About Tata Nano The Tata Nano, one of the most ambitious projects of Tata Motors, started in 2003. It was envisioned by the Tata Group chairman, Ratan Tata himself. Ratan Tata announced this project at the Auto Expo 2006 in New Delhi. Tata Nano was launched in January 2008 at the Auto Expo New Delhi. In Geneva 2008, the Nano made its first overseas premiere. On March 23, 2009, Tata started production of the Nano from makeshift assembly line at

Pantnagar and launched a car in three variants priced between Rs. 123,000 and Rs. 175,000

The Downfall Saga

Tata witnessed a sequential fall in 2010, lowest in November Nano sales was 509 units Issues like production delays, multiple fire accidents, increasing prices of car, difficulty in getting loan from

bank and the stigma attached to buying a cheap car was cited as cause for sales drop. A car in India was supposed to be a valuable product and Nano being termed as cheap car was not being

accepted by middle class.

What do they do ?They produce very low cost cars to the indian market. Making cars available to a costumer segment that could previously not afford cars.

External Analysis

Customer Analysis in the Budget Car Segment

Customer SegmentSegment User

Intention

Entry-Compact Car

Lower price, small cars

47%  Tata Nano, Maruti Alto, Ford Figo, Maruti WagonR, Hyundai's Santro, i10 and Eon and GM's Beat

Premium-Compact Car

Higher priced,

probably

11% Maruti Swift, Hyundai i20 and VW Polo

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second car

SUV Sport lover 23%

Luxury Sedan Luxury, Rick

19% Hyundai Verna, VW Vento and Chevrolet Cruze

http://timesofindia.indiatimes.com/business/india-business/Small-car-loses-appeal-with-market-share-dipping-below-50-SUVs-surge/articleshow/11864524.cms

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Customer Motivation

Segment Motivation

Entry-Compact Car Esteem need and update social status

Safety & Weather protection need to two-wheeler

Aspiration of owning car.

Premium-Compact CarUpgrading to car, Assumption as assets

SUV Speed, Safety, Reputation

Luxury Sedan Luxury, Reputation

Unmet needs1. Expensive than what was earlier promised

2. Safety Issues

3. Not environmental friendly

Competitor Analysis

Competitor IdentificationBajaj, Chery, Honda Siel, GM etc. REVA an electric car.

Global Players in India: 

Segments Companies

Cars/ SUVs Daimler-Chrysler M & M

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Daewoo Motors Fiat Ford GM Honda Hindustan Motors Hyundai

Mahindra & Mahindra Maruti Udyog Ltd Mitsubishi Skoda Suzuki Tata Toyota

Two-wheelers Bajaj Auto Hero Honda Hero Motors Honda Kinetic

LML Royal Enfield Motors Ltd. Suzuki TVS Yamaha

Major competitors

Maruti Strength:1. Maruti is in a leadership position.2. Largest network of dealers and after sales service centers3. Self competing product in small car segment like Maruti omni, Maruti 800,

Maruti zen, Wagon R4. Second hand car market with brand name Maruti true value

Weakness: 1. Lack of product in mid size car segment2. Low interior quality inside the cars3. Government intervention due to having share

Hyundai Strength:1. Quality advantage2. Buying experience like no other3. Quality service center across 1036 cities4. Largest car exporter in Asian market

Weakness1. Commodity price risk2. Exchange rate risk3. Spare part expensive

Ford Strength:1. Strong brand portfolio2. Strong engineering capability3. High network of distributors and dealers4. High employee productivity

Weakness:1. Continue decline market share2. Product recall3. Declining operating efficiency and weak returns

General Motors (GM) Strength:1. Branding2. World wide presence

Weakness:1. Diminishing dealer network 2. Insufficient liquidity

Reva Strength:1. Environment friendly

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2. Low energy cost3. Low maintenance cost

Weakness:1. Luggage space2. Low interior quality3. Metro car

Strategic Group

Two-wheelers Bajaj, Hero Honda Two wheelers efforts so consumer do not upgrade to car

