Tata Nano Cross Culture Marketing - Essay Example

?CASE STUDY: TATA NANO By Presented to Introduction Tata Motors is a branch of the Tata Group of companies which targets several markets globally. Tata is an Indian automobile company which has bought several other European brands over the last decade. Tata has acquired British company; Jaguar, land rover, together with a South Korean company Daewoo to increase its motor vehicle production and service quality (Hollensen, 2007, p. 287). The company offers other services in it conglomerate such as consultancy services. The focus of the case study is on the Tata Ultra-Low Cost Car. The Tata Nano is a small car targeting the lower echelons in the society. The product has several distinct features such as size, engine size, design and speed. The car borrows from the principles used in the production of the Volkswagen Beetle and the British Mini popular with the Mr. Bean films. In all cases, the cars were produced to meet a certain market segment and increase the ease of acquisitions. The performance and efficiency of the cars may not be compared to other luxurious cars, but the main goal of the cars is to reduce cost of purchase, as well as maintenance (Hollensen, 2007, p. 287). The car has registered mixed fortunes in the market since it was officially launched into the market. The marketing of the product may be the weak link, but there are still other improvements to be implemented in the product to succeed. Additionally, the product will face stiff competition from Bajaj motors who also intend to produce fuel efficient cars that fit in the same category as the Tata Nano. Market Segmentation for Tata Nano Market segmentation is the process of dividing the market using a certain way in order to target a certain set of buyers or consumers. In the past, most companies employed mass marketing with the exception of the motor vehicle industry which initially targeted the rich, but later covered the middle class and the current trend are to incorporate the low end earners (Sandhusen, 2000, p. 34). To incorporate them, Tata Motors produced the Tata Nano. Tata Nano is nicknamed the “people’s car” based on the specification and performance stipulated by the company. The cars were rolled into the market in 2006 with the Nano have different specifications (Beverly and Thomson, 2011, p. 67). The four-door Nano is over 10 feet long and nearly five feet wide. The size indicates the targeted market segment because the bigger the size the higher the cost of the vehicle. In addition, it is powered by a 623cc two cylinder engine as compared to the standard four cylinder engines. The reduction in the cylinder numbers is to reduce fuel consumption. In the process of reducing the fuel consumption, other features are eliminated. The maximum speed of the car is 65 miles per hour, which is slightly slower compared to luxury cars. The location of the wheels of the vehicle at the extreme ends improves the handling. It has a small trunk for load carriage (Allen, 2010, p. 89). The product design ensures cost of production is reduced while ensuring that the needs of the customers are met. The product targets the low end users in India which has several challenges (Cleland and Ireland, 2006, p. 45). India is marked with a serious challenge in terms of transportation because of the increased traffic snarl ups and jams. These traffic jams leads to loss of fuel and affects people's wealth. The production of the Nano ensures easy transportation and lower cost even in traffic jams due to the low consumption associated with the car. The lower echelons in the society have already been targeted by other companies such as the production of the Maruti 800 by the Maruti Udyog Ltd. The Nano has distinct advantages over the Maruti 800 because of the seating space, luggage space and cost. The product’s target market of the middle class and low echelons in the society must be evaluated to obtain brand association. The middle class in India cannot be identified easily, owing to the fact the society practice the caste system, which restricts movement of the middle class and the low end earners in the process. However, according to the data provided by the World Bank, the growth of the Indian middle class has facilitated the development of product targeting the segment (Chilton and Bloodgood, 2010, p. 67). The vast majority of the middle class in India earns between Rs 1000 and Rs 2000 per person per month. The earning shows that the need and demand for the cost effective cars is present in the middle class. The earning gives a rough idea on how to segment market to ensure success. The Indian market has no defined middle class, but the outstanding feature of the society is that less than one per cent of the Indian population earns more that Rs 10000. The rise in middle class in Asia and the Pacific is an indicator of the increased market segment (Cleland and Ireland, 2006, p. 67). The Nano targets the Chinese and Indian market because the two countries have a different approach in production with the middle and low income earners making almost 70% of the population. Their position in the country makes the segmentation targeting the group achievable because there is potential in the target market share. The market segment targeted is faced with a crisis in transportation and movement (Cooper, 2008, p. 90). However, with the production of low cost vehicles will solve the problem of the segment and facilitate better transportation. The major