Tata Motors A Business Strategy Report Marketing Essay

Tata Motors A personal line of credit Strategy herald Marketing EssayTata Motors Limited, Indias largest automobile fraternity, is the d cuttinging automobiled by far in commercial vehicles, and the second largest in the passenger vehicles merchandise with pull roundning products in the compact, mid-size car and utility vehicle segments. The sulkyprint of this report is to get and analyze the internal and external environss of the automobile exertion in India. The analysis should enable us to assess the electric current as well as previous strategies of the ac companion and redesign modernistic strategies for nurture optimization.Key FindingsThe research shows that Tata Motors has successfully applianceed Low-Cost Strategy by providing unmatched value for its customers m iodiney. With 50 years of experience, the federation has successfully served varied needs of its customers by providing an extensive range of products. Tata Motors is a pioneer in RD department wh ich all(prenominal)ows it to incessantly innovate and discover untried technologies.RecommendationsConsidering the emerging thriftiness and changing consumers spend, implementation of Low-Cost Strategy might not well-being in the long run. Consequently, it is recommended that the company should fol junior-grade differentiation strategy and heighten on providing unique goods and services to win over the commercialize from the aspiration players. By bringing revolutionary changes in the market, it would not be phantasmagoric to think of a future where customers would go outingly redeem for the added value to the product. entreeOutline of Business under studyTata Motors, a subsidiary of the Tata group, was at once known as TELCO (TATA Engineering and Locomotive Company). The group takes its micturate from the founder Jamsedji Tata and has its headquarters at the Bombay House in Mumbai, India. Established in 1945, Tata Motors has much than 4 gazillion vehicles driving on t he Indian roads. It was the firstborn Indian company from the engineering sector to be listed in the newfangled York Stock Exchange. It make its place amongst the demesnes top three passenger vehicle swordrs and is currently the leader in commercial vehicle. It also stands as the ordinal largest truck and second largest bus manufacturer.The company employs 23,000 workers, who be directed by the vision to become the best in its operations and product period staying intact with the championship ethics and value system. The multinational often hits the headlines because of its takeovers and mergers, peculiarly with the recent acquisition of Jaguar Land scouter (Tata Motors 2011). remote epitome of the Automobile assiduityEver growing Indian population and therefrom the workforce, has change magnitude the number of independent earners. This favourable trend provides a great background knowledge for the reading of automobile fabrication in India. During 2008 the patien ce had a sh be of up to 3.9% in countrys GDP, which is pass judgment to rise to 10% by 2016 (India Retail Report Q1 2011). Consumer spending on transport is also expect to experience an upward trend and advance by 73.2% in 2007-2015. Also, change magnitude practicement by the government for im turn out road infrastructure has promote led to a harvest-festival in multi-axle vehicles (Euromonitor International 2008).Reason for studying Tata MotorsTata Motors is lately the near talked most company. oer the years it has go awayd as a embarrassed hail vehicle manufacturer with prime focus on innovation. In divergence to its strategy, it would be hobbying to learn close its new ventures in the luxury market. The study therefore focuses on closely scrutinising and reviewing its current tactics and verifying for any scope for cash advance.Strategic compendMethods Techniques for info CollectionFor the execution of this research, we conducted an in-depth study of the available secondary data. The gathered tuition was verified with the online company records, reports and official websites.Tata Motors Internal Records and Annual ReportsCompanies internal records serve uped us analyzed its current position by revealing its earnings until 2010 and intellectual its past strategies and actions.Online DatabasesData retrieved from EBSCOhost database, Factiva database and e-books available online at Deakin library and google scholar proved to be extremely beneficial.Online Websites and Other ResourcesReliable articles, magazines, statistical trends, government websites and opposite relevant online sources like financial express, advertise enlightened our knowledge about the company.Text Book and Lecture NotesThe textbook Exploring Corporate Strategy by Gerry Johnson provided us with the framework to go about this project. Study guide and blab out notes were also valuable source for information.Business Strategy StatementTata Motors aims to emerge as the wor ld-class automobile leader with the remarkable price- surgical operation ratio in combination with hyper-efficient engines to acquire the large market share internationally.Tata Motors mission is to manufacture an organisation that people enjoy running(a) for, doing cable with and investing in. It focuses on customer needs to provide them a range of innovative products and keep abreast long-term relations, by working closely with its workforce and problem partners. The companys single-valued function is to consistently create shareholder value by generating greater returns and to nurse long lasting ties with the vendors and channel partners (Global Reporting Initiative 2010).The companys objective is to invest INR28.8billion over the next few years for increasing its production and INR60billion for the expanding upon of the existing manufacturing