Market Positioning of Tata Motors - Essay Example

?Marketing Executive Summary The existing global business environment has become extremely competitive for any company. Thus, it is crucial for any business to have good knowledge about the market where it operates and remain at a competitive position. For increasing the awareness about market, there is a need for market research. A good market research can reveal any change in the business situation which is noteworthy for any company to compete. This report will exclusively attempt to address whether Tata Nano, a vehicle of Tata Motors had been successful in attracting potential customers and the strategies which were followed to achieve the intended desires. The marketing research is conducted by investigating the problem through exploratory research methods. Table of Contents Executive Summary 2 Organization Background 4 About Tata Nano 5 Marketing Context 5 Marketing Issue to be Investigated 5 Research Findings 7 Marketing Research of Tata Nano 7 Target Audience 9 Product Strategy 10 Distribution Strategy 11 Pricing Strategy 11 Impact of Pricing Strategy on Customers 12 Impact of Marketing Strategy of Tata Nano 13 Promotion Strategy of Tata Nano 13 Impact of Promotion Strategy 14 Discussion 14 Recommendations 16 References 18 Organization Background Tata Motors, formed in 1945 is one of the biggest Indian automobile corporations. It is the first Indian company to be indexed in the ‘New York Stock Exchange’, in the year 2004. Like a true global player, Tata Motors has presence in the UK, Spain, Thailand and Korea. Tata Motors had conducted a series of acquisitions. In the year 2004, it had taken over Daewoo Commercial Vehicles which is one of the leading truck companies of South Korea. In 2005, it purchased 21% share of Hispano Carrocera, a bus maker corporation of Spain. In the year 2006, Tata Motors was involved in a joint business partnership with Marcopolo, a body making company of buses and coaches of Brazil. In the same year, Tata Motors had made mutual venture with a Thailand manufacturing company to produce and enter the market of pickup cars. In the year 2008, Tata Motors had purchased two British automobile brands namely Jaguar and Land Rover. Since 1961, Tata Motors has been increasing its international presence. Tata’s cars are exported in many countries of Asia Pacific, Middle East, South America, South East Asia and Europe. In previous 50 years since its inception, Tata Motors has shown tremendous growth. It has more than 4500 scientists and engineers, 25000 employees and in the year 2009–2010 its calculated earnings was approximately 20 billion USD (TATA Motors, 2011). About Tata Nano In the year 2008, Tata Motors had uncovered the cheapest car of India, Tata Nano. Tata Nano has become the yardstick among all the smaller vehicles. It has been made with proper regulatory safety necessities of Indian market. It is also an environment friendly vehicle which produces less CO2 emission than two wheelers vehicles of India. The bend body design and less weight has made Tata Nano a fuel efficient vehicle which provides dual benefit of reasonable transportation solution and low environmental pollution (TATA Motors, 2011). Marketing Context Before introducing any product in the market there is a need to conduct marketing research plan. The 4Ps of marketing is a useful tool to develop clear idea about success of any product in the market. It helps to define the target market i.e. the segment for which the product will be produced. The proper pricing of the product to meet the needs of target market must be performed. Subsequently, the place where the product will be available must be decided and finally the product must be advertised with proper promotion to develop brand awareness among target audience. Marketing Issue to be Investigated This research will investigate the marketing strategy of Tata Nano and its success in the automobile market. Tata Nano was introduced publicly in the year 2008. Initially, it was produced in two versions which are deluxe and standard. The vehicle has many different colors to choose from. Tata Nano is made in such a way that it can meet the preferences and needs of potential customers. Though Tata Nano is renowned as a small vehicle it has enough space for four people to ride comfortably. It has been made by keeping in mind the need of low cost vehicle which can be moved easily in the crowded areas and roads of India. Besides Indian market, Tata Nano is also suitable for international markets such as Africa, Latin America and other South Asian nations where demand for inexpensive vehicle exist. In this current economic condition there is a need for economically efficient vehicle which can satisfy the growing need of middle class family. Thus, Tata Nano provides promising opportunities for them who dream for four wheelers but are unable to afford them. This research will show the marketing strategies of Tata Nano for launching in the automobile market (TATA NANO, 2011). Research Findings Marketing Research of Tata Nano It has been