challenge with the market segment targeted is in the advertising and promotion strategy that could ensure that the target segment is met and informed of the new product. Market segmentation can be successful if the promotion and marketing strategy meets and informs the target population of the product. Segmentation can be achieved with the combination of the various strategies and approach to ensure that the target market is reached and are well informed of the product price, specifications and cost. For Tata Nano, the specifications should be the selling points of the car to the target market. Product cost and the maintenance cost should be presented to customers to ensure they understand the positives and negatives of the product, so as to make the right choice. The Nano has several advantages that if promoted will increase the volume of sales and improve brand loyalty. The marketing strategy will be a key issue in the market segmentation process because it will help in the creation of the positive and negative perception of the product (Kapferer, 2008, p. 78). Reasons for entry of Tata Motors into the global ultra-low cost car market The potential growth in the demand for the Low Cost Car (LCC) is evident in the international trends making companies scramble for the market. It is expected that by 2020, the demand for the cars will be at 17.5 million cars from the current 2 million car demands by units. With the perceived growth in demand, Tata Motors has engaged in developing a product that fits into the market effectively. The production of the Nano car is a product of market research and the perceived growth in demand. One issue of massive interest is the demand, in India for small cars that are pocket friendly. The demand for pocket friendly cars in India has been increasing despite the persistent traffic jams in the cities of India (Malaval and Benaroya, 2002, p. 128). The increase in demand for small cars offers opportunity to develop and increase the volume of sales for the company thus creating an opportunity for expansion. The rate of expansion depends on the availability of demand and opportunity for partnerships which may exist during Internationalization. After the global financial crisis witnessed in 2008, concern for companies and consumers has been on the reduction of cost either cost of operation or the cost of purchase. The concern for cost reduction has opened the door for the creation of demand. The global demand for ultra-low cost product has been the main reason for the venture into the sector. Tata is known for the production of cheaper products despite the poor penetration of Tata products in the global market. With a known reputation of cost reduction principles, the company can venture into the market with ease and succeed in the process of Internationalization (Nykiel, 2004, p. 233). The Indian market and Chinese markets are promising ones, but there is still potential globally with the Middle East, Asian and pacific lead the pack in demand of the small cars. The existence of demand in the local market has helped in the development of products for Indian market. However, the market currently has Maruti Suzuki as India’s largest passenger car manufacturer posing a problem of competition for the Nano model. The other reason for entry in the market is to improve brand presence (Saget, 2006, p. 69). Currently, Tata motors do not enjoy massive brand presence due to several problems. These problems include poor marketing strategy, negative brand perception, and pricing and inconclusive market research. The Tata Nano is developed with the sole purpose of developing a positive brand image and acquire new market segment. The focus of the marketing strategy is on the lower end of the society and the middle class who want comfort, as well as cost cutting measures (Preston, 2012, p. 176). Competitive advantage of Tata Nano The Tata Nano has several advantages compared to other small cars in the same category. There are several factors that the company considered in the design process of the car making it has several distinct advantages in relation to size, price, fuel efficiency and low maintenance Size The company has ensured that the small car is significantly bigger than the cars of the same category. Compared to the Maruti 800, the car offers larger seating area as well as leg space. Its size is slightly over seven feet making it bigger than any of the current ultra-low cost cars in the market. The company invested in increased size to offer better luggage space and comfort for the consumers (Sandhusen, 2000, p. 56). Price The price of the car makes it affordable for the middle class. To reduce cost of manufacture, the company engaged in the essential cost cutting measures by ensuring simplicity and material reduction. The country of manufacture has distinct advantages that lower the cost of production making the product price relatively cheap compared to cars from other countries. Fuel efficiency The car cuts on fuel consumption, which includes the development of a two piston engine a different approach to the known one piston approach present in the luxury cars. The use of two pistons reduces the fuel consumption effectively by reducing the amount of fuel needed to propel the vehicle. The reduction of the piston number is coupled with a horse power reduction which is the main disadvantage of the product. However, in terms of fuel use reduction, the approach reduces the fuel consumption by almost half the cost used by