Mr. Ravi
Kant |
Managing Director, Tata Motors |
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Thank you, Dharen.
Good after noon. What I’m going to be talking as the slide
shows really not so much as brand as commonly known but as how
do we build first the world class competence and that becomes
the foundation stone for building a brand whether in the country
or outside the country. We had some difficult times just few
year ago and therefore this came into sharp focus for all of
us and we had to rethink about the brand once again and I’ll
share some of these things about TATA motors as to what happened
in last six years. And how we are proceeding further and therefore
that kind of road that we are traveling on as where do we expect
to reach. First a very quick overview about building world class
competence and what has been the result so far. So a little
bit about TATA motors for those who do not know, it is India’s
largest automobile company, it is the second largest company
in the private sector, in the year that has just gone by we
don’t have the figures yet, but the previous it was more
then 20,000 crores and they are growing at a very fast clip
for last three or four years. As you can see from these figures
a very strong domestic position especially in the commercial
markets where we had started our lives in the automobile business.
We enjoy more then 60% market share and in cars we are the second
largest player although we came into the market only seven years
ago. As you can see 4.7 billion profit post tax 1.3 billion
US dollars. If you see the history of the TATA motors like any
other classical company we have also grown in similar fashion,
early phase, slow growth then getting the momentum and finally
when markets opened and liberalization happened we went full
steam. Then we were hit by the cyclical nature of the industry
actually the set came into sharp focus as long as the market
was protected there was barriers out there you did not feel
the nature of the market because all of us in which ever industry
we were in you kept kind of growing and this is the first time
that we got hit very hard, we turned in a loss of 500 crores
and it was the biggest loss in the corporates in India. So we
sat back and thought about it and then we unveiled the new strategy
and you can see from that how things are taken of course market
has helped us no question of that. I think that as we have gone
along most of the strategic tings that we have implemented have
worked very well and I think it is going very fairly accurately.
First thing to understand in the industry what type of industry
you are in, I think that is the key thing and that determines
what kind of a strategy to have and the thing that we knew but
we probably didn’t realize so badly is that we are in
a cyclical industry and as you can see that there is secular
trend as far as India is concerned and semi industry or commercial
vehicle industry is cyclical anywhere, automobile industry is
also cyclical but probably not so much, but civvies are far
more cyclical as you can see that the amplitude satellite quality
is going as we are going by. That therefore brings you number
of things, what happens when you are in the down cycle, something’s
have to happen, what happens as far as the top line is concerned
and what happens to the bottom line is concerned, when you start
thinking deeply about it common sense will give you many of
the answers and you will or when you are going in the down cycle
naturally your costs must be shrunk very badly so you should
be a lean organization so that even when the market is down
you are able to with stand the pressures. And you need to therefore
go into the segments that are less cyclical like for example
whether you take the passenger car market of LCV market you
see that they are less cyclical then the heavy trucks. So one
of the reason for getting into the car business was to offset
the cyclicality of the commercial vehicles. that was the key
strategic move that was done and you will see that it was not
an easy decision and at that point of time there were lots of
people who were skeptical about it but I think it has been ultimately
proved that what the company did was right and along with that
the second thing that is happening is the competition which
all of us face in which ever industry you are in just as in
the passenger car market you see. In five years alone there
were 36 models and today there are 59 models. Out of 36, 24
were by the Indian companies and today there are only 22 models
and 37 models have come from foreign players. That is the kind
of intensity that is really happening. So if this is the context
in which we are placed today then how do you tackle the situation?
So these are the two points I have talked about are set cyclicality
and de risking the business model and looking at the increasing
competitiveness. De-risking the business model is very important
because if the brand you are having is a strong brand and you
are doing well and suddenly you find that your business has
gone down and it has a great impact on the brand itself and
there fore you need to de-risk the business model and we will
come to some of the things that we have come to in de-risking,
for example getting into personal transportation, new segments
and in creasing segments that are less cyclical like the car
business that I had mentioned and LCV that I had mentioned,
buses because the whole bus market is controlled as far as the
roots are concerned, prices are concerned. So these are less
cyclical and it is all about getting into different business
so these are the some of the things that we tried to do. Second
is the increasing competitiveness. Here I would like to stay
for a minute, so about the competitiveness it is not only the
Indian players but now mostly from outside India. And if you
look at that, what is the strategy that MNC or that brand is
going to have. There are just two key points that we need to
take, one is technology and quality gap and the other is cost
gap. So that well known MNC is going to maintain ….it
has as quality and technology gap with the Indian manufacturers
say TATA motors, so in going forward you would like to maintain
that gap but it has a negative cost gap of say like TATA motors.
