|
India - News
Editorial
Opinion
Overview
Infrastructure
Demographics
Entertainment
Site
Map
Search site
Subscribe
Karmayogi
|
|
15 June 2006, News Updates
A place in the sun - TIME/ NY
Times
The Drive to compete in manufacturing - TIME
How Tata is shaking the foundations - TIME
A Place in the Sun -
India's rise is real, but it needs to spread the wealth
12 June 2006, TIME magazine/ 5 and
9 June 2006, New York Times
If ever a country needed a vote of confidence,
India
did last week. After a plunge in stocks listed on
Bombay's
main market index, came a spot of cheer: IBM—which already has 43,000
workers in India—announced plans to invest a further $6 billion there over
the next three years.
IBM's commitment was a reminder that
India—once
shunned for its hapless protectionism, suffocating bureaucracy and all-round
commercial torpor—can no longer be ignored. The country's growth rate is now
approaching that of
Asia's other economic juggernaut,
China. India
is being remade, as it is increasingly integrated with the global economy.
IBM is far from alone in its desire to tap the country's youthful,
technologically literate workforce. Multinational companies including Nokia
and Hyundai Motor have moved in, at the same time as India's domestic
success stories—among them outsourcing giant Infosys and the Tata group
industrial conglomerate—are shaking things up around the world. Cities such
as
Bombay
are buzzing with rude health, while small-town India is changing so fast,
former residents can scarcely recall the rice fields now buried beneath
shopping malls. We've witnessed
Asia's
economic tigers and dragons. Enter the elephant.
But competitors are trying to gain on I.B.M.
The rival consulting firm, Accenture, based in Hamilton, Bermuda, is ramping
up equally rapidly in India, while another outsourcing competitor,
Electronic Data Systems, based in Plano, Tex., recently made an offer for a
controlling stake in Mphasis, a midsize outsourcing firm in Bangalore.
"Right now,
India is like
a runner without shoes," says
Rakesh
Jhunjhunwala, a billionaire
Bombay
stock investor. "But look at that speed." Speed is good, as long as you can
go the distance.
Top of the page
The Drive to Compete
12 June 2006, Time magazine, By Michael Schuman
India's once
woeful manufacturing sector is starting to pick up steam. Hyundai Motor's
car factory in
India,
set amid palm-studded marshes on the outskirts of Madras, is a gleaming
example of what could be the future of India's economy. Built for $1
billion, its high-tech robots and monstrous steel-pressing machines will
churn out 300,000 Accent sedans and other vehicles this year, at world-class
quality levels. Hyundai has been shifting production of its smallest cars to
India to take advantage of low costs, thereby keeping the business
profitable. One-third of its cars produced in
India
are exported to Germany, Peru, South Africa and elsewhere. Opened in 1998,
the plant was operating long before Hyundai opened factories in China or the
U.S.—and the South Korean carmaker is already building a second, $1 billion
facility next door. Why? "We are going to use India as an export hub, and
the domestic market is also growing very fast," says Lheem Heung Soo,
managing director of Hyundai in India. "Right now the only difficulty is how
to produce more cars."
Until recently, Hyundai has been an exception
in
India.
The general consensus among multinational manufacturers had been that
India—with its miserable highways and airports, hostile bureaucracy and
militant labor unions—was no place for a factory. While companies happily
tapped India for its well-trained and low-cost IT-engineering talent,
they've placed their bets on China as a manufacturing center. Although
exports of manufactured goods from India grew 20% to approximately $70
billion in its last fiscal year, that's just one-tenth of the $700 billion
China
exported in 2005. Manufacturing accounts for only about 16% of India's GDP.
In China, its share is more than twice as large.
But now more companies are coming around to
Lheem's thinking. Near Hyundai's plant, Nokia opened the first phase of a
$150 million mobile-phone factory in March. In the state of Orissa on
India's east
coast, South Korean steel giant Posco plans to construct a $12 billion mill.
SemIndia, a company formed by chip-industry executives, will break ground in
June on a $3 billion semiconductor factory in the southern state of Andhra
Pradesh. Others are coming around, too. Dell Computer recently announced its
intention to build a factory in
India,
joining those it already has in
China
and Malaysia. In fact, the Indian manufacturing sector expanded 9% last
year, a key reason why the country posted economic growth of 8.4%. A 2004
report by consulting firm McKinsey & Co. and the Confederation of Indian
Industry says that manufactured exports from India can potentially increase
to $300 billion by 2015. "'Made in India' could become the next big
manufacturing exports story," the report said.
With the pace of reform accelerating,
India is
beginning to change in ways similar to those that helped China attract
foreign investment in manufacturing. India's rising middle class means
companies now see the country as an important source of consumer demand.
India has joined China as one of Nokia's five largest markets. According to
tech-consulting firm Gartner, mobile-phone sales in
India
grew 42% in 2005 to nearly 30 million units, and sales are expected to
quadruple by 2009. With so much potential, Nokia decided India was the best
option for a new factory. "We became eager to get closer and closer to
India," says Jukka Lehtela, director of Nokia's operations there.
