Mumbai: Cyrus Mistry, chairman of the $100 billion Tata group, has chalked out a plan to enable the dealers of all Tata companies revamp their businesses with the help of Tata Strategic Management Group (TSMG), the consultancy arm of holding company Tata Sons Ltd.
In January, Mistry advised TSMG executives “to focus on mid-sized businesses that are on a high growth trajectory and have direct links with major Tata companies”, according to Raju Bhinge, chief executive officer of the consulting arm.
TSMG, added Bhinge, has completed a pilot project with a big dealer of Tata Motors Ltd in Bangalore. The project—christened DEEP or dealer effectiveness for enhanced productivity—aims “at reorganizing the dealership in terms of structure, manning and productivity norms and its role definition”.
“He (Mistry) brought to our attention the extended ecosystem of major Tata companies. And, to our surprise, some of the major dealers and customers of companies within the Tata group have a turnover as high as Rs.1,000 crore and would require our assistance in scaling up their business and organizing their business effectively,” said Bhinge.
The move will not only increase their efficiency of the dealers but also help TSMG, which provides consultancy services across sectors like consumer goods, engineering, chemicals, and power, tap synergies within the organization and even non-Tata clients.
TSMG gets nearly 50-60% of its revenue from non-Tata clients and wants to scale up the revenues from such accounts to 75%. Mistry’s strategy, according to Bhinge, will help TSMG get non-Tata clients and also help major Tata companies cement bonds with dealers and customers.
Tata Motors will soon look at other dealer locations, according to Bhinge, where TSMG can bring in its expertise. Similarly, the firm will be looking to tap customers of Tata Steel who manufacture finished steel products. “The customers of Tata Steel will be able to get end-to-end solution under the Tata group—right from sourcing of raw materials to organizational solutions,” said Bhinge.
Focus on the mid-sized businesses seems to be one of the important strategic moves by Mistry after he took charge of the 145-year-old business house on 28 December.
“He (Mistry) asked us why are you not looking at these high growth firms that will be billion dollar businesses within a few years on account of the four-fold growth of the Tata group,” added Bhinge.
“The Tata group is huge and still has lot of synergies at the back-end and synergies in terms of customer relationships that have not been exploited to the fullest. Concentrating on the extended ecosystem of the group will help major Tata companies to get closer to their customers and further enhance their distribution channels and branding,” said Raveendra Chittoor, assistant professor for strategy at Indian School of Business.
Dealing with customers may enhance the prospects of some “consumer businesses” as well. Chittoor said the Tata Group has several consumer businesses like mutual fund and passenger vehicle business that have not been very successful despite a strong brand.
“Focusing on the customers of major Tata companies by TSMG can help gaining loyalty of customers for businesses that have not done very well,” Chittoor said.
TSMG is also looking at partnering with other Tata companies to broaden its spectrum of services.
The consulting company already has a tie-up with Tata Capital Ltd, Tata International Ltd (TIL), Tata Technologies Ltd and Tata Consulting Engineers Ltd.
Bhinge said TSMG is now looking to partner with TAL Manufacturing Solutions Ltd, a Tata company which produces machinery tools, aerospace structural products, and ground manning equipment. The consulting firm is also looking to leverage the network of TIL to expand its business in Africa.
TSMG will also offer consulting services for corporate social responsibility (CSR), water and energy-related solutions to its clients.
“CSR will be an important area for us since the government will soon make it mandatory for companies to spend 2% of their net profit on CSR,” said Bhinge. The CSR spend will increase multifold and companies will look at spending the budgeted funds effectively and we will be able to tap businesses here, he added.
In early 2012, Ratan Tata (now chairman emeritus) announced his vision to make Tata Group a $500 billion group by 2020.
Besides the consulting push with TSMG, Mistry is also building a young team and creating new positions within the group—Mukund Rajan, aged 44, was appointed as chief ethics officer, brand custodian and corporate social responsibility head on 28 December.
Mistry is also building a mergers and acquisitions team and Ajit Krishnakumar, investment banker at Rothschild India and son of Tata Group veteran RK Krishna Kumar has been brought in to head the team.
“Certain broad themes of Tata group’s business strategy have started to unfold. Mistry is creating a team with young people who will stay with him for the next 10 years or more. This clearly shows he is planning way ahead of several business houses who take a mid-term view of four-five years for their companies,” said Chittoor.