Introduction To New ProductDevelopmentMeaning Of Product:E.g.:- milk, computer, shoes, service after sales, railway services etc. aproduct can be divided into two categories o Tangible goods o Intangible goodsTangible products are known as goods that can be touched, felt and seen.E.g.:- computer, mobile phone etcIntangible products are known as services that cannot be touched andseen as the customer can feel and experience only after utilizing it. E.g.:-service after sales 2
New Product Development:A product can be considered new under the following situations:- New-to-the-world products New product lines Additions to existing product lines Improvements and revisions of existing products Repositioning Cost reductions 3
Stages Of New Product DevelopmentBefore the introduction of a product into the market, it goes throughseveral stages of development. These stages are known as stages of newproduct development. It includes the following:Idea Generation:Companies seek new ideas to enhance the performance of the existingproducts and to innovate new ideas. This stage is called idea generationstage. There are many sources for idea generation. It may be fromcustomers, dealers etc.Employees throughout the company can also be a source of idea. Toyotaclaims that its employees submit two million ideas annually over 85% ofwhich are implemented.Companies also find good ideas by researching competitor’s productsand services. They can find out what the customers like or dislike abouttheir competitor’s products. Ideas can also come from investors. Externalresearch, surveys industrial publications research and development etc.But the main source of idea generation is the customers by theirgrievances and complains and feedback. However, although ideas can 4
flow from many sources, it is not feasible to implement all the ideasgenerated due to lack of time and capital.Idea ScreeningThe main purpose of idea generation is to collect a larger number ofideas. However, not all ideas can be commercially viable. Therefore, thecompanies filter the less viable ideas with the help of systematic process.Companies can use various parameters to screen the ideas such asmarket size, technical capabilities, potential competition etc.Addressing the following issues will also help the companies to analysisthe attractiveness of ideas. Whether the product idea match the existing products of the company. The degree to which the new product can cannibalize the sale of the existing product. Company’s ability to produce and market the product. Buying behavior and the probable changes in the environment. 5
While screening the ideas, an organization may commit two typesor errors.Drop error where the firm rejects a very good idea.Cro error where a company selects a poor idea.Concept Testing And Development:All ideas that survive in the process of screening will be studied indetails. They will be developed into mature products. At this stage, theidea is submitted for the external evaluation to get a feedback from themarket. It helps a firm are organization to collect important informationlike customers initial reactions towards the product development. Duringthis stage, new product idea is described in the form of one or morebenefit that is then presented to a sample of potential customers for theirreactions.Marketing Strategy:Following a successful concept test, the new product manager willdevelop a preliminary strategy plan for introducing new product in themarket. The plan consists of three parts. The first part describes the target market size, structure and behavior for the first few years. 6
The second part outlines the planned price distribution strategy and marketing budget for the 1st year. The third part of marketing strategy plan describes the long run sales and profit goals and the marketing mix strategy over time.Business Analyses.After management develops the product concept and market strategy, itcan evaluate the business attractiveness. Business analyses are the firstin-depth financial evaluation of new product to be developed. Heremanagement needs to prepare sales cost and profit projections todetermine whether they satisfy company objectives. If they do, thenconcept can move to the development stage. SOWT analysis will beconducted at this stage by the organization. It also includes thefollowing:Total sales estimation:-These are the sum of estimated first- time sales, replacement sales andrepeat sales. Its method depends upon whether the product is one timepurchase(an engagement ring), an infrequently purchased products liketoaster, auto mobile etc. or a frequently purchased products likeconsumer and industrial non durables.Estimation costs and profits. 7
