SHRI RAMSWAROOP MEMORIAL GROUP OF PROFESSIONAL COLLEGES STRATEGIC MANAGEMENT CASE STUDY-2 TATA MOTORS:’LOCAL-GLOBAL’STRATEGYSUBMITTEDTO: - SUBMITTED BY:-DR.B.B.TIWARI SIR SHWETA PANDEY 1112270154 GROUP 36 M.B.A 3rd SEM
Q1)What are the strategies of Tata Motors in itsdevelopment?Answer: Tata Nano: The 8th wonder of the worldTata Motors, the company responsible for manufacturing and selling Tata Nano,falls under the Tata group umbrella. It is the largest automobile company in Indiaand the proud owner of the esteemed brands Jaguar and Land Rover, which itbought for $2.3 billion dollars in 2008. Tata Nano, the modern people’s car, cameinto existence as a result of Mr. Ratan Tata’s vision. In the late 1990’s, he saw atypical 4 member Indian family travelling on a two wheeler with mother sitting onthe back seat and precariously clinging onto the two kids and decided to develop acar to allow middle class families to swap their overloaded two wheelers for thecomfort and safety of a compact, air-conditioned car. Tata Motors began designingthe car in 2003 and after a painful gestation period was able to launch the car in2008 Auto Expo in New Delhi, India. The car is not only the means of providingluxury to millions of poor Indians but also the symbol of India’s ambitions tobecome a modern nation.The enigma of Tata Nano: An ExplanationTata Nano has been marred with one controversy after another since its inception.Originally, the plan was to manufacture the car in Singur, a city in the north-eastern state of Bengal, but due to the opposition to the site of production by thelocal farmers, company had to shift the production to Sanand, a city on the westerncoast of India. The delay in production and the rising LME (London Metalexchange) led to increase in prices by almost 15% and when the company had
volumes the demand for the car petered out to compound its problems.Furthermore, low sales of the car have been a result of a catastrophic marketingstrategy followed by the company. The irony is that the car never reached theintended target audience due to a lack of distribution and advertising efforts. Inmany rural regions, where communication is possible, there is no effective systemof finance in place. In addition, a few cars caught fire and the mishandling of thesefailures also cost the company quite dearly. Without basic financial infrastructureand media communication, the product was doomed to failure.Possible SolutionsFirstly, the positioning of the product is wrong. By emphasising its cheapnessrather than its simple, basic and appealing features, the company has scared awaymany upper middle class families who could afford it but aspire to buysophisticated vehicles. Besides, the two wheeler market is quite prominent inmetropolitan cities with much better infrastructure and purchasing power. Theprice of top end motorcycle models (A big hit among the teens) start from Rs.70,000 ($ 1400) and it will be much better if Tata Motors can position Nano betterand target motor bike riders by explaining them the advantages accrued from usinga car over the bike at little extra cost.Secondly, the message has to reach target consumers and the company would haveto adopt aggressive consumer enlightment policy through extensive advertisementcampaigns, especially in rural markets, to quickly pass the five phases of theadoption theory. In addition, it has to develop and simplify the financialinfrastructure (Partnership with banks, etc) to make sure the first time buyers withno regular employment and payslips to back an application for credit have moneywhenever they need it.Lastly, the recession has created an unforeseen situation where there is a demandfor small, fuel efficient cars even in the developed world. Tata Motors already
exports Tata Nano but mostly to Asian countries such as Taiwan. It is, however,about time that it ventures into the European, US markets and together with a welldefined marketing mix elements and positioning succeed in stimulating demand forit.Q2: Explain the SWOT Analysis of Tata Motors Limited.Ans) The company began in 1945 and has produced more than 4 million vehicles.Tata Motors Limited is the largest car producer in India. It manufacturescommercial and passenger vehicles, and employs in excess of 23,000 people. Strengths:-The internationalisation strategy so far has been to keep local managers in newacquisitions, and to only transplant a couple of senior managers from India into thenew market. The benefit is that Tata has been able to exchange expertise. Forexample after the Daewoo acquisition the Indian company leaned work disciplineand how to get the final product right first time.The company has a strategy in place for the next stage of its expansion. Not only isit focusing upon new products and acquisitions, but it also has a programme ofintensive management development in place in order to establish its leaders fortomorrow.The company has had a successful alliance with Italian mass producer Fiat since2006. This has enhanced the product portfolio for Tata and Fiat in terms ofproduction and knowledge exchange. For example, the Fiat Palio Style was
launched by Tata in 2007, and the companies have an agreement to build a pick-uptargeted at Central and South America. Weaknesses:-The companys passenger car products are based upon 3rd and 4th generationplatforms, which put Tata Motors Limited at a disadvantage with competing carmanufacturers.One weakness which is often not recognised is that in English the word tat meansrubbish. Would the brand sensitive British consumer ever buy into such a brand?Maybe not, but they would buy into Fiat, Jaguar and Land Rover . Opportunities:-In the summer of 2008 Tata Motors announced that it had successfully purchasedthe Land Rover and Jaguar brands from Ford Motors for UK £2.3 million. Two ofthe Worlds luxury car brand have been added to its portfolio of brands, and willundoubtedly off the company the chance to market vehicles in the luxurysegments. Tata Motors Limited acquired Daewoo Motors Commercial vehiclebusiness in 2004 for around USD $16 million.Nano is the cheapest car in the World - retailing at little more than a motorbike.Whilst the World is getting ready for greener alternatives to gas-guzzlers, is theNano the answer in terms of concept or brand? Incidentally, the new Land Roverand Jaguar models will cost up to 85 times more than a standard Nano!The new global track platform is about to be launched from its Korean (previouslyDaewoo) plant. Again, at a time when the World is looking for environmentallyfriendly transport alternatives, is now the right time to move into this segment?
