Market Share and Market Growth - Assignment Example

? I. Introduction It was just three years ago that one of the most recognized British luxury car market Jaguar Land Rover acquired by Tata Motors. A company that was more concentrated on its domestic Indian market suddenly received a global recognition. Though the company grew to huge size ever since it was established, it had to face all the challenges of globalisation all throughout its growth path. This essay will focus on the impacts of globalisation on Tata Motors. “Tata Motors Limited is India’s largest automobile company, with consolidated revenues of Rs.1, 23,133 crores (USD 27 billion) in 2010-11. It is the leader in commercial vehicles in each segment, and among the top three in passenger vehicles with winning products in the compact, midsize car and utility vehicle segments.” (Tata Motors, 2011) Established under the banner of Tata Group of India in 1945, Tata Motors is now a multinational company with a clear global ambition. It was initially formed as a joint venture with Daimler-Benz AG of Germany. The company received a breakthrough by the launch of its first passenger car, The Tata Indica, in 1998. The company is headquartered in Mumbai, India. The company’s global recognition can be established by the fact that it is the fourth largest truck maker and third largest bus manufacturer in the world. The first Tata car was rolled out in the year 1954. Most of the production facilities of the company are located in India itself. Globally, Tata Motors have significant operational presence in UK, South Korea, Thailand and Spain apart from the market presence in Europe, Africa, Middle East, South America, South Asia and South East Asia. (Tata Motors, 2011) Some of the big ticket acquisitions and joint ventures inside and outside the country have helped Tata Motors to grow at a higher rate. Some of the big acquisitions made by Tata Motors are South Korea’s Daewoo Commercial Vehicles Company, acquisition of 21% stake in Spanish bus maker Hispano Carrocera and UK’s Jaguar Land Rover. Some of the notable joint ventures of Tata Motors are Tata Fiat in India, Tata Marcopolo and Thailand’s Thonburi Automotive Assembly Plant Company. Tata Motors has also made impact by introducing the world’s cheapest car Tata Nano in 2008. Even during such tremendous growth period, Tata Motors is highly impacted by globalisation. Globalisation has impacted Tata Motors in many ways. Increased competitions, technological advancement, marketing challenges, etc. are some of them. This essay will make a closer look into the various impacts of globalisation on Tata Motors. II. Theoretical Framework The impact of globalisation on Tata Motors can be analysed based on the various theories and models. Some of the models that can be used in this case are Pestel Framework, SWOT Analysis, 4 P’s, Porter’s Diamond Model and Boston Matrix. Using these tools will help to look closely into the globalisation issues of Tata Motors. Pestel Framework: Pestel framework will help to analyse Tata Motors regarding the challenges like political, economical, social, technological, environmental and legal factors. It can be said that most of the impacts of globalisation can be discussed under any of these six environmental factors. “By using the PESTEL framework we can analyse the many different factors in a firm's macro environment.” (Oxford University Press, 2007) Understanding the factor(s) that has the most impact is important to formulate future strategies for the company. Therefore, a PESTEL analysis will help to identify which factor(s) cause the most impact on the businesses and operations of Tata Motors. SWOT Analysis: SWOT analysis is important in this case because it will help to identify the internal and external advantages and disadvantages for Tata Motors. “SWOT is the overall evaluation of a company’s strengths, weaknesses, opportunities, and threats.” (Wang, 2007) Understanding the strong and weak areas of a company is extremely important in order to decide how well it can make use of the market opportunities and face the external threats. It is more of an inside out approach. In this globalised market, Tata Motors has huge opportunities which can be leveraged using its internal strengths. Knowing the weakness and external threats will help Tata Motors for leveraging the market opportunities. 4P’s: 4P’s is an inevitable concept in any marketing decision making. Globalisation has put Tata Motors into various marketing challenges for the past many years. As competition has increased it became extremely important for the company to be keen on all the 4 P’s of Product, Price, Promotion and Place. The effectiveness of marketing mix plays a major role in determining the success of a company in a globalised environment. Excessive competition can be faced by Tata Motors only if they have the right marketing mix decisions. Therefore, it is important to analyse the effectiveness of the marketing mix decisions of Tata Motors. Porter’s Diamond Model: A more macro analysis of Tata Motors can be made with the help of Porter’s Diamond Model. All the other tools help to analyse Tata Motors based on a corporate level. But unlike those tools, the Diamond Model