Tata International Marketing Analysis - Essay Example

? Tata International Marketing Analysis Tata International Marketing Analysis Introduction As studies show, the majority of growth in the car manufacturing industry and automobiles is likely to take place in the emerging world markets, like China, Japan, India or Eastern Europe. The reason is that states and different regional alliances are systematically organizing their economics in which technology and innovation played a decisive role in the recent times. Today, China and India are on the top of world economics as both countries are advancing significantly in technology and engineering automation sections (Enderwick, 2012). In developing countries like China, India, and Brazil the demand is a great demand for small cars, where the reason is that the majority of the population belongs to the mid-class and prefer small cars rather than highly expensive luxury cars (Enderwick, 2012). Similarly, the rise of oil imports in the developed countries like US has lead to higher demand for fuel efficient cars. This has somehow promoted small car models, which are highly fuel efficient and cost effective (Enderwick, 2012). This study will give a detailed analysis of Tata Motors Company in order to understand how much enterprise is successful in its ultra-low cost car brand “Tata Nano” (McLoughlin & Aaker, 2010). The analysis will evaluate Tata Nano’s international marketing strategy with respect to the global market segments. The learning objectives in the study are to understand the position of Tata Nano market and to know how Tata Motors is compelling with its International marketing strategies (Kotler, 2009, pp.46). Background to Tata Motors Tata Motors is one of the major car manufacturing companies of Tata Group, the most recognized group in the Indian conglomerate market. The group is present in 85 countries across the world with a workforce population of 300,000 people working at the same time (Weihrich & Cannice, 2010). The Tata Group has founded 98 companies working in different market and business segments. All of this shows that The Tata Group is a leading benchmark in the Indian stock market and it is with a unified presence in the world’s multinational spectrum (Weihrich & Cannice, 2010, pp.103). Tata Motors is one of the stemming companies of the Tata Group. Along with the manufacturing of different car segments like trucks, trailers, and passenger cars, Tata Motors had found a distinctive recognition in India especially in passenger cars like Tata Nano (Akhanov et al., 2009). The car has become popular just because of its Ultra-Low Cost feature. It has touched the hearts of million Indians, who love the car just because of its cheap and easy to afford characteristics. Tata Motors holding a 15-20 percent share in the Indian passenger car market has stabilized a good position domestically, but due to low international sales volume the brand is weak in the global market domain (Akhanov et al., 2009). Analysis and Assessment of Tata Nano Theory of Blue Ocean Strategy “In a market there are two formats of industries, red oceans and blue oceans. Red oceans are old industries present with conventional norms and settings in the market while blue oceans are untouched market segments, where there is a space to adjust new products with new trends” (Kim & Mauborgne, 2005). Practice It was the fiscal 2008 when Tata Motors launched Nano on a global stage. The launch ranked the car to the World’s cheapest cars category, where it got available in the price US$2,230. This was the first time that India retrieved such cheapest car, which included all the features of a brand new car with the drastic attribute of affordability (Pride & Ferrell, 2011, pp.652). The Nano brought lots of expectations for Tata Motors, where the effort has been to promote it in the European corners. In this respect, the company follows extensive growth strategies to bring the car on the International market segment, where there is a need to understand the global low-cost car market spectrum (Shah, 2008). Behind Nano, there has been a definite innovative sense involved like an idea of blue ocean strategy which is effective to address the thought of cost-cutting Indian population (Henry, 2008). India has always been waiting for such ultra-low cost car “Nano”, where there are around 100 million people riding US thousand dollars motor bike. In such a scenario, the people would expect such cheapest car model to get availed for their respective purchase (Shah, 2008). The chairman of Tata group “Ratan Tata” knew that once he is successful in designing such cheapest car model (US$2,500 Nano), the success is