Tata Nano Case Study Argumentative
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1. How would you segment the Indian automobile industry? Where will Nano have the best appeal?
The automobile market in India shows that two-wheelers and three-wheelers in India vastly outsell four-wheeled cars. The graph below shows a good representation of how the market was segmented during the time of the case. This makes it easy to see that most mobile persons were buying motorbikes, scooters, and things of that sort.
A subdivision of the market can separate the car segment into passenger and commercial segments. It is the passenger segment on which Tata can capitalize. Many motorbike travelers can and do carry a passenger on the back of their bike. Like it is said in the case, if Tata can convert some of these two-wheeled riders by providing more comfort and safety for the price, Tata can capture a decent amount of the passenger car segment.
2. Will Tata be able to ensure quality and consistency? How important is car quality for the Nano? How important is service?
Tata held quality in a very high regard. They set specific quality assurance standards for all of their partners and affiliates making parts for them. Also, Tata believed that there was much built-in value in the design of the Nano because it was a project that was brand new and had to be reverse engineered to make up the cost savings necessary to hit the price point Tata planned on providing to consumers. Tata is big enough and has enough market share to be able to be concerned about quality and consistency. Tata employed the idea of the Nano being a “kit” car and having Indian entrepreneurs assemble and sell the cars to the public. These assembly operations would be trained by Tata corporate to stay up to the quality specifications set by the company.
Service is also a very important component in the car industry in general and is a vital part of the industry’s value chain. Met with the concerns about the overall service aspect of their business from the industry, Tata planned to increase the amount of licensed service outlets in the coming months and “keenly” concentrate on this area.
3. How do you evaluate Nano from various perspectives (Tata Motors, prospective consumers, society)?
Tata: The Nano is a great idea. The market is constantly changing and always competing on price. With a car which is extremely cost effective on the consumers’ pockets, Tata can gain market share and capitalize on a growing middle class and economy in general. The Nano makes sense for this market and has a very strong potential to do well, if executed properly.
PC: I am excited that I can buy a brand new car for just a little bit more than I could buy a used car for, even if it does not have many frills like air conditioning. I mean, it is India, after all. What is AC going to do to help with all the heat anyway? I am, however, concerned with how well the car with hold up to the wear and tear of daily use in a dusty and arid climate. How long will this car last before its maintenance costs dictate the purchase of another car? Will there be enough places to get my car serviced without having to travel out of my way?
Society: The idea of this car is genius, but the lack details leave a lot of room for negative assumptions. It is a cheap car, so the emissions must be horrible. Why would Tata try to sell that many cars to a people who are already living in overpopulated areas? Is it necessary to sell each person a car of their own? Would it not be more environmentally friendly to help create a form a mass public transport to keep up with the growing demand for transportation needs?
4. Evaluate the global expansion strategy for the Nano.
Tata’s global strategy with the Nano is to manufacture the the parts to assemble the car abroad, then send them to local manufacturing operations for final assembly. By manufacturing the parts in different places that can make the part the most cost effectively, Tata engages the distribution channel to make the sale of a car without the car actually being present. This could achieve some type of Just-In-Time efficiency highly improving on cost. When this strategy is applied to their ideas of expansion into other markets, the concept makes a lot of sense and can be highly profitable for the company.