The BCG Growth Share matrixTATA GROUP

Portfolio Analysis of the Tata Group (The BCG Growth Share

matrix)

The BCG Growth Share matrix uses the dimensions of relative market share and

the market growth rate to establish a 2*2 matrix containing 4 main quadrants –

Stars (high market growth, high market share), Cash Cows (low market growth,

high market share), Question marks (high market growth, low market share) and

Dogs (low market growth, low market share). The ideal strategy is to hold on to the

Stars and the Cash Cows, divest the Dogs and take a call on the Question Marks

(hold/divest).

We have conducted a detailed analysis (using the BCG Matrix) of the portfolio of

companies in the Tata Group. This involved analyzing the sectors in which the Tata

group operates as well as the companies in the Tata Group within each sector. We

studied the operational and financial performances of each company to understand

their growth stories. Special emphasis was laid on identifying the organic and

inorganic growth routes pursued by each of these companies under the Tata

umbrella. The conclusions drawn about these companies are based on analysis of

the global strategy of the Tata group and on detailed conversations with top

executives in the Tata Group.

The analysis reveals that Tata Steel, Tata Power, Tata Motors and Indian Hotels

emerge as clear Stars (high market growth, high market share). Hence, they

should be retained and the investment in these companies should be increased.

Tata Chemicals and Tata Tea emerge as the Cash Cows (low market growth, high

market share) and should be

held on to for the time being.

Some of the Question Marks

(high market growth, low

market share) are Tata

Teleservices, Voltas and Tata

Communications. These results

are shown in Exhibit 1 below.

Exhibit 1. Portfolio Analysis of the Tata Group using the BCG Matrix

The profitability of the Tata Group in the telecommunication sector has shown a

consistent decline from 10% in 2003 to 4% in 2006-07. Despite the telecom boom

in India, the question on the presence of the Tata Group in the telecommunications

sector warrants further discussion. For the Tatas, the broad objective behind

entering any sector is to be among the top 3 in that sector. Despite having had a

presence for many decades in the consumer durables segment, the Tatas have

been unable to capture the leadership position in the segment through Voltas.

Moreover, the growth registered by Voltas over the past few years has also been

far from impressive which necessitates the need to critically evaluate its

performance in this segment.

In addition, the question of operating so many companies under the Tata Group

needs to be looked into. Does it make sense to have so many companies in the

first place? Should there be a relook into the question marks like Voltas, Tata

Communications and Tata Teleservices? These are hard questions that need to be

answered as the group keeps going forward. With close to 100 companies under

one roof, the question arises whether all of them should be under the Tata Group

or should some be spun off.