The R&D, manufacturing, marketing and financial departmentsestimates the costs. The profitability of the new product is estimatedthrough various financial tools. The simplest technique is the breakevenanalysis in which the management estimates how many units of theproduct the company would have to sell to break even with the givenprice and cost structure. If the management believes that sales couldeasily reach the break even number, it is likely to move the project intodevelopment stage.Product DevelopmentIn this stage, detailed technical analysis is conducted to know whetherthe product produced at costs is low enough to make the final priceattractive to the customer.Here a working model or a prototype isdeveloped to disclose all tangible and intangible attributes of theproduct. A product protocol is prepared which is a detailed downiestcontaining the important attributes that are expected in the product. Oncethe protocol has been developed, it is handed over to the research thedevelopment department to develop the prototype of the product.Test Marketing:The test marketing is the stage where the product is introduced in a fewselected cities. During this stage, the company has to fate the followingexpense: 8
High advertisement High manufacturing cost. High distribution cost etc.For testing the product, marketer needs to make the decision on thefollowing issues. The no. of cities in which the product is to be tested. Geographic location of the cities. Time to carry ort test marketingThrough this exercise, company can know the customers response,feedback, suggestions, complaints and any other changes required to bedone for product modification.After successfully laughing the product in selected cities the companylaunches the new product in all other cities.There are certain methods ofproduct testing.Alpha TestingIn this method, a group of target audience is selected from the employeesof the company.Beta Testing: 9
It is carried out at the customer’s site. Generally, it is applicable forindustrial products where the customization takes place.Gamma Testing:It is carried out on a long term basis where the customers uses theproduct extensively and gives response after a long period of time. Saysix months.Commercialization:The results of the test marketing help marketers to decide the changesthat are needed in the marketing mix before entering into the market. Italso helps the marketer to decide the amount of production distributionstrategy, selling efforts and other issue like providing guarantees, serviceafter sales etc. the product enters the market during thecommercialization stage.Introduction To Tata Motors:Tata Motors was established in 1945, when the company beganmaking trains. o It has its manufacturing base in Jamshedpur, Lucknow, Pune and soon one more plant is going to established at Singur, West Bengal. 10
o Product Manufactured - Passenger Cars and commercial vehicle o Installed Capacity - 350,000-400,000 vehicles a year o Investment - Rs 2,500 crore (Rs 25 billion) o Turnover - $21.9 billion (Rs 967,229 million) o Employees - 2,46,000/22001 o Tata Motors had created the wealth Rs. 320 billion during 2001-2006 and stood among top 10 wealth creators in India.Tata Nano - ONE LAKH CAR PROJECT“People’s Car”“A promise is a promise,” said Rattan Tata, Chairman, Tata Motors,on 10th January, 2008, when the Nano was first displayed at the AutoShow in Delhi. The Nano project didn’t grab the attention of onlyIndians; the entire world had their eyes glued to the world’s cheapestcar. 11
A truly People’s Car, this time is from India. Though the dealer priceis Rs. 1 lakh, the price on road, when it will be launched, will reacharound Rs. 1,25,00 but it will be still more affordable and will be moreeco-friendly than most other cars giving a mileage of around23km/liters. The price of the car is such that a lot of rich and HNIs, ifinterested, can buy the car just by a single swipe of their credit cards.Providing a car worth rupees one lakh car was the dream of thechairman of Tata motors Mr. Rattan Tata. And with high qualified ITskills people he has shown the Indian talents to whole the world. Idea conceived by - Rattan Tata Cost of development - 1700 crores Manufacturing cost (excluding dealer margin and taxes)- Rs 65,000 per unit Development of Design - India Time for designing the car - 4 years Team - A team of 150 engineers , everyone below age 28 Biggest hurdle - To make a car cheap car without Compromising design 12
May western countries as well as many foreign countries have accepted Indian IT skills.Details Of Nano Specs: Engine: 624 cc / 33 bhp 4 door, 5 seater (and yes 4 Wheeled too) Rear Engine Weight: 600 kgs Mileage - 22-23 km/liter Variants: Standard Deluxe (with AC) Future: Diesel Variant Exports outside India or assembly plants outside Comparison 8% less in length (bumper to bumper) with respect to Maruti 800 21% more in inner space with respect to Maruti 800 Looks: Front side looks more like Matiz (or Spark as we now call it)Back side looks more like India with those long tail lights. 13
Insight: People often criticize something that is making waves everywhere. This has also been the case with Tata Nano. Competitors, safety regulators, environmentalists and most others conceived the problems that India will face, when such a car is available, much before the actual launch of the car.This will result into:OLD GENERATION NEW GENERATION SOWT Analysis STRENGTH Fuel efficient Brand name TATA Safe Cost price low OPPORTUNITIES 14
