The Innovation Management of Tata Motors to Meet the Challenges of Changing Markets - Case Study Example

Table of Contents

Executive Summary3

Introduction4

Background4

Drivers of Innovation at Tata Motors5

Innovation Strategies of Tata Motors6

Innovation Management Theories5

Innovation Process for Tata Motors 11

Recommendations12

Potential Challenges13

Conclusion14

1.0 Executive summary

Tata Motors, the largest automobile company and commercial vehicle sector in India, introduced the Tata-nano in January 2007. The car, a four-seater with a purchasing price of about 1440 Euro, is currently the cheapest car in the world. BASF is among the automotive suppliers. Tata Motors reduced the costs of production to attain this very low price by drastically mitigating the performance of the car and putting much emphasis on a design with low costs (Ray, 2013). This is just among the numerous innovations that the company has adopted to counter the highly competitive market. Tata Motors has also put several strategies in place to aid in innovative management.

2.1 Introduction

Innovation is a very critical facet for businesses (Birkinshaw, Hamel & Mol, 2008). In order for a business to prosper, changes should consequently be adopted. These transformations should be done on the products or services that the business is offering in accordance to the preferences and the tastes of the customers in terms of innovative services and products that a business organization provides. Companies are at risk of failing if they fail to adopt innovative measures for their businesses (Treece, 2010).

The innovation process is proving to be an uphill task for multiple corporations. Majority of these corporations fail to adopt effective innovative measures for their products and services that are in line with the customers’ preferences in the future since they are pre-occupied with the current activities (Kibert et al., 2011). These corporations may also encounter hurdles in the process of innovation due to inaccurate customer preferences assumption or making wrong decisions in this process.

Consequently, the study below will discuss the innovation management at Tata motors. The theories and models of the innovation process will also be discussed. The study will also outline the innovative strategies of Tata motors. Lastly, the paper will provide a strategic plan that will help the Company navigate through emerging challenges in the industry.

3.0 Background

Tata motors Limited is a leading automobile manufacturer both in India and internationally. Jamsetji Tata founded the Company in 1868 (Tata motors, 2016). It comprises of a portfolio that covers an extensive range of vehicles, buses, cars, sports, defense vehicles, and trucks. The company is driving the transformation of commercial vehicle landscape in India by providing customers with the principal edge auto technologies that is packaged for performances of power and lowest costs of the life cycle. Additionally, the company’s new-fangled passenger cars are built for purposes of superior comfort, performance, and connectivity.

What keeps Tata motors in the market lead is its focus on future preparedness and its channel of products that are technology-enabled (Footprint, 2009). The company’s Research and Design centers strive to create novel products that attain performances that will consequently fire the customers’ imagination (Tata Motors, 2016).

4.0 Drivers of innovation at Tata motors

4.1 Social drivers

As a company based in India, Tata Motors has particular local needs knowledge and the willingness to develop creative and innovative solutions that perfectly fit the requirements of low-income clientele (Krishnan & Jha, 2011). This is in contrast to firms in the west that have declined to develop a model of low cost despite having the essential capabilities.

4.2 Technological drivers

Tata-nano comprises of various well-known solutions of technology such as plastic usage rather than metal, modular, and identical components (Roland Berger Strategy Consultants, 2006). Put together, these aspects should encompass a successful strategy of innovation.

4.3 Indication drivers

Conventionally, global corporations with their origins in the West (Lee, 2009) have developed disruptive innovations of technology. This weak signal is an outstanding case in point for a possible transformation in the current pattern of innovation particularly when it comes to innovations that serve upcoming markets and individuals with low income.

4.4 Economic/industrial drivers

The major driver is viewed to be the target Tata Nano group and its huge potential of the market, which mostly comprises of moped riders, motorcyclists among others with low power of spending in emerging nations such as India (Tabe & Giriappa, 2013). Many individuals can now afford for themselves a comfortable and safe four-wheeled vehicle, since the Tata Nano price is only low times high than a traditional Indian motorcycle price (Reddy, 2011). Very low costs of labor in India comprise of favourable framework for global automobile corporations to outsource tasks of R & D correlating to vehicles of low price to departments that are situated in India.

