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Taj Group

Organizational Behavior Assignment

Executive Summary At 7.8 per cent contribution to national GDP, the hospitality industry is a major growth driver for Indian economy. The Indian Company limited, the parent group of Taj Hotels and is the largest player in the segment. With a presence across the country and in 16 international locations, Taj Group is one of ’s most iconic brands. The company has had a rich history of more than 100 years and witnessed major leadership changes. Equally intriguing is the growth story of the company. This report presents an overview of the company, its history and some iconic leaders who have created the brand that Taj is today. Being a major force to reckon in the hotel industry, Taj is also shaped by a lot of external factors comprising its business environment. The social, legal, economic, political and technological factors moulding the group and industry’s growth have been discussed at length in this report. In conclusion, the report also identifies the most important of the business environments responsible for its growth and success.

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Contents Executive Summary ...... 2

1. Introduction ...... 4

2. Company Profile (Content)...... 4

History ...... 4

Hotels ...... 4

The Taj Philosophy ...... 4

Leadership at Taj ...... 5

Ajit Kerkar ...... 5

RK Krishna Kumar ...... 6

3. Industry Analysis (Context) ...... 6

SLEPT Analysis ...... 6

Social Factors ...... 6

Legal factors ...... 6

Economic factors ...... 7

Political factors ...... 8

Technological Factors ...... 9

4. Conclusion ...... 9

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1. Introduction Hospitality and Tourism Industry contributes to 7.8 per cent of India’s GDP vis-a- vis global average of 4.2 per cent. India is ranked 12th among 184 countries in terms of travel & tourism’s contribution to GDP in 2012. Indian hotel industry grossed revenues of over $5.3 billion in 2011 and has recorded a strong CAGR of 13.3 per cent in the last six years. At $337.9 million revenue in FY12, Taj Hotels Resorts and Palaces is the market leader in the Hotel segment.

2. Company Profile (Content) The Indian Hotels Company Limited (IHCL), branded as Taj Hotels Resorts and Palaces, is an Indian chain of hotels and resorts headquartered in the Oxford House in . The company is a part of the , India's largest business conglomerate. Taj Hotels and Palaces owns and operates 93 hotels in 55 locations across India with an additional 16 international hotels in the Maldives, , Australia, UK, USA, , Sri Lanka, Africa and the Middle East and employ over 13000 people.

History Established in December 1903 by Jamshetji Nusserwanji Tata, Taj Mahal & Tower, the first Taj hotel is one of India’s most iconic structures. The group has expanded by converting former royal palaces in India into world class luxury hotels such as the Taj Lake Palace in , the Rambagh Palace in and in .

Hotels The Taj Hotels operates three categories of hotels - luxury, leisure and business hotels. . The Taj Luxury Hotels offer a wide range of luxurious suites with modern fitness centers, rejuvenating spas, and well-equipped banquet and meeting facilities. . The Taj Leisure Hotels offer a complete holiday package that can be enjoyed with the whole family. It provides exciting activities ranging from sports, culture, environment, adventure, music, and entertainment. . The Taj Business Hotels provide the finest standards of hospitality, which helps the business trips to be productive. They offer well-appointed rooms, telecommunication facilities, efficient service, specialty restaurants and lively bars, well-equipped business centres, and other conference facilities. The group also operates five-star deluxe beach resorts and business hotels.

The Taj Philosophy The Taj Group is known for its two guiding principles called the Four Steps of Service and the Taj People Philosophy. The group prides itself with excellent customer service which is laid

4 down by the Four Steps of Service. The group emphasizes employee development and is reflected in the Taj People Philosophy – “Nurturing employees from the womb to the tomb”. The extreme dedication to customer service by the Taj employees was brought to light during the terrorist attacks of 26/11 at Taj Mahal Hotel when the employees risked their lives to save their customers.