analyse the competitive position of a company in terms of the national advantages. (Refer Appendix 1) An analysis of national and global competition is necessary to identify the strategic position of Tata Motors. “Porter introduced this model in his book: The Competitive Advantage of Nations, after having done research in ten leading trading nations.” (Value Based Management, 2011) BCG Matrix: A BCG Matrix positioning of Tata Motors will help to identify the current position of the company in the market and the possible position. Market share and Market growth, two of the major determinants of a company’s success are the focal points of BCG Matrix. (Refer Appendix 2) In this globalized environment where automobile companies are into cross border sales and marketing, it is important to understand a company’s position in terms of market share and market growth. A constructive analysis of Tata Motors based on all the above five tools will be made in this essay. The aim is to identify the impact of globalisation on Tata Motors. Impacts refer to both positive and negative impacts. All the above five tools serve various unique purposes for the benefit of this analysis. The result of the analysis will determine what strategies have to be adopted by Tata Motors in order to tide over the challenges and bad impacts. Ansoff Matrix: Ansoff Matrix tool is used in order to decide the product and market growth strategy. This tool focuses mainly on products and markets of a company. Based on the competitive position of the present and future products and the present and future market or customers, a firm can arrive at the best strategy. The various product-market combinations put forward by Ansoff Matrix are market penetration, product development, market development and diversification. An analysis of the present and future products and markets of Tata Motors will show which strategy is being adopted by Tata Motors. III. Analysis III.I. Pestel Analysis Political  Hailing from one of the most politically sensitive countries in the world and having operations and marketing activities in various countries of the world, political factors have significant impact on the business of Tata Motors. Majority of the production facilities of Tata Motors is located in India. Most of the Tata passenger cars that are sold in various countries are exported from India. Recently, another auto major Maruti Suzuki had faced severe crisis due to the trade union strike in the plant. Therefore, Tata Motors have to be very keen on such factors affecting them. Economical  It is seen recently that most of the developed nations are facing the worst ever economic slowdown in their country. Some of the worst hit regions of the world are UK and Europe markets. Tata Motors had faced huge deterioration in their profitability from these regions due to low demands. But the overall profitability was made up because the other markets of the company were highly potential in terms of the market demand. Social  Social factors involve the culture, attitude and behaviour of every stakeholder of Tata Motors. At present the company is giving utmost importance to the social factors. This can be understood by the approach they take after acquisition of companies. Tata Motors never force an acquired company to change their cultural and behavioural pattern post their acquisition. Technological  Automobile industry is an area of continuous technological advancement. It can be evident from the progress of Tata Motors. The company is continuously improving the products to equip them with the latest technology. The launch of Tata Nano is an example for the deployment of technology in cost cutting. Environmental  Tata Motors is behaving very responsible on environmental front. Fuel efficiency is given primary importance for every product from the house of Tata Motors. But it lacks foot print on electric car segment. Legal  Being a company that is engaged in cross border business and acquisitions, Tata Motors had to deal with the legal formalities of India as well as other countries. But the company was very much responsive in this area as it operated with utmost care. III.II SWOT Analysis Strength  The major strength of Tata Motors is that it is the largest automaker in India. Low cost production techniques and competitive advantage on main raw material steel are additional strengths of Tata Motors. It has also made many strategic acquisitions in various segments that will continue to add value to the product portfolio. Weakness  The major weakness of Tata Motors is the poor quality of vehicles. Compared to the global competitors, the quality of Tata cars are still not up to the mark. Though the quality has improved considerable from what it was a decade earlier, the company still has a long way to go. Another weakness of Tata Motors is that it does not have presence in the electric and hybrid car segments. It is also not planning to make investments in these areas in the near future. Opportunities  Tata Motors have huge opportunities in the global market because it has made several strategic acquisitions. The company can generate more profits by focusing on third world countries that will be the growth engines of future. Tata can