Prepared By: Anant Maheshwari Raunak Vasandani Advait Bhobe Sangram Korekar Rahul Kumar Giffin K. GeorgeSundeep S. Kentigal
Tata Group is an Indian multinational conglomerate company headquartered in Mumbai, Maharashtra, India. It encompasses seven business sectors: communications and information technology, engineering, materials, services, energy, consumer products and chemicals. Revenue US$ 100 billion (2011-12) Profit US$ 5.23 billion . Tata Motors Limited, formerly known as TELCO (TATA Engineering and Locomotive Company), is a multinational corporation headquartered in Mumbai, India. It is Indias largest passenger automobile and commercial vehicle manufacturing company. Was established in 1945. The company manufactured its first commercial vehicle in 1954 in collaboration with Daimler-Benz AG, which ended in 1969. The company has 6 manufacturing and assembling Plants located at Jamshedpur, Pantnagar, Lucknow, etc in India.
Tata Nano Nano - the Dream Car is a rear-engine, four-seater Passenger Car from the house of Tata Motors. Tata motors surprised the world by launching the worlds’ cheapest Car Nano in the year 2008. Nano majorly aimed at Two-Wheeler users. Nano is also known as Lakh-takiya Car because of its price (Rupees One- Lakh Car) Company started its production in the year 2008 at Singur plant. The car itself is expected to boost the Indian Economy, create entrepreneurial-opportunities across India, as well as expand the Indian car market by 65%. Ratan Tata kept his promise and unveiled Tata Nano on 9th January 2008, at the 9th Auto Expo 2008 at Pragati Maidan in New Delhi.
STRENGTHS > One lakh rupees Car, against WEAKNESSES increasing steel prices. > Safety > Fuel-efficient. > Light vehicle > Fashion of Compact Cars in India. > Not suitable for hilly areas> 21% more Spacious then Maruti 800 & Trusted Brand Tata NanoOPPORTUNITIES > Two wheeler users THREATS> Global market like India, China, etc. > New Model of Bajaj Autos > Growing population of Middle class Limited RE60. and Lower Class who controls 59% of > Light vehicles like total income in India. Spark, Alto, Eon etc. > All the users of Maruti 800, as its > Second-hand usersproduction is stopped by the company.
“Dream, dream and dream – becausedream gives vision, vision gives thoughtsand finally thoughts lead to the action".Each letter of these motivational wordssaid by Indias former President Dr. A.P.J.Abdul Kalam goes exactly with Mr. RatanTata, Chairman of Tata group, who in theyear 2003, dreamt of producing a Safe,Affordable Car for the common man.
The project was given to Mr. Girish Wagh & his team included another innovative person Mr. Narendra Jain who was credited with the 1st gasoline engine made by the Tata’s. The main driving factor for re-engineering & innovation was LOW COST . After number of experiments they built a optimal engine of 624cc with a 34 bhp which gave to another innovation of high pressure diecast engine in India.They had to re-engineer lots of parts of the car which included: Door handles – 70% less parts than one of the cheapest European cars. Hollow steering shaft – lesser weight. MRF tires - redesigned to bear extra weight on the rear. In some of the cases the cost dropped by 60%due to their out of box thinking.
Plastics & adhesive replaces welding. 1 wiper instead of 2 wipers. Got the suppliers to establish base near the factory, extremely good supply chain they made “Completely Knocked-Down” kits (CKD) so that the distributors could assemble them at their own workshop. To enable cheaper assembly they glued the parts instead of welding them.
The strategy of the project was the awareness of the number of Indian families who had two wheeled transport, but couldnt afford a four wheel car, and was based on the companys success in producing the low cost 4 wheeled Ace truck in May 2005. Tata Motors had an idea that they would come up with low price car which would be affordable to low income groups & people in the rural area. Tata Motors set their retail price target before they designed the car. Doing so let them establish their demographic areas. Setting the price and working backwards also required a fundamental shift in the way the car was designed, since many costs are fixed once the design is set. Tata Motors worked in collaboration with their suppliers very early in the process - so early in fact that they were able to provide functional goals for many parts rather than technical specs.
Another cost cutting strategy - ‘Tata Motors distributed assembly model, where they ship the parts to local manufacturers for final assembly. The interesting challenge here was that aiming for a very low cost car meant the entire organisation had to be leaned down - not just manufacturing, but materials, design, human resources, and so on. The team has taken the benefit of best practices from other industries such as cycle manufacturing or PC manufacturing that involves mass manufacture and assembly. The Nano has 21% more interior space and 8% smaller exterior, when compared with its closest rival, the Maruti 800. The car will come in different versions, including one standard and two deluxe variants. The deluxe version will have air conditioning, but no power steering. With a length of 3.1 metres, width of 1.5 metres and height of 1.6 metres, with adequate ground clearance, it can effortlessly manoeuvre on busy roads in cities as well as in rural areas. One of the most significant dimensions of innovation is its modular design. The Nano is constructed of components that can be built and shipped separately to be assembled in a variety of locations.
Tata have called this open distribution innovation because it mobilizes large numbers of third parties to reach remote rural consumers, tailor the products and services to more effectively serve their needs, and add value to the core product or service through ancillary services. Tata Motors had a idea because he had a dream that people from rural areas &low income group has 4 wheeler car which would be affordable to them.