Leadership at Taj

Ajit Kerkar Kerkar joined IHCL in January 1962 as assistant catering manager. He began his career with J. Lyon & Company in London where he qualified in hoteliering. Climbing the ladder quickly, Kerkar became the general manager of the badly managed and poorly run Taj Mahal Hotel, Mumbai, in 1968. In 1970, he became its managing director. Kerkar was one of the 'super managers' appointed by JRD Tata, who were given full freedom to run the different wings of the family empire in their individual ways. Over the next 27 years, Kerkar built up IHCL as India's largest and most profitable hospitality company. In the 1970s, IHCL expanded in a major way in Delhi, Madras, Goa and Rajasthan. This was seen as a major achievement for Kerkar as he succeeded despite very little financial help from the Tatas. By the 1980s, the once sick hotel had turned into a chain embracing the US and Europe. Kerkar funded the expansion of the IHCL flagship Taj Hotel by floating different companies, with different partners. Kerkar pioneered the concept of palace hotels and resort hotels. He enhanced India's status as a tourist attraction by developing Rajasthan and Goa as tourist destinations. Kerkar had a well-polished public image and established himself as a capable executive. He was regarded as the man who almost single-handedly converted a one-hotel company into a thriving hotel chain with an international presence. Ultimately however, the Kerkar era came to an end on August 30, 1997, not with canape and champagne, but with anger and acrimony. Kerkar's troubles started when took over as the head of the Tata Empire. Unlike his father JRD Tata, Ratan Tata proved to be less trusting of his managers. As the Tatas had never helped Kerkar in any way - financial or otherwise, Kerkar commented that he didn't need Ratan Tata to start telling him how to run his business. Kerkar was asked to leave after two allegations of FERA violations surfaced: the non- repatriation of dollar deposits by two foreign airlines, which had offices on the Taj premises in Mumbai; and issue of Global Depositary Receipts (GDR) by IHCL's subsidiary, Oriental Hotels, amounting to about US$30 million. The Tatas leveled serious charges of misdemeanor and irregularity against Kerkar, who had by then become a legend in the hotel industry for turning a single loss making property (the Taj Mahal Hotel in Mumbai) into a reputed international chain.

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RK Krishna Kumar RK Krishna Kumar started his career with the Tata Group in 1963 when he joined the Tata Administrative Service. Over the period of 46 years that he has been with the House of Tata, he has served in several Tata Companies in various capacities. He is referred to as Ratan Tata’s right-hand man. He held several senior positions in the company, before being appointed joint managing director of Tata Tea Limited in 1988 and managing director in 1991. Under his leadership, Tata Tea moved from commodity to branded business and then into acquisitions, which transformed the company into a global beverage company. He was transferred to Mumbai and appointed MD of the Indian Hotels Company in 1997 after Ajit Kerkar’s exit. Under his leadership, IHCL experienced a stable growth. In January 2002 he was also appointed Director of , the holding company of the Tata Group. The government of India honoured him with the most prestigious civilian award, the Padma Shri, in 2008.

3. Industry Analysis (Context)

SLEPT Analysis The business environment consists of 5 major factors – Social, Legal, Economic, Political and Technological abbreviated as SLEPT. This section discusses the various environments influencing the growth of the company and identifies the predominant environment for growth.

Social Factors Social factors include the cultural aspects, health consciousness, population growth rate, age distribution, career attitudes and emphasis on safety. Trends in social factors affect the demand for a company's products and how the company operates. . Hotel industry is affected by the changes in the disposable incomes of individuals in the country. . As the income rises, more and more people tend to visit luxury hotels. . Location of the hotel also has an impact on its business. . The hotels which are situated near airports witness more business guests. . With the continued growth in India's GDP, improvement in the per capita income and increased aspirational spending, the Indian hospitality sector is expected to grow faster than most countries around the world.

Legal factors Every company is bound with internal and external rules and regulations. It also includes the international laws and regulations that company is bound to follow it also include the safety and health regulations of the employees of the company.

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. Hospitality law is the body of law relating to the foodservice, travel, and lodging industries. It encompasses a wide variety of practice areas, including contracts, antitrust, tort law, and more. . Duties of hotels:  Duty to guests  Duty to guest property . Anti-trust laws regulate business conduct to preserve competition and to prevent economic coercion. . There are two main types of contracts applicable to the hospitality industry: franchise contracts and management contracts. . Restaurant operators that serve alcohol should also be aware of their duties to their guests when patrons become belligerent or hostile to each other or to other guests. . Food allergies are on the rise, making it increasingly important for restaurants to not only train staff about ingredients but to also have appropriate labels for food containing peanuts or wheat. . Like other businesses, hotel and motel properties are subject to a long list of health, fire safety, taxation, business licensing, municipal property standards and other local regulation. . In many parts of the world, the hospitality industry is referred to as the “travel and tourism” industry or the “tourism” industry. . The Mumbai terrorist attacks, which included a hostage situation at the Taj Mahal Hotel, among other places, and the 2009 Jakarta bombings at the JW Marriott and the Ritz-Carlton hotels, raise questions about what a hotel can legally do to ensure the safety of its guests. . More recently, Will Pike, a British national paralysed during the 2008 terror attacks on Taj has won the legal right to sue Tata Group in a British court. Pike claims the Indian Hotels Company owners did little to provide security for residents despite several warnings that an attack on the hotel was imminent. . Legislations such as these have an effect on the industry and increase their liability in cases of negligence.

