New Product Development Process of Tata Motors - Essay Example

TABLE OF CONTENTS Introduction. 2. Methodology. 3. Main findings. 4. Conclusions. 5. Recommendations. 6. Bibliography. INTRODUCTION. Tata Motors is the leading automobile in India. With an estimated company revenues of USD 7.2 billion in the year 2006 – 2007. Established in 1945 by Jamsheti Tata, the company is currently under the leadership of Ratan Tata. Its workforce comprises of 22 000 individuals spread over its three main plants and other offices across the country. The company’s venture into commercial vehicles began in 1954, after an agreed fifteen years collaboration with Daimier Benz of Germany. Globally, Tata Motors is the fifth largest manufacturer of medium and heavy commercial vehicles and second largest in bus manufacturer. Although over four million Tata vehicles ply the Indian roads, products are marketed in several European, Asian, Australian and African segments. Its products are winners because of their convenience, affordability and utility. Tata Motors has a wide range of products including multi-utility vehicles, passengers and goods commercial transport. In India, seven out of ten commercial vehicles are of Tata. In 1988, Tata Motors launched India’s first ever indigenous passenger car, Tata Indica. Two years into the launch, Tata Indica became India’s fastest selling within its segment (Tata 2008). METHODOLOGY. This report seeks to analyze the new product development process of Tata Motors. The challenges faced by the management team during the innovation stages are explored thus the systems and processes applied by Tata Motors in ensuring that they respond appropriately to the pressure for change, and capturing an unmovable position in the increasingly competitive market place. The steps taken to ensure that a sustainable competitive advantage is maintained are assessed. A critical examination of the impact of the new product development process on the company and future business development opportunities is conducted. An evaluation of the culture, business structure and organizational behavior at Tata Motors is conducted. Surveys of several Tata Motors outlets are used for the provision of information. Information was also supplemented by web based research on Tata Motors. The main areas of the research were: 1. What role does innovation and creativity play in the new product development process? 2. How is the new concept tested? Is there a test marketing process involved? 3. What strategic options are available to Tata Motors to ensure its future success? 4. What are the components of Tata’s competitive advantage? How can it be sustained? 5. What can be concluded from making an analysis of the Tata Motors business strategy? MAIN FINDINGS. Innovation is associated with a particular way of approaching problems integrative: The willingness to move beyond perceived wisdom, to combine ideas from unconnected sources, to embrace change as an opportunity to test limits. Creativity is a generation of ideas where those ideas come from. Creativity is the link between ideas and action and it is turning ideas into actions and these ideas must be practical. The new product development process demonstrated by Tata Motors is proof that real business is purely strategy oriented. Early in January 2008, Tata Motors unveiled the world’s cheapest car, the Tata Nano, which was selling for $ 2 500. The car dubbed the “People’s Car,” was promising to be what the Fiat 500 and the Volkswagen Beetle was for Europe. They were successful in crating and nurturing a niche that had been overlooked and rejected by others. The world had concluded that there was little to be made from little cars. Tata Motors capitalized on the economies of scale of sharing costs incurred in the designing, manufacturing and retailing of the entire product range. The idea of the Tata Nano was the brain child Ratan Tata, the chairman himself after noticing how unsafe the average Indian family was when the father, mother and two children were all somehow aboard a motorized scooter. Although the initial concept was that of a soft top rural vehicle, the need result was a conventional automobile that meets the international side and offset impact standards. Ideally, this bridged the gap between the traditional minicar and the motor cars, which are very popular with the larger Indian population. They would actually be offering consumers the comforts of a large car but at the price of a small car. This proved to the world that automobiles need not to weigh tones to meet crash test standards and Tata Motors was the first Indian company to set up a state of the art prototype testing facility. They used advanced and sophisticated computers and software and subjected actual vehicles to physical crashes. The prototype testing stage is a major investment for Tata Motors. It was also apparent that a new car doesn’t need to cost thousands of dollars so as to get consumers on the road (Hack 2008). The market research revealed that the pricing element ha a direct impact on the success rate of the product. The Maruti 800’s demand had sharply declined over time as a result of the ever surging price. The economic reforms meant that the