Guru Nanak Institute of Management Studies Matunga, Mumbai 400019

Operations Management
PGDM SEM- 2{2011-13}
Under the Guidance of Prof Unmesh Alawani

The Team
Dinesh Dikonda 09

Jasmine Nagpal

20

Aalia Wahid

41

Jasia Wahid

42

Ramandeep Singh

48

Operational & Marketing Strategies Of TATA Nano

TATA Nano Khusiyon Ki Chabi

Seeing an opportunity in the great number of Indian families with two-wheeled rather than four-wheeled vehicles, Tata Motors began development of an affordable car in 2003. The purchase price of this no frills auto was brought down by dispensing with most nonessential features, reducing the amount of steel used in its construction, and relying on low-cost Indian labor.

The introduction of the Nano received much media attention due to its low price, and the car was available to buy throughout India in early 2011.

The Nano's development was foreshadowed by the 2005 success of the affordable, 4-wheeled Tata Ace truck. The Tata Nano is an inexpensive, rear-engined, four-passenger city car built by the Indian company Tata Motors and is aimed primarily at the Indian domestic market. Tata Motors began selling its "one-lakh car" in March, 2009.This nickname is due to the Nano's price point, near 100,000 ( US$ 2100). It is the cheapest road car in the world today, though the price continues to rise due to increasing material costs. In 2008 the Financial Times reported: "If ever there were a symbol of Indias ambitions to become a modern nation, it would surely be the Nano, the tiny car with the even tinier price-tag. A triumph of homegrown engineering, the Nano encapsulates the dream of millions of Indians groping for a shot at urban prosperity. Homegrown engineering" is a relative term here as much of the systems and parts used in the Nano may not have been developed or produced in India.

The Tata Nano has become somewhat symbolic as a modern 'people's car', often being compared to the likes of the Ford Model T and the original Volkswagen Beetle. Nano has also become a status symbol in its home market of India, where it provides an opportunity for new car ownership for people who would otherwise never own one, and for the wealthy to join the trend.

SWOT Analysis - Tata Motors Limited The company began in 1945 and has produced more than 4 million vehicles. Tata Motors Limited is the largest car producer in India. It manufactures commercial and passenger vehicles, and employs in excess of 23,000 people. This SWOT analysis is about Tata Motors. Strengths

The internationalisation strategy so far has been to keep local managers in new acquisitions, and to only transplant a couple of senior managers from India into the new market. The benefit is that Tata has been able to exchange expertise. For example after the Daewoo acquisition the Indian company leaned work discipline and how to get the final product 'right first time.'

The company has a strategy in place for the next stage of its expansion. Not only is it focusing upon new products and acquisitions, but it also has a programme of intensive management development in place in order to establish its leaders for tomorrow.

The company has had a successful alliance with Italian mass producer Fiat since 2006. This has enhanced the product portfolio for Tata and Fiat in terms of production and knowledge exchange. For example, the Fiat Palio Style was launched by Tata in 2007, and the companies have an agreement to build a pick-up targeted at Central and South America.

Weaknesses

The company's passenger car products are based upon 3rd and 4th generation platforms, which put Tata Motors Limited at a disadvantage with competing car manufacturers.

Despite buying the Jaguar and Land Rover brands; Tata has not got a foothold in the luxury car segment in its domestic, Indian market. Is the brand associated with commercial vehicles and low-cost passenger cars to the extent that it has isolated itself from lucrative segments in a more aspiring India?

One weakness which is often not recognised is that in English the word 'tat' means rubbish. Would the brand sensitive British consumer ever buy into such a brand? Maybe not, but they would buy into Fiat, Jaguar and Land Rover (see opportunities and strengths).

Opportunities

In the summer of 2008 Tata Motor's announced that it had successfully purchased the Land Rover and Jaguar brands from Ford Motors for UK 2.3 million. Two of the World's luxury car brand have been added to its portfolio of brands, and will undoubtedly off the company the chance to market vehicles in the luxury segments. Tata Motors Limited acquired Daewoo Motor's Commercial vehicle business in 2004 for around USD $16 million. Nano is the cheapest car in the World - retailing at little more than a motorbike. Whilst the World is getting ready for greener alternatives to gasguzzlers, is the Nano the answer in terms of concept or brand? Incidentally, the new Land Rover and Jaguar models will cost up to 85 times more than a standard Nano! The new global track platform is about to be launched from its Korean (previously Daewoo) plant. Again, at a time when the World is looking for environmentally friendly transport alternatives, is now the right time to move into this segment? The answer to this question (and the one above) is that new and emerging industrial nations such as India, South Korea and China will have a thirst for low-cost passenger and commercial vehicles. These are the opportunities. However the company has put in place a very proactive Corporate Social Responsibility (CSR) committee to address potential strategies that will make its operations more sustainable. The range of Super Milo fuel efficient buses are powered by super-efficient, eco-friendly engines. The bus has optional organic clutch with booster assist and better air intakes that will reduce fuel consumption by up to 10%.

