Tata IndicaThe Making of the

Small Car

MADE BY :

ACHYUT VITHAL AGARWAL SHADWAL HARSH AYAN ASIF SUSHANT GUPTAKATIYANI TOMAR TARUN KRISHNAPRANSHUL TRIPATHI VASUNDHRA SINGHPOOJAN JAIN

INDEXHISTORYMAKING OF INDICAOUTSOURCING OF COMPONENTSVENDOR DEVELOPMENTSUPPLY CHAINOBJECTIVE OF COST MINIMIZATIONSTP ANALYSISBCG MATRIXSWOT ANALYSISCONCLUSION

HISTORYThe background of Telco India's leading automobiles

manufacturer dates back to the early 1920’s , TELCO originally belong to peninsular locomotive company & its plant was established in Tatanagar Jamshedpur & was taken over by East India Railways in 1927.

In 1945 TATA sons purchase the plant from the govt. For manufacturing steam locomotive boilers & other engineering product.

Tata got into the motoring business in 1954 when it starting producing heavy trucks in a joint venture with Daimler-Benz , Daimler Benz helped TELCO to establish strong R&D centre at PUNE, Maharashtra in 1960

Over the year , the company acquired technology from several collaborations & Co-operations agreement with international countries .

Tata Cummins Ltd

Joint Venture Cummins Engine Co.

Business Manufacture of Cummins “B” series engine

Tata Holset Ltd

Joint Venture Holset Engineering Co. Ltd

Business Manufacture of turbochargers

Concorde Motors Ltd

Joint Venture Jardine International Motors Ltd

Business Retailing of Passenger Cars

In 1986 the company rolled out its 1st Light Commercial Vehicle – TATA 407 . In 1991 TELCO produced indigenously design, passenger car Tata Sierra & Tata Estate

By late 1990’s Telco emerged as a leading name in commercial vehicles, passenger vehicles etc.

MAKING OF INDICA In 1990’s Telco’s chairman Ratan Tata flirting with the idea

of developing a small car & in 1994 Tata gave basic design to their car.

In 1995 Tata announced that it planed to build a car which will priced to Maruti 800, Shape like Zen & spacious like Ambassador.

Telco was the truck maker, producing a small car - Indica represented a different kind of challenge for Telco

As an Automaker Telco had to focus on the value chain that stretched b/w raw materials & after sales service as well as assembling the parts into the complete automobile.

Telco outsourced 80% of the components (1200 out of 1500 plus part) from 200 odd vendors , to develop Indica. Telco had to combine learning from its predecessor & its own unique supply chain management to sustain low cost .

Outsourcing the part was one of the most difficult part for Telco in producing Indica , for that Telco decided to shop globally for the best deals & use its own experience.

Tata Indica was launched in 1998 & within a week of launching , company received 1,15,000 bookings & in two years Indica became no. 1 car in its segment.

OUT SOURCING OF COMPONENTS

COMPONENTS SUPPLIER

5 Door Hatch Back I.D.E.A Italy

Engine Institute Francais Du Petrol , France

Assembly Line Nissan Plant , Australia

Presses Mercedes Benz

Piston Rings India Piston

Steering System Rano TRW Steering system

Seating System Tata Johnsons Controls

Unlike Global Automobile majors like Ford or General Motors which had global vendor base , Telco had to start from the scratch for this Telco had to take its primary “make or buy” decision for key inputs & Telco decided to Shop Globally.

Radiators Tata Toyo

Rear View Mirrors Tata Ficosa

Air Conditioning Kits Subros Ltd

Wind Screen & windows Asahi Glass

Fuel Lines Imperial Auto

Differential Assemblies Sona Steering

Sheet Metal Items JBM Tools

Telco turned to the Italian & France company for design & engine respectively & applied its engineering skills to adapt engine requirement.

Of the Rs 2.5 billion spent on designing the Indica the major share went in buying design tools & training engineers in new skill.

VENDOR DEVELOPMENT

Next Step was to identify the vendor , most of the parts that went into making Telco were sourced locally except for some sheet metal parts, cylindrical gaskets, and belts –which amounted 2% of the components value, The Indica was totally indigenous.

