Tata Nano The Peoples Car

Making the bet..

Carla Kingston
Marc Nisbet
Lindsey Fair
Otilia Vides-Alfaro

Overview of the Peoples

Car
World's
Cheapest Car
Only made &
sold in India
currently
Launched in
2009
Designed and
manufactured
by Tata Motors

What makes it so cheap?

PESTLE Analysis
Political
Tax reductions applied to the specific vehicle segments
(utility vehicles and multi-purpose vehicles)
The growth of exports in the industry are strong
specifically in Asia and Africa
FDI rules have been left quite open to allow business
to prosper in the country
Labour regulations should be closely monitored
specifically if doing business with other countries
(i.e. any acquisitions, joint ventures)
Different parts or regions of India offer incentives
such as tax and excise duty benefits

PESTLE Analysis
Economic/Financial
Fastest automotive market in Asia
Global recession had an impact on the industry and
caused for funding to be limited, this would also have
an impact on plants that have employees being
represented by unions, and therefore eliminating jobs
due to low productivity
Pricing and currency would have an effect on the
production of vehicles and would define on its worth
of exporting to other countries

PESTLE Analysis
Socio-cultural
Indias population 1.14 billion
The focus to shift on how to serve the bottom of the
pyramid is quite crucial as they represent about 250
to 300 million people of the Indian population
By 2020 disposable income will grow significantly
allowing the population to have a greater purchasing
power

PESTLE Analysis
Technological
India has approximately 4 million vehicles on Indians
roads, this shows that infrastructure is there and has
a potential for the industry to grow.
Qualified engineers in India have allowed the
industry to focus on R&D initiatives and focus on how
to build innovative products

Legal
The end result of the production of a vehicle has to
follow regulatory and safety requirements
In India, the requirement is to achieve Euro 4
emission regulation
Numerous patents related to 'small' car

PESTLE Analysis
Ecological
This industry is building vehicles that are environmentally
friendly, which would mean that if a product is cheap it
would not attain such requirements. Depending on the
country, in this case India there is a specific
environmental requirement, and if not will it meet the
needs of other countries (the rest of Asia and Africa).

5 Forces Analysis
Threat of New Entrants
Extremely High Risk in the ultra low cost car segment
Suzuki 800 is already on the market
Ford will release at car for $7,600
Toyota will release a car for $10,826
Hyundai will release a care for $3,700
Dodge will release the Dodge Hornet
Renault Nissan will release a $3,000 car
*everything can be duplicated

5 Forces Analysis
Bargaining Power of Buyers
Moderate Risk
Buyers already forced the closer of one location
due to uproar of farming community
With more options being released on the market the customers will
have the power to insist on more value added options while going for
low pricing.

5 Forces Analysis
Threat of Substitutes
Moderate Risk
Walking
2 wheel vehicles
Car pooling/sharing
As Indias economy continues to grow a public transit
system may become an option

5 Forces Analysis
Bargaining Power of Suppliers
High Risk
70% of the suppliers are local and can easily supply the
same concept parts to the other manufacturers
Suppliers were heavily involved in the design process of the Tata Nano
Increased demand for parts may result in higher prices

5 Forces Analysis
Rivalry Among Existing Competitors
Extremely High Risk
It appears that both Hyundai and Renault Nissan are in the same price
bracket and making a play for the same target customers
With respect to the Tato Nano going to the US, in order to meet
stronger regulations the price will increase and there is already a large supply
of low cost vehicles in the US.

Value Chain Analysis

Inbound
Logistics

R&D

Win-win
relationship
with
suppliers

Building on
success of
ACE

Cheapest
location +
supplier colocation
Opportunity
to learn to
access b-o-p

Innovation
culture
weekly
meetings
Development
of unique
drive train

Protected
satey of
suppliers

Product

MarCom

Unique
features

Missed
Segment
needs

Pre-booking

Cheapest of
the low cost
cars by 37%

Shaky price
point

Traditional
delivery

Reliable +
fuel efficient
Two cylinder
engine,
drive train
Rear engine

Sales /
Delivery

Promo: 1 lahk Distributed

manufacturing?
promise
220 M value
80% of
Customers
segment
pay upfront
chose
to book a
higher end
Nano
models of
the Nano

Firm InfrastructureProduction and warehousing..

Human ResourcesLateral recruits + Ravi Kant - marketing
Technology

Tata owns tech companies + Strong focus on

R&D (2000 engineers)

Operations

Strangle hold on inputs for their suppliers

Service
Poor
response
time to
customer
needs

156,000
Cars on
back order
Lost sales

Profit?

Diversified Suppliers

Pricing Strategy
Cost Leadership Strategy
Trade-Off Concept Strategy
Price Penetration
Strategy (vs
skimming)

Double the price

Double the value

TOWS
External Opportunities

recession / hard economic times

BRIC economy growth
demand for smaller cars (congestion and envt)
growth of local car buying market
opportunity to expand model to other BRIC
economies

External Threats

fuel costs
recession / hard economic times
head hunters / poachers
volitality and pressure of competition high in
auto industry

Internal Strengths

able to up capacity in previous case so proven its doable (pg 4 of case)

brand strength / awareness = strong domestic player 64% market share in India, leader in commercial
market)
first to market advantage R & D (37 patents for Nano, over 3000 engineers)
supplier / partner relationships demand driven
large portfolio with global presence

Internal Weaknesses

Safety concerns
inability to produce products to meet
demand in timely manner
People don't want to buy 'worlds cheapest car, customers want
trendy

TOWS strategies
WO Mini-Maxi" Strategy
Minimize weaknesses, maximize opportunity
Form strategic alliances to ramp up production (W2) and address safety
concerns simultaneously (W1)
Have first mover advantage but not able to capitalize on it, they
have opportunity, so work on building capacity quickly (W2)
If they can do this, then quickly need to go to ST and minimize threat of
competition
Keep low price point, same product focus, change positioning (O1, O3, W3)
seek potential other markets to 'try again' (O2, O4)
WT Mini-Mini" Strategy
If they're not careful they may need to fall to
retrenchment strategy or merge so they can
quickly change and expand to meet market
demand / opportunity