plants and in make upting up vehicle testing facilities (self-propelling Manufacturing Solutions 2010).Tata Motors incomparable ability to manufacture downhearted price vehicles provides the company with a greater scope of earning high profit margins and enjoys a greater market share. sparing slowdown has hyped the competition to provide low priced but the best woodland vehicles. Understanding rural Indian economy and growing incomes of the farmers, Tata Motors view incr assuaged opportunities for its commercial sector (Thakkar 2010). Nevertheless Tata Motors have a range of coming(prenominal) Jaguar and Land rover cars for the luxury brand buyers to mystify the higher-income/ tribute customer segment. This could create a greater success for the company in near future.Tata Motors have remarkable advantages of manufacturing in India when compared to other MNC enemys. It benefits from the low dig approach, extensively skilled and interwoven backward and forward linkages, boosting IT engineering, strong auxiliary industry, substantial knowledge of the market, improving infrastructure and increasing d omestic demand.Tata Motors aspires to be a world-class maker of quality vehicles by striking offset between the needs of its customers, employee, suppliers, investors and the community as a whole.Analysis of External environs of the Business large Environment analysisEconomic Factors The Indian economy has experienced constant growth out-of-pocket to the increasing per capita income, which grew by 14.2% in 2006-07. The total consumer spending attachd by 73.9% during 1995-2007 this is expected to off 58.2% in 2007-2015 (Euromonitor International 2008).According to the World Factbook (2011), Indias inflation rate roseate to 11.7% in 2010 driven by increasing food and go off prices. Moreover, uprising commodity prices and hardening interest rate has put downd enormous haul on costs and margins of Indian manufacturers (Mitra Sen 2011).Figure 1 India GDP quotation Index Mundi 2011Demographic Factors Indias total population of 1.19 billion constitutes 70% dominance buyers, wh ich are below 35 years. It is seen that 130 million people had been added to the working population between 2003 and 2009. This indicates an increase in number of people with lesser dependency. The trend is credibly to add value to vehicle demand with a shift toward high end cars (Automotive Mission Plan 2006).Figure 2 Vehicle Sales in India generator India Retail Report Q2 2011Political-Legal Factors Indian government has taken some(prenominal) incentives under the current 11th quint year plan (2007-2012) to boost the automobile sector. The finance bill 2006 has minify the excise duty on the small cars and duty on rude(prenominal) material which is now 5-7.5% as compared to the previous level of 10%. The Ministry of Finance announced 150% weighted deduction under the income Tax deport for in- house RD intake for all sectors (Anand 2009). The government has introduced a National Automotive testing and RD Infrastructure Project (NATRIP) which is based on building world class t esting and RD infrastructure for vehicles in the country for automotive safety, sack and performance standards in India. Moreover, the Government has allocated a part of its budget for the improvement of road infrastructure (Planning Commission 2006).Environmental Factors Increasing consciousness about global warming requires production of fuel efficient vehicles. Moreover, diesel fuelled locomotives pose greater threat to the environment as compared to the CNG vehicle (Centre for Science and Environment 2011). Furthermore, Recent disclosure of Euro V standard by the European burster requires India to revise its emission standards (Automotive Mission Plan 2006). Recently legislated carbon levy on coal producers has provided a source of financing clean nada research and development (Building Green Business 2010).Technological Factors The automobile industrys spending on RD has change magnitude from US$54.58 million to US$214.26 million in last four years which is 0.8% of the tot al nations GDP (The Financial comport 2008) (Ramanathan 2011). Furthermore, NATRIP is aiming to integrate the strengths of IT and electronics with the automobile engineering sector (Planning Commission 2006).Impact of Macro Environment on Business Overall, underdeveloped economy with growing working population and consumer spending indicates an increase in the consumer demand, subsequently a growth in the automobile industry. Other prime factors contributing to this trend are improved expenditure on RD, boosting IT and reduced duty on raw materials. However, the escalating fuel and commodity prices and rising interest rates can cram industrys progress.Thus PESTEL analysis shows that mainly the economic and demographic factors are likely to be the main drivers for the advancement of automobile industry in future.Industry AnalysisThreat of new entrant uphill Indian market is attracting automobile companies from all over the world. International car rental firms are posing a greater threat with near twelve brands, expected to enter the market (Gupta Shekhar 2010).However, Tata Motors enjoys economies of scale and level of experience, thus challenging for the new entrants.Figure 1 Five force frameworkSource Johnson, Whittington Scholes 2011 negociate power of buyers Increasing disposable income and availability of better alternatives have embossed the customer expectations and array of choice. This has led to a decline in consumer truth towards particular vehicle brand. Indian consumers are now enjoying the greater bargain power (Gupta Shekhar 2010).Bargaining power of Suppliers The Indian auto component industry has witnessed a strong growth during 1995-2005, subsequently making automobile one of the fastest