5.0 Innovation strategies of Tata Motors

Tata Motors is a people oriented company (Goldstein, 2008). The company pursues the ‘customer pull’ strategy. For instance, there were no eight plus one seating cars in the segments of luxury cars until the introduction of Tata-sumo in 1994, which was a huge success (Mukherjee & Sastry, 2002). Additionally, there were no other light transportation vehicles for commercial goods until the introduction of Tata-ace. A three-wheeler Bajaj vehicle of the old generation was the only transportation vehicle. Further, Tata-magic was introduced for the transportation of the public in rural and semi-urban areas. This was an improvement to the Tata-ace transportation vehicle (Kalogerakis et al., 2014).

Tata Motors is making technological innovation leaders within the corporation (Krishnan & Jha, 2011). This is because the company has been concentrating on human resource development for the novel innovations by utilizing various methods such as balance scorecards. The company is also making innovative leaders in other nations due to their familiarity of other nations.

In regards to people, the company has adopted innovative means to leverage capabilities of human resource to attain challenging objectives. Tata Motors has identified dynamic and young managers to act as leaders of innovation, which consequently has contributed in Tata motors’ innovation success (Shariff & Elsalhy, 2013). A case in point is some of the most prestigious innovations, Tata-nano and Tata-ace that were designed by young engineers and leaders (Bruche, 2010). These innovative teams have been reporting remarkable results over a period. Each product that has been designed by these teams of young engineers has attained phenomenal success.

6.0 Innovation management theories

Innovation theory, tools, and models can be amassed into innovation management techniques. These techniques can be categorized as the variety of tools, methodologies, and techniques that back the innovation process in businesses and aid them in a methodical way to meet novel challenges.

Suitable innovation management techniques application enhances the ability of a company to introduce proper new-fangled technologies in processes or products as well as the essential transformations to the organizations. Nonetheless, majority of firms do not have a culture of innovation that favours the introduction of change within a corporation (Hidalgo, 2008).

6.1 Sustainability innovation management theory

Sustainability concepts have to do with enhancing the incumbent product by creating a sequence of generations until the product reaches its life cycle end. Usually large corporations are very effective at designing sustaining innovations since their business cultures, processes and resources are set up in a manner that sustainability efforts will be enabled (D’ Amato, 2009). Usual sustainability efforts comprise of cost reductions in that purchasing raw materials cost for a particular product drops as volumes of sales rise. This is besides the enhancements of design that enables the product to utilize affordable materials. Expansions of product line or product proliferation are another sustainability effort where companies fill out their product line by giving additional offerings such as size as a fix (Rubin, 1997). This is because majority of the novel products do not have a complete products suite to meet each needs of the end-user segments.

For majority of innovators, sustaining innovations are an essential evil. Sustaining innovations seem to offer protection of creating a disruptive innovation or breakthrough for the company (Lee, 2009). This is the reason why sustainability innovations are so critical to constant success. A company requires something that generates finances to finance efforts of future developments.

In strategy terms, products of sustainability innovation are concerned with taking advantage of the product by broadening its life cycle as far as it can go. Majority of products of breakthrough do not last for a long time without an effort of sustainability to back them. This effort of sustainability is where there is maximization of sustainability since expenses that are not required can be eradicated and the products’ benefits can be improved steadily.

The innovation management issue is deeply correlated to the manner in which a company manages its external associations (Berkhout, 2013). Additionally, the innovation management analysis should be seen as being entrenched in a relationships’ network linked to social and regulatory governance, the socio-technical regimes and the value chains in which it is entrenched. Sustainability innovation is also related to the corporate strategy and the sustainability system should be viewed as a co-evolutionary process that involves innovative companies and a wider setting of customer prices, infrastructures and institutions (Schaltegger et al, 2011).