No benchmarks made the task difficult and often frustrating. “Go beyond just the usual cost reduction exercise. Show the world the ingenuity of Indian engineers” said RNT urging them to include him in their team. “Only countries like India or Pakistan can make such a low cost car in the world”, concluded RNT. These words of RNT had a far-reaching effect on the product development team.
The top leadership, involving Mr Ravikant, Managing Director, was tasked to continuously motivate the team. The team was often exposed to competitors from around the world, which was turning out to be tedious for the entire team. For example in the task of engine designing Jain did 150 thermodynamic simulations, each of them stretching from 8 to 10 hours Components were critical and vendors played a significant role, in determining costs of any automobile. E. Balasubramaniam who was Tata’s Head of Sourcing was greatly respected by vendors and he convinced them to go down on their cost curves.
Girish Wagh told the car team that Indians wanted to graduate from two wheelers to four wheelers for emotional reasons. And the “average Indian” cannot afford expensive four wheelers. Jain searched globally for an engine that could fit a small car. He even contemplated the engine of the two-wheeler but gave up, as it didn’t produce RNT’s dream car for the average Indian.
He then started designing the engine afresh. His first product was one that delivered 20 bhp but that was not sufficient. He increased the engine’s capacity to 554 cc, which delivered 27 bhp. But it still did not have the required power .The process went on till the capacity of 586 cc was reached. And finally in October 2006, Jain built a 624 cc engine with a bhp of 34. This was an optimal design. This was the first time a high pressure die cast engine was made in India. Compared to the first Maruti 800, which delivered 37 bhp, Jain’s engine was more optimal. It had a multipoint fuel injection system developed by Bosch.
The engine appeared to have the zing to satisfy all parameters namely low cost and acceptable performance and conformed to all current and potential regulatory requirements. Tata Motors had a to develop an assembly kit for distributors who would stock ‘Completely Knocked- Down’ (CKD) kits of the car at warehouses and assemble them on site. Transporting car in a CKD condition is much less expensive than a fully assembled car. Finally, in Jan 2008 the car named was ready to be showcased to the world.
Why? Poverty is heterogeneous and context-specific, livelihood systems are diverse and dynamic, and operations need to be flexible and demand-led. Working with upcoming technologies and groups. Focusing on ‘Utility’ & ‘Cost’ aspects. Setting up a good supply chain can deliver low costs and high quality.
Tata Nano Innovative Approach – Cut Costs, Meet The Schedule and Eliminate Wastage. (E.g. Plastic panels, eliminating screws etc.) Calls from various markets abroad. Region-wise Variants
Innovative Ideas put to action: Aakash Tablets Low-cost AC’s and Water-Purifiers manufactured by Tata Group ‘Heat-based’ Refrigerator
Tata Nano is being refreshed to realise its full potential. "We were not prepared to market the car as we should have. I think that has a lot to do with the fact that momentum got lost," he told in an interview. Due to issues like plant transfer, insufficient advertising campaign, and dealership network.
“…But they also received calls from Latin America,Europe and Other countries in Asia. The either wanted tobuy the car or start its distributorship or wanted RNT tosetup a plant in their country.”“The launch of Nano was big talk in Detroit Auto Expo.” “It was the first major breakthrough after the world saw the introduction after the world saw the introduction of the first automobile by Henry Ford.” - Carlos Ghosn, CEO Nissan Renaults
The Global Middle Class, 2009: People andSpending
For the first time in history, a truly global middle class is emerging. By 2030, it willmore than double in size, from 2 billion today to 4.9 billion. Brookings Institutionscholar Homi Kharas estimates that the European and American middle classes willshrink from 50 % of the total to just 22%.
Latin America "Most countries in the region are on their way to becoming middle-class societies; this represents a historic change,“ - Jim Yong Kim, World Bank President • Rapid economic growth and more inclusive social policies in Latin America in the last decade have lifted 50 million people into the middle class, which for the first time rivals the poor in number. • Poverty fell and the middle class rose. • Roughly 30% of the population now falls into that category, equal to the third of people still in poverty . • At least 40% of the regions population has moved to a higher economic class between 1995 and 2010.
“The potential market for such an affordable car is enormous throughout the developing world.” - Ratan Tata
Conclusion: Emerging markets are a fertile ground for innovation. The challenge of reaching dispersed, low income consumers in emerging markets give rise to significant innovation. The strategy is not to sell the maximum cars to target audience however to sell maximum cars to maximum people. Companies which innovate on this dimension are likely to be richly rewarded. World is getting tougher day-by-day ‘being unique’ is a competitive advantage & Tata motors did the right thing by launching Tata Nano.
The company should focus on advertising & promotion of Tata Nano which is critical for the sale of the car. In the world of mass customization, the work of the marketing department is restricted not only to developing more customer but also to find out a way to strike a balance between customer loyalty and customer satisfaction. There is a problems in the area of services and distribution. Poor service and absence of trained service personnel across the country affects the growth of automotive vehicles especially those of passenger cars. This case is similar to Tata Nano. High prices of petrol, poor road quality and absence of poor parking facilities in commercial and residential cities, pollution and high taxes on four wheelers affect the market for four wheeler automobile industry, of which Nano is no Exception.