Large market for First car in low selling range Awareness in the Can hit in global market market WEAKNESS Low power Not a status symbol Delay in manufacturing Limited features THREATS Company rival Not sure to hit in rural and semi-urban areas 15
New Product Development And NanoAs seen before, A product can be considered new under the followingsituations:- New-to-the-world products New product lines Additions to existing product lines Improvements and revisions of existing products Repositioning Cost reductionsAs far as Nano is concerned, it falls into new to the world products in thecontext that it has made a history for the cheapest car ever made withoutcompromising on quality. I.e. best way value analysis.It can also be considered as new product in the since of cost reduction asit’s the first time in the history that such a cheap car is produced.The story of the Nano is not confined to its impact on the auto industry.Its a tale that illuminates the India of today—an eager, ambitious nationwith a combination of engineering talent, a desire for low costs andvalue, and the hunger of young managers looking to break from ahidebound corporate environment. Indeed, the team that worked on the
Nano—on average aged between 25 and 30—has helped to flatten TataMotors stodgy, multilayered management structure, which has resultedin an unexpected side-benefit called "organizational innovation".Idea Generation And NanoA dream is born –Says, “I observed families riding on two- wheelers -- the father drivingthe scooter, his young kid standing in front of him, his wife seatedbehind him holding a little baby. Add to that the slippery roads & Nighttime too. It is downright dangerous. It led me to wonder whether onecould conceive of a safe, affordable, all-weather form of transport forsuch a family.”So when Tata Motors needed someone to take charge of the companysmost ambitious plan yet to build the worlds cheapest car ever Ravi Kant,who by then had become the companys managing director, again turnedto Wagh. Wagh remembers what he learned marketing the little truck."People want to move from two-wheelers to four-wheelers," he says."Today they cant afford it."More and more can, but Indian car buyers today represent a tiny slice ofa potentially giant market India has just seven cars per 1,000 people.Indias auto industry has grown an average of 12% for the past decade,
but just 1.3 million passenger vehicles were sold in India in the fiscalyear ending March 2006. That means a billion Indians buy about thesame number of cars in a year as 300 million Americans buy in a month.If four wheels cost as little as two wheels, that could change fast. About7 million scooters and motorcycles were sold in India last year, typicallyfor prices between 30,000 rupees and 70,000 rupees, about $675 to$1,600. Tata is targeting a price of 100,000 rupees one lakh, in Indianterms of measurement or about $2,500 at current exchange rates, for itssmall car. That sounds impossibly cheap in the West but remains threetimes higher than Indias annual per capita income. The average pay forfactory workers at Tata Motors is just $5,500 a year.Idea screeningThe next step was the screening of idea. How is this dream possible?What should they make? A scooter with two extra wheels at the back for better stability? An Auto-rickshaw with four wheels? A three wheeled car like a closed auto- rickshaw?? A four wheeled car made of Engineering Plastics?
A Four wheeled rural car? Rolled up Plastic curtains in place of windows? Openings like Auto rickshaws from the side A four wheeled open car with safety side bars?But the market wanted a car and if they build a people’s car it should bea car and not something that people would say,“ Ah! That’s just ascooter with four wheels or an auto-rickshaw with four wheels & notreally a Car.”Trying to build a car cheap enough for motorcycle buyers seems to makesense now but seemed crazy several years ago when Rattan Tata,longtime chairman of Tata Motors and scion of the nations giant TataGroup conglomerate, first mentioned his dream of building a one-lakhcar in 2003. "They are still saying it cant be done," he says, insisting thatit can and will. "Everybody is talking of small cars as $5,000 or $7,000.After we get done with it, there will hopefully be a new definition oflow-cost."
Concept Testing And DevelopingBefore starting the project, Wagh did something no one at Tata Motorsever had: He talked to customers. The three-wheeler men inevitablyinsisted on a cheap, dependable truck that could go from village tomarket carrying, say, a ton of onions or potatoes, one night, as sunsetapproached, Wagh stuck with one rickshaw driver. He says, "I keptasking the question. Why? Why? Why do you want a four-wheeler?"Wagh remembered. Finally, he got the real answer. It turned out it wasntreally a problem of transportation of vegetables “If I had a four-wheeler,I would have better marriage prospects in my village," the young mansaid. Drivers of three-wheelers are looked down upon in India. Waghrealized that four wheels had emotional, not just practical, appeal.Thus the new product was now to be developed.But what type of product?