depend on joint ventures or acquisitions for these markets. Threats  The major threat for Tata Motors is competition. Competitors introduce products that are superior to Tata Motors in terms of price and reliability. Raw material price increase and increased safety regulations of various countries also pose significant threat for Tata Motors. Threats of safety concerns are popular in markets like UK and Europe where vehicle safety standards are comparatively higher. “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.” (Marketingteacher.com, 2011) III.III. 4P’s Product  Tata Motors have a good portfolio of products among the commercial vehicles and passenger cars segment. The company had placed the products effectively in all these segments. The acquisition of luxury marquee Jaguar Land Rover has given an edge for the company in luxury car segment as well. Tata Motors had been successful in terms of product placement at various segments. It has also been pioneer in vehicles like Tata Nano and Tata Ace. “Analysts tracking the company noted that Tata Motors has been investing larger amounts in recent years. Going by its annual report for 2009-10, it had invested Rs.12, 697.38 crore since fiscal 2008, making for an average of at least Rs 4, 200 crore in each of the past three years.” (Seth, 2010) Price  Tata cars are differentiated in terms of their competitive pricing strategy. In India, the lowest priced sedan car available is Tata Indigo. Tata provides advanced product features at a lower price compared to their major competitors. Therefore, it can be said that Tata Motors is very much successful in their pricing strategy. Place  Tata Motors is also into a continuous expansion spree by investing heavily in distribution networks. Tata has realized that customers prefer the car that can be taken to a nearer service centre in the event of any issues. More dealer networks had helped to increase the market share of Tata Motors in the recent years. Promotion Tata Motors had invested huge in promotion and advertising in the recent years. Tata Motors is adopting a push strategy in promoting their products. All the promotional activities of the company focus on educating the customers regarding the features and benefits of the products and thereby intend to push the customers towards the products. The marketing activities of Tata Motors are well recognised in the market. III.IV. Porter’s Diamond Model Factor Conditions: The factor conditions that help Tata Motors are skilled workers, low cost of human resources and strength of economy. India is the primary market of Tata Motors and where most of the production facilities are situated. Compared to the global players, Tata has an advantage of low cost on salaries and wages of employees. This will help the pricing decision. Another advantage is that India is a developing country and the demand for cars in the country is at a tremendous growth rate. Demand Conditions: The greatest advantage for Tata Motors is its huge domestic demand. Tata Motors is India’s largest commercial vehicles manufacturer and second largest passenger car manufacturer. The Indian market share contributes a huge portion to the overall profitability of the company. Related and Supporting Industries: Tata Motors has the greatest advantage in this factor. Steel is one of the major raw materials for vehicle manufacturing. Tata Steel is the largest steel maker in India and one of the leading steel makers in the world. As such, Tata Motors enjoy a backward integration advantage in steel. This again will help the company to have a better synchronization of ideas. Firm Strategy, Structure and Rivalry: Firm strategy is the factor that helped Tata Motors to become the largest automaker of India. The way Tata Motors structured its global operations seem to be successful. The company has used acquisitions and joint ventures in the right mix. But rivalry in the industry is a major factor. More companies are entering into the Tata’s market and are supplying products with superior quality at competitive price. III.V. BCG Matrix “The Tata Motors Group's global wholesale volumes for FY 2010-11, including Jaguar Land Rover, stood at 1,080,994 units, representing a growth of 24.2% as compared to the previous year.” (Tata Motors, 2011) Tata Motors enjoy a market share of 61.8% in the commercial vehicles segment. At the same time, the market share of passenger vehicles segment is just 13%. The Jaguar Land Rover brand has recorded huge increase in sales compared to that of the previous years. Therefore, considering the overall picture, Tata Motors is witnessing high growth and high market share among the product segments. This positions them as Stars. The excess cash generated by the larger market share is balanced in the excess investments made for coping with the higher growth rate of industry. Once the market matures, the growth rate will come to stagnation. This will help Tata Motors to move into the position of Cash Cows. The present Star position will ensure sufficient cash flows in the coming years. All the above five analysis has helped to bring out the various competitive benefits and problems that are faced by Tata Motors. Though the overall picture looks good