Strategy - Tata Group Sets out its Conglomerate Vision

The headline above from the FT really caught my eye this morning. Tata Group, perhaps best known in the UK for its ownership of Jaguar Land Rover (JLR) and Corus, has set out ambitious plans to invest $35bn in capital spending over the next three years as part of its vision for the next 10 years.

Tata Group is one of the world's most diversified businesses and is a great example of a conglomerate. Tata Group is not quite as diversified or valuable as Samsung - but it clearly has ambitions to become one of the world's most valuable businesses.

The Chairman of Tata Group has outlined the key corporate objective for the business by 2025 as part of what is imaginatively called “Vision 2015”. He wants Tata Group to be…

“…among the 25 most admired corporate and employer brands globally, with a market capitalisation comparable with the 25 most valuable companies in the world”.

Running a conglomerate like Tata is hugely complex and difficult decisions need to be taken about where to allocate investment to generate the best returns. The choices Tata must make are the classic example of product or business portfolio analysis.

• Which of its business units have the best growth prospects?
• Which have competitive advantage in their markets?
• Which need sustained capital investment in order to remain competitive?

The FT suggests that much of Tata Group’s existing market valuation is dependent on its substantial IT outsourcing division, together with the superb recent performance of JLR (one of the best examples of successful takeovers in recent years).

What would it take for Tata Group to achieve the objective set out in Vision 2025?

I consulted the PwC listing of the top global companies by market capitalisation (a good proxy for "the most valuable companies in the world").

Tata Group certainly faces some stiff competition to reach the top 25.

Here are the current top 20: (as at March 2014)

There is a pretty impressive list of companies hot on the heels of the top 20, including Toyota, IBM, China Mobile, Facebook, Coca-Cola, Amazon, BP, Unilever and Volkswagen.

And of course we've not eve mentioned the large number of fast-growing Chinese multinationals who have their own global ambitions, including Huawei and Lenovo!

Can a conglomerate (other than Samsung) really ever hope to become one of the most valuable businesses on the planet? What kind of capital investment would be required to achieve that by 2025? I suspect Tata's vision is a little ambitious.

You can watch more about Tata's strategy here with this short FT video: