Overwhelming excesses in World War I almost led to extinction for this flagship Tata group company
The early 20th century was hardly the time when one could have the benefit of established and well documented business practices. But then, this cannot be considered as an excuse for a spate of reckless expansions made by Indian businessmen of that time; for the adage ‘never bite more than you can chew’ was well known even then. Their spirit of enterprise rose to unmanageable proportions when World War I provided them with a unique opportunity to spread their wings. The war period created a serious crunch in imports, leaving the field wide open for these firms to tap the domestic Indian market. And the most interesting in this regard were the Tatas, then led by Dorabji Tata (son of J. N. Tata, shown in picture). A lot of ventures they started into construction, banking and cement lost their bearings when peace dawned and had to be shut down or merged. Tisco was the starkest case of a thoroughly ambitious expansion plan going awry. In war time, Dorabji decided to ramp up production from 100,000 tonnes of ingots to 4,20,000 tonnes (source: The Oxford History of Indian Business, Dwijendra Tripathi). As the war ended, Tisco found itself competing with steel imports once again, and faced declining margins and rising inventories, rather than the other way round; leading to a severe liquidity crunch. Today’s Big Pharma companies would sympathise; their situation is quite similar when patents on their products expire and generics take up the market by storm, messing up the entire margin calculations!
The early 20th century was hardly the time when one could have the benefit of established and well documented business practices. But then, this cannot be considered as an excuse for a spate of reckless expansions made by Indian businessmen of that time; for the adage ‘never bite more than you can chew’ was well known even then. Their spirit of enterprise rose to unmanageable proportions when World War I provided them with a unique opportunity to spread their wings. The war period created a serious crunch in imports, leaving the field wide open for these firms to tap the domestic Indian market. And the most interesting in this regard were the Tatas, then led by Dorabji Tata (son of J. N. Tata, shown in picture). A lot of ventures they started into construction, banking and cement lost their bearings when peace dawned and had to be shut down or merged. Tisco was the starkest case of a thoroughly ambitious expansion plan going awry. In war time, Dorabji decided to ramp up production from 100,000 tonnes of ingots to 4,20,000 tonnes (source: The Oxford History of Indian Business, Dwijendra Tripathi). As the war ended, Tisco found itself competing with steel imports once again, and faced declining margins and rising inventories, rather than the other way round; leading to a severe liquidity crunch. Today’s Big Pharma companies would sympathise; their situation is quite similar when patents on their products expire and generics take up the market by storm, messing up the entire margin calculations!
Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
and Arindam Chaudhuri (Renowned Management Guru and Economist).
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