Indian market possessed a higher purchasing power. So Tata Motors put their creativity and innovation to the test and went after what was not by the consumer, rather that what was already the norm for many manufacturers. The Booz Allen Hamilton company (2008), experts of innovation, say that innovation is not only instrumental to growth but also in maintaining a competitive advantage. Innovation functions must include strategy setting, technology and capability building, process and organization modification and scientific assessment of these innovation processes. The alignment of the innovation model must be in sync with the corporate strategy and paying attention to the clients contributes to success. Tata Motors has been successful at this. The company is guided by the vision of being “the best in the manner in which we operate, best in the products we deliver and the best in our value system and ethics.” They also realize that employees must be helped in realized their full potential. This is through innovative Human Resource practices that will ultimately provide and empower employees with viable career paths in sync with the corporate goals. Potential development and overall performance improvement is ensured and reinforced through extensive staff training and development programmes. They also have a very comprehensive auto finance operation which aims to support customers in the purchase of the Tata Motors vehicles. Its international footprint was further magnified when Tata Motors got into mergers and acquisitions with other engineering sector players. In 2004, it acquired Korea’s second largest commercial vehicles makers, Daewoo, and rechristened it to launched new products into the Korean market and also exported some of its new products to others markets, around two thirds of heavy commercial. Tata Motors are also involved with Tata Cummings, Concorde motors, Nita Company, Hispano Carrocera, Marcopolo, Fiat, Thonburi among others. Before 1991, India was a very strict protectionist economy that saw even the manufacture of mere safety pins being tightly regulated. When India finally opened its doors to both local and international companies, the need for vigorous economic reforms was in order. This was dire consequences to Indian companies and Tata Motors was not spared. However, it emerged to be one of the truly resilient companies to survive the nine year old reform period. Ratan Tata has been credited with propelling the group out of the tough times. He is said to have seen economic reforms as much needed and an opportunity to reassess the competition, albeit the harsh economic conditions. His strategy to remain afloat began by the reconstitution of the board id the main holding company to comprise of younger and more energetic individuals. He also disposed off some businesses and cut links with several international partnerships. The company managed toward off the unrelenting Japanese competition. What can conclusively be established is that Ratan Tata welcomed changes brought by he economic reforms as inevitable and challenging. He is quoted saying on Outlook (2000) that “Indian businesses cannot turn to the government for protection. Instead, there should be some soul searching on how they should play in the new competitive environment.” The main idea being that the quest for a newer and leaner corporate structure that is best suited to deal with the prevailing changes, namely competition. The increased competition made it apparent to all that there was need to ensure customer satisfaction, become established as consistent with quality and create a powerful brand image within the market place. The ultimate goal for Tata Motor’s on the Nano is to maximize profit and offer higher priced and better equipped versions in the world, beginning with developing markets such as Africa, South East Asia and Latin America. The Nano is currently exclusively sold in India but there are plans to diversify to other markets. Kanter (2000) advises that for a company to be fully global, a company must act locally but think globally and plan in advance for the future target markets. Professor Rosabeth Kanter is reputed to be knowledgeable in matters of organization, structure and change. She says the all mangers need to change in one way of the other and thus change must be lasting. She explains that companies must surpass the ‘flag planting’ internalization stages to reach seamless global presence and worldwide integration. According to Kanter 2001, while innovation is important for growth, caution must be taken to avoid the classic traps of innovation. This basically means that ideas must be broad and deep while gauging for effectiveness. The innovators must also be connected with mainstream business so as to remain in touch with the happenings within the industry. Tata Motors seeks to maximize profits and minimize costs while having a clear competitive advantage. It’s no longer an option for companies to maximize production while passing on the inefficiencies to the customers through hiking of costs. They have thus come up with strategies to ensure that they give customers a run for their money. Among these strategies includes customization which means that the