Economic factors Taj group, being a chain of luxury hotels, faces a high elasticity of demand. Like most luxury products and services, the group is most impacted by economic factors. The growth and the stability of a particular company depend on the economic conditions of the country. Economic factors include interest rates, taxation changes, economic growth, inflation and exchange rates demand and supply of the particular commodity and globalization. . Today the tourism and hospitality industry in India contributes around 7.8 per cent to the national GDP and 8.78 per cent of the total employment in the country.

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. The constant transformation has made the Indian hotel industry more functional and practical and has gained a level of acceptance world over. . The per capita income of India has risen increasing the customer base for luxury hotels. . With the increase in the paying power of the guests the need for the good and luxurious hotels become massive . Economy of India faced one of the most minimal drops in the whole world because of the controlled and sound financial system in the country. . This helped hotels to only concentrate on the foreign travellers which had reduced, and the local market being stable was much of a relief to the Indian Hotel Industry. . In the recent past India has witnessed many foreign tourists arriving with the whole and sole purpose of meetings, conferences etc. Thus Hotels try to capitalise on the foreign travellers who are seen to bring more money to spend along with increasing amount of expectations from the hotels. . The guests are willing to pay for the services they get and the more the guests pay the more would the hotel and the industry would prosper.

Political factors As luxury hotel industry relies heavily on foreign travellers as compared to domestic customers, the industry is hugely impacted by political factors. Political factors are basically to what degree the government intervenes in the particular sector. Specifically, political factors include areas such as tax policy, labour law, environmental law, international trade restrictions, tariffs, and political stability. Government may also introduce a general initiative which can be helpful in the encouragement of the business ultimately leading to the growth of the company. Hotel industry and tourism industry need government support to sustain the competitive world. . Government charges huge amount of tax from the luxury category of hotels. . It charges 10% luxury tax on all rooms of hotels even if the rooms are not occupied during peak tourist season (as on Nov 21 2013). . Tax rates are hugely affected by the political changes that occur. . Governments across the world also issue travel advisories against other countries under circumstances such as political instability, looming threat of terrorism or heightened international tensions asking their citizens to avoid travelling to the listed country. This has a significant impact on the tourism industry and thereby the hotel industry. . The hotel industry gets huge incentives and support from the state governments as the development of this industry in turn results in growth of the state.

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. The Terror attack on Mumbai renowned hotels Taj and the Oberoi’s had brought a substantial drop in foreign travellers to India and raised questions about security arrangements in place. . As a consequence, luxury hotels across the country had to redesign their security arrangements installing CCTV cameras at key locations, restricting parking of vehicles in proximity to the main complex and installing bullet-proof glass windows.

Technological Factors Technological factors include aspects such as R&D activity, automation, technology incentives and the rate of technological change. They can determine barriers to entry, minimum efficient production level and influence outsourcing decisions. Furthermore, technological shifts can affect costs, quality, and lead to innovation. . Availability of Wi-Fi. . Building sate of art features. . The standards of facilities and services offered have evolved over the last decade by the extensive use of technology, environment friendly services, pricing, market segmentation, regional preferences, etc. . The Indian hotel industry has seen a significant growth in room inventory across categories from upscale luxury to limited services and boutique & budget hotels.

Technological advancements by Taj . Taj hotel was the first building in Bombay to be lit by electricity, and the first hotel to have a laundry, and refrigeration in India. . Other Taj firsts in Indian hospitality included American fans, German elevators, chandelier polishing machines, Turkish baths and English butlers. . India's first all-day dining restaurant, its first 24-hour coffee shop and the country's first international discotheque were started by Taj. . The Taj group was the first to launch the concept of palace and heritage hotels. Recently, it launched the first truly Indian spa concept, the Jiva spas, at four of its hotels.

4. Conclusion As per a Credit Suisse Research Institute Study, Taj is one of the 27 Great Brands of Tomorrow, the only hospitality brand recognised by this study. The key catalyst for Taj's growth is the successful emergence of its new brands and its ability to leverage these brands across different customer segments and geographies. Based on the industry analysis, the business environments having the greatest impact on the growth are economic and political factors.

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