It would like to close that negative cost gap and maintain its
technology and quality gap very naturally. We are coming from
the other side we have the cost gap and it is a challenge as
to how to maintain my cost gap going forward because those fellows
can come to India and reduce the cost gap so for us therefore
it becomes a huge challenge being in a low cost country how
do you continue to enjoy that cost gap that you have and close
the gap in technology and the quality and I think that time
alone will tell because both are ultimately going to be fighting
for the same ground and which of the two is going to be more
successful. So during these both off set cyclicality and the
competitiveness what kind of competence we need to build I have
listed down six of them and we will go thru them very quickly
on each one of them. Product development is the key. In our
industry almost everything depends on the product therefore
you need to have a highly efficient system of product development
and I have just taken some examples like the passenger cars,
normally what you need to change in from one generation to another
generation the same platform in the car business is you need
to spend about a billion dollars. What TATA motors was able
to do quite cleverly in half a billion dollars it not only took
a Greenfield site, built a factory and raised a platform on
the three big variants were taken out one was the hatchback,
sedan and the station wagon and all within half or slightly
more then half a billion dollars. So you were able to do this
thing is a very competitive manner because in the car business
it is said unless you are a million player means million volume
player, you have to talk in millions you don’t make money.
And here we were able to prove that with 100 thousand vehicles
that is one tenth of that you could make money. So I think that
these are the kinds of things that we need to think as we move
forward and we enjoy the good market share and we are number
two in hatch, number one in sedan and station wagon segment.
Second example is say a small mini truck, most of you would
not be aware of this as this was introduced nearly eleven months
ago and has turned out to be phenomenally popular thing because
we were able to read the market well based on the road development
which was going to take place, based on other activities in
the country that were going to happen, distribution of goods
and people. We had just introduced the lower version of goods
vehicle and it has already reached in a year’s time an
annual figure of fifty thousand. Now this is big and the whole
commercial vehicle industry is about three to three and half
lakhs vehicles so you can understand how one product has in
eleven months time captured almost the fifty thousand annualized
volumes. Now how did we do it? Earlier because of the historical
reasons, because you were not allowed to import anything we
tried to do everything in-house that was right at that point
of time, because we did not have any connectivity to any technology
at that time from outside and the government didn’t allow
that and we didn’t have any collaboration. We had for
first 16 years till ‘69 collaboration from the technical
and the equity collaboration with ( not clear) and after ’69
there is not technical collaboration. They are just investors
in the company. So from that mind set to be able to go to a
mind set where you go to whole new ball game where the market
has changed from a sellers market to buyers, where competition
intensified as you said we had to change our business model
itself of product development. Therefore we moved from trying
to do everything in-house to as I said trying to develop the
product ourselves to managing product development. It is not
just the way onwards but if you think carefully it was the major
change that was done in the company last four five years. It
is the managing the process of product development and therefore
we connected ourselves and networked ourselves with the whole
technology partners, some within the company and some within
the group itself, like TATA technologies and Incat UK, European
technical center, the engineering centers in India along with
the joint ventures and the companies that we have taken over
and whole lot of vendors, suppliers and other people. While
this was being done the whole process was being up graded many
times over. We introduced the product lifecycle management system,
new product introduction system and advanced computer rated
design and I think that what we have got is fairly advanced
level of things and we are still going into things understanding
for example aircraft is being designed. Today we have come to
a situation that if I tell you that the (not clear) systems
is today creating a plane the very first plane which is going
to made will be a saleable plane, that means no crashing, no
testing. Normally what you need to do in the cars and others
is that you need to test drive them by crashing and destroy
lot of them. But we have now reached such an advanced stage
level that the first plane itself is going to be a saleable
one. So we are trying to see how we can make my automobile.
Earlier I used to destroy hundreds of automobiles to have that
right quality but now I can do these things mostly on software.
