Creating a Corporate Advantage: The Case of the Tata Group

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Introduction

 

Business Group refers to a collection of subsidiary and parent companies that operate as a distinct economic unit entity via a common control structure. The BG structure plays a major part in the overall goal and mission of the company. More importantly, the business groups requires a better structure in order to facilitate better management of employees, business operations and customer relationships (Chittoor, Narian, Vyas & Tolia, 2013). Business structure influences the ability of a company to make decisions that affect the financial capacity of the firm. Most of the business tends to apply a hybrid Business Group structure, which encompasses a mixture of diverse models with a major strategy.

Business Group Structure in Tata Company

Tata Group has witnessed tremendous changes in its business group’s structure over the recent past. Initially, the company had different structure as compared to other western conglomerates. The parent company was not listed while its subsidiaries were listed. The structure provided its subsidiaries with more freedom and enhanced relationship with the parent company. Therefore, subsidiary companies were autonomous public companies in the stock exchange (Chittoor, Narian, Vyas & Tolia, 2013). The unique business structure in Tata Group was described as “Tata-ness” which offered crucial glue, which bound the different businesses of the Tata group together and formed a common identity.

The holding company in Tata Group was a family company, which manages equity stakes in other subsidiaries. Other diverse businesses were sheltered in a in a distinct firm which may be under a CEO, shareholders, board of directors and management team (Chittoor, Narian, Vyas & Tolia, 2013). Tata group applies federal structure, which describes the special organizational structure of business group. Tata Sons is the main holding company (parent) or primary promoter of the Tata Group. It was formed in 1868 as a trading company. The chairperson of Tata Sons also works as the Chairperson of the Tata conglomerate. Most of the chairpersons in Tata Sons were from the Tata family. However, in the recent past, it implemented leadership transitions were chairpersons are experts. However, Tata Sons is not listed in the security stock exchange. Moreover, Tata Sons owns many registered firms in India. The Brand Equity Business Promotion Agreement (BEBP) manages Tata logos and trademarks (Chittoor, Narian, Vyas & Tolia, 2013).

Tata Industries Limited also serves a holding company or promoter in the Tata group. Tata Sons aiming to manage its businesses established Tata Industries Limited in 1945. It also possessed two functioning divisions that worked as independent centres for profit enhancement such as Tata Strategic Management Group. The directors of Tata Industries and Tata Sons serve as the directors of some of the Tata group companies (Chittoor, Narian, Vyas & Tolia, 2013). The executive board of every firm had ultimate powers in decision-making and had full freedom. Some of the Tata subsidiaries included the Tata chemicals, Tata steel, Voltas, and Rallis India among others.

The Business Groups structure of Tata Group provides a common culture that is normally referred to as Tata-ness. The structure is designed in a manner that permits creativity and innovation of individuals in the firm. In addition, it helps to balance between the need for control and command in the management of the firm and the demand to be free flowing, innovative and creative (Chittoor, Narian, Vyas & Tolia, 2013). The free-flowing strategy is considered important because only group services and processes that benefit to the firm are maintained. Small firms are also given a chance to enjoy the group services. The parent company offered nourishment through strategic guidance, ethics and values while the subsidiaries provided business sustainability (Chittoor, Narian, Vyas & Tolia, 2013).

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