growing Industry. Increased availability of bring sources has lowered suppliers negociate power. This can be seen in Tata Motors extended forward and backward unsloped integration of its value chain through acquisition or human beings of steel, manufacturing and retail operations (Zahrai 2009).Rivalry between Competitors Indian automobile industry is highly competitive with three major players, namely Maruti Suzuki, Tata and Hyundai. Tata Motors and Hyundai Motors have nearly equal percentage of market share, although less than Maruti Suzuki. An important factor, which adds fuel to the competition, is that all major vehicle providers are highly competent to pursue opportunities with scrappy strategies.Figure Market Share of Passenger Vehicle Providers (2010-2011)Source alter from The Economic Times 2011Threat of Substitutes Automobile industry in India whitethorn fear the rapid development of public transport, most economical and fast being metros.The analysis infers that four forces are strong enough to make this industry less attractive. However, to survive Tata Motors need to closely monitor the competitor actions and respond quickly to the changes in customer needs and expectations.Strategy essaySource Adapted from Taylor 2011Critical Success FactorsThe Critical Success Factors will enable Tata Motors to gain competitive advantage over the competitors to enter the blue ocean.Economies of Scale Reaping the benefits of economies of scale, Tata Motors has been able to establish itself as a successful low cost provider (Business India Intelligence, 2008).Diversification Tata Motors product line ranges from worlds cheapest car to pricey models such as Jaguar and Land Rover to trucks passing the million unit output mark reaping the benefits of economies of scale (Maekawa 2008).Innovation Today the company employs over 2000 engineers and scientists, providing a leading edge in RD. This endowed technical capability has leave behinded constant innovations, thus serving the unique needs of the customers (IBEF 2010).Analysis of Internal Environment of the BusinessCompanys Capabilities and StrengthsTata Motors have distinctive capability due to its comparative advantage in producing low cost cars, whic h is out of the win of competitors.The value chain for Tata Motors starts with the IT teams innovation as a tool for line growth.Primary ActivitiesInbound logistics such as Tata Power Co., Tata Steel table service them gain economics of scale.RD, designing, manufacturing, assembling, Kaizen TPM teams for testing and packaging to improve its operating efficiency.To capture significant market, it provides variety of light and heavy commercial, utility vehicles, and passenger cars. Tata statistical distribution Company limited (TDCL) provides logistics support for distribution.The company optimized its cost on gross sales and marketing to underwrite awareness about their latest launches.Easily accessible service centres, 24 hours IT Service desk and Tata AIG insurance finance facilities provide an ease to the customers (Tata Motors 2011).Support activitiesTata constantly strives on innovation by providing its employees with a fashion for development through vocational and cros s-functional training programs. Its HR process has been machine-driven for far reaching profits.Competitive Strength of BusinessTata Motors give treated competition to other players in automobile industry with its strong low cost strategies like production of Tata Nano. These schemes provide value for service to customers. lift AnalysisStrengthsWeaknessesStrong domestic player with a turnover of roughly $15,771.6 million in 2009.Extensive range of commercial and passenger vehicles with several variants to suit customer preferences.INR50,154million expenditure on robust research and development (RD) capability with Strong engineering skills in designing.Enjoys Low labour cost by manufacturing in India. Ultra cheap Nano, which was designed to replace the twain wheelers with an affordable four-wheeler, was their greatest achievement.Tata Motors had debt of INR435, 815 million at the end March 2009, which inefficient cash inflow and degrades creditworthiness.General public associat e Tata as low price and hence low quality, however this image may not do well in the premium sector.Inferior labour productiveness and lean production...OpportunitiesThreatsTechnical know-how may transfer from Jaguar Land Rover and also the premium brand can benefit from reduced cost.Emerging market of India with increasing income levels.Infrastructure development in India will further increase the vehicle demand.Fuel efficient and eco friendly cars may get its way into the market.The price of raw materials is increasing and the company cannot pass the nub to its non-affluent customers. advance fuel prices may have an adverse effect.Cost of confluence environmental regulations.Global financial crisis of 2007-08 has lead to financial crunch thereby rising the interest rates.Developing markets has attracted severe competition which could jeopardise Tatas position.Source Datamonitor 2010Strategy and CultureTata Motors have a distinct way of doing business, more profoundly known as, T he TATA way. The most deeply engraved value in the company is trust. The companys logo, leadership with trust personifies peoples belief in the brand. Thus the company respects the trust embedded in it by many and strives to honor its commitments. Other five core values that underpin the Tata way of doing business include integrity, responsibility, unity, understanding and excellence (Tata Motors 2011).The corporate governance of the company originates from its flush legacy of ethical, fair and transparent governance practices followed since ages, even before they were made mandatory by fostering highest