Threats

Other competing car manufacturers have been in the passenger car business for 40, 50 or more years. Therefore Tata Motors Limited has to catch up in terms of quality and lean production. Sustainability and environmentalism could mean extra costs for this low-cost producer. This could impact its underpinning competitive advantage. Obviously, as Tata globalises and buys into other brands this problem could be alleviated. Since the company has focused upon the commercial and small vehicle segments, it has left itself open to competition from overseas companies for the emerging Indian luxury segments. For example ICICI bank and

DaimlerChrysler have invested in a new Pune-based plant which will build 5000 new Mercedes-Benz per annum. Other players developing luxury cars targeted at the Indian market include Ford, Honda and Toyota. In fact the entire Indian market has become a target for other global competitors including Maruti Udyog, General Motors, Ford and others. Rising prices in the global economy could pose a threat to Tata Motors Limited on a couple of fronts. The price of steel and aluminium is increasing putting pressure on the costs of production. Many of Tata's products run on Diesel fuel which is becoming expensive globally and within its traditional home market.

Impact on the Automobile Industry Much of India's low-cost production edge comes from cheap labor and a large part of the low-cost assembly in factories and plants is done through manual operations. Because of its size, it requires less metal, has a smaller and lighter engine than other cars, smaller tube-less tyres and a basic interior. .Instead of annual contracts, Tata went with long term volume contracts with its suppliers, driving down the costs even further

SPECIFICATIONS
Overall Length Overall Width Overall Height Wheelbase Ground clearance Minimum Turning Circle Radius Seating Capacity Fuel Tank Capacity Kerb Weight Nano Nano CX Nano LX Boot Space 600 kg 615 kg 635 kg With rear seat folded: 500 Litres Without rear seat folded: 80 Litres 3099 mm 1495 mm (Without ORVMs) 1652 mm 2230 mm 180 mm 4m 4 persons 15 Litres

How did TATA Manage to offer Nano at such low price

Tata Nanos launch in 2009 Marketing strategies then

The Tata Nano, manufactured by Tata Motors, is one of the smallest as well as lowest powered (35ps) cars in the world. It was designed to be the cheapest car in India aimed mainly at the lowest price segment in the Indian domestic market.

The car was launched in the Indian market in March, 2009, with a pre-launch price offer of Rs.1, 00, 000. Seeing an opportunity in the great number of Indian families with twowheeled rather than four-wheeled vehicles, Tata Motors began development of an affordable car in 2003. The purchase price of this no frills auto was brought down by dispensing with most nonessential features, reducing the amount of steel used in its construction, and relying on low-cost Indian labour. The introduction of the Nano received much media attention due to its low price, and the car was available to buy throughout India in early 2011. The Nano remained a modern-day symbol of India's ingenuity. The public euphoria secured Tata Motors more than 200,000 bookings, from which a computerized program shortlisted 100,000 "lucky" customers for deliveries through 2010. Of the remaining, 55,000 chose to retain their bookings for the second lot of deliveries. The rest were refunded their entire booking amount (US$1,800 for the Nano base model; US$2,400 for the Nano CX; and US$2,800 for the Nano LX). The Nano's development was foreshadowed by the 2005 success of the affordable, 4-wheeled Tata Ace truck.

Failure of Tata Nano after its launch in 2009what went wrong!

Tata Nano was placed near the wisdom shelves of Mustang and Beetle before its launch. It was an experiment for disruptive innovation and pride of many Indians during those flamboyant press releases praising Indias Innovation. Ultimately it was a failure. Sales in November 2010 dropped by 85% from 2009 and started the critics. Three main reasons came out: Tata recalling cars for installing fire safety after fire reports. Waiting list and production delays. Heat and sound caused by engine.

In November 2010, Tata Motors dispatched only 509 units of the Nano to retailers, according to SIAM (Society of Indian Automobile Manufacturers). In a year that the Indian auto industry grew close to 32% (based on SIAM i.e, Society of Indian Automobile manufacturers data), Nano's dispatches declined steadily from a high of 9,000 units in July, 2010.

