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Infallibility of Ratan Tata: A Case Study

Article · June 2020

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 Review of Management, Vol. 10, No. 1-2, June 2020

Review of Management
Vol. 10 No. 1-2, June 2020 pp. 25-29
ISSN: 2231-0487

Infallibility of Ratan Tata: A Case Study

Shweta Jha*

ABSTRACT
Ratan Tata began his career at Tata Steel as an apprentice in 1962 and rose to become its
chairman in 1991 –a position he held till 2012. He served the Tata Group in different capacities
and steered the Group companies to flourish and gain competitive ground in the wake of
liberalization, globalization and privatisation that incidentally coincided with his tenure as
chairman of most iconic of India’s corporate houses with legacy of over 150 years. This case
study looks at his strategic vision to consolidate the position of the Tata Group and infuse
competitiveness through augmenting operational efficiency and culture of innovations. He
also altered the structure of the group companies so as to strengthen the position of the
holding company and avert any hostile takeovers. True, his tenure as chairman of Tata Group
resulted in a windfall and under his leadership the Group saw phenomenal jump in its
revenue, market share and brand equity.

KEYWORDS: Ratan Tata, Tata Group, Leadership, India

INTRODUCTION
When India was opening up for globalization, liberalization and privatisation in 1991, the
iconic Tata group was engineering a major organizational shake-up in terms of installing a
nondescript Rata Tata as successor of JRD Tata. Even the top management team working
closely with JRD Tata had no clue about the transition. Then, Ratan Tata had no success stories

*Associate Professor, Apeejay School of Management, New Delhi

E-mail: [email protected]
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 Review of Management, Vol. 10, No. 1-2, June 2020

that could inspire his senior colleagues to accept him as the new chairman of Tata Group.
However, no one had guts to question the wisdom of JRD Tata and thus began the Rata Tata
era in Tata Group.

Initial challenge for Ratan Tata was to establish his authority and augment efficiency across
the group companies which largely functioned independently. For long, the Tata group
companies had functioned in a decentralized mode. But the decentralized arrangement was
crumbling under the competitive forces that were knocking at the doors of the country in the
wake of opening up of Indian economy at the behest of the International Monetary Fund and
the World Bank. There could not have been a better and more interesting time to take charge
of the Tata Group for Ratan Tata “who was at the right place at the right time and could see
what was happening around him and respond accordingly” (Datta, 2012).

EARLY CAREER
Ratan Tata studied architecture at Cornel University in the United States of America and had
job offer from IBM. However, he returned to India to take care of his ailing grand mother and
started his modest career in 1962 as apprentice at the shopfloor of the Jamshedpur plant of
Tata Steel Ltd. then known as Tata Iron and Steel Company (TISCO). Later, Ratan Tata was
given responsibility of turning around NELCO. He was able to increase the market share of the
company from 3% to 20% in a short span of 3 years. However, NELCO was closed in 1977.

The same year, Ratan Tata was sent to revitalize Mumbai-based Empress Mills which was in
shambles. He was able to energise the workers, but could not get adequate funding support
from the top management of Tata Group. Workers’ strike worsened the scenario and finally
the Empress Mill was closed in 1986. Before his ascent to the chairmanship of the Tata Group,
he served as the chairman of Tata Industries which looked at emerging areas of investing
doing businesses. Some of the ventures that Tata Industries launched included Tata Telecom,
Tata Keltron, Hitech Drilling Services, Tata Honeywell, Tata Elxsi, Plantek, Tata Finance, etc.

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 Review of Management, Vol. 10, No. 1-2, June 2020

MAJOR CONTRIBUTIONS
As chairman of the Tata Group, Ratan Tata focused on augmenting operational efficiency and
culture of innovation which became all the more important in the wake of increased
competitiveness in the country, rising foreign direct investments in almost all the sectors and
changing expectations of the stakeholders. Interventions at the behest of Ratan Tata enabled
Tata Steel Ltd. to become the lowest cost steel makers of the world (Datta, 2012). Likewise,
significant improvements were witnessed in Tata Motors Ltd. as well.

Ratan Tata meticulously strengthened the authority of Tata Sons Ltd. –the holding company
of all the Tata Group companies by increasing the stakes. Earlier, Tata Sons Ltd. had minority
stakes in most of the Group companies which made them vulnerable to hostile takeovers.
Moreover, he introduced the system of royalty payment by the Group companies for using
the brand name of Tata. This enhanced the brand equity of Tata Group instantaneously.

