Tata tumbles down brand table after bruising conflict
For the first time since 2007, Tata Group does not figure among the top 100 brands in the world.
India’s biggest conglomerate has tumbled to 103rd position from 82nd a year earlier in the Global 500 2017 list released earlier this month by Brand Finance, an international strategy consultancy.
Brand Finance says it calculates the value of a brand by using a “royalty relief approach”, which involves estimating the likely future sales attributable to a brand and calculating a royalty rate that would be charged for the use of the brand.
In other words, it makes no reference — direct or indirect — to the bruising internal conflict that has played out over the last few months on the board of Tata Sons, the parent of Tata Group.
But it would be clear even to a layman that the public fracas, exchanges of charges and counter-charges and washing of dirty linen in public have made a substantial contribution to the slide.
After all, what is brand value if not a perception that enables a company to price its products higher than its peers and withstand market challenges? David Haigh, the CEO of Brand Finance, put it succinctly when he said that the purpose of a strong brand was to “attract customers, build loyalty, to motivate staff” and above all “to make money”.
The Tata brand has been battered by the uncertainty caused by the abrupt ouster of Cyrus Mistry as chairman in October and his replacement by patriarch Ratan Tata on an interim basis, followed by the appointment last month of Natarajan Chandrasekaran, who will formally take office on Feb 21. However, investors’ perception of the Indian multinational was already flagging because of the poor performance of some of its businesses.
Barring Jaguar Land Rover and the IT services of Tata Consultancy Services (TCS), two of 100-odd businesses that make up the Tata Group, many others — from steel to vehicles, power, hotels or beverages — have been bleeding red ink for the past few years.
Mr Mistry did not go quietly. He shocked the country with allegations of corruption, bad acquisitions and interference by Ratan Tata. His charges of misgovernance and fraud at a joint venture with AirAsia sent a clear message to stakeholders that all is not well with the conglomerate, founded by Jamsetji Nusserwanji Tata in 1868.
It is not clear whether the new chairman, known to all as Chandra, will be able to restore civility and unity in the top ranks of the business empire. He brings to his new position a sterling record at TCS, but he may not feel he has enough of a mandate yet to embark on a restructuring of the Tata businesses, which seems to be the need of the hour. In all likelihood, he might continue with the status quo for now, emphasising consolidation and avoiding any bold decisions.
The fact is, Tata has been slipping down the global brand table for a few years. It was in the top 50 in 2011 and 2012, and its brand value peaked in 2013 at US$18.1 billion. But by 2015 it had slipped to 65th place with a brand value of $15.4 billion.
But all is not lost for Tata Sons. For one, it remains the top brand in India, well ahead of Airtel (190), Life Insurance Corporation (222), Infosys (251), State Bank of India (294), Indian Oil (369), HCL (378), Reliance (345) and Larsen & Toubro (498). But all of them except State Bank of India and Larsen and Toubro have registered substantial improvements in their rankings.
Overall, Google topped the Brand Value index followed by Apple, Amazon.com, AT&T and Microsoft.
If Mr Chandra can carry out a thorough restructuring, consolidate profit-making businesses, diversify aggressively into domestic growth sectors and empower the boards of group companies, he can put Tata Sons on the path to recovery.
The company may have made a good beginning by appointing S Padmanabhan, a Tata veteran of three decades, as chairman of Tata Power. Similarly, Harish Bhatt has been made chairman of Tata Global Beverages, Ishaat Hussain now heads TCS, and OP Bhatt leads Tata Steel.
A lot will now depend on how the company fares in the next few years and whether it is able to attract new talent.
Meanwhile, the cases filed by Mr Mistry in various courts and tribunals will have an adverse impact, which will be magnified if key business units remain in the red in the medium and long term.
Undoubtedly, Mr Chandra’s leadership ability will severely tested. He will need to deflect the focus from the recent leadership tussle, build competitiveness, and maintain a balance between the company’s growth and the funding requirements of the Tata Trusts for charity. If he succeeds in achieving these goals, it will be a major assurance to the market and shareholders. To do so, however, he will require the unambiguous backing from Ratan Tata.
Sources say the group has already launched efforts to improve on its brand value and hired some top brand managers for the job.
In an interview in December with the business newspaper Mint, Tata Sons’ new brand custodian Harish Bhat said: “I would say this controversy (involving Mr Mistry and Ratan Tata) perhaps has to some extent impacted the way stakeholders look at the brand, and we will build on the brand and nurture it in the future, bearing that in mind.”