Tata Motors strives to maintain sustainability in the innovation process (Srivastava et al., 2012). The company has adopted the Tata Business Excellence model that has created an exploring culture of diverse innovative excellence models in various processes of organization. In regards to the process of product development, the company has adopted the process of Stage Gate that sets the benchmark for the innovation and development of the right market product.

6.2 Disruptive innovation management theory

Disruptive innovation management theory refers to a process in which a smaller firm with fewer resources has the capability to challenge successfully developed current companies (Markides, 2006). As the current businesses stress on enhancing their services and products for their most demanding clientele, these businesses exceed the requirements of some segments and ignore the requirements of others.

Disruptive firms start by successfully focusing on the segments that have been overlooked, obtaining a foothold by offering a more appropriate functionality, mostly at a decreased cost (Georgeantsaz et al., 2005). The incumbent businesses chasing surging profitability in segments that are in high demand appear not to respond with vigor. The new entrants then shift to the upmarket, offering the performance that the mainstream clientele of the incumbent businesses need and at the same time safeguarding the advantages that drove their initial success. When this conventional clientele start getting used to offerings of the new market entrants in quantities, disruption has consequently taken place (Christenses, Raynor & McDonald, 2015).

The disruptive innovation of Tata Motors of the People’s car will transform the automobile market on its head subsequently resulting in a paradigm shift (Lim, Han & Ito, 2009). The company consciously sacrifices some of its functions as several other disruptive innovations to have the ability to mitigate costs and the cost of selling.

Additionally, Tata Motors has been targeting the millions of Indian motor scooter drivers and motorbike in its disruptive innovation strategies. This will enable the company win over a large portion of the price sensitive motor scooter drivers and motorbike that so far could not afford the people’s car. This disruptive innovation will subsequently open up a completely novel safety and comfort world for the scooters and motor bikes driving Indians.

Tata Motors is making use of European partners’ network in its innovation strategy such as BASF. BASF supplies the company with components of plastic nature that aids Tata motors with its design. In the past, the company has adequately proven that is very knowledgeable in designing likeable cars. Meanwhile, the company is very active at the other end of the sale of the car price.

6.3 New-market innovation management theory

New market innovations theory refers to the application of an incumbent product in a new manner and at times a different customers’ segment (Sauramo, 2014). Several things are considered when new markets are being explored for a company’s product. This includes adjacent spaces that are fertile grounds for an existing product introduction. It also encompasses studies of customer usage since they are already using the product of a particular company in both new and diverse ways that the company has not yet considered.

Innovations of the new market can be remarkable successful if it is efficiently executed. New markets should be seen as cosmic unexplored region frontiers where a company may prove its solution to be very useful. New market innovations strategy can fall on benefit leadership or cost leadership. The company also adopted a three-pointed strategy to foster and improve innovation across sectors of business and companies. They include initiatives and facilities that make it possible to learn from other firms, effective communication and innovative efforts and ideas recognition.

7.0 Innovation process for Tata motors

Innovation is a great catalyst in assisting businesses move faster, affect all of its products design and also help in the process of manufacturing products and subsequently ship them to assemblies (Gunasekaran et al., 2012). Innovation can be done in three primary steps. First, ideas can be generated from the market and customer needs. The second step is the good idea selection from numerous ideas. Thirdly, the idea can be implemented to create a novel product or service for developing the incumbent service or product.

In regards to Tata motors, the company greatly prefers innovation and creation of new products stating it is part of the company’s legacy (Adams et al, 2012). For decades now, Tata Motors has been innovating new products with their first steam road roller introduced in 1948. It designed various products that have in turn transformed the Indian automobile market dynamic (Ranawat & Tiwari, 2009).

In product terms, Tata Motors adopted Japanese technology and designed the model 407 platform that suited the conditions in India in 1980 (Sagar, & Chandra, 2004). This was a huge achievement for the company since the platform has been occupying two thirds of the market in the third decade since its introduction in the Indian automobile market.