Some of the less profitable businesses such as cement, textiles and cosmetics under the
umbrella of Tata Group in were dropped under the leadership of Ratan Tata. On the other
hand, he entered the emerging areas such as software, telecommunication, finance and retail.
Besides, Ratan Tata’s major contributions would include global acquisitions such as Tetley
Tea, Corus Group, and JaguarLand Rover.

Ratan Tata is credited with colossal financial success during his tenure as Chairman of the
Group. ‘The Group’s aggregate sales at the end of 2011-12, at ₹ 4.51 trillion, was 43 times the
turnover in 1992-93, the first full fiscal after Tata took over as chairman; while net profit
growth in the same period was even more spectacular, rising 51 times to ₹ 33,664 crore’
(Datta, 2012). Moreover, the aggregate market capitalization of the group at ₹ 4.54 trillion in
fiscal 2012 is 33 times higher than it was in 1992-93. In the same period, the Sensex, the
benchmark equity index of BSE, grew nearly eight times’ (Datta, 2012). However, one of the
most expensive failures of the Tata Group was Tata Nano –a people’s car that Ratan Tata had
bet despite resistance from within the group.

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 Review of Management, Vol. 10, No. 1-2, June 2020

CONTROVERSIES
Ratan Tata had to face public embarrassment in 2010 when his private conversations with
Neera Radia got leaked on the electronic media. Second time he had to lose face was when
the Tata Group forced Cyrus Mistry to resign as Chairman, presumably at the insistence of
Ratan Tata. Ironically, Ratan Tata had brought Cyrus Mistry as his successor with a lot of
fanfare. Apart from these two controversies, professional life of Ratan Tata has been without
any blemish. He has never been found deficient in his conduct as Chairman of the Tata Group
or earlier as employee of the Tata Group companies.

CONCLUSION
Leadership style of Ratan Tata is deeply rooted in Indian ethos. Ratan Tata served the Tata
Group for almost 50 years. He has been quite active even after relinquishing his position as
Chairman of the Tata Group in 2012. He is now focusing on the charitable arms of the Tata
Group. Besides, he has also turned an angel investor and venture capital enthusiast. He has
supported a number of start-ups in the recent past. Ratan Tata has also received Padma
Vibhushan (2008) and Padma Bhushan (2020) –the Government of India’s third and second
highest civilian awards.

REFERENCES
Datta, A. (2012). Ratan Tata: A journey in four stages. Mint:
https://www.livemint.com/Companies/n47iePUboPWvCqG5FM8IVK/Ratan-Tata-A-
journey-in-four-stages.html

FURTHER READINGS
Bhattacharyya, S. (2006). Entrepreneurship and innovation: How leadership style makes the
difference?. Vikalpa, 31(1), 107-116.
Cappelli, P., Singh, H., Singh, J. V., & Useem, M. (2010). Leadership lessons from India. Harvard
Business Review, 88(3), 90-97.
Cappelli, P., Singh, H., Singh, J., & Useem, M. (2015). Indian business leadership: Broad mission
and creative value. The Leadership Quarterly, 26(1), 7-12.

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 Review of Management, Vol. 10, No. 1-2, June 2020

Correa, J. A. CHARISMATIC LEADER: THE MODERN CHANGE AGENT OF INDIA. Advance

Management Practices in Business, 61.
Crainer, S. (2010). The tata way. Business Strategy Review, 21(2), 14-19.
Jain, D. (2018). Who is at fault? Tata Sons in 2012 or Mistry in 2016: A Case Study on Tata
Group. IIUM Journal of Case Studies in Management, 9(1), 1-6.
MC, A. B., & Rentala, S. (2018). Role of leadership and corporate governance: The case of Tata
group and Infosys. FIIB Business Review, 7(4), 252-272.
Nathan, S. V. (2017). The What and How of Leadership Development. NHRD Network
Journal, 10(4), 37-47.
Oke, A., Munshi, N., & Walumbwa, F. O. (2009). The influence of leadership on innovation
processes and activities. Organizational Dynamics, 38(1), 64-72.
Sarkar, A. (2016). We live in a VUCA World: the importance of responsible
leadership. Development and Learning in Organizations: An International Journal.
Vakhariya, S. (2017). Tata at a Crossroads. American Journal of Educational Research, 5(3),
284-295.
Wong-MingJi, D. J., Kessler, E. H., Khilji, S. E., & Gopalakrishnan, S. (2014). Cross-cultural
comparison of cultural mythologies and leadership patterns. South Asian Journal of Global
Business Research.3 (1), 79-101.

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