The Tata group has taken the opportunity to blend its diverse range of businesses in China to good effect. This special report looks at how eight Tata companies are realising their potential in one of the world’s most influential and significant markets.
Call it the China condition — the irresistible urge that enterprises with a global outlook have to be part of the greatest growth story of the modern economic age. The Tata group has not been immune to the magnetic pull China exerts on companies major and minor, but it never needed convincing about the merits of this extraordinary market. And the evidence is in the numbers.
China was a sizeable piece of the trading business that Tata group founder Jamsetji Tata built as a budding entrepreneur in the latter half of the nineteenth century. Rocket forward to today and the Tata presence in China is of a different, and vastly more substantial, order. Tata companies, taken together, registered sales of more than $10 billion in China in the financial year 2016, they procured raw materials and equipment worth about $1 billion, and they currently employ nearly 8,000 people.
The Tata business spread in China takes in automotive and IT, communications and steel, transportation and trading. There are stellar names in the collective, Jaguar Land Rover, Tata Consultancy Services and Tata Steel among them, as also relatively smaller entities such as Tata Technologies, Tata AutoComp Systems, Tata Projects and York.
Not all of Tata’s operations in China have progressed at an even pace, but each has in its own way contributed to enhancing the familiarity and trust with which the group is perceived in China. What unites these varied companies is clarity on the importance of expanding with purpose in a market as vital as any in the world, and the absolute necessity of responding and adapting to changes that come thick and fast, and suddenly too.
“Tata is by far the most successful India-headquartered company in China and one of the more successful foreign companies in the country,” says James Zhan, the Beijing-based chief representative of Tata Sons. “China is a huge market for Tata and we are influential in some key sectors. There have been ups and downs, though, and that is understandable. This is a unique country and you have to factor in differences in language and communications, government structures and regulations, in the business culture as a whole.”
The urbane and soft-spoken Mr Zhan avoids banging the drum loudly as he puts Tata’s China performance in perspective. “Not many multinationals do consistently well in China. You must have the right products and services and you must sell at the right price if you want to make money. Get this equation wrong and you won’t succeed, no matter how hard you try.”
Building an efficient local operation is also crucial. “People talk constantly about localisation and that is far from easy,” asserts Mr Zhan. “It’s imperative, of course, that you have a stable management, but beyond that it depends on the product or service you are offering and the nature of your business. It makes a lot of sense to go local if you are selling to domestic customers. However, that does not hold true if you are targeting multinationals and offshore markets.”
It is often said that guanxi — the Chinese word for ‘connections’ — counts for plenty in the Middle Kingdom. Mr Zhan is not so sure. “Connections are important but that alone will not get the job done. They certainly can open doors but what do you talk about once the door is open? Government officials are inclined to come straight to the issue. You have to have the right solution or suggestion to get their attention. Access is not a problem for us; we will be heard because we are Tata.”
Jaguar Land Rover aside, business-to-business rather than business-to-consumer is bread and butter for the Tata group in China. “This is a giant market for consumer products and we are not selling many of those, so the potential is there,” says Mr Zhan. “Despite that, we are much better known in China now and the effort to engage with the general public is a continuous one.”
An area where Tata companies have excelled is employee relations. Attrition rates and turnover ratios are a bugbear for countless organisations in China, where jumping jobs is commonplace. “Our companies have been able to consistently create a capable workforce, with the majority of them being locals,” says Mr Zhan. “Stable management teams are of the essence and that’s another positive on our side.”
The Tata Sons representative office plays a focal role in easing the way for the group and its constituents in China. The office works to promote the Tata brand in the country, helps Tata companies develop their businesses, and enables them to establish relationships of consequence with government institutions, Chinese enterprises and with stakeholders.
The office is also involved in ensuring that sustainability remains a priority, particularly with community uplift programmes. “We take our responsibilities as good corporate citizens very seriously,” says Mr Zhan. “Abiding by the law, making sure we do the right thing on emissions, and lending a hand with social development projects — we do all that we can.”
Mr Zhan is upbeat about the prospects for Tata companies in China over the coming years. “We can build a more evenly distributed business; China can be a bigger market in services for Tata. The group pulls in about 10% of its global revenues from here and there is scope for more. There’s no question about the potential and we expect to capitalise.”
As for China’s ambitions as a country, the pathway has been laid. “Socialism with Chinese characteristics,” as President Xi Jinping recently articulated, has a place in it for all players, local and foreign. Economics as an end in itself, the drive to enrich technological innovation, the emphasis on a cleaner environment, and openness for business are the pillars being reinforced as China pushes forward with its singular development agenda.
The Tata group cannot but benefit in fuller fashion from the tenor and manner of China’s evolution, and it has carved out the near-ideal niche to accomplish exactly that.