Tata cost leadership
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Tata cost leadership

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Tata cost leadership Tata cost leadership Presentation Transcript

  • A Presentation on Prepared by:- Mehul Rasadiya Submitted to:- K.K. Parekh Institute of Management Studies (Amreli) 1 Cost Leadership Strategy Ms. Brinda Raycha
  • COST LEADERSHIP  Cost leadership is a concept developed by Michael Porter,  Used in business strategy.  It describes a way to establish the competitive advantage. Cost leadership, in basic words, means the lowest cost of operation in the industry. The cost leadership is often driven by company efficiency, size, scale, scope and cumulative experience A company could be the lowest cost producer, yet not offer the lowest- priced products or services. 2
  • COST LEADERSHIP  An integrated set of actions taken to produce goods or services with features that are acceptable to customers at the lowest cost, relative to that of competitors with features that are acceptable to customers.  Relatively standardized products  Features acceptable to many customers  Lowest competitive price 3
  • COST LEADERSHIP  Cost saving actions required by this strategy:  Building efficient scale facilities  Tightly controlling production costs and overhead  Minimizing costs of sales, R&D and service  Building efficient manufacturing facilities  Monitoring costs of activities provided by outsiders  Simplifying production processes 4
  • VALUE-CREATING ACTIVITIES FOR COST LEADERSHIP  Cost-effective MIS & Simplified planning  Consistent policies & Effecting training  Easy-to-use manufacturing technologies  Finding low cost raw materials  Monitor suppliers’ performances  Economies of scale  Efficient-scale facilities  Effective delivery schedules  Low-cost transportation  Highly trained sales force  Proper pricing5
  • COST LEADERSHIP STRATEGY: COMPETITORS Threat of new entrants Bargaining power of suppliers Rivalry among competing firms Bargaining power of buyers Threat of substitute products Rivalry with Existing Competitors  Due to cost leader’s advantageous position:  Rivals hesitate to compete on basis of price.  Lack of price competition leads to greater profits. 6
  • COST LEADERSHIP STRATEGY: BUYERS Threat of new entrants Bargaining power of suppliers Rivalry among competing firms Bargaining power of buyers Threat of substitute products Bargaining Power of Buyers  Driving prices far below competitors, causing them to exit, thus shifting power with buyers back to the firm. 7
  • COST LEADERSHIP STRATEGY: SUPPLIERS Threat of new entrants Bargaining power of suppliers Rivalry among competing firms Bargaining power of buyers Threat of substitute products Bargaining Power of Suppliers  Can mitigate suppliers’ power by:  Being able to absorb cost increases due to low cost position.  Being able to make very large purchases, reducing chance of supplier using power. 8
  • COST LEADERSHIP STRATEGY: NEW ENTRANTS Threat of new entrants Bargaining power of suppliers Rivalry among competing firms Bargaining power of buyers Threat of substitute products The Threat of Potential Entrants  Can frighten off new entrants due to:  Their need to enter on a large scale in order to be cost competitive.  The time it takes to move down the learning curve. 9
  • COST LEADERSHIP STRATEGY: SUBSTITUTES Threat of new entrants Bargaining power of suppliers Rivalry among competing firms Bargaining power of buyers Threat of substitute products Product Substitutes  Cost leader is well positioned to:  Make investments to be first to create substitutes.  Buy patents developed by potential substitutes.  Lower prices in order to maintain value position. 10
  • To develop TATA into a world class Indian car brand for innovative and superior value vehicles VISION 11
  • • To be the most admired multi-national Indian company producing vehicles that people love to buy • To create an organization that people enjoy working for doing business with and investing in Mission 12
  • “I saw families ridding around on scooters with kids standing up and mother carrying a baby and sitting Pillion and decided to do something about . It started as an quest for an affordable transportation solutions.” . Idea Generation Of Nano 13
  • 14
  • TATA’s NANO Why Nano ? A Promise is A Promise – Ratan Tata 15
  • TATA Implemented Cost Leadership Strategy 16
