestic market. But in 1991, the Indian economy opened up, exposing its companies to competition from multinational corporations for the first time.
Companies like Tata had to restructure massively to survive the onslaught of international competition on their home turf. Alan Rosling, executive director at Tata Sons, says a decade of global exposure gave the company the confidence to step overseas. "Each of our companies has had to go through the same experience of facing up to what it means to be competitive, what it means to get your costs down, what it means to get your products to world-quality standards. Having done that, obviously you say to yourself, if I compete with the [multinational corporations], majors, at home what is to stop me from going overseas," he says.
Tata Tea's takeover of Tetley for about $430 million gave it access to an international brand and a foothold in 35 countries, including many wealthy Western markets.
The takeover of the British corporate icon by a company from a former British colony was an ironic twist on globalization. But it opened the way for other Indian companies to spread their wings overseas and move into new markets. Friendlier government policies and greater access to capital helped.
Tata is one of several companies from developing Asian economies to successfully make the leap into the world market place. Many of them, especially in India, are family-owned companies that are rapidly taking advantage of relaxing government controls and booming global trade.
Corporate analyst DH Pai Panandiker says such deals helped transform a lackadaisical manufacturing industry that had never kept pace with global standards. He says groups such as Tata realized expansion was necessary in a global economy. "The fact is, even if you want to remain in business even in your own country, you have to look outside in order to minimize your cost, in order to have efficiency, in order to have the best technology and so on. So this is part of globalization of the Indian industry," he says.
The Tata group continues the drive overseas. This year, the group made two significant acquisitions in East Asia - buying South Korea's Daewoo's truck-making unit and Singapore's NatSteel.
The takeover of NatSteel gives Tata Steel access to the booming economies and manufacturing hubs of East Asia, including China. The Singapore company will turn raw material from India into steel to sell on the world market.
Pradeep Menon at the India-Singapore Chamber of Commerce in Singapore says the deal caused some surprise in a small country more used to acquisitions by large Western companies. But he says industry in Singapore is optimistic about the takeover because top Indian companies have begun to reach global standards. "The Tatas are known for their quality, certainly there is a lot of confidence that they will bring top-notch expertise, and their reach into global markets and their product knowledge to the table and enhance what NatSteel is capable of doing. It is definitely true that Indian companies have come up the quality ladder in a big way," he says.
The Tata group has signed a two billion dollar investment agreement with the Bangladesh government to build a power plant, steel mill and fertilizer factory. It has also sealed a deal to buy out the Global Tyco Network in the United States to gain access to a vast undersea telecommunications cable system linking three continents.
Analysts say the Tata story shows it is not just Indian technology companies that are succeeding globally. Industrial groups such as Tata are forging overseas in more traditional areas such as tea and manufacturing.
Tata's Mr. Rosling says Indian companies have the potential to make a global mark, but they have much more work to do before making a serious impact on world markets. "And clearly we have learning, we have learning in terms of management process, in terms of cost, and most particularly in terms of product. So access to technology and transfer the technology is one of the things that we need to do more on so that our products become leading edge rather than just competitive which they are at the moment," he says.
But even as they scout for overseas opportunities, Tata and other Indian conglomerates also want to remain firmly anchored at home in India, where a booming economy and a market of a billion plus people offers huge opportunities.