“TATA-NANO-VATION”

CASE STUDY ON

About TATA motors

Established in 1945, the company is top 1 automobilemanufacturer in India, world’s 4th largest truckmanufacturers and world’s third largest bus manufacturer.

Tata motors has produced & sold more than 4 million cars inIndia so far.

It has more than 25000 employees, 4500 engineers andscientists and with R&D.

Tata launched “TATA INDICA” India’s largest selling car,which is India’s first fully indigenous car.

In 2005, they created a new segment mini trucks with thelaunch of “TATA ACE”.

In Jan 2008, TATA unveiled its “People car” , TATA NANO thecheapest car.

Business Models for TATA NANO

Dream of Sri RATAN TATA, a car cheap enough for motor cycle buyers.

For this project, TATA adopted “COLLABARATIVE APPROACH”, which usually believes in vertically integrated approach and company believes it could do everything better than others

BUSINESS PROCESS OUTSOURCING

Outsourcing was into New product development, SCM, Design and styling of its products also.

Refined the manufacturing process by breaking down everycomponent of the car into its smallest pieces.

eliminating everything that was unnecessary.

Business Models for TATA NANO

Continued…..

outsourcing its manufacturing to a limited number ofsuppliers.

NANO was more eco-friendly and affordable with a millageof 23 KM/ltr.

It even attracted rich individuals.

“A Promise is a Promise” said Ratan TATA, on launch of TATANANO.

The NANO project didn’t grab the attention of only Indiansbut whole word.

CHA

RATAN TATA’s Dream

NEW PRODUCT DEVELOPMENT

IDEA SCREENING

Three major requirement of TATA Motor’s engineers is

Low cost (₹ 1,00,000)

Emission Norms

Acceptable performance standards( 4 wheeler)

Company generated several ideas, such as….

A scooter with two more back wheels for better stability.

An auto rickshaw with four wheels?

A four wheeled rural car?

A four wheeled open car with safety side bar?

Made with openings like auto rikshaw?

And so on…

But market wanted a CAR and not something people would say

“That’s just a scooter with four wheels or auto-rickshaw with four wheels”

RESEARCH & DEVELOPMENT

Named the project X3 consisting of 5 major team members fromdifferent disciplines.

Girish Wagh one of the 5 members, did something no one at tatathought of,

“He interacted with customers”

He approached with a question, why? Why do you want a fourwheeler?

Interestingly, customers said,

“If I had a four wheeler, I would have better marriage prospects in my village”

Drivers of 3 wheelers are looked down upon in India.

Then he understood that four wheels had an emotional, not justpractical.

BUTwhat type of product?????

The car has to be built on a different platform as compared to the conventional one.

It must meet all the safety and regulatory requirements.

The car has to be designed so that it can be exported.

The car must be a beacon for the Indian automobile Industry and prove the world India is capable enough.

Continued…

The design team initially came up with a vehicle which had bars,which was more of a quadricycle than a car, so a failure.

Wagh used to spend an hour or two on the floor in order to takesuggestions from designers, manufacturing team.

Then team grew into 500 members, on a daily basis 5 coremembers gathered to discuss about development andsuggestions.

Ratan Tata insisted to change the design, he wanted it to be easyfor tall people to get in and out and the height was increased by100millimeters.

The initial two cylinder engine was 580cc, later the capacity raisedto 624cc to have optimum engine performance.

COST CUTTING FEATURES

The trunk is only accessible from inside the car as the rear hatch doesn’t open

One wide wiper instead of usual pair.

No power steering, radio or music can be fitted as accessories.

No air bags In any model

624cc two engine cylinder.

No air conditioning.

To ease the assembly, body panels are glued instead of welded.

Collaboration as a source of innovation….

TATA MOTORS considered COLLABORATION as the source ofinnovation from different company’s idea to reduce cost.

TATA divided the components into two types – proprietary designand Tata motors design.

For proprietary design components Tata went with establishedsuppliers such as BOSCH GROUP.

BOSCH GROUP, which supplies the engine management systems.

BOSCH GROUP

Bosch group decided to take the challenge to be a part in cheapest car though they (Bosch) developed systems only for high end vehicles.

Bosch again split the development between its design centers Bangalore and Germany

Using local design capabilities was a crucial decision and employment took place at higher wage levels.

Bosch developed a software consists of electronic control unit, fuel injectors, sensors, ignition oil, tank vent level and throttle body assembly.

Cost effective “drum brakes” were used.

SUPPLIERS

There were more than 100 suppliers.

The brief to suppliers was:

“Make things smaller and lighter, do away with superficial parts, and change the material wherever possible”

A few did their own way and few developed with the tata motors.