for the company, there are various factors that require improvements in the company. III.VI. Ansoff Matrix Tata Motors is one of the most successful automakers from India. It can be seen that the company has not confined itself to the Indian market for sale of their automobiles. The company has made timely identification of market opportunities outside Indian and is very successfully operating in such countries. This shows that Tata Motors adopt market development to a great extent. At the same time, Tata Motors being an automobile company, introducing new kinds of products is very essential to stay in the market. Tata Motors had aggressively introduced several new models in the market for withstanding competition. This shows that the company is adopting a combination of market development and product development strategies. The company also uses market penetration strategy which is quite common for every player in the industry. IV. Conclusion Based on the analysis in the previous sections, the following findings can be summed up regarding the impacts of globalisation. Political Environment: Tata Motors operate in a politically sensitive environment. India has been in the news recently for several rounds of corruption in the political system. Therefore, the company has to form strategies that will go well with the political environment of the country.0020 Lack of Electric and Hybrid Cars: Electric and Hybrid cars are the future of automobile industry. As global warming and other environmental issues are gaining more importance, introducing electric and hybrid cars will help the company to sustain market share. But the company’s effort to develop Tata MiniCat, which runs on compressed air, is appreciable. Advantage of the strategic relationships: Tata Motors should make better use of the current joint ventures and strategic partnerships. It has to look out for opportunities for further possible alliances. Quality issues: Tata Motors should work hard to improve the quality of vehicles especially in the passenger car segment. The quality of interior plastics is the area where the company faces major criticism. Opportunities in third world countries: Tata Motors have huge advantage in the third world and developing countries. V. Recommendations Based on the findings of the analysis, the following strategies can be formulated for the sustainable growth of Tata Motors in future. 1. China is one of the fastest growing automobile markets in the world. Tata Motors have only small market share in the Chinese auto industry. Dealership network is very much essential for fast growth rate. Therefore, Tata Motors should enter into a joint venture with a Chinese automaker for distributing their products. Over years, Tata Motors should also invest for a production plant in China to take advantage of the country’s cost advantage. 2. Tata Motors should definitely show their presence in the electric car segment. At present, inorganic growth seem to be better than the organic growth. Therefore, it is better for Tata Motors to acquire an electric car company. Fly Bo of China is an electric car company that can add value to the Tata Motor’s portfolio. Tata Motors should attempt for acquiring a controlling stake in Fly Bo. 3. Tata Motors should raise the benchmark of the quality of plastics used in their cars. The company should source better plastics to be used in their vehicles. 4. Tata Motors should invest more in research and development facilities to produce better engines that are more reliable than that of the competitors. Bibliography Tata Motors, 2011. Company Profile. [Online] Available at: [Accessed 4 December 2011] Oxford University Press, 2007. PESTEL analysis of the macro-environment. [Online] Available at: [Accessed 4 December 2011] Wang, K., 2007. A Process View of SWOT Analysis. [Online] Journals ISS. Available at: [Accessed 4 December 2011] Value Based Management, 2011. Diamond Model – Porter on Nations. [Online] Available at: < http://www.valuebasedmanagement.net/methods_porter_diamond_model.html> [Accessed 4 December 2011] Marketingteacher.com, 2011. SWOT Analysis – Tata Motors Limited. [Online] Available at: < http://marketingteacher.com/swot/tata-motors-swot.html> [Accessed 4 December 2011] Seth, S., 2010. Tata Motors plans to invest Rs. 9,000 cr over three years. [Online] Available at: < http://www.livemint.com/2010/09/01232631/Tata-Motors-plans-to-invest-Rs.html> [Accessed 4 December 2011] Tata Motors, 2011. Consolidated Results for the Year ended March 31, 2011. [Press Release] 26 May 2011. Available at: < http://www.tatamotors.com/media/press-releases.php?id=670> [Accessed 4 December 2011] Gaadi.com, 2011. Tata MiniCat. [Online] Available at: < http://www.gaadi.com/Tata-MiniCat> [Accessed 4 December 2011] Morrison, C, 2008. 30 Electric cars companies ready to take over the world. [Online] Available at: < http://venturebeat.com/2008/01/10/27-electric-cars-companies-ready-to-take-over-the-road/> [Accessed 4 December 2011] 12manage.com, 2011. Portfolio Management based on Market Share and Market Growth. [Online] Available at: [Accessed 7 December 2011] Appendix 1. Porter’s Diamond Model (Source: Valuebasedmanagement.net) 2. BCG Matrix (Source: 12manage.com) Read More