The answer to this question (and the one above) is that new and emergingindustrial nations such as India, South Korea and China will have a thirst for low-cost passenger and commercial vehicles. These are the opportunities. However thecompany has put in place a very proactive Corporate Social Responsibility (CSR)committee to address potential strategies that will make is operations moresustainable. Threats:-Other competing car manufacturers have been in the passenger car business for 40,50 or more years. Therefore Tata Motors Limited has to catch up in terms ofquality and lean production.Sustainability and environmentalism could mean extra costs for this low-costproducer. This could impact its underpinning competitive advantage. Obviously, asTata globalises and buys into other brands this problem could be alleviated.Since the company has focused upon the commercial and small vehicle segments,it has left itself open to competition from overseas companies for the emergingIndian luxury segments. For example ICICI bank and DaimlerChrysler haveinvested in a new Pune-based plant which will build 5000 new Mercedes-Benz perannum. Other players developing luxury cars targeted at the Indian market includeFord, Honda and Toyota. In fact the entire Indian market has become a target forother global competitors including Maruti Udyog, General Motors, Ford andothers.Rising prices in the global economy could pose a threat to Tata Motors Limited ona couple of fronts. The price of steel and aluminium is increasing putting pressure
on the costs of production. Many of Tatas products run on Diesel fuel which isbecoming expensive globally and within its traditional home market.Q3) Describe the Future strategies of Tata motors.ANS.)Tata Motors produces vehicles both in the Light Commercial Vehicles(LCV) and the Medium and Heavy Commercial Vehicles (M and HCV) segments.It faces higher competition in the LCV segment, where its Tata ACE has been ahuge success. Internationalization forms a key component of Tata Motors strategyand it has successfully entered countries having a demand similar to India likeSouth Africa, Thailand and Argentina, mainly through acquisitions and jointventures. It needs to improve its product reliability, service network and channelreach in order to maintain and replicate this success in other markets. Some of therecommendations for Tata Motors are exploring mass customization options in theSmall Commercial Vehicle (SCV) segment, improving brand reputation andtechnology appropriation to bring out a world class ultra-HCV segment. Tata Motors is currently Indias largest automobile company with revenues of $7.2 billion in 2006-07. It is by far the leader in commercial vehicles and the second largest player in the passenger vehicles market with winning products in the compact, midsize car and utility vehicle segments. Employing around 23000 people and headquartered in Mumbai, Tata Motors became the first company from Indias engineering sector to be listed in the NYSE in September 20041. While currently about 18% of its revenues come from international business, the companys objective is to expand its international business, both through organic and inorganic growth routes. For Tata Motors, the coming years will be particularly exciting . The company will be launching a range of new, technically-advanced
commercial vehicles and passenger cars, both in the domestic and overseas markets. Ratan Tata says: “There will, of course , be challenges but the tremendous spirit that has always been displayed by employees at all levels in the organisation, I believe, will meet those challenges and enable Tata Motors to retain its leadership position as a major Indian automotive company actively participating in the country’s prosperity and carrying the banner of India to overseas markets with a sense of great pride.”Q 4: Explain the Marketing Strategies of TATA Motors tocapture high market share?Ans) Marketing Strategies of Tata Motors that have allowed it to Take A GiantLeap in the Market place .Tata Motors is an Automobile Company in India and is a very high earningcompany. Its revenues reportedly in the year 2008-2009, is 14 billion. But itsachievements do not stop there. It is among the worlds top automobile companies,reportedly the 4th largest truck manufacturer.With 23,000 employees what is notable in Tata Motors approach is the fact that itsmarketing approach is novel and founded on clear cut internet marketingguidelines. One only has to go to the Tata Motors website to find that it integratesmultiple media outlets in its marketing approach. From its use of flash to its sleekwebsite design, the company uses what is essential to great profits- innovation.Innovation is simply the process by which companies increase their profitability in
the marketplace by staking out a position that other companies in the market cantdo. It clears out space in their prospects mind as to what their company is able tooffer them that no other company can.For Tata Motors- excellence in service and presentation- is the perception thatcomes to the prospect s mind, for others it may understanding a customers familyneeds for a car.Essentially what Tata Motors has done is theyve brought a new range of value totheir market by bringing media and technology that have not been overemphasizedby their competitors so that they could carve out an unshakable space in the mindsof their customers and thus lead to increased sales. Q5):What are the modes by which the company marketed its vehicles internationally? Ans: Tata Motors for entering into global markets adopted strategies of development through subsidiaries, strategic alliances, joint ventures and acquisitions. By these modes the company marketed its commercial and passenger vehicles in several countries of Europe, Africa, Middle East, Australia, South East Asia and South Asia. Tata motors performed following operations in international market: Setting up a separate R& D departments internationally that are in Spain, UK, South Korea.
Joint venture with Thouburi Automotive Assembly Plant Company ofThailand to manufacture and market company’s pick-up vehicles.Tata motors acquired 2 per cent stake in Hispano Carrocera SA, Spanishbus manufacturing company.It has assembly operations in Malaysia, Kenya, Bangladesh andSingapore.Tata Engineering services in Singapore is engaged in the manufacturingof high-precision tooling, spare parts and warehousing.Ratan Tata believed that entry in South Africa will be possible step forentering into other countries in Africa.