seen that majority of Indian people are money savers. They are greatly economical and cost conscious. Their decision of purchasing vehicle is influenced by money value. Thus, it is quite difficult to sell a medium car in the vehicle market of India. Indian Automobile Market Share in 2009 – 2010 Source: (KPMG, 2010). However, as many people are relocating from rural to urban areas, the market for small vehicle has increased rapidly. In this era, there is a trend of dual income in family, thus the concern about vehicle safety has come into forefront. Therefore, people’s choices are shifting from two wheelers to small vehicles because of safety and flexibility (FADA, 2007). The affordability factor plays a major role in purchasing vehicles in India. The majority of vehicle market is consumed by two wheelers because it costs almost 900 USD which is affordable by average income group customers. Besides cost there are other reasons for high market share of two wheelers in the automobile industry of India (KPMG, 2010). Vehicle Affordability of India in 2010 Source: (KPMG, 2010). Fuel is another important consideration while of purchasing vehicle. The fuel efficient vehicle always attracts potential customers of India. For people with average income group, fuel efficient car is a major concern for making purchase decision. Besides, the rising price of gasoline had further increased the demand of ‘fuel efficient vehicles’ in Indian market. Many automobile companies started to attract customers by offering most fuel saving vehicle by using various methods such as weight reduction and implementing new technologies. Thus, the majority of passenger cars sold in Indian market were small cars where petrol hatchback represent maximum share (65% of total market) because of high fuel efficiency (Chugh & Et. Al., 2011). Market Share of Fuel Type Vehicles Over 2002 – 2006 Source: (Chugh & Et. Al., 2011). In the year 2010, the small vehicle comprised of more than 61% of the Indian market and it is expected to increase further in near future. Thus, Tata Nano which costs less and is also fuel efficient is likely to attract potential customers (Chugh & Et. Al., 2011). Target Audience Tata Nano is targeted to the middle and lower middle class family, young graduate customers who want to buy their first car and motorcycle riders who prefer to change from two wheelers to four wheelers. These types of customers are especially price conscious and they certainly want value–for–money. Tata Nano is targeted for those customers who cannot afford to buy a four wheeler. In Indian market and other developing economies there are millions of citizens who belong to middle class families. Thus, Tata Nano is affordable by millions of people across India and throughout the world (Worldwatch Institute, 2011) & (Partha, 2011). Product Strategy Tata Nano set its cost in such a way that it can be affordable by potential customers. It is ideal for people who had motorcycle and wish to buy four wheelers for the first time. The product is also appropriate for woman customer segments that prefer to drive a car than other transportation medium such as public bus or scooter. As it is prepared for ‘middle income group’ people, Tata Nano is prepared in such as way so that it saves fuel compared to other luxurious cars. It can run over 21.97 KM in one liter of fuel. In highways the mileage increases to 25.97 KM per liter which makes it a fuel efficient vehicle that can save more money. As this car is targeted for family of four members, it has been made in such a way so that it can fulfill all the safety requirements. It contains the features such as anti invasion doors, seats belts, anchorages, rear track glass, crumple zones and tubeless tire which ensure the safety of the vehicle. Tata Nano is an environment friendly vehicle. It emits low CO2 compared to motorcycles. Besides these features the looks of Tata Nano is stylish and is available in many ranges of color. The customers are also permitted to select extra accessories to fulfill the personal requirements of vehicle. Thus, Tata Nano meets total requirements of potential customers i.e. affordability, environment friendliness, safety and fuel efficiency which makes it ‘people’s car’ (SRM University, n.d.) & (India News, 2009). Distribution Strategy For distributing the product, Tata Nano had followed the ‘open distribution’ strategy. As the customers of Tata Nano belong to the middle class people group, this strategy provides Tata Nano to get in touch with the potential customers. Tata had organized plenty of third parties to reach out to distant rural customers. It focuses on customizing the product according to people’s choices and adds value to the vehicle through additional services. The distribution strategy of Tata provides three benefits. It raises modularity of production process and vehicle. The leveraging of third party suppliers helps to access the target consumers in rural locations. It helps to develop long lasting relationship with customers and produce in-depth insight of customers’ requirements, and also