Out of India, A “Third Wave of Globalization” Emerges

MUMBAI, India: Across much of the world, India is still known as a land of elephants and maharajahs. But one day, it might be known for Tata.

You may never have heard of the Tata Group. But there is a fair chance you have sipped a Tata drink, put on Tata shoes or slept in a Tata hotel in New York, London or Sydney. Your company's software may be made by Tata. The ball bearings in your power drill may be from Tata. When you last checked e-mail, telephoned Beijing or used Skype, Tata's 60,000 kilometers, or 37,000 miles, of deep-sea cables may have connected you.

And all this was before Tata made a bid of $10 billion including debt on Tuesday to buy the Corus Group, a British-Dutch steel maker. If completed, the deal would make it one of the world's top producers and nudge Tata closer to the status of global household name. Corus said Tuesday that talks were ongoing and that it was too early to comment.

The world has gotten used to the notion of India as an outsourcing powerhouse teeming with low-cost labor. But India is now emerging as a new kind of powerhouse: a fount of the next generation of global megacorporations.

"This is the third wave of globalization," said Arindam Bhattacharya, a director at the Boston Consulting Group in New Delhi and co-author of a recent study on emerging multinational companies. The first wave was colonialism, he said, and the second wave was the penetration of developing countries by multinationals from the United States, Europe and Japan.

As the Tata Group fans out internationally, the world is witnessing a rare event: the birth, in the former third world, of a diversified global business conglomerate - a company with the breadth and ambition of a General Electric, if not yet the heft.

To be sure, Tata remains far short of GE's stature. Tata's market value, at $47 billion, is one-eighth of GE's - equivalent to what the American giant was worth back in 1992.

But quietly and largely out of public view, Tata is weaving itself into the global economy. It operates in 54 countries on six continents, and 17,000 of its 202,000 employees are not Indian, according to figures provided by the company. It spent $1.5 billion on foreign acquisitions last year. It now generates 30 percent of its revenue outside India, and its $6.7 billion in international sales is on pace to double every two years. It exports 800,000 pairs of shoes a year from China to the shops of Europe.

As new multinationals like Tata emerge from the very different soil of the developing world, their leaders think and act in very different ways, bringing into the mainstream new habits that could alter the way business is done everywhere.

In Tata's case, the group brings an Indian-taught ethos of seeing its own growth as inextricable from the growth of the overwhelmingly destitute country that surrounds it. The group's holding company, Tata Sons, is owned by charities, with two-thirds of its profit going to philanthropy.

"We're making money in order to give it away," said Alan Rosling, a Tata executive director brought in two years ago to support its companies in their globalization strategy.

Its developing-world roots have infused Tata with a focus on designing products for low-income consumers whom traditional multinationals have neglected.

"We want the brand name to be international and, at the same time, at the bottom end of the economic pyramid," Ratan Tata, the group's chairman, said during an interview in 2004.

Tata's automotive arm is working to become an international player by catering to that demographic. It is developing a $2,200 "people's car" that it will likely sell in kits, to be assembled at every dealer's garage to save costs. And its low-cost focus is already making it a global force in trucks. It bought out the truck operations of Daewoo of South Korea in 2004, and in the three years since it began selling South Africans its cheap, made-for-India trucks, including its Ace minitruck for $5,000, Tata has captured one-fifth of the local market.

Growing up in a country with a prickliness about foreign domination, Tata has learned to tread lightly in overseas markets. It now benefits from an image as the un-multinational - a company that comes to places like South Africa and Bangladesh saying that it wants to learn rather than teach and to help build a nation, as it did in India, rather than merely seize market share.

In Bangladesh, the group has proposed a $2.5 billion investment in the country to build a steel plant, a coal mine and a power plant. Tata also agreed to build two hospitals and two educational institutes to improve the offer.

Tata was founded in India in 1868 by a family of Iranian ancestry.

In India, it has grown to be ubiquitous. The Tata name is now stamped on a bewildering array of brands - salt, tea and coffee on grocery shelves; clothing and jewelry in glitzy malls; the trucks and cars on India's bustling streets; and credit cards and telephone bills. Most Indians will confess to feeling a twinge of patriotism at the mention of the name Tata.

In the past 15 years, the group has built up the largest Asian software company, Tata Consultancy Services.

Tata is also the largest seller of whole-bean coffee in the United States and the world's second-largest brand of tea, having acquired the 147-year-old Eight O'Clock Coffee brand in June and, in 2000, Tetley of Britain. (The No.1 brand is Lipton.) In August, it bought 30 percent of Glaceau, a U.S. maker of "enhanced water" for the young and affluent market, with products like vitamin water, fruit water, and "smartwater."

Tata is also on a quest to spread its Taj hotel chain. It recently paid $170 million for the Ritz-Carlton in Boston, having earlier taken over the W in Sydney, managed by Starwood, and the Pierre in New York, managed by the Four Seasons.

In the October issue of The Harvard Business Review, Tarun Khanna and Krishna Palepu, Harvard scholars, argue that the fortitude required to do business in developing countries equips companies like Tata with the skills to blunt what would otherwise appear to be the "near-insurmountable advantages" of Western multinationals.