the four piston engine. The engine capacity is reduced to 624cc which is half of the standard car engine. Production efficiencies Tata motors have been in the market for some time with established efficiency and production plants. The availability of the production plants reduces the cost of production because there are no set up cost in the design and manufacture of the cars. The production process uses the already established production units thus reduces the cost of doing business. Countries of expansion The target countries for Tata Nano were China and India, but there are potential for cars in other countries around the world. The potential continents that the car could have success are Asia and Africa. Cost is serious issues that influence purchase of vehicles in Africa. In Africa, 90% of the population is poor while 10% are rich (Crawford, 2000, p. 89). The poor cannot afford the expensive and luxurious vehicle. In addition, the cost of maintenance is unusually high making them shy off from even trying to buy the vehicle. Currently the demand for cars in Africa is 1.4 million, but it is projected to rise to 5 million in 2020. The project illustrates the demand for new vehicles increasing thus offer an opportunity for Tata to venture into the market. The car market in Africa has distinct advantages that if used may result in increased volume of sales of the car. The African market main concern is the cost of the car and maintenance cost which gives the Tata Nano advantage over other cars. The car is relatively cheap when compared to other cars in the same category (Shaw, 2011, p. 78). Africa offers a massive growth potential for the car manufacturers to venture in the next decade. However, the major challenge with the market is the perception. There is growing concern for quality after the infiltration of Chinese substandard products in the market especially in the motorcycle sector. This concern must be addressed will create a serious problem when developing the brand image. The Middle East countries offer expansion opportunities for the Tata Nano market owing to the increasing population and improved per capita earning of the citizens. Countries like Dubai and Saudi Arabia offer enormous potential for growth in sales. First, the countries per capita income are high, the infrastructure is well developed allowing for low clearance vehicle to operate easily. The population increase and need for personalized transport offer a chance for Tata Nano to succeed in the market. The success of Tata Nano will depend on the ability of the company to develop a good marketing strategy and improve product visibility. The availability and visibility of the product are factors that must be addressed when venturing into the Middle East market because of the consumer behavior of the region (Cleland and Ireland, 2006, p. 45). Consumers behave differently in the region because of the effect of religion and culture of the community. In Saudi Arabia, the marketing strategy must focus male marketing because women are not expected to drive making car purchases a male affair. The employment of the male marketing process will facilitate success in the country. Apart from Dubai and Saudi Arabia, the company may need to venture into the Pacific and Oceania countries with care because of the stringent environmental legislation in the countries. Conclusion The success of Tata Nano will depend on the development of proper marketing strategy because the product has several advantages. The cost and fuel efficiency of the vehicle gives it a massive advantage in the developing countries. The target of the company is China and India, but there is potential for growth and success in other developing countries. The competition in the Ultra-low cost cars is increasing with the entry of other companies, but the Nano still presents a platform of advantages which is vital in improving the sales of the car (Malaval and Benaroya, 2002, p. 89). With the increasing competition, the expansion of the company to other countries through marketing will ensure success of the products. The development of the necessary marketing strategy will be the main stepping stone which includes penetration marketing and advertising. The Nano will be successful because of the market research conducted before the launch of the product (Cooper, 2008). The product size, price, and specifications have been the main areas of focus, making the car achieve success in product development. In conclusion, that the company has achieved massive success by launching the Tata Nano, but their success cannot be maintained without expansion and Internationalization. Tata Nano is car with enormous potential in the market (Shostack, 2001, p. 89). Bibliography Allen, J. 2010., Marketing Your Event Planning Business: A Creative Approach to Gaining the Competitive Edge. London: John Wiley and Sons. Beverly, M., and Thomson, T. 2011., The Power of Real Time Social Media Marketing:How to Attract and Retain Customers. New York: McGraw-Hill Professional. Chilton, M. A., and Bloodgood, J. 2010., Adaption-innovation theory and knowledge use in . Management Decision, 1159-1180. Cleland, D. I., and Ireland, L. R. 2006., Project Management: Strategic Design And Implementation. New York: McGraw-Hill Prof Med/Tech. Cooper, R. 2008., Perspective : the Stage-Gate® idea-to-launch process -update, what's new and nexgen systems,. Journal of Product Innovation Management, , 213-232. 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