Tata Cross Culture Marketing Analysis - Essay Example

? Case Study of Tata Cross Culture Marketing Analysis Case Study of Tata Cross Culture Marketing Analysis Introduction Tata Nano is popular for the world’s cheapest car that is built by Tata Motors India achieving great efficiency in terms of price, seating space and fuel. Tata Motors focused on top 15% to 20% of the Indian population that commute by two wheelers. This case study reports a successful milestone of Tata Nano, one of the cheapest cars in the world manufactured under the vision of Ratan Tata (The founder of Tata Motors). In India, over 11 million vehicles are manufactured annually and exports reach about 1.5 million units each year. The big chunk of the automobile industry is two wheelers with a market share of over 75% (Imagin, 2011). In this respect, Ratan Tata decided to manufacture a car at a price of motorbike so people can get around with convenience and achieve major milestone in the Indian and global automobile industry. Several engineering changes were made in order to keep the cost of car model below $ 2500. At the beginning, the manufacturing process was carried out in Sigur and then moved to Sanand Gujarat because of the suppliers’ proximity. This low cost car that is Nano was launched in March, 2009 at Parsi Gymkhana Mumbai (Tata Motors, 2010). The outlook and interior of Tata Nano is quite impressive, it is tall and narrow, respectively convenient for drivers and back sitters. It has four big windows that allow fresh air and light. Its body is designed with much inner room and space (Chhangani, 2009). Tata Nano is simple and functional; it has good inner volume to adjust passengers on the long routes. There are rumors in the market that Nano is made up of the plastic body, and its motor is powered by hamster in the wheel, all such rumors are just rumors, in-fact Tata Nano is simple car but with tough body design and structure. Its body is made up of steel, only the bumpers are plastic. Its weight is 1320 ponds which is less dense than other economy cars present in the market (Kurczewski, 2009). Manufacturing a car at this nominal price of $ 2500 was a complete challenge, but it was tactfully faced by Tata Managers and leadership. Approximately 99% of Nano’s components are sourced locally, most deliberately from India rather depending on foreign suppliers (Hollensen, 2011). After launching Tata Nano in India, future intentions were to enter in the global low cost car market. China and Russia was very lucrative markets for such low cost car category, but the challenges were distinctively there in Europe and North America. It was all because of the emission rules and standards which kept Nano on the back side of the European region (Hollensen, 2011). By understanding Tata Nano’s Case in India, this study will highlight the importance of Tata Nano market in other emerging markets (China and Japan), its need in the European markets and the competitive advantages that Tata Nano sustain in present markets (Hollensen, 2011). Main Reasons for Tata Nano to enter in Global Low-cost Car Market Affordability in Emerging Markets People living in the emerging markets (India, China) prefer motorbikes more than cars, because of the affordability factor. Tata Nano was designed by keeping this factor on priority; as it was all about hitting the world’s cheapest cars category, “The Ultra-Low Cost Category”. Meanwhile, Tata Motors had the opportunity on the native Indian soil, which made it possible to manufacture such ultra-low cost car “Tata Nano” (Hollensen, 2011). This brought one reason for Tata Motors to intrude the emerging markets besides India (Hollensen, 2011). Environmental Friendly In developed markets such as North America and Europe, there are strict government regulations for environment protection. People are more conscious on environment friendliness of transportation. Hence, cars, which are lighter and smaller consume less fuel and spread less pollution are preferred as compared to the large ones consuming more fuel and environmental resources (Vlasic, 2010). On this basis, Tata decided to target the developed markets, as they had all built in features of green energy (eco-friendliness) in Tata Nano to replicate it across the border markets (Hollensen, 2011). Growth in Demand It was the time when the global recession hit world financially, and a lot of people even the top management downsized due to the lack of financial resources. It was due to the vision and the current hidden demand that was recognized by the chairman of Tata motors, by analyzing market where low cost car market can pick the growth rapidly, 2 million low cost cars sold in 2008 and it is expected to reach about 17.5 million cars globally by 2020 (Pope, 2008). So, it is the growing low cost market that escalated the demand for low cost cars like Tata Nano. Tata Motors recognized it as a major reason and compelled Tata Nano to compete on the non-Indian soils, “the International emerging markets”. Growth in Income The exceptional economic growth forecasted in the emerging markets such as China and Brazil because of economies of such markets are export driven, strong capital and investment inflows and well capitalized banking industry is there. It is the global expectation that world growth will increase about 70% in the next few years due to the emerging markets, “China and India” that contribute 40% to the growing world economics (The Economist, 2010). This growth is expected to be strong and more favorable in the coming years as it will help the developed counterparts to rise over 4% each year (Guarino, 2010). Hence, people will move to segments in the upward direction and will favor the automobile industry specially the ultra-low cost car market to excel