Telco employed a simple yardstick for selecting suppliers ; the ability to supply components at negotiated cost with good quality and quantity.

In the first stage of selection , an initial assessment team from Telco evaluated the suppliers, this was followed by self- evaluation of the suppliers, based on format provided by Telco.

Then there was a quality system survey, carried out by a Telco quality audit team & it applied a 13 steps Quality improvement programs, covering suppliers self-evaluation, through design evaluation & audit of supplier quality .

Another key to Telco’s successful vendor-base was a modern system of process management.

Telco’s target-costing was broken up into vendor-wise cost target & the suppliers to carry out their own value-engineering exercises to lower cost & improve quality

Telco even involved its vendors in the design-process to give suppliers more lead time to innovate, and for better supply chain coordination

 T.K. Balaji, CEO, Lucas-TVS, which supplied electrical components and fuel-injection systems for the Indica, “By making vendors its partner early, TELCO ensured both quality and price-conformity. Late involvement would have yielded different results.”

M.S. Kumar, Director & CEO, Rane TRW Steering Systems (Rane), which supplied the steering systems for the Indica, added, “TELCO has been extremely supportive, making available its entire R&D resources to our engineers. It is one of the best experiences we have had in product-development.”

SUPPLY CHAINSupply chain management is a process to provide the product

or service from suppliers to manufactures to wholesaler to retailer to customers. The ultimate goal of any supply chain management system is to reduce inventory cost & provide their goals & service very effective way.

Telco Chosen the supply chain management because they want to provide their product & service immediately to their client & customer, supply chain also reduced the cost of logistics.

Supplier

Manufacturer

Wholesaler Retailer custom

er

Tata make joint venture with manufacturers & the transporters for improving their supply chain, Transportation cost alone accounted to 45% of the total logistics cost for company.

They wanted to create a positive image in the mind of customer through their proper supply chain & supply chain also created the reliability of the product in the customer mind.

All high value components were delivered daily & in case of near by suppliers , twice a day & vendors who were located far away from pune set up local warehouse near the plant.

The material was centred to the factory where it was checked whether the material was scheduled to arrive or not, if the material was not scheduled the truck was not allowed to enter the factory premises .

Once the material was unloaded & unpacked it moved to the transit area & from there they went into the Super Market

The Super Market was close to assembly line , in super market material were arranged in such a way that workers could easily access all the material without wasting much time and effort.

The benefit of this just in time inventory system was that the inventories were low & so interest cost was also low ,again the manpower required to handle the inventories was also low.

OBJECTIVE OF MINIMIZING THE COST

The supply infrastructure would become economical as the volume of the business that Telco offered its vendor increased.

The volume of business will increase with a large number of cars.

The learning that it was extracting from Indica supply chain would also be available to the company as it moves into other products

There seemed to be a distinct opportunity for a smaller, cheaper car, positioned as an entry level for the first time buyer.

STP ANALYSIS OF TATA INDICA

STP Marketing is 3 steps approach to build a targeted marketing plan . The ‘S’ stands for Segmentation , ‘T’ for targeting & ‘P’ for positioning. Going through this process allows a business owner to formulate a marketing strategy that ties company, brand & product benefit to specific customer market segment.

SEGMENTATION The Segmentation step is the brainstorming activity. You

list out all the potential market segments you could target in marketing campaign

TATA MOTORS HAS SEGMENTED ITS CUSTOMER

IN FOLLOWING WAYS

DEMOGRAPHIC VARIABLE AGE - Anybody of age b/w 18 to 50 years INCOME - Anybody with income of 4 lakhs p.a OCCUPATION - Employed as professional, manager & those

who want to buy their 1st car. SOCIAL CLASS - Middle Class, Upper Middle, Lower Upper

& Upper Upper

PSYCHOGRAPHIC PERSONALITY – Dreamers those who want to achieve big ,

Ambitious , Price conscious .

BEHVIOURAL VARIABLEBENEFITS – Quality, StyleUSER STATUS – Potential User & First time userREADINESS STAGE – Those who are aware , informed ,

interested & intending to buy.