helps to understand the customers’ affordable capacity within customized production cost. The innovation of IT and social institutions had influenced potential buyers to purchase Tata Nano product (BusinessWeek, 2008). Pricing Strategy The aim of Tata was to develop the world’s cheapest car for middle class families. Thus, it applied many strategies to make the car inexpensive to gain competitive position in the market. It had implemented cost saving measures in every department. Tata Nano is produced in such a way that it can reduce the production cost with maintaining the basic functionality. For example, in the standard model of Nano there is no air conditioning facility. The body part is made of pane metal and plastic material and the steering is manual. This makes the price of Nano quite inexpensive (2500 USD). It can be said that the price of Nano is approximately equal to the cost of a DVD player of a deluxe western vehicle. The nearest rival of Nano is the Maruti 800 which costs 2 times higher than the Nano (Scribd, 2011) & (Hagel & Brown, 2008). Besides, it has also brought another model which has air conditioning, automatic transmission with an extra cost of 510 USD–765 USD. With this pricing strategy, Tata had made most economically affordable car (Shah, 2008). Impact of Pricing Strategy on Customers The pricing of Nano has made a new benchmark for automobile industry. It has replaced the market of Maruti 800, the second cheapest car of Indian vehicle industry. The use of Nano as incentive had increased considerably. Many commercial companies started to present Nano as incentive to the junior executives. Previously, the junior executives were given Maruti 800 for fulfilling their target but the low cost of Nano had replaced Maruti 800. The striking prize of Nano had fascinated many customers to change their preferences from maruti 800. In place of giving expensive inducement such as foreign travel, notebook PC and LCD TV, Nano has become an alternative option to replace these incentives. Nano not only attracts due to its inexpensive price but its family oriented outlook has also attracted buyers to purchase it. Many international companies have considered replacing the Maruti 800 or costly two wheelers from their incentive menu with Tata Nano because it can provide more safety than motorbikes. The Indian companies which operate in foreign countries also have started to consider Nano instead of other Japanese or European vehicle for their workers (TATA NANO, 2011). Impact of Marketing Strategy of Tata Nano The marketing strategy of Tata has created a major impact upon the Indian vehicle market. In the year 2009, when Nano launched it had received almost 203,000 orders from customers which was twice the initial sales plan. It was calculated that the booking amount of Tata Nano was approximately 501 million USD. Tata was not prepared for this amount of vehicles to manufacture, thus the company decided to provide Nano in a lottery basis to the first 100,000 people and kept rest of the order for later. The booking of Tata Nano was measured as 17% of 1.22 million vehicles sold in Indian market (Nair, 2009). Promotion Strategy of Tata Nano In November 2010, Tata Nano experienced unsatisfactory sales of only 509 vehicles. The reason for decline in sales was due to many unpleasant fire incidents and delay in manufacturing, which had damaged the reputation of low cost car Nano. As a result, the sales of other competitors had increased drastically. Thus, Tata had come up with promotional strategy to revitalize the sales of Nano. It has developed many supreme showrooms with 500 square foot size each and recruited 1200 employees to operate. Tata had also joined with one of the big retailing companies Big Bazaar to receive attention of almost 150 million citizens who prefer to go there every year. In every mall of Big Bazaar Tata had placed Nano to increase the brand awareness and increase the purchasing decision among consumers. In almost 70 malls of small town of Big Bazzar, Tata had placed Nano products (Cars4Indians, 2011). In November 2010, Tata introduced express loan for purchasing Nano because non-accessibility of funding is one of the main reasons for decline in sales of Tata Nano. Tata provides a loan of 80% of total price of the vehicle to the customer. Tata Nano also offered customers warranty free of charge for 4 year or total 60,000 km. For minimizing the maintenance cost, Tata also provided plans of   99 per month to improve customer assistance (George, 2010). Impact of Promotion Strategy The promotional strategy was successful for Tata. These strategies have helped to bring Tata Nano closer to the middle class customers. In March 2009, Tata had experienced 35% increase in sales of Nano (Cars4Indians, 2011). The promotional strategies had resulted in upward trend of sales of Tata Nano. It had successfully attracted more than 5700 customers by their various schemes and offerings. Their attractive financial offer resulted in positive response from potential buyers. In the year December, 2010 the production was