Hello there people, the Date for CAT is not far off and hopefully, your weak areas are getting diminished by the day. However, there is one major focus area which needs to be taken care of (but is neglected by many): Awareness about contemporary Politics and current affairs. We believe that it would take regular reading to get to the point where you could compete with the IIM call getters from across the country when you are poised to take on them in a GD or an interview. So, starting today there shall be a column on contemporary issues which shall be written by a very respected political observer: Mr.Balaji Vishwanathan (who has generously agreed for his answers to be put to use for the student community to thrive), who is currently the Most Followed Writer on Quora (180,000 followers throughout the world) In fact, the columns are going to be in the form of Question-Answers which are relevant in the MBA preparation point of view. All the very best, Cheers!
Today we shall see the expert's opinion on the recent removal of Mr.Cyrus Mistry as the Chairperson of Tata Sons:
Q: Why has the Tata sons board voted to remove Cyrus Mistry as chairperson?
It looks to be a clash of visions between Ratan Tata and Cyrus Mistry. From the point of view of Tata, they want to look the “long term”, but Mistry’s job was to keep the company surviving to even see the long term. The fight between the short term and the long term, eventually led to the fallout.
Cyrus Mistry had to do the job exactly like that of Lou Gerstner, the iconic CEO of IBM who took the conglomerate from a family controlled troubled entity to a thriving modern business. Tata group is a complex thing with a very confusing ownership structure and myriad bureaucracy. Mistry struggled implementing the new professional structure and pushing for performance, in an organization that looked like the old IBM - self-absorbed and too much obsessed with the future.
Ratan Tata began a massive expansion of Tata, getting into all sorts of places. At the height of the market in 2007, he bought the biggest purchases ever done by an Indian company - of Corus in the UK. He was not alone. Indian business houses were all over Europe with their massive purchases building world’s largest steel businesses [Tale of two acquisitions: Mittal Steel's acquisition of Arcelor and Tata Steel's acquisition of Corus]
While these massive global acquisitions made for some good chest thumping in some Indian corners they also tied down the company’s performance. Under Ratan Tata, the Indian company became less Indian, making most of its revenues from outside India. It is strange and ironic. At a time when global companies were growing their Indian investments, Tatas seemed more getting out.
Corus was losing money a lot and Tata had little expertise to manage such an organization. Indrajit Gupta: Tata Corus: A deal from hell. Mistry took the tough decision to undo the great legacy of Ratan Tata. That didn’t go well. From Tata’s POV, the decision is a sort of betrayal of UK workers who had put their weight behind Tata’s purchase. Tatas believe that this decision to get out of UK steel business will impact the company’s image in the long term.
Ultimately, it is about the struggle to become a modern corporation. Tata probably didn’t have the patience to go through the full journey.
Q: What is the likely impact of Cyrus Mistry's sudden removal on 24 Oct 2016?
For better or worse, Tata group is a massive oceanic fleet that is on autopilot. It is not easy to change its direction nor get it either better/worse by changing leadership.
Various Tata companies would continue to run tomorrow like they did yesterday. Their day to day performance has little relationship with the Chairman of the group.
However, the fallout will have following medium term implications:
1. Chaos at the market as investors hate surprises. The way in which the Chairman was sacked brings down some of the confidence.
2. A big question on the restructuring that is happening. Mistry has been bringing the company to sanity at the cost of bit of its reputation. What happens to the moves like selling Corus
3. A potentially nasty legal battle between the two Parsi families - Pallonji family and the Tata Sons that could pull down the industry for a while.
That's all for today, stay tuned for more daily updates coming your way around 12 pm every single day.
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