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When Ratan took over from J.R.D. in 1991, reform was on the way and state-sponsored monopolies were on the way out. The new chairman saw the need to overhaul the firm's culture. He ordered each company to meet performance targets--to be No. 1 or No. 2 in its market--and to meet quantified goals for leadership and innovation or be sold. Tata Steel, for example, shed half its 78,000 workers between 1994 and 2005. "The Tata group's relationship with its employees changed from the patriarchal to the practical," reads the Tata code of honor, which sets groupwide standards of conduct. Subir Gokarn, chief economist at ratings agency Crisil, says Tata read the runes of change and largely avoided the rash of business failures that followed reform: "He survived the bloodbath. Those who made no changes became extinct."
Tata signaled a new prominence for the emerging Asian conglomerate in 2000 when the most Indian of brands bought one of the most English, Tetley Tea. At $435 million, the deal was the biggest in Indian history. For Tata, buying an iconic Western brand was not the goal. Growing Tata Tea was. "We look for the acquisition of companies that fill a product gap or have a strategic connection with what we do, wherever that company might be," he says. The same holds true for the latest steel deal: it fills a gap. Corus makes a wide range of high-end products not in Tata Steel's repertoire. The pairing will give Corus access to cheaper steel while handing new markets and know-how to Tata.
One aspect of the past that still survives is J.N. Tata's idealism. Tata Sons, the holding company that manages the group, is 66% owned by 11 charitable trusts, which spent $379 million on social causes in 2003-04. Other Tata companies donated an additional $97.8 million. Beneficiaries range from educational, health and scientific institutes to the Ganges River's giant mahseer fish, saved from extinction by a Tata-funded breeding program.
What really excites Tata is his ability to combine the group's philanthropic heritage with modern business sense. Targeting the bottom of the income pyramid ticks both boxes. Tata points out that consumption, as it is understood in the West, is still a dream for all but a fraction of 3 billion people in the developing world. Only 58 million Indians, out of the country's 1.1 billion population, earn more than $4,400 a year, according to New Delhi's National Council of Applied Economic Research. The challenge is to make consumers out of people whose disposable income is meager but growing.
One of Tata's answers is the $2,200 car, a four-door, rear-engine runabout he designed himself that's currently under development. Another is the Ace, a 700-cc truck that Tata Motors sells for less than $5,000; it's a runaway success. Purchases of these vehicles are supported by low-interest consumer loans from Tata Finance. Tata's hotel chain is building 200 hotels across India under the Ginger brand, offering air-conditioned rooms with wireless Internet access for 1,000 rupees ($22), one-twentieth of the cost typically paid by business travelers today.