the rising economics (Pope, 2008). Such progressive growth of emerging markets also gave Tata Nano a reason to come on board, especially on the International emerging market segment (Pope, 2008). To Capture Market Share The rivalry among competitor was low in emerging markets because three companies, Cherry Automobiles, Geely automobiles, and Suzuki-Maruti were present in the ultra-low cost car market. Even the price was of such manufacturers offering cars at minimum $ 5,000 (Hollensen, 2011). Hence, it was a nice opportunity to grab market shares by offering competitive low price of $ 2,500, if the distributor increases production at lower per unit cost then it can help further to achieve greater market for Tata Nano (Markgra, 2012). Competitive Advantages in Emerging Markets Value Chain The value chain is the flow of activities from raw materials to the finished product here in the case of Tata Nano, it holds an advantage of the value chain which means Tata has a chain of suppliers, a chain to source 97% automotive parts and components domestically (Hollensen, 2011). Tata Nano couldn't have made this possible to make such a car with comparatively low price; all this became possible by the support of its local suppliers. (Red if India Abroad, 2009). Since, Tata has more than 100 closely integrated suppliers like Bocsh, Sona Group, Rico Auto Industries, Maharashtra Glass and Agro, Motor Industries Company, and Exide Industries etc. (The Kenyan Keralite, 2008). Hence, this value chain is making Tata Nano a successful export company in the emerging markets, holding a competitive value chain advantage in the domestic Indian soil (Jenner, 2012). Low Pricing The low price of Tata Nano is further major competitive advance as it helps to create a buzz in the emerging markets. This pricing strategy of Tata Nano gives a unique competitiveness, as the price itself is not completely based on the profit margins, but has a compelling from the immense volume of the buyers. The price of Tata Nano reduced up to $2500 (Hollensen, 2011). Tata Nano captures good market share in the emerging market because of its price that is too low for people. (Dongyan, 2008). The low price definitely will have an impact on the quality and style but its quality is not below the standards and it is eye catching and stylish (Marketing Practices, 2009). Labor cost If Tata Nano exports to emerging markets, it will have the advantage of labor as the domestic labor is cheap, loyal and lasting in India. The manufacturing facility of Tata Nano is located at Gujrat, which is the main hub of the labor, so the labor is cheap comparatively with other cities, and it is an estimation that labor cost is fifty percent lower than other cities of the country (Shah, 2008). This sets a non-ending advantage for Tata Nano as the labor is prolonged in India since Nano’s emergence (Shah, 2008). Blue Ocean Strategy Ratan Tata surprised automobile sector with India and overseas market by offering Tata Nano just at Rs. 100,000. Tata Nano becomes the world’s cheapest car. It was Blue Ocean strategy because Tata Company touched the hidden market that was the ultra-low cost car market. Even QQ3, m300, Marrie Star and S.R.V mini were present in the market, but Tata Nano was taking the number one in the low cost car market (Hollensen, 2011). This strategy remained untouched and did not implement by any rival of Tata Nano in the automobile industry; it will be a definite competitive advantage for Tata Nano which it would enjoy in both emerging markets segments Chine and Russia. The entire market is divided in to oceans Red Ocean and Blue Ocean, the red ocean means the older industries which already exists and its market space are known, but the Blue Ocean market is hidden, and nobody can exactly know its market, it is because it has not been touched by the marketer (Shukla, 2012). The strategy has found opportunities for Tata motors, especially for Tata Nano which has developed much space in the emerging market segment (Shukla, 2012). Suggested Screening Criteria Regulations The screening criteria depends on business model that Tata Nano is the world’s cheapest car by applying efferent use of resources on the local side. It received media attention around the globe for a starting price Rs.100, 000 or $2500. It meets Indian emission, safety and pollution standards (Sundelin, 2009). If Tata expands its presence from local to the international market the emission and safety standards will create a hurdle by increasing its price as the case price is increasing by adding emission and safety charges in developed countries like Europe, U.S.A, and Japan. In addition, the import tariffs, Sales Tax and other expenses will also add up to the existing cheap price of Nano “US $ 2500” (Hollensen, 2011). Structural changes will be in the car to meet the emission and safety standards in North America. So the price will be different from the price set in India. On the basis of these additional costs occurring in these countries, Tata will have to revise car prices for such countries. Hence the structural changes on emission and safety standard, and then price revision has to be done on such ground (The Economist Times, 2010). Market Growth It is very basic rule to know the number of competitors in the market and what demand whether increasing tremendously or there is the saturation point, In other words. Market growth measures the increase in value of an entire market, not only the sales of a single firm within the market. It is a standard that if there is a market growth 10% or above then it is counted as good growth, low growth if it is 1 percent or 2 percent (NFGL, 2007). Hence, market growth will be another major screening criterion if Tata Nano market on the International