July 2008

A passage to Britain

A look at 100 years of Tata’s presence in the UK and what the future has in store

In 2007, Tata Sons’ UK subsidiary, Tata Limited, celebrated its centenary year. Tata marked this anniversary by winning the auction to acquire Corus — the erstwhile British Steel — one of Europe’s largest steel makers. That has once again made the UK Tata’s leading international market.

The Corus deal was the largest-ever Indian acquisition of a foreign firm. It has catapulted Tata Steel from its earlier rank of 56 to the world’s sixth-largest steel producer and has secured the company a capacity of 19 million tonnes in established markets. Tata Steel now has the lowest-cost distinction in two major continents, Europe and Asia.

Tata continued its internationalisation journey in 2008, with Tata Motors acquiring the UK-based Jaguar and Land Rover for $2.3 billion from Ford Motors. The deal has added fuel to Tata Motor’s global aspirations while enhancing its international footprint with two premium brands.

The combined revenues of Tata companies in the UK were close to $9 billion in 2008, with 19 companies operating in the country. Tata now employs more than 47,000 people (following the Corus and Jaguar-Land Rover acquisitions). The UK illustrates many themes of Tata’s internationalisation agenda: enterprise, boldness, investment, the development of business models that cut across geographies, the creation of local employment, and a commitment to the community.

The UK was Tata’s first overseas foray, more that a century ago. It was also the place where the new phase of our internationalisation kicked off, seven years ago, with Tata Tea’s path-breaking acquisition of Tetley. The market leader in the UK and Canada, Tetley contributes some 66 per cent of the consolidated turnover of the Tata Tea group of companies. The integration of Tetley into its fold has driven the transformation of Tata Tea, which has become an innovative, consumer-oriented and brand-focused company.

Tata has made two other acquisitions in the UK, both in 2005. Tata Chemicals acquired the Brunner Mond Group to become the third-largest producer of soda ash in the world, and Tata Technologies acquired INCAT International, which, combined with Tata Technologies’ offshore capabilities, creates a strong and seamless onshore / offshore delivery capability for international customers in the automotive and aerospace industries.

As elsewhere, Tata Consultancy Services (TCS) is, in many ways, the pioneer of Tata’s presence in the UK. With five offices and a delivery centre in Guildford, the UK is one of TCS’s lead markets. Its £500m takeover of Pearl’s Peterborough call and IT support centre makes TCS the first Indian firm to open a back office in Britain.

The centre provides telephone and internet support for 2 million UK customers — who hold 4 million life insurance and pension policies — and employs about 1,000 people. This investment illustrates that the Indian IT industry is not just about outsourcing of work to lower-cost countries such as India, but also about developing an efficient delivery model across differing geographies.

Another trend-setter in the IT space is Tata Interactive Systems, which provides custom-built e-learning material as well as instructional design, project management and technical consultancy services in the UK. Tata Interactive is now among the largest developers of e-learning in the UK.

An example that breaks the stereotypes about Indian business is Tata Motors European Technical Centre. Currently based at Warwick, the centre employs more than 80 highly skilled engineers, who work seamlessly with Tata Motors’ Engineering Research Centre in Pune (in western India) to develop and refine the company products.

Tata Communications entered the UK market in 2004 to tap the enterprise customer base in the country and has gone on to successfully offer wholesale voice operations for European carriers seeking Indian termination services. The UK operations account for more than one-third of Tata Communication’s European revenues.

And, of course, the UK has Taj Hotels and its Crowne Plaza London-St James, bought in 1982. The property has 342 rooms, renowned food and beverage services, and architectural gems such as the exquisite terracotta frieze and the beautiful fountain. Adjoining it is 51 Buckingham Gate, which offers 82 elegantly furnished apartments.

Tata’s commitment to social responsibility has also manifested itself for long years in the UK. Sir Ratan Tata — the younger son of Jamsetji Tata, the Founder of Tata — made a donation that enabled the London School of Economics (LSE) to research the causes of poverty. This led to the setting up, in 1912, of LSE’s Sir Ratan Tata department, subsequently called the Department of Social Sciences. The department’s first lecturer was a bright young man named Clement Attlee, who went on to become the British prime minister when India became independent, and also set up the British National Health Service.

The Lady Tata Memorial Trust was set up in 1932 by Sir Dorab Tata, the elder son of Jamsetji Tata, to support research into leukaemia and other blood diseases. The trust is in memory of Sir Dorab’s wife, Meherbai, who died of the disease in 1931. The trust set up a scientific advisory committee of eminent scientists and physicians to advise them on research applications and the distribution of funds. Tata Limited administers the awards, which have over the years been in the region of £250,000 to £500,000 every year.

Tata companies have continued this remarkable legacy of social commitment. Tetley tea sold in the UK supports the British Heart Foundation by raising funds for this leading national charity. TCS UK has 20 corporate social responsibility champions and teams running education, disability, elderly, youth and IT-related projects using its core competencies. This includes practical involvement and fund raising (TCS matches the funds raised by employees).

TCS UK also participates in Prince Charles’s ‘Seeing is Believing’ programme, which encourages senior business people to respond to the critical issues facing some of the world’s most disadvantaged communities. It also supports the ‘Responsible Offshoring’ programme. In both of these initiatives TCS works with ‘Business in the Community’, an association of 750 companies that have made a commitment to practice ethical and compassionate business methods. And TCS is a member of the UK Percent Club, comprising companies that donate more than 1 per cent of their profits to charity.

As a liberal and open economy, the UK has proved an attractive destination for Tata to realise its international ambitions. Increasingly, the sustaining of our competitiveness will require innovation and technology, attributes that will build on our natural advantage of lower cost.

Tata’s presence in the UK, however, is as much one of learning. For example, one of the key attractions of Corus to Tata Steel was its renowned technical skills. Tata companies will need to source technical and managerial expertise from countries such as the UK, and creatively blend it with competencies from India and elsewhere. By doing this, Tata can define a new competitive paradigm with the potential to create truly world-beating and global companies.