Corporate Strategy

Assignment
On
TATA Nano

Submitted To
Prof. Gopinath

Submitted By

Bhargav.B (10B13)

MBA ‘ B’ Sec
TATA NANO -The People’s Car

VISION (SEEDS OF THE DREAM)

Mr. Ratan Tata said,

“I observed families riding on two-wheeler the father driving the scooter, his young kid
standing in front standing, and his wife seated behind him holding a little baby. It led me to
wonder for such a car which is safe & affordable to any.”

PLANNING OF TATA NANO

The project to create the world's cheapest production car began in 2003, under
the Chairman of Tata Motors, Ratan Tata, inspired by the number of Indian families
with two-wheeled rather than four-wheeled transport. The Nano's development has been
tempered by the company's success in producing the low cost 4 wheeled Ace truck in
May 2005.
Contrary to speculation that the car might be a simple four-wheeled auto rickshaw, The
Times of India reported the vehicle is "a properly designed and built car". The Chairman is
reported to have said, "It is not a car with plastic curtains or no roof — it's a real car."

To achieve its design parameters, Tata has refined the manufacturing process,
emphasized innovation and sought new design approaches from suppliers. The car was
designed at Italy's Institute of Development in Automotive Engineering with Ratan Tata
requesting certain changes, such the elimination of one of two windscreen wipers.

The Nano has 21% more interior space and an 8% smaller exterior, when compared with
its closest rival, the Maruti 800.The car will come in different versions, including one standard
and two deluxe variants. The deluxe version will have air conditioning, but no power steering.

The car was expected to be produced in the Singur plant in West Bengal, but due to
politically-motivated agitations instigated by the Trinamool Congress, mother plant has been
shifted to Sanand in Gujarat. The initial production target set by Tata Motors is 250,000 units per
year.

SWOT ANALYSIS OF TATA NANO

Strengths:
 First mover advantage
 Brand name of TATA
 Cheapest
 Eco-Friendly
 Fuel Efficiency & Engine
 Stylish

Weaknesses: ‡
 Booking is a tedious task.‡
 Exclusively for city usage purpose, not suitable for hilly areas.
 Placement of engine at the rear end can be a point of risk in case of head on collision.
 Low suspension power.
 Low engine capacity.

Opportunity:
 Cross border existence of market.
 Huge customer base in the form of Indian middle class.
 Growth in the automobile sector.
 Bikers can be motivated; auto rickshaw & second hand
 Market can be motivated.

Threats:
 ‡Rising oil prices.
 ‡Increasing cost of raw materials.
  ‡Indian roads not suitable for the kind of strength the product has.
 ‡Other competitors (Bajaj, Maruti)
 ‡Government may come with new rules.

PORTERS INDUSTRY ANALYSIS

Competition in the Industry

 Have to offer lower price to the customers.
 A competitor's single innovation can change the whole scenario of the industry.
Potential of new entrant into Industry
 The easier it is for a new firm to enter in a business, the more cut-throat competition.
 Barriers to entry
 Government Restrictions and legislations
 Patents
 High Entry Cost
Power of Suppliers
 If there are few suppliers providing material essential to make a product then buyers can
set the price high to capture more profit.
 In case of Nano the power of the suppliers is limited and thus their power is high.
Power of Customers
 ‡Power of buyers is low because they are large in number and highly fragmented
Threat of substitute products
 Various options in terms of cheap cars because after the launch, various other automobile
companies have lowered their prices of respective segment.

PRICING STRATEGY
Tata initially targeted the vehicle as "the least expensive production car in the world “aiming for

a starting price of 100,000 rupees or approximately $2050 US] despite rapidly rising material
prices.
As of August 2008, material costs have risen from 13% to 23% over the car’s
Development and Tata now faces the choice of:

 Introducing the car with an artificially low price through govt-subsidies and tax-Breaks,
or Foregoing profit on the car.
 Using vertical-integration.
 partially using inexpensive polymers or biodegradable plastics instead of a full
Metal body, or raising the price of the car.

ACTUAL OPERATION
Due to opposition to Tata's Singur car-factory by Mamta Banerjee, Tata Motors decided
to cease operations in Singur on 2 October 2008 and started manufacturing Tata Nano at its
Pantnagar plant. On her protests and the consequent pullout, the media heavily criticized
her and The Telegraph even said: "India is being raped by those who profess to be her soldiers,
the guardians of peace." Financial Times reported: "If ever there were a symbol of India’s
ambitions to become a modern nation, it would surely be the Nano, the tiny car with the even
tinier price-tag.
A triumph of homegrown engineering, the $2,200 (€1,490, £1,186) Nano encapsulates
the dream of mil lions of Indians groping for a shot at urban prosperity. That process has
stalled...No big economy has prospered without undergoing a huge, often brutal, shift of
labour from the countryside to cities and from farms to factories. There is a yawning gap
with China. India’s information technology and service sector, no matter how dynamic, simply
cannot absorb enough labour. To truly shine, India will need millions, perhaps tens of millions,
more manufacturing jobs. Why has it not created them?"
Currently, Tata Motors is reportedly manufacturing Nano at its existing Pantnagar
(Uttarakhand) plant and a mother plant has been proposed for Sanand Gujarat. The

company is hoping to produce 50 Nanos per day in Pantnagar by January–March 2009 ]. Ratan
Tata has said that Nano will be brought within set timelines. Not many dealers will be appointed
till March 2009. The company will bank on existing dealer network for Nano initially. The new
Nano Plant could have a capacity of 5, 00,000 units, compared to 3, 00,000 for Singur. Gujarat
has also agreed to match all the incentives offered by West Bengal government.
Future Prospects:

Tata motors is reportedly working on some very revolutionary and ecofriendly initiatives,
some of which are personally supported and endorsed by Ratan Tata. Other than the petrol
version of TATA Nano, TATA motors have plans to offer the following options:

 Green Versions:
TATA motors believe that the electric cars are the best alternative for petrol
driven cars. Hence keeping this mind TATA motors has planned to come with
greener versions of TATA Nano. Tata motors also believed to be making electric
version of the Nano, called the E-Nano which is intended to be “worlds cheapest
car”. TATA motors is also working with the French firm for using compressed air
as an energy source, the company has tied up with Moteur Development
International (MDI) for this purpose. Thus TATA motors is trying out various
alternatives and is doing its best to make the Nano up to the mark, future proof
and environment friendly.
 Diesel Powered Nano:
TATA Nano is finding a way to come up with diesel variant. TATA Motors
believe that diesel version of Nano will be more fuel efficient and cost effective.