customers are provided with customized standard features, personalized service such as clearly explaining the warranty and service terms. There is also the aspect after sales services, which is key to customer satisfaction, considering there is pressure by the customers to improve the overall quality. Tata motor recognized this need and appreciated the fact that as the length of vehicle ownership increases, so does the challenges of managing customer expectation [Tata 2008]. Tata Motors have been recognized for exemplary performance. In 2006, they were recognized for being a leader in the heavy commercial vehicles segments and for customer satisfaction. This is characterized by market and customer satisfaction leadership. This is also inculcated into the dealers who are expected to be the provider of a smooth purchase experience so as to ensure customer sales and service satisfaction. It was also chosen as India’s most trusted car brand by a Nielsen consumer’s survey in 2006 and for the second consecutive year, they were rated as the commercial vehicle manufacturer of the same year. These are just but some of the recognitions. Tata Motors is consistent in its pursuit of increased share holder valve, create and sustain stronger relationships and maintain business relationships to provide customers with real value for their money. Its competitive advantage is further reinforced by its corporate social responsibility and protection of the environment. People feel appreciated by the company when it gives back to the ones who sustain it. The fact that the company has provided employment to many individuals has made Tata Motors be seen as a contributor to the country’s economic growth, especially because of the creation of jobs. As part of its diversification process to expand its presence outside Asia, Tata motor placed its bid for Ford Motors, a major US automaker for its iconic cars the Jaguar and Land Rover. To the surprise of many, Tata Motors emerges as the preferred bidder, outshining India’s Mahindra & Mahindra and a US-based equity group, One Equity, for Fords deal estimated at USD 2 billion. This inertia to introduce has furthered their expansion into global markets. To date, Tata Motors is increasingly becoming popular in Europe. The company announced plans to produce an ultra cheap and better version of the Tata Nano that would meet European standards. In my opinion, this initiative is destined to be a major success because Tata Motors have proved themselves over and over. Firstly, they have an increasingly strong market presence and secondly, they have demonstrated an ability to understand the client needs. Kanter (2000) insists that a company must develop its culture as this means that the communication channels have been unified. It is also important to be community embedded and Tata Motors commitment to Corporate Social Responsibility cannot be questioned. They are signatories to the United Nations global Compact and are actively involved in social and community initiatives on labor and environment standards that are compliant with global compact principles. They are involved in community development and service to the communities around its manufacturing plants. They have also made heavy investments in technology for tomorrow that is geared towards low pollution emission and high on energy conservation. The environmental conservation efforts take a dual approach of reducing environmental pollution through regular control drives with the ultimate goal of restoring ecological balance. This is through reduction of waste and pollution production, conservation and recycling of resources and soil and water conservation. The energy conservation policy is committed to the optimal use of energy and fuel through the use of energy efficient alternatives and eco-friendly technology, waste minimization and eventual elimination of wastage, introduction of an effective energy management system and adaptation of effective and diligent maintenance work habits (Tata Motors 2008). The challenges facing Tata Motors are many. There is the issue of competition from international auto industry players. The Japanese Toyota for example is very dominant in Africa while Ford vehicles have an intensely loyal American following; the fordism movement. This makes it very difficult to penetrate such markets. Critics have raised concerns that the Tata Nano will increase environmental degradation, not only in India, but globally. This is because the affordability of this vehicle will increase consumption, meaning more pollution, air and noise. Driving on the roads will also be a nightmare because of increase traffic jam. However, Tata motors claim that some motor bikes on the roads cause much more pollution. Another concern was that safely concerns had been sacrificed in the quest to minimize costs. However, despite the concerns, the Tata Nano has passed the international impact tests and was thus compliant with safety norms. A popular New York Times columnist Thomas Friedman wrote in a recent article titled “No, No, No Don’t Follow Us” that the Nano was highly retrograde initiative from a country capable of incredible innovation (Biopact 2008). Friedman further says that India should instead invent in modern mass transit, which will both energy and environmentally friendly. However due to the immerse consumerist ideology that is so deeply ingrained in the world, the danger signs are continuously being ignored. The issue of fragmentation of markets, as is the case with consumer goods, is also an issue as it is virtually impossible to survive. The pressure to have a consortium of similar companies within an industry is immense as a way of presenting a strong front to multinationals. RECOMMENDATIONS Several pointers can be taken from Tata Motors that can be applied to other organizations. 