In 1990, the introduction of the Indica platform was also a great success. The company has been working to improve the Indica platform several times (Bruche, 2010). Tata-ace was also another innovative capacity instance of the company. Tata-ace was launched in 2005, becoming the first mini-truck in India (Tiwari & Herstatt, 2012). It was a big achievement in India’s market of small commercial vehicle. Further, Tata Nano also refered to as the people’s car was another huge milestone innovation of the company that also demonstrated Tata Motors’ innovative capabilities (Kale, 2012).

8.0 Recommendations

The following propositions are meant to help foster the culture of innovation to aid Tata Motors augment its competitiveness through innovation and also aid in taking advantage of the knowledge-driven economy opportunities;

First, Tata motors should set up a comprehensive scheme with regional and national governments to foster innovation management. The goal is to enhance the actors’ expertise, encouraging methodologies and tools of innovation management within the company. It also helps in fostering international networking development among diverse actors to promote experience and knowledge exchange.

Secondly, there should be support for initiatives of awareness that are well designed to improve the confidence of citizens in innovations as a way to promote competitiveness in the company and the society’s welfare.

Priority should be given to a novel initiative of awareness to encourage advancements in product development and industrial design process, against a milieu and because of both the company and customers’ significance.

Thirdly, the company should support common certification systems development in innovation management. This would be essential to define standards and practices in this area.

Tata Motors should also focus on cultural aspects since the cultural facets play a significant role in the innovation and creativity environment creation. Culture equates the agreed norms that mould shared beliefs and values’ pattern and behaviours. Three aspects of cultures that can make a difference encompass practices, institutions and values. For instance, Indian approaches gives significance to work as well as individual interactions and friendly correlations that leads to the advantages of teamwork, which subsequently helps in innovation initiatives.

For Tata motors to be successful, it should create a good climate for innovation and motivate personnel in the company to act and think creatively. This subsequently leads to novel innovations. Additionally, the innovation and creativity climate provides support for the use and development of new practices, concepts and approaches.

9.0 Potential challenges

The international automotive market is already very competitive. This is likely to continue growing since competitors are struggling to retain their position in the developed markets while at the same time attempting to attain a presence in the upcoming markets. Tata Motors will struggle to manage implementation and vision with the diverse joint ventures and subsidiaries. The company will have to come to a decision whether particular divisions can run autonomously or requires handholding from corporate.

In light of the constant worldwide spectrum globalization, the automotive industry is still very competitive. It is only anticipated to intensify further. Factors that are influencing competition and share of the market encompass features such as safety, quality, management and price.

As the demand of the market is still evolving, other features of innovation such as the technology and reliability of the fuel, economy starts to come up only to need further development of products. This is in speed terms at a minimum cost to keep up with the advancements of the competitors. Tata competitors in India include Honda motor, Hyundai, and Fiat among others. In premium markets, its competitors include Mercedes Benz, Audi and Jaguar.

Additionally, as new standards of emissions are implemented, prices of trucks augment and the manufacture profit drop as the costs of R & D rise to develop vehicles that are compliant with the novel standards. Nonetheless, Tata is in a distinct position to leverage current joint ventures in order to situate itself as a leader in mitigated commercial vehicles emissions.

10.0 Conclusion

Innovation is a very vital facet for businesses. Companies should maintain innovating novel services and products for their clientele in accordance to their preferences to prosper. The culture of a country is also a vital facet in enhancing innovation. Norms and attitudes of individuals play a significant role when working in a particular corporation. This subsequently leads to effective innovation in an organization.

Tata motors have been significantly focusing on innovation. The company has been spending many finances on development and research to innovate new technologies and products. Tata Motors has a people-oriented innovation strategy focusing more on the significance of development of human resources for development.

In sum, innovation has become a vital aspect for Tata motors since it conducts its business worldwide. The goal is to develop relevant and new services and products and Tata Motors perceives innovation as the means to attain this.