definite to comfort native 100 million population. This is how the story of Nano was a blend of Indian market nature (low cost) and a blue ocean strategy which addressed the thought of people quite instinctively and comprehensively in the region (Pride & Ferrell, 2011). Reasons for entering the Global Ultra-Low Cost Market Theory of Discount Pricing “If high volume of products is sold in low costs instead of low volumes in high prices, there are more chances that the firms grow with net incomes and greater revenues. Low cost is a valuable attraction point for the wise consumer in the market” (Smith, 2011). Practice India being a hub of small car manufacturing segment has brought a significant opportunity for brands like Tata Nano to come up on board (Meehan et al., 2011). With several resources on the Indian soil, Tata Motors had the flexibility to establish Nano on World’s ultra-low cost car position (Smith, 2011). This is because Tata Motors have all the resources (technical staff, engineers, raw materials, equipment and government support) they decided to breach international market with US$ 2,500 Nano (Kotler, 2007). Among the multinational competitors, Tata Motors is holding a precise advantage in labor cost section. The labor cost is low in the Indian region, comparatively low than other parts of the world. Apart from all, there is a continuous support from Tata Group to Tata Motors, which provide sufficient stocks of metals and machine tools to produce at least a volume of the fiscal. This is how Tata Motors can produce 230,000 to 250,000 passenger cars annually for the Indian market segment (Grant, 2001). In the recent times, Tata Motors has expanded on the basis of luxury car brands like Jaguar and Land Rover. Plus there is a merger with Fiat to provide Italian made cars to the Indian district. Fiat being a strong compeller in South America region has also brought opportunities for Tata Motors worldwide. This will give a chance that Tata Motors come up with its Ultra-Low Cost model at least in the South American region (Gillespie et al., 2010). Among other reasons, the main reason is Tata’s low cost production methods, which give more room to the company to expand country wise (Doole & Lowe, 2008). The company has frequently relied on cost cutting ideas in manufacturing, like they excluded non-functional parts or high cost imported parts in Nano to make it a worthy ultra-low cost model. This gave the basis to establish Nano on the Indian soil and so as on to the global market like China and Japan, etc. (Grant, 2001). Apart from all entering the global market is a challenge, but it could be a fruit if Tata Nano totally manufactures on local grounds (Grant, 2001). In captivation of the similar idea, the complete production takes place locally giving more room to Tata thinkers to see a step ahead forward. The suppliers, vendors and the production crew all are there to support the cause of Ultra-Low Cost Nano, giving flexibility to Tata to advance on the global spectrum (Grant, 2001). The European markets and the markets of developed countries like US are also demanding fuel efficient small cars like Tata Nano (Akhanov et al., 2009). If Tata Motors is able to bring Nano on developed regions, there would be more chance that the brand receives good response in the start. This indicates another reason that Tata Motors approached the global ultra-low cost market (Akhanov et al., 2009). Competitive Advantage in the Emerging Markets Resource Based Theory “To receive a persistent competitive advantage, an enterprise has to match its internal skills and knowledge (resources) with the external environment opportunities and threats”. The resource based approach gives a sound basis to compete in the market” (Grant, 2001). Practice Apart from price distinction, Tata Nano has also attracted the market in terms of low bulk car features, like small engine with a respective less horsepower and much fuel efficiency (Akhanov et al., 2009). This has encouraged the buyers to purchase such ultra-low cost model in a most precise and frequent manner. The competitive advantage is there as it is with respect to price and also in terms of “Nano’s” fuel efficiency, which is the basic need and requirement of Indian customer population (Akhanov et al., 2009). In emerging markets like India, China or Japan, Tata Nano is fulfilling a similar type of requirement in customers. The markets are with resembling consumer behaviour as the requirements are the same as low cost, high fuel efficiency and low regular maintenance etc. In this respect, China is also in the development of cheap cars category like Geely Automobile, a Chinese brand which is in the