That is the kind of change which is taking place. So building
world class competence and product development, building world
class competence and supply chain, improvement and quality,
enhancing people capability and such things like that and I
don’t want to spend time on that. just to give you an
idea tat by doing this we are able to more then double the productivity
in five years time. Outsourcing and global sourcing it is mentioned
here that how do I maintain my cost competitive advantage. To
maintain that I have to those places where there is lower cost
and not be fixated that I have to buy everything from India
or I have to do everything myself. So both outsourcing has become
a big thing and also location wise and percentage wise as you
can see out here from a highly vertically integrated company
that we were, TATA motors were we have now reached the position
where the small vehicle that I talked about almost 80% of it
is outsourced. From almost 80% in-house we have moved to 80%
outsource and these kinds of things have happened very rapidly
last few years. So the key really is how do you move in times
where you are able to retain you cost competitive advantage
because if you don’t you will not be there. As in many
companies in the automobile line what s happening to them. And
of course the data management and I don’t want to go that
much into that. The key is to do all this as I said how do I
bring the break even point, in he sense that when bad times
are there I still should not make losses though my profits may
shrink. They all add up to whatever I have said to reduce because
we are in a cyclical distance. That is something that you should
understand and as you can see that in three years time from
two thirds capacity of utilization it came down to one third
capacity of utilization afterwards it has moved up slightly
because of huge increase in input cost material like steel and
all. All of these things are done to assure the continuous strength
of the brand and does not get shaken because of the external
circumstances which are going to buffet it. marketing and sales
– again it is very simple but these kinds of things for
the commercial vehicles is not done and we have introduced it
in segmentation and what we are seeing is this principle is
applicable in India as well as outside India and as you move
forward you can really predict as to what will be compositions
of the different segments and therefore what kinds of products
that you need to have. And which markets in the world are moving
in tandem in particular phases of evolution. The new sales planning
process which was introduced have the….now getting into
CRM TATA motors is the only automobile company in the world
that has taken the end to end solution for the CRM which we
are doing and no other automobile company is doing this or tried
to really do it. Then there is the usual corporate identity
program ands doing all these things you see that strength of
the opposition in the market, in the domestic market the CV
market share is about 16% and he car market is about 17%. One
of the things to really look at is a dimension to go into less
cyclical segments to offset the cyclicality. Other thing is
go into markets which are also cyclical but also a phase like
and that was the key thing for us to get into the international
business although markets outside India are also cyclical but
fortunately there is a difference in phase. And therefore some
markets may be going up and some maybe coming up. If you play
that intelligently you can manage the business mall. Now in
international business there are two kinds, one is organic growth
and the other is inorganic growth. So I’ll spend few minutes
on organic growth. We were supplying vehicles to 80 countries
and this was as I said merely dispatching vehicles from here
and not really having the connectivity with the customers or
with the classical marketing so we decided that’s not
the way we are going to do this and this was decided about three
and half years ago. And so we took a much focused approach and
I will show you what this focused approach is as we actually
sank the markets and by shrinking the market and taking the
more focused approach we increased the numbers quite substantially.
So the various factors and screens that we used was market attractiveness
and potential regulatory environment in that geography and the
TATA motors ability to adjust in that markets. The triangles
that I had showed you earlier if that if we are strong in say
segment C which is the India position today and therefore if
I find that there is market like South Africa for example a
substantial C type of a segment and we have e product which
is close to us and there fore we can make a big difference.
So how did TATA motors sales do?
As you can see from here that every year we have been doubling
the sales in the international markets, from less then nine
and half thousand to fifty thousand this year which is just
to conclude. And next two years we are seeing that this process
will continue. And as I said earlier three years ago we had
shrunk to 45 and next year we shrank another five and later
another five. So we are shrinking the markets and doubling the
numbers. The other one is the inorganic growth. Tow years ago
we took over a company called Daewoo commercials in South Korea,
many reasons, some of these are given here but the best of it
was the complimentary product range and it hastened our introduction
and the entry into the higher grade of segment by almost two
years and because we were anyway working at it and this enabled
us to c\short circuit us the time frame and reduce that by half.
What I want to talk here is….many times the financial
marketing is all those things are important and the product
is important but I think that we miss out on the soft issues
and what is the important point here was that you need to be
extremely conscious about the soft issues and we have put up
a four stage process that we follow initial understanding, basic
familiarity, language familiarity and the familiarization with
the country and harmonization and finally synergization and
I think that we have been extremely successful and that is what
we were following now or last few years. So what we are making
is good corporate governance, cost effectiveness is strong in
generic ways and what we are getting from Korea’s work
ethics quality and production activity. I think that we will
be able to build a good brand in Korea of TATA Daewoo. And people
aware now becoming familiar with that. I think a good respect
amongst everybody all the government constituencies or the industrial
constituencies or the media or the general public has enabled
to create a very good brand image thru doing many things including
advertising as the results speak for themselves. As you can
see that we have increased the market share by almost by 8%
and we launched a entry into the medium commercial vehicles.