Top Player Hyundai, Maruti Exisiting player in the segment e.g. Maruti 800/ Alto, i10

New Entrant Ford, Nisan Nisan Renault, Ford Figo

Environmental Reva Fuel efficient/environment concious

Competitive Strength Grid

Rating Scale:

3: Above Average

2: Average

1: Below Average

Assets and Competencies Maruti 4 Wheeler Two Wheeler NANO

Product and Service Quality 2 3 1

Product Differentiation 2 3 2

Market Share 3 3 1

Financial Capacity 3 3 3

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Quality of Management 3 3 2

Distribution Channel 2 3 1

Brand Recognition 3 3 1

Advertising and promotion 3 3 2

Market Analysis

Market Size

Year 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11

No. of vehicle sold

1,061,572 1,143,076 1,379,979 1,549,882 1,552,703 1,951,333 2,520,421

Emerging sub market

1. Financing market2. After sales service centers3. Accessories manufacturing organization 4. Lubricants Market5. Fuel market

Market Growth:

1. Market of Indian Auto Industry is in Growth Phase.

Factors Affecting sales levels:

1. Rate of urbanization 2. Increasing disposable income3. Car being a kind of status symbol4. Increasing number of nuclear family5. Road becoming unsafe for two wheelers6. Increasing number of workingwomen.

Segment with high unrealized potential:

1. Lower middle class income group.2. Rural population

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3. Students

Profitability Analysis

. THREAT OF NEW ENTRANTS (High)

Price: To maintain of the lower cost of the final product pricing is difficult for the companies.

Entry cost: High Capital investment and expertise is required.

2. BARGAINING POWER OF BUYERS (High)

Variety of choices: products availability

Product differentiation: price, durability and brand equity

Profitability: Easily available finance options

Quality: safety measures, efficiency and mileage, warranty

Customer density: growing middle class, raise in standard of living, urbanization

3. DEGREE OF RIVALRY (High)

Competitors: Multinationals players and domestic (aggressive and strong) industries with strategic alliances.

Brand image: Existing industries Brand equity influences the customers.

Switching cost: Cost of new entrants is high. (High fixed cost)

4. THREAT OF SUBSTITUTES (High)

Second hand cars

Bike, moped, scooters

Efficient public transportation

5.BARGAINING POWER OF SUPPLIERS (High)

Increasing trend of input cost (like steels, iron)

Concentration on limited suppliers

Organization/ cartelling

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Distribution- Booking stands in different places

- Outlets in cities

- Clubs & Showroom in cities

- Supermarket & Big Bazar

Market Trends- Shifting to compact car because of traffic congenstion

- Two wheelers shifting to four wheelers for status, safety and weather protection

- Increasing demand of fuel efficient car due to hike in fuel price and shortage

- Demand of environment friendly car

- Increase cost of production because of raw material hike

- Growth Vehicle market due to urbanization and economic growth

Key Success factor

Marketing Advertising Affordable Safety measure Fuel-efficient Product differentiation (first mover advantage) Innovation Technology

Environmental Analysis

Environmental analysis:

Source Description Strategic Implication

Time Frame

Importance

Technological Indian auto car industry must to go for alternative source of energy; they need to make fuel-efficient and environment friendly cars, et. They also need to improve the safety technology.

Tata Nano used the concept of Disruptive Technology which was

Med-high

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cheaper than existing Technology.

Regulatory Government is still having very high import duty on cars. Indian carmakers face less competition from their foreign competitors.

Very limited Low

Economic India’s average income is increasing resulting to high disposable income. Increasing inflation though creates a challenge before the manufacturer to keep their prices unchanged even when their own cost is going up.

Introduction of cheap car. First mover advantage.

High

Natural Decreasing raw materials and sources of bio - fuel for auto car industry. Coal prices have gone higher and iron-ore, the main raw material is also affected by high inflation.

Medium

Demographic India’s growing population creates a huge and growing market segment that can be targeted for such products. More and more population is moving to the cities. Most of the population is young, increasing literacy and income further favors the auto car industry.