The car to cost Rs. 1 lakh on road. The car should be built on a different platform than conventional ones. It must be meeting all the safety and regulatory requirements. It has to be built on a scale which shall be more than double the earlier launches of similar products and the ramp up must be smooth. The car has to be designed so that it can be exported to other countries as the domestic demand may not materialize as per projections. The car must be a beacon for the Indian Automobile industry and prove to the world that we are capable to take any challenge and come out worthy winners.That quest to build the worlds cheapest car hasnt ended. The Nanoshould be available this fall, but the mission began back in 2003, whenRattan Tata, chairman of Tata Motors and the $50 billion Tataconglomerate, set a challenge to build a "peoples car". Tata gave anengineering team, led by 32-year-old star engineer Garish Wagh, three
requirements for the new vehicle: It should be low-cost, adhere toregulatory requirements, and achieve performance targets such as fuelefficiency and acceleration capacity.The design team initially came up with a vehicle which had bars insteadof doors and plastic flaps to keep out the monsoon rains. It was closer toa quadricycle than a car, and the first prototype, even a bigger engine,which boosted the power by nearly 20 per cent, was still dismal. "It wasan embarrassment," says Wagh.But failure didn’t stop themthey quickly realized it was necessary to bring everyone on board, "elseit leads to last-minute heartache and delays". Every morning, he wouldspend an hour or two on the floor of the Pune factory, insisting thateveryone involved—designers, manufacturing teams, and vendordevelopment people—be there to accelerate decision-making andproblem-solving.Over time, Waghs team grew to comprise some 500 engineers, animpractically large group to gather on a daily basis. So instead, a coreteam of five engineers gathered every day at three pm to discuss thelatest developments. Each engineer represented a different part of the
car: engine and transmission, body, vehicle integration, safety andregulation, and industrial design.The body had to be changed because Rattan Tata, over six feet tallhimself, wanted it to be easy for tall people to get in and out of the car."Imagine the plight of the body designer—he went through hundreds ofiterations, then at the last minute the car length was increased by 100millimeters!" Wagh says. The attention to detail paid off: When the carrolled onto the dais at the Auto Show in New Delhi in January, andRattan Tata stepped out of the drivers seat with ease, it made animmediate impact.What shook the automobile world most was the fact that the designersseem to have done the impossible: The sleek, sophisticated Nano doesntlook flimsy or inexpensive. If it had been an upgraded scooter on fourwheels, Tata still would have been applauded for making a family offour safer on Indian roads. The Nano, however, affords both safety andstatus. "The innovation wasnt in technology; it was in a mindsetchange".Business AnalysisCost
Since the car had to be built within a cost of Rs. 1 Lac, no conventionaldesign would work as the costs shall be higher and so the entire car hasto be redesigned.What makes Nano so less expensive can be well understood from thefollowing diagramThe design has to question the need of each and everycomponent from the point of view of its necessity of existence and alsothe minimum requirements of its functionality. Value Engineeringconcepts have to be deployed to finalize the minimum requirements.Disruptive Technology:Is a Technology that brings radical change by introducing new ways ofdoing things usually at a Technology that is: Significantly cheaper than existing Technology. Is much higher performing? Has greater functionality and Is more convenient to Use. Brings to market a totally different Value proposition than the one available and can change the Paradigm about a product.
The Guiding factor was that the cost has to be minimized for eachcomponent yet maintaining its basic functionality.The Alternatives are: Reduce Consumption of Material being used. Alternate Suppliers to get same material at fewer prices. Use alternate materials. Eliminate use of Material. Eliminate a process Or a Combination of the above.The design was outsourced to Italys Institute of Development inAutomotive Engineering, but Tata himself ordered changes along theway. Most recently he vetoed the design of the windshield wipers. Hissolution: a single wiper instead of two, giving the car a cleaner look.THE COST REDUCTION PARADIGM Value EngineeringAlternatives:The target was very clearly defined that within the given cost structureof 1 Lac all the components have to be allocated a maximum price andthe same had to be achieved using the available alternatives.