Reasons for Tata Nanos failure:

1) Even before the first car hit the roads, the Nano brought controversy. In October 2008, work 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). In the interim, it rolled out only 50,000 units (as opposed to 300,000 units at Singur) from its Pantnagar plant, in Uttarakhand. As a result, instead of an open sales launch, it had to launch the car through the booking route in April 2009 and could begin deliveries only in July 2009, and that, too, in a staggered manner. Because the Nano plant had to move from West Bengal to Gujarat, production timelines were difficult to maintain. With not enough cars being made, the company felt it didn't have to advertise or even set up efficient distribution channels. But the hype about the car died down. 2) As of December 2010, there were about 77,000 Nanos sold -- a far cry from the one million units group chairman Ratan Tata had been talking about in 2005. This figure included open sales (that started in August 2010) and some deliveries to the second batch of applicants. That implied that at least 78,000 (23,000 from the first batch plus 55,000 from the second) got cancelled or "delayed delivery" (where customers opted to take delivery later). 3) Overconfidence and arrogance: The real problem behind the declining sales was a total marketing failure. Even during the bookings, it was the banks [giving auto loans] who were advertising [and not the company]. In 2009, the Nano won the 'Indian Car of the Year' award, but the Tatas did not leverage this at all. They thought the car would sell

itself because it was 'the Nano' and [because of] the kind of coverage it received around the world. 4) The incidents of fires in a few cars in mid-2010. It is not uncommon for cars, especially in the hot weather conditions in India, to have initial safety concerns. But in the case of the high-profile Nano, these concerns made waves. Instead of using this as an opportunity, the Tatas went into denial. 5) The positioning of the car was entirely wrong. There was a great disconnect in the kind of people they were reaching out to and the kind of people they wanted to sell to. The 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 to be consumed by the pressure on margins. They ended up selling 75% of the cars in five major cities in India. For 50% of the people, it was a second car.

Tata Nanos modified marketing strategies as of 2012

Tata Motors aimed to undo the 'Nano is a poor man's car' perception in the Indian market.

At the 2012 Auto Expo, Tata Group chairman, Ratan Tata admitted that there had been quite a few blunders in the way the Tata Nano was marketed and distributed in the country. To make the necessary correction and to boost the sales of the small car, the company is now gearing up to introduce new marketing and distributing strategies in the Indian market. The new strategy aims at reaching out to multiple segments of target customers and to undo the perception that the Nano is a poor man's car. According to the company, a typical Nano buyer is relatively scared to go to a full-fledged car showroom and therefore, the company is setting up exclusive showrooms to sell Nano cars in Tier-III and Tier-IV cities across the country. Apart from the existing showrooms, Tata Motors has so far set up around 105 exclusive Nano showrooms and 250 special kiosks. Altogether, the company now has around 750 sales points where the Nano is available.

Online marketing:

 Website: TataNano.com, a website dedicated to Tata Nano saw huge spurts in traffic ever since the website has been released. The folks at Tata have done a good job at building a beautiful website which experience wise is also good. The major sections of the site are : a) Galary (both pictures and videos) b) Nano Games (rather Link to a nice virtual driving game by Zapak) and downloads c) Community d) Booking Details e) Nano merchandising: There are Nano shirts, Nano headgears, and Nano toys available on the website. The website is quite informative and easy to navigate while the chat feature is either programmed or buggy. The site also has a forum which is slightly active and has no signs of involvement by officials from Tata. Social Media: There are definitely some efforts to use social media to market the car. Tata Nano has made effective use of blog, sites like Orkut (has 11000 members), Facebook (has 6000 fan pages) and Youtube (a YouTube channel for Tata Nano which has some 78 subscribers and has managed to generated more than 10,000 views on videos of the car.

Offline Marketing:
Collaborations: As a part of their strategy to avoid premium for booking Nano, Tata partnered with a few banks for releasing application forms. ICICI bank for example initiated a whole campaign to get noticed and spread the word. Icicibank.com had a banner ad on their home page for booking Nano. Not only this, the banks hired extra part time staff to book the Car. Roping banks like ICICI and SBI helped in also offering loans for total payment of car. Tata announced a bank interest on the applications for Nano which will be rejected in lucky draw.

 Mall Promotions: Tata ran a series of promotional activites on Malls to get Nano in front of perspective buyers.

Leveraging Existing Infrastructure: Now you can find Nano merchandise, application forms and demo cars in Tata Indicom, Titan, Croma and Westside stores. Tata Indicom is also offering a money-back offer with every application form.

TV commercials: TV Though Tata didn't invest heavily into TV commercials; they did get a few channels to use the word nano instead of small wherever possible. For instance, instead of anchors saying well be back after a short break on TV channels, theyre saying, Well be back after a NANO BREAK.

Tata Motors offers special scheme on Tata Nano for defence personnel
In February 2011, Tata Motors formally announced a special scheme on Tata Nano for all defence personnel. Tata Motors offered a free comprehensive maintenance package for 4 years/ 60,000 km. Service intervals were at 1000 kms, 5000, 10000 and thereafter, at every 10,000 kms. The older Nano came with an 18 month warranty and this increase in warranty and support should enhance the USP of the hatchback in a big way.

Conclusion
Tata Motors spokesperson Debasis Ray says that their customer satisfaction studies with current Nano owners indicate that more than 80% are "satisfied" or "very satisfied" with the car. Thus the new marketing strategies for Tata Nano have worked wonders for the car.