Targeted middle class and lower income group segment. First car buyer segment.

High.

Threats Growing competitors and emergence of complete green cars which do not consume fuel and work on alternate sources of energy

Medium – High

Opportunities Demand for less expensive cars due to the recession and growing immigration population which falls in the low to medium income group

Economic car High

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Growth strategies of Tata Nano:The growth strategies used by tata for nano is a related product diversification strategy where they develop a new product for the new market.

Asset and Competencies:Sustainable competitive advantage:

- Innovative actions- Value creation- Costly to imitate

Internal Analysis

Performance AnalysisProfitability: not profitable business. Sales of 15000 units are requiring for breakeven. However sales never been BEP point any month till may, 2011.

Sales

Shareholder Value Analysis:

SWOTStrength:

- First Innovation- Set a benchmark Weakness:

- No Modern facilities-ABS,PS,AC etc

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- 41 Patents for innovations - Low Price & Stylish - Environmental friendly- Green house

effect - High fuel efficiency - Space-

Internal-21% more than M-800 External-8% less than M-800

- Variometric gear system- Magnifies torque - Tested successfully for crumple zones- TATA brand - globally renknown

- Less Boot space - No Headlight levelers - Not fit for hilly terrain - Poor traction control - Poor engine cooling & hence overheating - Small Tyres Windows wind down by hand - No passenger side mirror- Lesser safety as fuel tank is right under the

fuel tank

Opportunity:- Created a Niche market - Diesel & Electric variant - Recession - Royalty - Developing low price engine oil - Auto Finance - Increasing Percapita Income

18,884 in 2002/03 to 38,084 in 2008/09- Market share of two wheelers is 76.5%- Trend selecting compact car - in city area

traffic congestion is high.- Fuel Crisis (people prefer fuel efficient

compact car)

Threat:- New competitor – Bajaj, Chery, Honda Siel,

GM etc. REVA an electric car. - Traffic congestion. - Government may increase taxes in metros. - Rising cost of raw material. - Reducing Parking Space. - Strict European Safety standards - Bad impression due to delay in lunch in

Market- Cheapest car image- Environmental awareness products e.g.

Reva

Internal Analysis

Performance AnalysisObjective Area Objective Status and Comment

Sales To find out the sales and the trend in the sales of the company as a whole.

US$ 67.4 billion in 2009-10, with 57% coming from abroad. (US$ 27 billion from commercial vehicle). Between 1954 to 2011, has sold over 5.9 vehicles in India; largest private corporate group in India in terms of market capitalization and revenues. Products exported to 85 countries

Profit ROA = profits/sales * Retained earning = An

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sales/assets average of INR 23,327.74 millions from 2007 to 2011

Quality/Service Whether the organization has been able to provide quality goods and services;

2009 annual survey by Reputation Institute ranked TATA group as the 11th most reputable company (out of 600) in the world.

Cost

New Products First mover advantage Pioneer in establishing and financing numerous quality researches, educational, and cultural institutes in india.

Customer Satisfaction Among the top three in passenger vehicles in india.

People 395,000 people employed worldwide

Other Has operations in more than 80 countries across six continents; Carnegie Medal of Philanthropy awarded to the group in 2007 for its long history of philanthropic activities.

B. Summary of Past Strategy

Focus on INR 1 lakh car

High publicity and hype on the car

Sale of application form (INR 300) for booking the cars.

Low cost strategy

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C. Strategic Problems

Exit from Singur due to land acquisition disputes

Financing not easily available to buy the car

Too much focus on “Cheap Car” rather than an “affordable car”

Booking of the cars were 95 % of the car’s ex showroom price, which was unaffordable to the target customers

D. Characteristics of International Organization

Indian multinational conglomerate

In the fifth generation of family stewardship

Largest private corporate group in India in terms of market capitalization and revenues.

Tata groups has been spread over various industries such as communications and information technology, engineering, materials, services, energy, consumer products, and chemicals.