  • Innovation has been the hallmark in the mission for the Nano. It has focused on creating cost effective solutions. A new brand of innovation that makes more out of less.  34 patents have been filed.  Inexpensive solutions availing the existing infrastructure of Tata motors.  Modular design: Components in kit forms that can be easily shipped, assembled and serviced even by local entrepreneurs.  Light weight welded steel platform. Minimum use of steel to reduce weight.  Adoption of rear engine, rear wheel drive.  Elimination of propeller shaft. 17
  • LOGISTICS & SUPPLY CHAIN MANAGEMENT  Mother plant  Manufacture the complete car.  Centralization of purchase .  97% parts locally sourced.  Only 20 companies to supply 70% of components.  Volume commitments. 75% from single source.  Half the vendors will be located near the mother plant. 18
  • JOINT VENTURE 19
  • SWOT Analysis of TATA Nano S W TO 20
  • STRENGTHS Price Mileage Style Brand Name First Innovation 21 TATA Nano’s
  • WEAKNESSES Fiber Body Low Suspension Light Weight Not Suitable for Hilly Areas Low Space 22 TATA Nano’s
  • OPPORTUNITIES Bikers can motivated Auto Rickshaw & Second hand market 23 TATA Nano’s
  • !THREATS Other Competitors New Regulations 24 TATA Nano’s
  • TATA produce a Cheapest car Because..  Mother plant  Manufacture the complete car.  Having best engine technology (FIAT) Threat of new entrants Bargaining power of suppliers Rivalry among competing firms Bargaining power of buyers Threat of substitute products Rivalry with Existing Competitors So no one Competitors are there 25
  • No one other competitors are there because TATA is only one company which are providing cheapest car , so low bargaining power of buyers Threat of new entrants Bargaining power of suppliers Rivalry among competing firms Bargaining power of buyers Threat of substitute products Bargaining Power of Buyers 26
  • Low Bargaining power of Suppliers because…..  97% parts locally sourced.  Only 20 companies to supply 70% of components. Threat of new entrants Bargaining power of suppliers Rivalry among competing firms Bargaining power of buyers Threat of substitute products Bargaining Power of Suppliers 27
  •  Less possibility of threat of potential EntrantsThreat of new entrants Bargaining power of suppliers Rivalry among competing firms Bargaining power of buyers Threat of substitute products The Threat of Potential Entrants 28
  •  Bikes  RickshawThreat of new entrants Bargaining power of suppliers Rivalry among competing firms Bargaining power of buyers Threat of substitute products Product Substitutes 29
  • ON A THIN MARGIN  Tata’s will barely make any profit in the initial stage. A few experts also predict that they will loose money, as a one lakh car is not feasible.  A low profit model is not a major concern. The concern is to meet the sales target and economy of scale. 30
  • Tata Motors launched the Ace truck in May 2005 for just above Rs 200,000. 31
  • Also launched the cheapest water filter from Tata Chemicals. less than Rs 1000. 32
  • 33
  • WHY TATA NANO PULLED OUT OF SINGUR? 34
  • Political Battlefield 35
  • LAND CONTROVERSY  Acquired Land  Compensation  Admitted Mistake  Misunderstanding 36
  • CORPORATE RIVALRY ?37
  • DESTRUCTIVE POLITICS... “I once mentioned that if somebody puts a gun to my head, you either pull the trigger or take the gun away because I will not move my head. I think Ms.Mamta Banerjee has pulled the trigger,” - Ratan Tata Chairman,Tata Motors Ltd. FRONT LINE ,Volume 25 - Issue 22 :: Oct. 25-Nov. 07, 2008. INDIA'S NATIONAL MAGAZINE38
  • FIGHT FOR NANO BEGINS – AGAIN • Orissa offered land at Gopalpur • Maharashtra, Andhra Pradesh, Uttarakhand also made an offer39  West Bengal’s loss another State’s gain  Karnataka 1st to offer  Gujarat offered 3 strategic locations - Mundra in Kutch district - Charodi in Sanand & - Surat
  • Winner - Gujarat 40
  •  Reliable Infrastructure  Locations - Government owned land  Charodi and Chharal villages in Sanand the ultimate choice “You are stupid if you are not in Gujarat” - Ratan Tata Vibrant Gujrat 41
  • BENEFITS TO Loan of Rs 9,570 crores THE DEAL Rs 2,900 cr. for Nano plant Rs 6,670 cr. for Infrastructure development Repayment of Rs 9,570 cr. loan @ 0.1% over 20 years42
  • THE SWEETNERS  100% exemption on electricity duty  Concessional power tariff  1,100 acre land comes cheap  No stamp duty, Registration and transfer charges  Payment for land in 8 equal annual instalments43
  •  Benefits to Component manufacturers and Vendors  New Investment opportunities and positive sentiment in Gujarat  Benefit to Real estate market  Additional jobs and training opportunities BENEFITS TO GUJARAT 44 Vibrant Guj
  • Win-win situation45