The Guiding factor was that the tax structure, on materials andmanufacturing, must support the final cost of Rs. 1 LacThe Decisions were: Establish factory in a tax free zone. Get the tax advantages on infrastructure development. Get the suppliers to establish base near the factory. Get special concessions from State Govt. In short select a manufacturing location where all the advantages could be achieved.In short select a manufacturing location where all the advantages couldbe achieved.Total sales estimationNow the question was, “how much to produce”
It was estimated that the demand for the people’s car shall be at least twice the demand for Maruti 800, the lowest end car. Initial projections were at about 500 K cars per year. The basic reason was the conviction that the target price shall redefine the 4 - wheeler segment. The price decision of Rs 1 lakh is definitely going to make a lot many people transit to 4-wheeler fold and that shall explode the demand. F only 10% customers of 9 Million two wheeler market transit to 4-wheelers it shall amount to 50% of the passenger car market share. It was decided to set up plants with 5 lacs cars per annum capacity and ramp the same up in stages, in line with increase in market demand.The initial response to the Nano has been overwhelming and the tiny,Noddy-land car is expected to help the company cross severalmilestones. With revenues at Rs 1,29,994 crore for the financial year2006-7, and group companies enjoying a market capitalization of Rs2,51,487 crore as on January 10, 2008, the Tata Group is on a strong
footing, contributing more than 3 per cent to Indias GDP. Nano, beingthe worlds cheapest car, has made international players sit up inamazement and the company has received proposals from some African,Latin American and Southeast Asian countries to manufacture the carthere.Product Development And finally the product was developed with the following features. Engine Capacity Bosch 624 c.c. twin cylinder Low capacity, Lighter, sufficient with better Power Rear Engine to reduce the transmission length using a balancer shaft. 4 Speed Manual Gear Box All Aluminum Engine Higher thermal conductivity than cast iron, Lighter and so better mileage Engine Management System by Bosch Superb control over emission and smooth acceleration. Dimensions L: 3.1m, W: 1.5m, H: 1.6m
Less length but more inner cabin space due to height. Comfortable leg room. Independent Front & Rear Suspension McPherson Strut in Front & Coil spring & trailing arm in rear. Better ride than Maruti 800. Single piece ribbed steel body with safety features such as crumple zones, intrusion resistant doors, seat belts, strong seats & anchorages. Safety requirements are adequately met. Single Wiper in place of two. Cost effective yet functionality is met Tube less Tires Weight reduced by 2 Kg. Cost reductions 200 Rs. And in line with modern vehicles Instrument console in the centre Elegant to look at and can be used both in Left Hand & Right hand version. The list goes on and on.
