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Tata created an uncontested market place which made it possible to make the competition irrelevant. This is because the product was not easy to imitate and the company managed to reap the fruits through huge…
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Case – Tata Nano The Nano was conceived as a result of the blue ocean product strategy. Tata created an uncontested market place which made it possible to make the competition irrelevant. This is because the product was not easy to imitate and the company managed to reap the fruits through huge profits. Although the market was already being served through two-wheelers, Tata created and captured a new demand following the introduction of the cheapest vehicle, which met all customer demands.
The Nano was strategically priced to cater for the larger market which incorporated four wheeler non customers. Since India’s GDP was low, the vast majority of the population could only afford two wheeler vehicles. The strategies employed in ensuring that the Nano met all demands by the non-four-wheeler customers included ensuring that it was affordable for this portion of the population. It was priced at only 1 Lakh making it the cheapest car. In addition, it met high fuel efficiency standards and met all safety standards that the two wheelers could not meet. For these reasons, people placed orders before they had even seen the car.
There were several hurdles that the Nano had to address in the market. First, the Nano had to ensure that it offered better services than the two-wheeler by becoming a safe, all-weather vehicle. In addition, it had to be affordable. Second, the car had to be designed in a way that it promised an upward social mobility. Third, the designers could not compromise the buyers so as to ensure low cost car. For instance, they could not design it being a two door vehicle since this would reduce accessibility to rear seats.
In spite of the huge initial orders, there were obstacles which resulted in poor sales. First, Tata did not have its own distribution channels; therefore, it resorted to using the traditional dealerships, which had limited space. Although this was a main issue Tata resulted to using other outlets so as to make the showrooms available in many cities in India. For instance, the company tied up with Big Bazaar to display the vehicles in smaller cities. Additionally, two wheeler customers who were the main target were turned off by the perception of the Nano being the cheapest car as people wanted to upgrade their social status. Second, Tata also had a production problem since the interim facilities’ production was low. Third, the company had issues with local communities who protested the use of arable land for industrial uses. This is one of the main obstacles that affected the progress of the Nano project since the company had to relocate the plant which was almost complete. The daunting task led to lost time. However, Tata managed to deal with this issue through reaching an agreement with the state government of Gujaat that enabled the company to acquire a parcel of land to which it relocated the firm that w sin dispute. When dismantling and transporting the equipment, the company used anti rust protection procedures and tagged the materials to make them easier to retrieve. This reduced the time required to construct the new plant by approximately 10 months.
Since competition from other companies has stepped into the market and began producing other models, Tata must undertake counter measures since a red ocean market is not highly profitable. Such measures may include customizing the vehicles and improving their efficiency further while maintaining the price range since the models introduced by the competitors are priced higher than the Nano. The company can also seek and take advantage of other uncharted territories before the competitors do. Read More
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