same objective to Tata Nano. Tata Nano and Geely S-RV stand in one category and that is low cost category (Doole & Lowe, 2008). This has brought competition between Nano and S-RV, where the difference is that Tata Nano stands on top in the World’s cheapest car category while S-RV stands in the fourth and fifth position of the same category (Doole & Lowe, 2008). This shows that Tata Nano is with a more price advantage than other competitors in the emerging markets, providing more room and opportunity to Tata Nano to progress in the developing countries (Doole & Lowe, 2008). According to Oxyer (2008) global lost-cost model, there is a constant glow in the ultra-low cost car market. The forecast of the model has predicted a frequent growth rate where expectations are for 17.5 million low cost cars to be produced by the year 2020 (Enderwick, 2012). This has shown a lot opportunity for small cars segment and the brands, which hold substantial interest in the ultra-low cost car segment. In respect of Oxyer (2008) model, Tata Motors hold a lot of opportunity in the coming years. The opportunity is direct in the emerging markets, where there is more potential, which can bring an extra advantage for Tata Nano at the end of the year 2012 (Enderwick, 2012). The advantage would be there for Tata Nano if it maintains a dominating position in the global small cars market, especially in the category of Worlds cheapest cars like Chinese SR-V (Shah, 2008). Another mega advantage for Tata Motors is that it is self dependant, and have all the resources in its native soil (India), to make it recognized worldwide. In such context, if Tata is stick to conventional manufacturing strategies and to the right marketing mix, there is no stopping that it break through the market of international low cost cars (Kotler, 2007). The same is what is going around in the Chinese index and so as in the Japanese corners, where technology and engineering together bring competition for Tata Nano. Meanwhile, if Nano stands in a good market position based on its sales results at the end of the fiscal 2012 then there are more chances that Nano would lead the market from the front and it could enjoy its worth competitive advantage among the emerging competitors in the Ultra-Low Cost Car Category (Enderwick, 2012). Screening criteria for Nano’s International Market Segmentation As far as for Nano’s Indian market, Tata Motors holds a systemized cost effective and well engaged supply and distribution model, but the scenario is totally different if Nano gets launched to International market segment. In this context, the strategists of the company will require a comprehensive screening approach (Henry, 2008). The approach should be assessing all the areas which are crucial in the international market segmentation process. The first and the most important one is that Tata Nano will have to suit the regulations of the region in which it is coming out as a ULCC (ultra-low cost) model. Likewise in Western Europe, Japan and North America, there are preset regulations, which demand emission and safety features in the ULCC models (Henry, 2008). This could add more cost to Nano if Tata Motors applies the conventional production models. Even if it is able to meet the requirements, the cost of supply chain, logistics and manufacturing in the international segment will definitely distort the original price of Tata Nano, which is US $ 2,500 (Shah, 2008). Dealership profit, import tariffs, marketing cost, and franchising cost will also distort ULCC Nano price (Shah, 2008). All these factors need to be screened and are significant to be addressed if Tata Nano is going to approach the international market segment. Price US$2,500 can be set as a screening criteria for Tata Nano as it is sufficient to highlight and identify the key challenges which the company has to bear in the international market segment (Doole & Lowe, 2008). Regions Effective To Enter With respect to the requirement of fuel efficient cars, Nano holds a lot demand and potential in the European and American market segments (Doole & Lowe, 2008). In America, there have been continuous warnings coming up in the fuel efficiency section, where Nano is the one right potential car to deal such problems in the region. The problems of high energy conservation, traffic congestions, and environmental hazardousness have brought a demand of Tata Nano in the American district (Doole & Lowe, 2008). On the other hand, Europe could be the second leading choice especially the region of Italy, where Tata Motors is already in a good relationship with Fiat Italian cars brand. Sri Lanka is also a potential market segment where Tata Motors