Then there's the
China
factor—or rather, the anywhere-but-China factor. Korean giant LG Electronics
exports to the Middle East from appliance and consumer-electronics factories
near Pune and New Delhi because it's faster to ship to those markets from
India than from China. The company recently opened another Pune plant to
make optical-disk drives for Europe. "We didn't want to depend on the
Chinese for everything," says Kim Kwang Ro, managing director of LG
Electronics in India. "Our company decided to diversify."
India's
manufacturing sector isn't being driven exclusively by multinational cash
and expertise. A decade ago, Bajaj made one million two- and three-wheeled
vehicles with 24,000 employees; today, it churns out 2.2 million with
10,000. "It is possible to deliver Japanese quality at Indian prices," says
Pradeep Shrivastava, a vice president for engineering.
The Indian government estimates that the nation
needs $200 billion of new ports, roads and other infrastructure. In
December, the shipping ministry announced a $22 billion program to double
the capacity of the country's ports by 2012;
India has
also embarked on a $50 billion program to add or modernize 40,000 km of
highways over the next several years. The government is facing stiff
opposition to another major reform—of the country's onerous labor laws—from
labor unions and leftist politicians.
Initiatives like that are encouraging. "Add
infrastructure and a flexible labor policy and boom! We'll have so much
foreign exchange coming in we won't know what to do with it," says Rahul
Bajaj, chairman of Bajaj Auto. But the country has made false starts on the
road to modernization before. Is this time different? "I don't think this
party can be spoiled," says Shirish Sankhe, a partner at McKinsey in
Bombay. "No
one wants to stay out of
India."
We'll see.
Top of the page
How
Ratan Tata is shaking the Foundations
19 June 2006, Time magazine, By ALEX PERRY
You wouldn't expect the head of Tata group,
India's largest conglomerate, to say the rich are boring. But Ratan Tata
comes close. Acting rich doesn't interest him. "I've never had the desire to
own a yacht, to flaunt," he says. "It's not really [the point]." Nor does
the Prada-wearing class excite him as a marketing opportunity.
"Everyone is catering to the top of the pyramid," says the 68-year-old at
his office in Bombay House, Tata group's elegant Edwardian headquarters in
India's business capital. "The challenge we've given to all our companies is
to address a different market. Pare your margins. Create new markets."
The Tata group's global clout means its
chairman's thoughts on the world economy are worth listening to. The group
comprises 93 companies, including the world's second largest tea business (Tata
Tea); Asia's largest software firm (Tata Consultancy Services); a steel
giant (Tata Steel); a worldwide hotel chain (Indian Hotels); and a sprawling
vehicle-manufacturing arm (Tata Motors) that includes a bicycle factory in
Zambia and a project to make a car selling for $2,200. Since Ratan Tata
became chairman in 1991, he has multiplied Tata group revenues seven times
to an annual $21.7 billion. Since 2000, the group's market value has jumped
14 times to $39.9 billion. And over the past six years Tata has been on a
$1.9 billion acquisition spree that has netted
Britain's
Tetley Tea, South Korea's Daewoo Commercial Vehicles,
Singapore's
NatSteel and New York's The Pierre hotel, among 14 others.
Tata is one of
Asia's most
influential businessmen. And perhaps more than any other company, Tata group
exemplifies India's metamorphosis into a modern economy. For much of their
138-year history, the Tata family companies were the heart of
India's
insular business establishment the last business group you'd have turned to
for radical thinking, or owning anything abroad. The group's founder, JN
Tata, was a nationalist driven by the idea of a strong, self-reliant India.
He gave the country its first steel plant, first hydroelectric plant,
first textile mill, first shipping line, first cement factory, first science
university, even its first world-class hotel. His successors among
them JRD Tata, India's first pilot created the first airline, first motor
company, first bank and first chemical plant.
But after independence in 1947, the group came
to symbolize all that was bad about Indian business. It lost its airline and
insurance arm to nationalization. To avoid giving up more to the Congress
Party socialists who ruled India for half a century, JRD Tata, a distant
cousin of Ratan Tata, emphasized individual companies over the group,
keeping the conglomerate's stakes small and demanding little coordination.
Meanwhile, shielded from competition by the restrictive bureaucracy of the
"license
Raj," Tata's
companies became bloated and calcified.
Ratan took over from JRD in 1991. India was
beginning economic reforms, and, with state-sponsored monopolies on the way
out, the new chairman saw the need to overhaul the firm's culture. He raised
the conglomerate's stake in all its companies to a minimum 26%. And he
ordered each to meet performance targets to be first or second in its
industry, and to meet quantified goals for leadership and innovation or be
sold. Most shaped up. Tata Steel, for example, shed half its 78,000 workers
between 1994 and 2005 using retirement and voluntary redundancies to lower
costs and boost productivity. "The Tata group's relationship with its
employees changed from the patriarchal to the practical," reads the Tata
Code of Honor, which sets group-wide standards of conduct.