The Final verdictTHE CAR COSTS Rs 1 lacTest Marketing And CommercializationNano is soon going to launch by the end of April. It will becommercialized in whole of India. It is mostly targeted to the middleclass and lower middle class people. The effects of Nano and itscommercialization will be soon known after it comes into the market.TATA NANO V/S MARUTI 800 CompetitorAs we know the price of Nano car is much affordable for middle classpeople. This car can be easily affordable by middle class people. In theIndian market it will face only by one competitor that is Maruti – 800,which produced by Maruti udyog.The real question arise who will have the last laugh Tata or Maruti 800?The answer is neither Tata nor Maruti 800 but they are the buyers whowill have the last laughCan Nano beat the popularity of Maruti 800. All the things depend ontheir marketing strategy that how they will attract to Indian middle classcustomers.Never mind the fact that what was touted as a Rs.100,000 car
will cost at least a fifth more and thats for the standard non-airconditioned version.Jagdish Khattar, a former head of Maruti 800 manufacturer MarutiUdyog Ltd, says its too early to say whether the Nano will overtake theoriginal."Its a good product but its still too early to say whether it will overtakethe 800 because it caters to a totally new market segment," he said whilewatching a live telecast of Tatas press conference after unveiling of theNano. But clearly, at least one other manufacturer was worried.Whether or not the Nano will overtake the Maruti 800, one thing is forsure: the current Auto Expo will be remembered for Tatas peoples carand for that product alone. It is the Nano that has captured the heartsand minds of a majority of the spectators. Price of Maruti in major city of India – 800 (a/c LPG) (Figures in rupees) Mumbai 245648 Delhi 228858 Bangalore 231407 Kolkata 236826 Lucknow 232542
TATA NANO V/S MARUTI 800 FEATURES OF TATA NANO COMPRAED TO MARUTI 800 COST: The dealer price of Maruti 800 varies from city to city. The dealer price in Delhi is 1.97 laths and the road price is approximately 2.28 laky Indian rupees. The dealer price of Nano is just 1.00 lakhs rupees and the road price is only 1.26 lakhs rupees. So here we can put the equation 2 * Nano = 1* Maruti – 800ENGINE:
Maruti 800: – 800 cc Tata Nano :623 cc (better fuel than Maruti 800)ENGINE TYPE: Maruti 800 – petrol/LPG Nano : petrol (diesel version will be later)SEATING CAPACITY: Maruti 800: 4+1 person Nano: 4+1 person FUEL TANK CAPACITY: Maruti800 : 28 Lt (petrol), 19.2 (LPG) Nano: 30 Lt. WEIGHT
Maruti 800 – more than 690 kg (gross weight is 1000 kg) Nano – more than 600 kg TOP SPEED: Maruti 800 : 120 km/hr Nano : 90 km /hr SEGMENT: Maruti 800 – middle class people Nano: lower and middle class people. FUEL CONSUMPTION: Maruti 800: city 13.6 and highway 17.6 km Nano: city 22 km and highway 26 km DIMENSIONS: Maruti 800 Tata Nano Length 3.335 meters (131.3 3.1 meters inch Width 1.440 meters (56.7 1.5 meters inch) Height (55.3 inches) 1.6 meters
BREAKS:• Maruti800: Front Disk, Rear Drum• Nano: Front Disk, Rear Drum COLOURS Maruti 800 Tata Nano:
The Nano are not much taller and broader as compared to Maruti – 800 but it has 21 percent larger spaces in side but 8 percent short than Maruti.Disadvantages of NANO vs. Maruti 800
1. LPG/CNG version is doubtful.2. Top Speed will be laser than 800.3. Space for Language is less. Views about success of Nanothe question asked here was,”do you think Nano will be successful” theoptions given were yes no not sure.
It’s very interesting to note here that none of the respondent said thatNano won’t be successful. As shown in the chart, the portion of purplecolor which shows failure is not there at all.But again every body does not believe in its success. As seen form thechart, 50% of the respondent has a doubt about success of Nano. Nano- A People’s Car !!!
in this chart, number of respondents is given on the y axis and somefeatures are given on x- axis.The question asked here is, “What is it that makes Nano a people’s car?”By analyzing the chart, we can say that people consider the cost factorthe most for Nano followed by the innovation. Even looks has got quitepositive reply. Nano is a product that is developed perfectly at minimumcost without sacrificing .ConclusionMY OPINIONAfter the study of various aspects I found that –Nano Car Is Definitely Not For:- Someone looking for better performance Someone who is looking to impress Someone who want to speed trial on Sunday Someone who is looking for long drives.
But Nano Car Is Defiantly For – Someone who is looking to buy a car but cannot afford much price. A students who want to go college, tuition instead of bike etc. Someone who depends on second hand car. For a house wife who can buy a car with her own savings. Someone who depends on scooter. So Nano is not a basically a luxury cars but it can fulfilled the all capacity for middle class people. Impact Of Tata Nano On Life Of Common Man In India every one can afford a Nano, just as we buy any electronic appliances for a home uses. Decrease in price of second hand car. High traffic on roads due to sale of exceeds car on roads. Increase in loan on car installments. And finally Nano is definitely better than Maruti 800.
tata has succeeded in value engineering of the product and its greatsuccess for tata’s. It’s something on which India can feel proud of.Nano has been developed effectively.