Case Study Analysis : TATA NANO

What does this picture, brings to your mind..??

His Vision..will it be a reality..?

To make, a common man drive safe, along with his family, within his budgets

About TATA s
A diverse conglomerate with presence in Steel to FMCG 96 companies, 6 continents Presence in: heavy engineering, energy, IT/ITES, communications, consumer products, chemicals Started as TELCO in 1945: A train manufacturer TATA Mercedes-Benz trucks unveiled in 1954 Entered passenger vehicle segment in 1990, with launch of Sierra (SUV) India s car-Indica launched in 1998 Indigenously developed mini truck TATA-Ace in 2005 Made the world s biggest automobile acquisition of JLR brands from Ford motor Co. Currently world s 6th largest auto maker Listed in BSE & NYSE

NANO : The World s cheapest car

Year 2003: Rattan Tata visits Geneva motor show identifies the market potential 2003: for a small peoples car, in the lower middle class segment. Instruction given to the engineering & design team of TATA motors, back home in India, to develop a small, fuel efficient, car within a unit price of $ 2500 ( approx. 1 L Rs. ). Market research, feasibility analysis done on the project. Talks with Buddhadeb veteran leader from the W.Bengal, identifies Singur as a possible location. Just before the launch, compelled to shift manufacturing to Sanand in Gujarat, amid political turmoil. Year 2008: Launched NANO- India s small wonder to the world. 2008: NANOMedia praises TATA s for the launch of World s cheapest car .

TATA s Go to Market strategy

 Goal to sell 1M units annually  TG : Middle class Indian families & college going students  People who want to shift from two wheeler to four wheeler for family travel  Major competitor : Maruti 800 , Alto  Head on collision with India s thriving second hand car market

Product USP s
 Safety & Comfort

 The 1L. Car

 Fuel efficiency

 Best car suited for Indian roads & climate

Competitor Analysis
 Main Competitor : Maruti 800, Maruti Alto.  Maruti has the Early mover advantage  Maruti s Goodwill as a common man s car give them the market leadership position  Maruti-Suzuki have twice the no. of dealers than TATA MarutiMotors  Renault-Nissan JV is already in talks for producing a Renaultsmall car  Nissan, Bajaj, Hyundai also are on the path to produce a low priced car for middle class segment .  Organized & unorganized second hand car marketing companies like Mahindra First choice , Maruti True Value , etc

SWOT Analysis
Strengths
Technical know how to develop cars through various JV s including Daimler, JLR Acquisition The cheapest car tag Cost optimized production through the outsourcing model Efficient utilization of labor NANO has 21 % more interior space than Maruti 800 ,Alto. Goodwill for TATA s among the Indians Sanand plant is easily accessible by rail, road and near to Jamnagar port The fuel efficient car Have cleared all environmental and safety tests TATA s strength of managing & turning around companies Streamlined modular function

Weakness
 Poor dealer network of TATA Motors compared to Maruti-Suzuki Maruti A unique distribution channel for rural areas is missing  Poor dealer margins of just 1 % ( J.D.Power, A.T.Kearney studies)  Variable cost of maintenance for Nano is much higher than a two wheeler  Indians are always cost conscious, there will be a space for two wheeler in their minds  How much will a customer forgo for $ 2500 ? Air-conditioning ? Power Airsteering ? Power windows ? Dual windshield wipers ?  Shifting of manufacturing from Singur to Sanand cost TATA s additional inventory  Production cut down to 10,000 units from the expected 40,000 during first few months  Could have achieved the economies of scale  Dealer margins for spare parts & servicing are much lower than other competitors  Perception among customers that cheap price means poor quality & Dumping down engineering

Opportunities
India: World s third largest economy by 2020

2nd largest automobile market after China Growing Indian Middle class More than 60 % of Indian s still don t own a car C.A.G.R : 25 % 30 % export growth annually A younger Indian demography : 65 % of Indians are under the age group of 25-55 yrs. 25 Only 25/1000 people owns an automobile A big gap exists btw the % of market share btw major two players (ref: table 2) Cheap availability of Indian talent India s second position in the two wheeler segment 10 % two wheeler customers = 50 % share of car market India s growing second hand car market Kit car concept : ease of assembly, satellite assembly operations. CRISIL report : NANO could increase the no. of house holds who could afford a car in India by 65%, Brings down the cost of entry of ownership of car by 30 %

Threats
 Diminishing Goodwill  Sales satisfaction index ranked company below average  Reduced PR due to Fire accidents  People s car an environmental nightmare : Thomas Fredman , GREENPEACE reports  Continued downturn of stock prices for TATA motors since launch of NANO  Rickshaw drivers legal suit to enable them drive NANO under their existing license  Almost 90 % of the parts are outsourced, 75 % were single sourced  Cost of materials escalated from 13 % to 23 % since launch.  Threat of new products from Bajaj, M & M-Reva, Renault, Nissan. M-Reva,  Goal of selling 1 M cars annually a distant dream.  Extended break-even time break Trade union issues/political issues/Legal battles.

PEST ANALYSIS

Political
 Close watch of political climate across geographies  Laws and regulations in various countries : Commerce, trade, labor, etc  Regional, national, local political scenarios

Economic
 Have operations in various economies around the world  Sound presence in EU  Have capability to gather information and act according to the Economic scenario (ex: Aluminum industry in Kenya Vs. Engine prices) Monitor's currency fluctuations closely

Social
 Beliefs , opinions & general attitude of all stakeholders  Culture & attitude of people determines the future of a company  Ex: Daewoo motor co. Take over : retained all Korean employees & Korean Management  JLR deal : retained 80 % of EU employees & dealers

Technological
sound technical know-how know Indigenously developed NANO, INDICA, TATA-ACE, Commercial TATAvehicles  Sound understanding of customer needs & converting them to R & D  R & D team includes more than 1400 scientists & engineers  Receptive to: change-adapt-evolve-stay competitive change-adapt-evolve Have

Analysis based on Porter s 5 Forces

Source :http://en.wikipedia.org/wiki/File:Porters_five_forces.PNG

Bargaining power of customers The least price. But TATA s need to hang on with the promise

Bargaining power of suppliers 90 % of parts are outsourced 75 % from a single vendor

Competitive rivalry within industry Maruti 800 (rural areas only) Maruti alto M & M Reva

Threat of new entrants Bajaj-Renault JV Bajaj M & M Reva acquisition More upcoming small car ventures

Threat of substitute products Second hand cars Organized second hand car market