grounds. Market Size The market size means total sales of a particular good or service. The basic method to calculate market size is to multiply the number of customers with competitor price. For example, we want to calculate market size of low cost cars in India; we need to find out the number of low cost car buyers in India with the price of low cost car (The Times of India, 2010). This will formulate a demand screening via market size assessment, an additional criteria to screen the international market (The Times of India, 2010). Suggested Regions to Enter As we know that the engine of Tata Nano is the smallest and it could bring Nano a reception from countries desiring fuel efficient cars. European consumers prefer smaller cars with the smaller engine capacity, because of the fuel consumption (Canis, 2012). The Commission promotes the members of EU courtiers to revise its taxation policies for encouraging automobile industry, so they produce fuel efficient cars so that it will be easy to switch towards less emitting cars (UNEP, 2012). Among European countries, UK will be the best region because there Tata Nano will compete Alto SZ by Suzuki, the price of Alto SZ is $ 7,796 in the UK market (Nagra, 2012). In order to meet the compliance policies of those regions, some modifications would be needed in the car like the interior of the car will be customized, but the exterior would continue to remain the same. In addition, the US market will be better for the Tata Nano because there is also a demand for fuel efficient cars. Some modification will be needed before entering into the US market, like Tata Motors would have to redesign the model in order to meet American standards and will need to add power steering, traction control and air bags in the car. After these changes, the price of this car would reach $8,000, but still remain in the cheapest car category as and it will beat the competitors of Mexican-made Nissan Versa because the price of Versa is $11,750 in US market. Hence the American market is also feasible for Tata Nano (Deccan herald, 2012). After UK and USA, Brazil should be another market. The government is revising its regulations for fuel efficient cars with a minimum amount and car manufacturers will have to meet the local content requirements. The government will penalize car manufacturers by raising their tax bill 30%, and if they do not violate the regulations then such car manufacturers will gain a tax advantage. If companies succeed to improve fuel efficiency by 22 percent then the government will reduce industrial tax by two percent (Ribeiro, 2012). So all of this has to be addressed before Tata Nano joins the international market segment. Conclusion Tata Nano is the vision of Ratan Tata the founder of the Tata group, who has a vision to provide a car of Rs. 100,000 or $2500. This is for the common man who prefers to drive a car in the price of a two wheeler motorbike. Tata focused on 15% to 20% people of Indian population, which commute by motorbikes. For coming to such lowest price Ratan Tata learned that the unnecessary components will be eliminated from the vehicle in order to keep its cost lower, and in the month of March 2009 Tata succeed to launch Tata Nano at Parsi Gymkhana Mumbai (Imagin, 2011). In starting the manufacturing facility was located in Sigur but due to some land issues from the habitant of Sigur the facility was moved to Sanand Gujrat because this territory is the labor cheap region (Tata Motors, 2010). After launching in India Tata Nano can be admired by larger market and so can attain market share in other emerging world markets. There could be several success reasons in emerging markets because it was expected that in next coming years the emerging countries will contribute 70% of world growth and India and China will be at the top of this contribution because both will contribute 40% in world growth (The Economist, 2010). The overall growth of low cost cars is increasing worldwide, 2 million low cost car sold in 2008 and expected to reach about 17.5 million cars globally by 2020 (Pope, 2008). Tata Nano is environmental friendly so developed markets such as North America and Europe can be targeted where the governmental regulations are strict for environment protection and people focus on environment friendly cars. The cars which are lighter and small consumes less fuel as compared to the large one, small cars does not pollute the environment (Vlasic, 2010) Tata Nano applied Blue Ocean strategy because Tata Company touched the hidden market that was the ultra-low cost car market. There are other competitors such as QQ3, m300, Marrie Star and S.R.V mini in the market but Tata Nano takes a lead in ultra-low cost market (Hollensen, 2011). The competitors are few in the emerging markets only three companies, Cherry Automobiles, Geely automobiles, and Suzuki-Maruti were already present in the ultra-low cost car market but still the price of Tata Nano is lower than the price offered by competitors as the Price of Nano was $2500, in the market offering cars at minimum $ 5,000 (Hollensen, 2011). Three countries will be best, USA, UK and Brazil because of the demand of such fuel efficient and environmental friendly cars. The Commission of UK revising its taxation policies in order to encourage fuel efficient cars (UNEP, 2012). UK will be the best country because there Tata Nano can compete with Alto SZ by Suzuki; the price of Alto SZ is $ 7,796 in the UK market (Nagra, 2012). In addition, the US also promotes fuel efficient cars and Tata Nano will get the price advantage because Mexican-made Nissan Versa cheapest car sold at $11,750 in the US market, which is still higher than Tata Nano $ 2500 (Vlasic, 2010). 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