And in three months itself we were able to capture 13 and half
% market share. So all these things that we have been trying
to do have worked very well and today two thirds of all exports
of the heavy commercial vehicles of Korea are actually accounted
by our company; a similar kind of thing we did for the buses
where we were able to get technology from a small company but
we were able to take that technology and spread it over on a
much larger canvass and which is therefore a win-win situation
for both. Here also you can see as far as sales and revenues
are concerned they have gone up very substantially. And therefore
the point that I would like to mention which I was talking about
– the soft issues. The philosophy is not to be an Indian
country in that country and it is very natural I think that
when we are talking about the templates we must be quite clear
if I can take the lower portion first, when you think of a US
multinational company some image comes to our mind, when you
think of brand Japan something comes to our mind, when you think
of brand Germany or Korea something comes to our mind, so when
you think of an Indian company or a brand nothing comes to our
mind. That is because there is no global Indian brand today;
there is no Indian MNC today. But surely in five to ten years
time there would be a few Indian companies and therefore there
is a lots of responsibility in these companies to create that
template to create that what India brand will be known as and
the way we are seeing is that we should not be seen as an Indian
company in that country but should be seen as a local company
in that country. That means that I must connect myself to the
society there, I must connect myself with the different constituents
there, I must be seen to seeing and participating there in the
development in that country and the society and the area in
which I work. I think that is a very different kind of way which
other MNC’s have worked and that is what the TATA motors
in particular is trying to d o and I think that we are getting
early successes of that and we are seeing the strength of that
and I think that this is the template which at least as far
as we are concerned we are going to follow and based on that
the brand is going to be created, that means that the TATA brand
or the TAT motors brand is going to be something which does
not alienate and it is something which is trustworthy and the
kind of values that we have built over hundreds of years or
more then hundred years in India. We have to build in those
countries; we have to bring those things of trust, transparencies,
corporate governance, ethical values and things like that in
those countries in a fast manner. And that is what we are tying
to do and that is what is going to give us a sustainable competitiveness
in the market as compared to others. That means warm up relationships
with our constituents in the markets that we serve. So these
are the kinds of things that we are doing. Human resources I
don’t want to speak much on that. From a very hierarchical
organization we are moving albeit not as fast as one would desire,
to a very collaborative approach and trying to do things and
see things …it is interdependence that is going to bring
success to us. And finally whole thing is to be ….we are
trying to knit together. Two things here one is what we call
the TATA business excellence model and the balance score card.
This excellence model we have done quite well as you can see
there are seven things that are based on the Malcolm baldry
award of the US, leadership strategic planning customer market
focus information and the human resource process manages business
itself, al these are kind of interdependency is clearly established
here and we have done quite well on this as we have got the…
we are the third company in the TATA group who got this TBM
award and last year we also got the CIA award for business excellence.
And the balance score card again which is knitting together
various perspectives like the financial, business, customer
process and learning both perspective and all knitting it together
and again interdependency and the collaborative missive and
here also you can see here that is happening that is well rewarded.
And what the results have been of the various actions that we
have taken, we are now in a generic company, it is very difficult
but we are working on it on the negative working capital as
I mentioned the cost of steel as in last two years it has gone
up so it is bit positive but the attempt is going to be that
we work it in negative capital and low debt equity rate ratio
as you can see in business results have been quite favorable
in revenue, margins and finally the market has awarded in terms
of market capitalization as you can see market capitalization
as on 19th of April that’s day before yesterday TATA motors
were nearly 8 billion dollars and the GM was 11.6 and Ford was
13.4; well I think it speak two things one is how the market
capitalization of GM and Ford has really fallen down very precipitously
and how the TATA motors has gone up so there is a very little
difference as you can see and that tells you as to where things
are moving and other on of course is the market cap in India
we are by far are the largest market cap. So all these things
put together are actually building TATA motors brand to building
TATA brand not so much as really about a particular indica brand
or a particular ace brand and things like that, those things
are there of course but many of the discussion will happen in
the course of these two days you will learn about it but what
I’m talking about is building the company brand basically
and I think what has been done so far has been quite a challenge
and is turning out to be quite a satisfaction to us. So thank
you very much. |
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