1. Successful innovation basically entails six crucial steps. These are direction, capability, culture, learning, structure and process and effective decision making skills. These steps must be integrated and synchronized to ensure the organizational success. 2. In essence, the new product development process entails a process of idea generation and screening, business analysis, product development, test marketing, commercialization and eventually, the actual product launch (Cooper, 2008). 3. Focus should be directed towards providing customers with real value of money by providing quality products and service. Care should be taken to ensure that safety norms are meet so as to give customer due confidence in their well being from intrusions and serious accidents. 4. There should be advancement in production technology so as to be compliment with environment regulations. 5. Considering the fact that costs and competition in the markets, priority should be directed towards the management of spending and the improvement of efficiency. 6. Customer feedbacks play an important role meeting energy efficiency equipments and superior safety measures. 7. There should be division of labor to ensure that no one individual taking on too much work. This therefore ensures that the management is able to adequately oversee all divisions. This has included that the personnel at the country of operations are local because they have a better understanding of the markets. 8. Proper logistics must be put in place to ensure that products are delivered to customers using cheap fast and safe ways .This may entail the acquisition of more supply chains. 9. In the quest to reduce costs, it may be necessary to procure the services of management solution providers. CONCLUSION. In conclusion, a lot can be learnt from Tata Motor and can be summarized as follows. 1. The Carlsberg - Tetley techniques have been applied to ensure that a culture of consistent quality, innovation and continuous improvement and thus, emerge as the customer’ premiere choice. 2. An effective culture is characterized by a breakthrough process, creative flips, positivity, unity of purpose and vision and staff training. 3. It is important to participate in Corporate Social Responsibility and environmental conservation efforts. 4. There is need for market research and ensure improvement to remain relevant to the consumer. 5. Change must be seen as a continuous and gradual process that is usually met with daunting challenges. 6. A strategic venture into acquisitions and joint ventures is instrumental in entering in entering and expanding into different market segments. 7. Resources must be allocated towards continued research, technological, strategic acquisitions and marketing. 8. The company’s structure should have fewer divisions but a larger number of business units. BIBLIOGRAPHY Biopact. Tata Nano is here – What now? Last retrieved form the World Wide Web on 8th February, 2008 from http://biopact.com/2008/01/tatas-nano-is-here-what-now.html Booz Allen Hamilton (2004). Product and Service Innovation. Last retrieved form the World Wide Web on 8th February, 2008 from http://www.boozallen.com/capabilities/services/innovation Cooper Robert (2008). Formula for Success in New Product Development. . Last retrieved form the World Wide Web on 8th February, 2008 from http://www.stage-gate.com/downloads/working_papers/wp_23.pdf Cooper Robert (2008). Leadership and Corporate. Last retrieved form the World Wide Web on 8th February, 2008 from www.robertcooper.com Energy Manager Training Award Booklet (2004). Last retrieved form the World Wide Web on 8th February, 2008 from http://www.energymanagertraining.com/eca2004/awardbooklet2004/049-056CHAPTER-6%20(TATA).pdf. Haak Chris(2008). Tata Reveals Its Nano, A $2,500 New Car. Last retrieved form the World Wide Web on 8th February, 2008 from http://www.autosavant.net/2008/01/tata-reveals-its-nano-2500-new-car.html Kanter Moss Rosabeth (2001). Innovation: The Classic Traps. Last retrieved form the World Wide Web on 8th February, 2008 from http://harvardbusinessonline.hbsp.harvard.edu/b01/en/common/item_detail.jhtml?id=R0611C Kanter Moss Rosabeth (2000). World View: Global Strategies for the New Economy. Boston, MA: Harvard Business School. Outlook (2001). Changing India’s Corporate Culture. Last retrieved form the World Wide Web on 8th February, 2008 from http://www.tata.com/tata_sons/media/20001_changing.htm Tata Motors (2008). Green Matters. Last retrieved form the World Wide Web on 8th February, 2008 from http://www.tatacarsworldwide.com/company/environment.asp Read More