Tata “Nano”: The People’s Car

Comparative Issues on International Management
Tata “Nano”: The People’s Car

INTRODUCTION

The Indian company called Tata Motors manufactures the cheapest car in the world (Said, 2012). This caught the attention of the consumers in India especially those that earned an average income in the country. This four-wheeled drive vehicle replaces the motorcycle and scooters due to its safety and convenience. India’s “People’s Car” will be a “safe, affordable, all weather vehicle for a family which is today traveling on a two wheeler (Robinson, 2008).

Despite the herculean problems that Tata Motors encountered to launch the Nano car, the company still pursue what they had promised the consumers that awaits the cheapest car. The launch date of Nano cars was delayed but eventually still reach the triumphant success of gaining the cost competitiveness in the market.

QUESTIONS AND ANSWERS

1.What inspired Tata Motors to build the Nano? Why was there a need for an inexpensive car in India?

People’s car, as what they have introduced the new Tata “Nano” car in the country of India. The average annual income in India is around 445,520 INR (8,000 USD), according to 2012 salary survey (Averagesalarysurvey, 2013). Considering the facts mentioned above, there is a need for an inexpensive car in the country. The population was patronizing the motorcycles and scooters, as it doesn’t cost them much. The vehicles were normally used by India’s average class family and used it for travel with four passengers seated on the motorcycles. This led the founder to built a car that promotes safety when travelling compared to the motorcycles and affordability in price that most of the population can afford. So when “TaTa announced that they would build a ‘people’s car’ that would be fuel-efficient and low on emissions and would cost just ‘one lakh of rupees” (Auto India, 2009), the population of India was in disbelief and interested to the promise that the company announced to the public.

2.What innovative steps did Tata undertake to design the Nano in a way that would meet the $2,500 price tag? Do you think that low price automatically means poor quality? How did Tata Motors address the quality issue while developing its budget car?

Every design had to cater three key requirements; cost, regulatory requirements and acceptable performance standards (Tatanano, 2013). The Tata Nano used the competitive advantage of cost and differentiation in making innovative move to design the Nano cars. “A firm can achieve a higher rate of profit (or potential profit) over a rival in one of two ways: either it can supply an identical product or service at a lower cost, or it can supply a product or service that is differentiated in such a way that the customer is willing to pay” (Grant, 2010, p. 222). The Nano car used the cost advantage through tight cost control, the process of engineering skills and process innovation. Although the Tata Nano will only earn a small profit on manufacturing the cars, they still continue what they had promised. Tata designed the car by asking the suppliers to cut cost on the components of the car. They have reduced the amount of the steel used, made the engine smaller and fuel-efficient The Nano car gained its cost advantage but still remain its quality through differentiation advantage. The research capability, design, quality and product engineering skills make the Nano cars exceed the expectations.

The Nano cars has the product engineering skills and design, the car can be construct and ship separately to be built in different locations, but they train people to maintain quality assurance. The design provides comfort and safety for the passengers compared to the motorcycles and scooters that apparently used by the middle class population. The research capability of knowing what people needs for the mode of transportation but still at a reasonable cost. Tata Nano addressed the quality issue by simply asking what does customer want in a car? And customer needs? Tata Nano still maintain the quality of the car by emitting some of the features that are not basically important for motorcycle users such as the radio and the air conditioner, which they can set-up according to their preference. These customers want a car that is affordable, fuel-efficient and safe to use.

3.What causes delay in Nano’s launch? What important features of the Indian economic environment were the key factors that caused the problem? What does this story teach about risks of doing business in India?

The Nano’s launch was delayed by land disputes. The company’s purchased a land area to built a plant in West Bengal, India. But after they thought that it was a government owned land, protest from local farmers arises claiming the land bought. Workers from the company failed to go to the plant due to the threats received from the protestors. Tata Motors forced to suspend the plant and moved the allocated land by the government but still farmers filed cases demanding for better compensation. Tata Motors decided to move to their existing factory as a quick solution delay the launch of the Nano car.

The key economic factors that caused the problem is the lack of implementation of acts, rights and memorandum of the Ministry in acquiring a land India. And considering the high dense population in the country, most of the land is use for living and farming. The learning that must have to be noted in the story is to always make a deep research and study before making any preliminary steps in businesses. Forecast the threats that may encounter to come out with a good action.

4.Would you agree that introduction of the Nano to the world auto market will be setting new trends in the auto industry, and possibly reshaping the industry? What did Tata Motors teach other automakers in terms of leadership and innovation?

The Nano cars set a trend in the automobile industry by addressing the customer needs in the mode of transportation particularly in the country of India. Like what Toyota done, the brand sells cars at price lower than the cost of the existing luxurious cars. They cater the market of Asia and acceptance in response considering the affordable replaceable parts of the car parts compare to the existing brands. The Nano cars set a new trend by showcasing the cheapest car in the world but still have the design and the quality that car owners wanted. Volkswagen produced tiny cars decades ago because there’s a need for a car. Then Tata motors produced Nano cars because there is a need for a car that must fit the budget of the most population in India. Car manufacturers will predominantly make a substantial move as that Tata motors approached the market.