Tata group consisted of 114 companies and subsidiaries in eight business sectors, 28 of which were public listed companies

E. Portfolio Analysis

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Market share

Tata groups has been spread over various industries such as communications and information technology, engineering, materials, services, energy, consumer products, and chemicals.

Tata Steel, Tata Motors, Tata Consultancy Services, Tata Technologies, Tata Tea, Tata Chemicals, Titan Industries, Tata Power, Tata Communications, Tata Sons, Tata Teleservices, Taj Hotels

F. Analysis of Strengths and Weakness

Strengths

Strong Brand Name

Strong Research and Development

Strong Financial Back-up

Operations in more than 80 countries across six continents

Leader in commercial vehicles and among the top three in passenger vehicles in India

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World’s fourth largest truck manufacturer and world’s second largest bus manufacturer

“India’s most valuable Brand” in an annual survey conducted by ‘Brand Finance’ and ‘The Economic Times’.

Weakness

Low interior quality in their overall automobile segment

Return on investment in Tata motors shares is low.

Tata motors not able to meet safety standards in their vehicles.

Tata motors has not been able to get a foothold in the luxury segment in the domestic market.

G. Financial Position Based on Existing Strategy (Tata Motors)

Financial Highlights (in Rs. Billion)

Mar’ 11 Mar’ 10 Mar’ 09 Mar’ 08 Mar’ 07

Operating Income

480.25 353.73 256.61 287.68 266.64

Cost Of Sales

432.54 313.40 239.38 257.37 240.78

Reported Net Profit

18.11 22.4 10.16 20.29 19.13

Retained Earnings

22.79 29.34 20.54 23.83 20.14

Customer satisfactions:

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Determinants of Strategic Options

Strategies previously used by TATA

- As read in the news paper, Tata's are making money just from the Application form sale. Rs 300 form will be filled by more than 20 million(expected by me) people of India. Think of the amount he will get, which is non refundable. Additionally, Ratan Tata is asking for booking amount, with the form. He will keep the amount with him till the time allotment is not done. The minimum amount is 95K, again multiply the figures, it will run into billions.

- Focus on the “Rs. 1 lakh” car.

Strategies at present used by TATA

- Addressing safety issues and convincing the customers. the new safety features were installed for the already sold cars

- Easy financing was made available to the customers; their own financial branch, Tata Motors Finance made loan easily available within 72 hrs. Entered into financial arrangements with different financial institutions.

- With the motive to reach out to the semi urban and rural areas, it established “F Class showrooms” which were abt 500 sq. foot unlike the other 3000-4000 sq foot showrooms. It also made it available in supermarkets through selected Big Bazar outlets

- Marketing communication through emotions and sentiments through TV visual media – sentiments of anticipation and joy surrounding the arrival of Nano into a family.

- The Company’s Vice President R Ramakrishna stated that firm has taken initiatives to tap various sections of the target consumers and are also working towards revising the perception that the ‘Nano is a poor man’s car’.

- “Quite a lot of marketing activity is in place now – reaching out to the target segments; network strategy; handling the customers at the dealerships ; tie-ups with various financiers.

Sources reveal that exclusive showrooms in Tier-III and Tier-IV cities across the country are being set up by Tata Motors in order to sell Nano. This move has been planned as according to the firm a typical Nano buyer feels apprehensive in reaching out to a to a full-fledged car showroom.

Approximately 105 exclusive Nano showrooms and 250 special kiosks have been step up by Tata Motors in order to push the sales of Nano apart from the existing showrooms that the firm has. As of now the firm has approximately 750 outlets across the country from where customers can have an access to Nano.

- The firm is targeting multiple segments for Nano and it is working on different marketing strategies for different consumers of different age groups.

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Possible Solutions

- Product Attributes

- Value Proposition

Supporting evidence

- Higher market share of compact car (47%)

- Lower number of competitors, with power as it has first mover advantages

- Profitability ration shows profitable

- Market size is big and growing. Trend is leading toward compact, fuel efficient and economic segment.

- TATA as company demonstrate sufficient assets

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