approximately 200 units in a day and in January, 2011 the production figure increased to almost 300 units daily (George, 2011). Discussion Tata had put considerable effort towards attracting potential customers for purchasing Nano, world’s cheapest four wheelers. It has been made by targeting the middle class customers of India who prefer to buy a car or shift their transport medium from two wheelers to four wheelers. Though the launching of Tata Nano was impressive, but because of certain serious incidents it failed to perceive potential customers. In November 2010, only 509 products were sold. The fire incidents had imposed bad reputation for Tata Nano and thus company began to install safety devices in their vehicles. For gaining popularity, Tata had implemented quite a few marketing strategies. It had developed showrooms and placed Nano in every retail outlet of Big Bazaar to increase the brand awareness among middle class families. Tata had also offered financial benefits to customers for buying Nano. Tata Motor Finance provides customer loan to cover 90% of total price of Nano. This strategy helps customers to acquire money for buying Nano. Tata had also extended their warranty period of Nano. In order to create brand awareness, Tata had developed advertising campaign. Through the television advertising Tata tries to reveal the main features of Nano which are affordability, safety, mileage and space which is appropriate for a middle class family with four members. Tata had also used alternative media for brand awareness. It had developed advertisements on the web, newspaper and other print media. These drastic marketing strategies have helped to revive the sales of Nano. The sales had increased by 11.69% in February’ 2011. Tata had experienced sales of 8262 Nano products in February. In domestic market, the sale has increased by 18.25% i.e. 31909 in the year 2011. Table showing Total Sales of Tata Nano from April 2009 – February 2011 Total sales of Tata Nano Year Apr-09 Apr-10 Feb-11 Sales 57199 64383 77543 Source: (Autoinfoz, 2011) & (KAMAL, 2011). Through their good marketing strategies, Tata had also gained huge popularity in the international market and attracted many overseas customers. Almost 30 million users had viewed the Tata Nano website. The web applications of Tata were also sold heavily which was recorded as 600,000 with a price of 300 for one application. Despite bad performance of Nano, the order placed for the vehicle consisted of almost 17% of passenger vehicle in the year 2009. Tata had witnessed that sale of passenger vehicles of Tata products had improved by 1.24% in the year 2010 (Nair, 2009). Thus, it can be said that Tata Nano which has been made by aiming towards middle class people has proved itself in the Indian small vehicle market after facing many difficulties. In April 2011, almost 10,012 units was sold in India which proves that it has attracted many Indian ‘middle-class’ families (Rodrigues, 2011). Recommendations Tata Motors had successfully created world’s cheapest vehicle which is a milestone for India. Since the introduction of Nano it has improved successfully. Today, India is known as one of the fastest rising economies in the world. The purchasing power of people has also increased considerably from 1998 to 2011 which is accounted as 2946 USD. As the income has grown, the consumption structure has also changed. The demand of small vehicle has increased rapidly which contributes over 70% of yearly car production. The poverty rate had reduced from 1995–2005. The growth of middle class people has also increased after the liberalization. It has been expected that by 2025 the middle class people will contribute over 59% of total consumption (Scribd, 2011) & (Trading Economics, 2011). Source: (McKinsey & Company, 2010). Within 2030, more than 100 million household will join the middle class family. Thus, in future there is a good opportunity for Tata Nano to increase its market share in Indian market. Tata Motors must increase its production capacity of Nano to fulfill the demand of customers. By proper branding it can alter the car customers to Tata brand customer. Previously, Nano had faced many problems for fire incidents and delays which damaged its reputation. As the income of people is upward rising, Tata can develop Nano to be more luxurious by inputting attractive features. Further, it can develop more safety features which will help to break the rumors about Nano products. As the price of gasoline is increasing it can affect the purchasing of petrol vehicle in future. Tata can introduce hybrid version of Nano which can run by biofuel or through battery and electric energy. This can ensure survival of Tata Nano in future automobile market. References Autoinfoz, (2011). Tata Nano Achieved Surging Sales Figure. India Car News. Retrieved Online on May 25, 2011 from http://www.autoinfoz.com/india-car-news/Tata-car-news/Tata-Nano-achieved-surging-sales-figure-67.html BusinessWeek, (2008). "Open Distribution" Innovation. Nano Diaries. 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