Tata Motors got the “first mover advantage” in selling cheap cars in India and they have used the PESTLE Analysis as a competitive move in innovating the recreation of Nano Cars. In Political factors, the export rate in Asia is increasingly strong and India has tax incentives and other benefits. In Economic factors, Tata motors look at the global recession status of the industry and importing cars is very limited due low funds in the industry. So they take the strategy of producing cars within the country that fit to the status of income of the over-all population. In Social factors, India’s population of approximately 1.13 billion people (estimate for March 10, 2008) comprises approximately one-sixth of the world’s population (muslimpopulation, n.d.). In Technological factors, the engineers focus on the research and development on how to make the Nano car cost effective but still got the quality. Legally the Nano cars follow the India’s safety and the regulatory requirements. Ecologically, Nano cars are environmental friendly and met the India’s environmental requirements.

5.Do you agree that there is a future for low budget cars like Nano in other market besides India? Do you think Tata Motors is going in the right direction to develop its low cost Nano models adapted to European and U.S. markets? How would you evaluate a likelihood of success of the Nano on the U.S. market? What should Tata Motors do to win American consumers?

Every country has there own distinctive needs according to the lifestyle that people used to do. A car like Nano can be appealing to the European market considering the sizes of the streets and how European patronized small cars
because its easy to park in the city and the countries were very urbanized. But Nano cars cannot be appealing to the U.S. market considering of the lifestyle. In Americans, large size matters considering that shopping is one of the favorite activities of the Americans. The body size of Americans is quite bigger for Nano cars. U.S. has big parking spaces and winter is a major issue, so heater and big cars to drive in the icy roads is what needed in the U.S. market.

Tata Motors should create a car according to the lifestyle of the American Consumers. Tata motor’s can use the SWOT to know how to compete in the U.S. Market. Through this the company will know their strengths, the weaknesses that they have to reorganize, opportunities that awaits for future cars if they will implement further researches and development and threats that the company might encounter considering of the existing brands that leading the market and customer’s loyalty to brand that develop for years. Through this Tata motors will identify the type of car that they might offer to the U.S. market. CONCLUSION

Tata motors reach the triumphant success in the country of India in the creation of the cheapest car in the world. They have a remarkable move by understanding the needs and the budget of the customers when it comes to a car. A thorough research and development give them the best possible solution to provide the client’s needs. They have reviewed every angle that they need to address for the fabrication of the Nano cars except the land property they bought from the government.

Tata motors can be improved and be appealing to the European market. But there are factors that should be consider when targeting a specific location with a different culture like Europe that is entirely different from India. Nano cars cannot be appealing to the U.S. market considering the lifestyle, weather, existing brands, customer loyalty and the size of the car. U.S. market still preferred branded and top of the class cars. These are the things that Tata motors need to be focused with.

RECOMMENDATIONS

Tata motors should make an in-depth analysis on how to make a competitive strategy in targeting each market to introduce Nano cars. Nano cars can sell like hotcakes in the country of India due to a need of a cheap car. Nano cars needs to be improve before they target the European market due to the automotive preferences when it comes to features of car. Tata motors should create a product strategy considering that it is a different market setting. They should develop the resources they have to improve the Nano car and do an existing competitor’s analysis that can be a threat for Nano cars before it penetrate the market. Nano car can be an ideal car to another country but no in the U.S. market to consider the brand preferences and established brand in the U.S. market. Tata motors can make an alliance to the established brands to gain an appealing brand and introduce a car that will suit the American’s taste.

REFERENCES

Averagesalarysurvey.(2013). Average Salary in India. Retrieved August 18, 2013, from http://www.averagesalarysurvey.com/article/average-salary-in-india/28162105.aspx

Auto India. (2009). Tata Nano Review. Retrieved August 18, 2013, from http://www.tatanano.com/downloads/testrack_nano2.pdf

Grant, R. (2010). Contemporary Strategy Analysis. West Sussex, United Kingdom. John Wiley & Sons Ltd. Muslimpopulation. (n.d.). Demographics of India. Retrieved August 21, 2013, from http://www.muslimpopulation.com/asia/India/Demographics%20of%20India.php Said, S. (2012). The Top 10 Cheapest Cars in the World. Retrieved Aug 20, 2013, from http://www.therichest.com/auto/the-top-10-cheapest-cars-in-the-world/

Robinson, S. (2008). The Worlds Cheapest Car. Retrieved August 21, 2012, from

Tatanano. (2013). The Nano Story. Retrieved August 18, 2013, from http://www.tatanano.com/technical-specifications.html