TATA NANO – THE MODEL FOR THE TWENTY FIRST CENTURY

HEG

ElwinKusumaningtyas

Goran Adam Gasparac

Hung Duy

AGENDA

Tata Group

Tata Motor

Tata Nano

Question 1

Question 2

Question 3

TATA Group

• 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

• Tata Group has over 100 operating companies each of them operates independently out of them 32 are publicly listed.

TATA Group

• The major Tata companies are Tata Steel, Tata Motors, Tata Consultancy Services (TCS), Tata Power, Tata Chemicals, Tata Global Beverages, Tata Teleservices, Titan Industries, Tata Communications and Taj Hotels

• The combined market capitalisation of all the 32 listed Tata companies was $89.88 billion as of March 2012. Tata receives more than 58% of its revenue from outside India

TATA Motors

• Tata Motors Limited (formerly TELCO) is an Indian multinational automotive manufacturing company headquartered in Mumbai, Maharashtra, India and a subsidiary of the Tata Group

• Its products include passenger cars, trucks, vans, coaches, buses and military vehicles

• It is the world's eighteenth-largest motor vehicle manufacturing company, fourth-largest truck manufacturer and second-largest bus manufacturer by volume

Tata Nano

• Mission : World cheapest car (100000 rupiees ~ $2500)• Three requirements

1. The car should be low cost2. Adhere to regulatory requirements3. Achieve performance targets such as fuel efficiency and acceleration capacity

Question 1

• Does the so-called one lakh (100,000 rupes) car really have potential beyond India? What criteria should Tata Motors use for deciding which countries to enter? Should Tata also launch the Nano in developed countries ? Why and Why not ?

In India

• 2009-2013 : 229.157 cars were sold• Who want to own cars in India ? Middle class or high class

people, not people own motorbike• Not potential because most of people, who use motorbike,

they do not want to own a cheap car, because they are worry about the safety (no air bags, cheap materials)

• Not convenient ( no air conditioning, radio, or power steering). They buy a real car, they do not buy a 4 wheels car instead of a 2 wheel motorbike

Criteria Tata Motors should use for deciding which countries to enter

• Market scale : average income of citizen (low and middle class)

• Tax for imported cars ( Price)• Tax for cars ( annual tax for owners)• Consume trends for vehicles (prefer cars or motorbike)• Road infrastructure (small or big, high or low speed, crowded)

Developed countries

• Tata should not sell Nano in developed countries because:1. They do not believe the quality from an Indian Company (Safety requirements)2.They care about convenience (space, air conditioning, power steering)3.Their average income is high, they do not need to buy cheap cars as Nano

Question 2

• What challenges do you envision in launching the Nano?

Challenges in launching the Nano (open sales)

• October 2008work at Tata Motors' Singur plant in West Bengal came to an abrupt close because of political pressures.

• The company announced plans to move the factory across the country to Sanand, Gujarat. (This started operations in June 2010).

• As a result, instead of an open sales launch, they had to launch the car through the booking route in April 2009 and could begin deliveries only in July 2009.

Challenges in launching the Nano (booking period)

• The public euphoria secured Tata Motors more than 200,000 bookings, from shortlisted 100,000 customers for deliveries through 2010. Of the remaining, 55,000 chose to retain their bookings for the second lot of deliveries.

• by the end of the year, December 2010, there were just about 77,000 Nanos sold. includes open sales (that started in August 2010) and some deliveries to the second batch of applicants. at least 78,000 (23,000 from the first batch plus 55,000 from the second) have cancelled or "delayed delivery“

• The general perception was that consumers would have to wait two years for delivery.

Challenges in launching the Nano(capacity)

• In fact, The root of all [of Tata Motors'] problems is that they didn't have the capacity right to go all over the country from day one. With such an initiative, the most important thing is to have the mother plant up and running. They probably had a plan in place that they couldn't execute, because they just weren't ready for a whole roll out.

Nano’s strategy to setback

• the Nano is get back to focusing on the people for whom the car was originally intended

• the communication that went out clearly stated that the Nano is now easily available with an easy-payment scheme.

• The segment they're targeting is very cost competitive; they need to keep their cost structure very tight.

• To soften the blow, Tata Motors has set up financing arrangements with 29 banks and non-banking finance companies, with almost 90% assistance at "easy rates." Additionally, Tata Motors Finance, a subsidiary of Tata Motors that helps finance their vehicles, will process the loan of applicants with unclear documentation (a rampant problem with customers in that segment) in just 48 hours.

New challenges

• increased competition in the small car segment It will be priced close to the Nano.

• And there is another positioning problem coming up as the Tatas add bells and whistles -- a more powerful engine, power steering, power windows, five-speed gearbox and even an airbag.

• Power, in all its forms, will come at a price.

Question 3

• How should the Nano be positioned? Would you apply the same positioning strategy in say, india and germany or would you adjust it? If so, why and how?

Product positioning

• product's positioning target segment for the Nano was two-wheeler owners and first-time buyers from small towns and rural areas.

• With over 11 million two-wheelers sold in India last year (according to SIAM), the market clearly exists. But instead of reaching out to the intended segment, understanding their purchase behavior, Tata Motors seemed had no control on it.

• most bookings were from those who were familiar with cars, The attractive price tag + the cornerstone of the Nano mania = turned out to be a double-edged sword.

• "There is a great challenge in telling people that this is an economical car, because a car is an aspirational product,“That is something the Tatas have to crack.

• They shouldn't say:'Here is a car that's cheap, so buy it.' That will not work; the car has to connect with the right customer segment emotionally. They have to win the battle of the mind.

Product positioning strategy