Arvind Kapur, CEO of Rico, supplier of blocks to the engine,decided to use aluminum for engine instead of traditional cast ironas it was smaller, lighter and cost was less.

Rico also found a way not to connect the engine with the rearwheels

Price negotiations from Tata motors side apparently started from50 % of what suppliers offered.

Distribution Manufacturing

EOS was very crucial factor to reach low cost of the product.

Tata wanted to build one million Nano’s per year.

NANO is constructed of components that can be built and shipped separately to be assembled in a variety of location.

So. Tata nano is being sold in KITS.

Any local entrepreneur can establish assembly unit and can sell in pre-defined locations.

TATA NANO-A GLOBAL CAR?

Though It succeeded in creating huge market hype before the launch, it took whole 2 years to sell its 1,00,000th car.

Couldn’t meet the annual sales expectations of 2,50,000 cars.

First reason is the forced movement of production plant from west Bengal to sanand, Gujarat because of strike.

“Hence company was unable to deliver cars to first buyer’s in time”

Few fire incidents and resulted media sensitivity.

Negative word of mouth from non targeted customers who bought the car.

Positioning as “worlds cheapest car” was actually a disaster in global market.

CASE QUESTIONS

How do you view Tata Nano as an innovation ?A differentiated product or a low cost product

Differentiated+

Low cost product

Tata Nano is a both a differentiated product with the lowestpossible price.

Tata Nano is a low cost car by the positioning itself as the “Worldscheapest Car” with a price tag of ₹ 1,00,000.

Started with the theme “A car for everyone”

Targeted to 2 wheeler motor cycle buyer who cant afford 4wheelers

Low cost product with complete entry level features.

Tata Nano is differentiated in a very different manner,

Stating itself as worlds cheapest affordable car

Nano born with the emotional touch and that created a hugemarket hype.

Collaborative approach with more than 100 suppliers for thisproject is truly uniqueness

Also targeting is differential factor.

Tata Nano could not have seen the light of the day had it not embarked upon a policy of collaborations and alliances.

Do you agree? Justify?

Without collaborations and alliances,

NANO wouldn’t have reached

customer.

Bosch being a major player in supplier took a challenge andsucceeded in providing with the least cost technology.

Giving free decision making to the suppliers made them innovators.

Without the suppliers the Nano would have been costlier in severalfactors.

The innovation was faster as each supplier produced simultaneously.

Innovation from different suppliers.

The plants and employment might have increased the price of endproduct.

Breaking down of components and outsourcing them gave an optionto concentrate more on that particular product.

Tata Motors bargained up to 50% with the suppliers.

Despite the huge market hype and the first mover advantage, it appears that company has not able to cash upon in? do you

agree with this? What are the reasons for this?

Yes, TATA MOTORS was unable to cash upon it.

Because,

The annual sales expectations of 1 lakh per year was not reached.

It took 2 long years to reach its 1,00,000th car.

Strikes in west Bengal resulted in movement of production plant to sananda, Gujarat which not only resulted in 18 months delay to first buyer and also huge cost.

It also resulted in heavy inventory costs.

Few fire cases made customers to back out on the verge of buying, safety does matter.

The sound of 2 cylinder engine was a major negative factor which made it sound like a auto.

Negative word of mouth by non targeted customer group.

Continued..

Lack of basic features made it just plane product but not a complete car.

The price gap between Nano and Suzuki alto was only around 50,000 after equipping Nano with necessary accessories.

The positioning was a unable to attract customers as they still looked car as a status of symbol.

No one wants to own a car, that showcases as cheapest car.

Style

Craze over 2 wheelers and convenience of travelling in rural areas with two wheeler in lands.

Well, the launch of 2012 model, is a success.

What is the role of leadership and strategy execution in bringing out such zero- base products? Justify your answer.

Team work

Suggestions from everyone

freedom to suppliers in R&D

A team of 500 members lead by 5 core members made Nano into reality.

Mr. wagh used to take suggestions from every person in the plant to make it better and better with least cost.

The suppliers are allowed to research for their particular part so that they can come up with innovative ideas.

Collaborative approach

Open distribution

Cost reduction (Low cost provider strategy with manufacturing strategy)

EOS

Niche market

For this project Ratan Tata believed “Together more can be achieved”

More than 100 suppliers, everyone trying to reduce the cost.

Anyone with an assembly plant can become a distributer for that particular region.

Cost reduction of each and every part resulted in low price.

Economies of scale is a strategy that they have planned but failed.

Tata Nano targeted to motor cycle buyers instead of car buyers.

Penetration pricing.

STRATEGIES

QUESTIONS?Thank YOu