standards of professionalism, integrity, honesty and ethical conduct (Corporate Sustainability Report 2008).Information and power passes through a vertical hierarchy with chief executive officer being the foremost authority. The vice chairman of Tata Motors, Ravi Kant, attaches greater importance to communication. He strongly believes oral communication helps one understand the be havioural pattern. As a leader, the body language, communication style and the way of treating employees matter the most because the followers observes and take their own cues. Friendly relations with workers allow wakeful flow of ideas, thereby encouraging greater yield. Further, Code of Corporation revealing Practices confirms transparent declaration of its operations (Business Strategy Review 2010). Company successfully integrates advanced international HR worry processes by retaining local managers in recent acquisition and transferring few senior managers from India. This makes exchange and adaption to new expertness easier while maintaining the companys core values.Quality has always remained the cornerstone of the Tata way of business as such a formal system to scale the performance of different companies was introduced. TQMS help companies under the Tata group to conduct and enhance its business endeavours especially in relation to business excellence and ethics. Further, JRD Quality jimmy Awards named after the late chairman of the group, JRD Tata where incorporated for ensuring and encouraging quality consciousness. The booty acknowledges the company within the group that achieves highest level of quality and excels quality management (Tata Motors 2011). Such practices entrench a learning environment that would consequently help achieve leadership in the marketplace by constantly endeavor to become the best. Strict fellowship of companys culture has allowed it to smoothly adhere to its strategy.Business Strategy ChoiceTata Motors has constantly strived to be a low cost leader in the automobile market. Thus by employing Low cost strategy, it has made its presence felt especially in the untapped and developing markets like India. The most evident example is that of the ultra-low cost Nano. However, with increasing interest rates, raw material and fuel prices the company may not be able to sustain this strategy in the long run.Nevertheless, macro environment analysis suggests that economic growth and rising disposable incomes may increase the potential luxury vehicle buyers. Thus, TATAs acquisitions of Jaguar Land Rover take care to be a sound decision. Also, the ever-increasing competition in the industry requires Tata to implement Differentiation strategy. In accordance to this strategy, the company must focus on providing unique goods and services to win over the market from the rivalry players. This would allow the company to enjoy a premium price that the customers would willingly pay for the added value to the product.Implementation of this strategy can be a typography of cake for Tata Motors if it duly considers the following-Strategy executionIndulge in vulturine RD to ensure innovations that can add value to the product at nominal cost. This will include designing sophisticated eye-catching models.Adopt sustainable practices and maintain healthy relations with all the members of the value chain and constantly up grade their knowledge by encouraging a learning environment. carry surveys to keep the company updated with the current demands of the buyers and meet them much before the rivals.Rising awareness about global warming and ever increasing fuel prices will see a growth in the green car sector. Thus adding super efficient engine and eco friendly vehicles to the companys portfolio will win a greater market.Improving the budgetRegardless of the growing profits, the company must focus on getting rid of the substantial debts and vitiate deals that may degrade their creditworthiness.Focus on improving global sales for speedy recovery of fixed cost.OutsourcingOutsourcing of trivial operations is worth the expenditure as it allows the company to concentrate on vital jobs ask to beset differentiation.Ensuring ImprovementThe company must encourage interaction between the supply chain members for constant up gradation of the market demand and quicker delivery, thereby directing efforts towards the improvement of production time cycle.Promoting customization, where buyers can custom-make their vehicles as per their desire, can be an attraction for experimenters.Capturing greater chunk of market by launching altered models with varied prices for each segment.ConclusionThe study shows a brighter future for the automobile industry in India. However, vigorous scope for the development of this market has attracted many players. Availability of numerous alternatives and substitutes has further increased customers expectations. Also, the growing youth market comprises of the experimenters, who desire up gradations and new innovations in their possessions. All these analyses provide Tata Motors to become more sensitive to the needs of the buyers and ensure is execution much before the rivals. The company must constantly look new markets and ensure new innovations because the risk takers are the profit makers. Over and above the company can segment the market and have something for everyone in order to capture a major proportion of the market.Understanding the immense competition where every automobile company is fighting to become the best, Tata Motors is required to build additional competencies. The brand must stabilise its position as a leader in the commercial vehicle market and set new trends in the passenger. The recommended differentiation strategy will give the company a leading edge through its careful implementation and execution.