have contracted and exported different Tata models. All of this would require the basis of franchising and effective supply chain which can engage Tata Motors to the next level of International market segment (Doole & Lowe, 2008). The opportunity is there only if the company adopts systematic methods, and the objective is clear inside and outside the company. Franchising is one method, which can come up as a cost cut off strategy, because by franchising, Tata Motors will be able to produce Nanos internationally and in a larger quantity. The savings in cost of exportation, logistics and international distribution will occur in that manner (Gillespie et al., 2010, pp.309). Conclusion Tata Motors is one of the renowned car manufacturing companies in India. The company is a stemming company of India’s largest conglomerate business group “Tata Group” (Akhanov et al., 2009). Tata Motors holds a 20-percent share in the Indian passenger car market. The market is will captured by Tata Motors in India, but due to decreased exports the company has not been able to recognize its position in the international market segment (Akhanov et al., 2009). The chairman of Tata Group - Ratan Tata came up with the idea of ultra low cost car “Tata Nano”. It was the year 2008 when Nano was launched in the Indian passenger car market. The market welcomed this new car model as the price set for the car was just US$2,500, comparatively lower than the domestic motor bike price. Ratan Tata was well aware of the consumer perceptions in the region, which expected low cost and high fuel efficiency in the car models (Smith, 2011). In this scenario, Tata Nano won hearts of the Indian people, giving them the surprise in keeping the price so low. It was something really rewarding for a country with more than 100 million people, which desired for such mega launch of ultra-low cost car (Meehan et al., 2011). Today, Tata Nano is in a good recognition, especially in India where people buy it as a perfect ideal passenger car at the cheapest price to avail. The price US$2,500 has been the attraction point of Tata Nano as it has suited and surprised majority of the population in India. In other emerging markets like China or Japan, car model like Tata Nano holds a lot of worth and advantage (Doole & Lowe, 2008). The advantage is there because Tata Nano has already earned a good rank in the world’s cheapest cars categories. Meanwhile, Tata Motors will have to plan an effective supply chain module to bring Nano on the European and American ULCC market. Though the Europe and American market is requiring such effective low cost car model, but Tata Motors will have to bring a cost cut strategy to enter such challenging international market segments (Doole & Lowe, 2008). For the next appearance, Europe and America could be effective regions as there is a consistent demand of fuel efficient cars and demand is of eco-friendliness and green (Weihrich & Cannice, 2010). List of References Akhanov, E., Ghaffar, R. & Ibanez, L., 2009. Tata Nano Business Plan. Research Report. Tata. Doole, I. & Lowe, R., 2008. International Marketing Strategy: Analysis, Development and Implementation. London: Cengage Learning EMEA. Enderwick, P., 2012. Understanding Emerging Markets: China and India. London: Routledge. Gillespie, K., Jeannet, J. & Hennessey, H., 2010. Global Marketing. Mason: Cengage Learning. Grant, R., 2001. The Resource-Based Theory of Competitive Advantage. Research Report. New York: University of California. Henry, A., 2008. Understanding Strategic Management. New York: Oxford University Press. Kim, W. & Mauborgne, R., 2005. Blue Ocean Strategy: How to Create Uncontested Market Space and Make Competition Irrelevant. Boston: Harvard Business Press. Kotler, P., 2007. Framework for Marketing Management. New Delhi: Pearson Education India. Kotler, P., 2009. Marketing Management: South Asian Perspective. New Delhi: Pearson Education India. McLoughlin, D. & Aaker, D., 2010. Strategic Market Management: Global Perspectives. New Delhi: John Wiley & Sons. Meehan, J., Simonetto, M., Montan, L. & Goodin, C., 2011. Pricing and Profitability Management: A Practical Guide for Business Leaders. Chichester: John Wiley and Sons. Pride, W. & Ferrell, O., 2011. Marketing 2012. Hampshire: Cengage Learning. Shah, S., 2008. Low-Price Tata Nano Sparks Industry Innovations. [Online] Viewed at: [Accessed 4 December 2012]. Smith, T., 2011. Pricing Strategy: Setting Price Levels, Managing Price Discounts, & Establishing Price Structures. Mason: Cengage Learning. Weihrich, H. & Cannice, M., 2010. Management: A Global and Entreprenueurial Perspective. New Delhi: Tata McGraw-Hill Education. Read More