After nine years of consolidation and
streamlining, Tata signaled a new prominence for the emerging Asia
conglomerate in 2000 when the most Indian of brands bought one of the most
English, Tetley Tea. At $435 million, the deal was the biggest in Indian
history, and it presaged a wave of international expansion by Indian and
Chinese businesses like Mittal Steel and Lenovo. For Tata, entering the West
was not an end in itself. Buying Tetley was simply a way to grow Tata Tea.
Says Rothschild's Bhandarkar: "Other Indian groups look at things
opportunistically. Tata is the only one with an international strategy." If
the group has a geographical tilt, it is towards the developing world. And
that's based on a business approach that has not changed since its
foundation.
The son of a Parsi trader from Bombay, group
founder Jamsetji Nusserwanji Tata knew how to turn a profit. But JN also had
a patrician vision of spreading wealth and lifting a nation. In a 1902
letter to his son about building a workers' city around his Tata Steel
works, he deplored the squalor of industrial England and anticipated what
would become a standard for urban planning: "Be sure to lay wide streets
planted with shady trees, every other of a quick-growing variety. Be sure
that there is plenty of space for lawns and gardens." After his death in
1904, the city took his name, becoming Jamshedpur. Tata Steel introduced a
series of worker benefits that would become common only much later in the
West, such as the eight-hour working day in 1912, maternity benefits in 1928
and profit-sharing in 1934. Today Jamshedpur, with free housing, free
hospitals and free schools, sports stadiums and clean streets, remains the
envy of the country. In 2004, the U.N. chose it along with Melbourne and San
Francisco as one of six examples of urban-planning excellence.
J.N. Tata's ideals survive today. Tata Sons,
the holding company that manages the group, is 65.8% owned by 11 charitable
trusts, which spent $379.2 million on social causes in 2003-04 alone. Over
the following 12 months, Tata companies donated another $97.8 million.
Beneficiaries range from a host of Tata educational, health and scientific
institutes that dot India to the Ganges River's giant mahseer fish, saved
from extinction by a Tata-funded breeding program.
The group's corporate piety extends to the
boss' pay. Though the business house carries his name, Ratan Tata merely
draws a salary from Tata Sons. And while hardly poor, he takes personal
modesty seriously and is famously private. He lives with his two German
shepherds, Tito and Tango, in the same second-floor apartment in Bombay that
he has kept for 20 years. He is one floor below his stepmother, and
neighbors say they have never known him to throw a party. His one indulgence
apart from his dogs he is frequently spotted muddying his pinstripes as he
plays with them in a park near his home is a collection of cars. Apparently
embarrassed by the extravagance, he excuses his interest as stemming from a
love of design, not show. "I drive them periodically," he says, "and then
back to the garage."
What really excites Tata is his ability to
combine the group's philanthropic heritage with modern business sense.
Targeting the bottom of the income pyramid a lot of people with a little,
rather than a few with a lot ticks both boxes. It's almost as if he's
reciting from last year's hit book, C.K. Prahalad's The Fortune at the
Bottom of the Pyramid Eradicating Poverty Through Profits.
One of Tata's answers is the $2,200 car, a
four-door, rear-engine runabout that he designed himself and that is
currently under development (he aims to sell a million of them a year in
India after its release in 2008). Another is the Ace, a 700cc truck that
Tata Motors sells for less than $5,000 and, since its launch in southern
India in May 2005, has accounted for two-thirds of all trucks sold
domestically. Purchases of these vehicles are supported by low-interest
consumer loans from Tata Finance. Following the same model, Tata's hotel
chain is building 200 hotels across India under the brand Ginger, offering
rooms with wireless Internet access, air conditioning and ensuite bathrooms
for 1,000 rupees ($22), a fifth of the cost of a room paid by budget
business travelers in India today. Tata is also eyeing low-cost housing.
That same desire to market to, and invest in,
some of the world's poorest countries is behind Tata's affinity for
Bangladesh and Africa. In South Africa, the group has investments in mining,
tourism and engine manufacturing. There is an instant-coffee plant in
Uganda, a bus factory in Senegal and a phosphate plant in Morocco. "We look
at countries where we can play a role in development," says Tata. "Our hope
in each is to create an enterprise that looks like a local company, but
happens to be owned by a company in India."
After 15 years as chairman, Tata is thinking of
retiring. Asked how he would spend his days, he says he gave up golf long
ago and has almost no free time outside the business. On rare evenings off,
he says he takes a half-hour boat ride across Bombay harbor to a small,
scruffy beach house. "It seldom had power, so I had to put in a small
generator," he says. "It's quiet and away from everywhere. There is a town
and there are neighbors, but I go quietly on my own. I walk the beach and I
read and I think about what I should do." It's not how you conventionally
picture a tycoon's life. That's his point.
Top of the page |
|
31 Jul'06
15 Jul'06
30 Jun'06
26 Jun '06
15 Jun '06
News Updates
31 May '06
15 May '06
30 Apr '06
15 Apr '06
31 Mar '06
15 Mar '06
28 Feb '06
31 Jan '06
15 Jan '06
|