The Research team of TATA Indica spend time in :

Understanding the needs & preferences of the customerGrouping customer based on their need & preferences Targeting the segment that the company can best meet the

needs & preferencesBranding the commodity

TARGETING When you have multiple, distinct market segments, you typically

need to customize marketing campaign that appeals to each. As you go through STP process you select which segment to target with your upcoming campaign . Tata motors has full market coverage in vehicle market as they cover market through differentiated marketing.

For Ex. Using The Cell Phone example , you decide to launch new campaign to promote advance new mobile feature ,media, apps etc.

For this Campaign you would develop messages & use media tailored to that targeted market.

POSITIONING Positioning is how you align your brand or product in the target

market . The goal is to offer something that is bigger , better or more valuable than your competitors to a particular market segment. Your marketing serves as your big picture guide in building your marketing campaign.

Tata Indica position itself as:• Slogan “ The Big ... Small car” & “ More car per car”• Position as an affordable car.• As the 1st passenger car develop in India • As a fuel efficient car providing a comfortable drive.

STP

Segment Hatchback for families and taxi segment

Target Group Targeted towards the Families belonging to middle class segment, Cab Operators.

Positioning Positioning as fuel efficient, affordable car, 1st passenger car develop in India .

BCG MATRIX OF TATA MOTORS

Safari Dicor , Indica Vista , Star bus , Manza , Winger, Magic

???Nano, versa & other new inventions

Safari, Sumo, Indigo CS

Indigo Sedan, Sierra, Estate

HIGH

LOW

HIGH LOW

BUSINESS

GROWTH RATE

Indica was one of the 1st Indian hatchback to provide space , comfort and economy in one package . It had the monopoly in diesel segment ; this coupled with low maintenance cost resulted in making the car preferred choice of taxi operator and middle class .

This is the reason why Tata Indica is put in the STAR as star are the units with high market share in Fast growing industry ; show the best profits and great opportunities in the organization and generates high revenues

SWOT ANALYSIS OF TATA INDICA

SWOT

STRENGTH

• Fuel efficient• Good presence in taxi segment• Strong distribution and Service network• Strong backing by Tata brand

WEAKNES

• No strong product differentiation when compared to competitors• Brand dilution due to strong presence of taxi segment

OPPORTUNITY

• Increasing per capita income & purchasing capability of customer• Increasing the customer engagement programme• Augmenting distribution & service network in various countries

THREAT

• Increasing Fuel cost• Competitors from other Automobile giants• Competitive product offering same level feature at a lesser price

4 P’S OF TATA INDICA

PRODUCT - Until 1998 India was not different from other less developed countries in one crucial aspect; it had not produced the car indigenously . That situation changed with the launched of Tata indica in December 1998. The vision of the TELCO was to give an Indian car which price to Maruti 800 , Shape like Zen and Spacious like Ambassador

PRICING - TATA motors have always have followed a strategy of value based pricing in the Indian car segment. The prices were fixed keeping few factors in mind – Market conditions , cost incurred , Profit % desired & Dealer profit . Tata follows the same strategy for Tata indica as well , different variant s of model are priced suitably , keeping the factors in mind.

PLACE - Tata focused on its channel of distribution to provide good service , Tata distributed the product at the right time & right place . Effective & Efficient distribution was important for organization to meet its overall marketing objective.

PROMOTION - To reach its promotional goals, Tata developed an effective promotional mix of advertising & sale promotion strategy . Tata develop a promotional mix for each segment of the distribution channel. To promote Indica ,to large retailers that sell its products .

CONCLUSIONTATA Indica is a milestone model in Tata's journey in the

Indian automotive . Tata Motors through Indica has demonstrated how to manage

product lifecycle effectively. The brand which was launched in 1998 has passed through many hurdles.

The brand successfully transcended the initial flaws, bad customer /expert reviews and brickbats to become one of the largest selling cars in the Indian auto industry.

The brand survived and thrived because of the constant focus of Tata Motors to improve the product continuously.

More than the product innovation, it was the value proposition that forced customers to choose Indica despite all those nagging troubles.

You cannot get a diesel car with that much space at the price at which Indica is selling ( so far).