With reference to textbook, Crafting & Executing Strategy, ISBN 9780077720599 ab

ID: 2741123 • Letter: W

Question

With reference to textbook, Crafting & Executing Strategy, ISBN 9780077720599 about case Tata Nano, please explain - History of the organization (unit/company) - Current mission statement (if any) - New (suggested) mission statement - Current vision statement (if any) - New (suggested) vision statement - S.W.O.T. analysis for the company - Strategic group map for the company - Competitive analysis - Industry analysis - Short term plan/longer-medium term plan - Human resource plan (if applicable) - Detailed Financials (current and go forward) - Implementation - Organizational culture impacts • What does a 9-cell industry attractiveness / business strength matrix show • How well is the existing strategy working? • What issues should the Board of Directors be concerned about? Which should have the highest priority? • Identification of problem(s) Do you clearly and explicitly articulate that issue(s) that face Tata and the Nano? • Analysis of identified problem What information from the case supports your problem identification? You will have a lot of data from the case - I'm not looking you to restate all the details - pick the points that are relevant form the SWOT, PESTEL, etc that help build your case. • Recommendations What should Tata do, and why? What are the implications if they do/do not carry out the recommendations?

Explanation / Answer

History of TATA Nano:

Ratan Tata announces his vision of a small car. He felt that an ideal price for a car should be $2500 or Rs. 1 Lakh. Small car team head Girish Ahuja had to keep the budget of the car below 1 Lakh taking into consideration The cost, the regulatory requirements and acceptable performance standards. One out of three designs were selected. Small car Nano was decided to be produced in Singur in West Bengal. The 1 Lakh car was named as Nano and unveiled at Delhi Auto Expo and witnesses an explosion of media interest. The Project moves from singur to sanand in Gujarat.

Following the India's growing openness, easy availability and easy availability of finance at relatively lower rate with attractive offers, the demand was Nano was very high. People felt a couple of Advantages such as

Drawbacks can be listed as below:

Is TATA NANO a BLUE OCEAN STRATEGY?

According to KIM and MAUBORGNE, in a blue ocean strategy, one creates uncontested space where the competition is irrelevant, invents and captures new demand and offers and also helps customers a leap in value while also streamlining its cost.

Features of BOS strategy that Authors claim.:

SWOT ANALYSIS- TATA NANO:

Strenghts

Brand name

Cost price low Awareness in the market

Fuel Efficient

Safe (European safety standards)

Oppotunities

TATA Large market for selling

First car in low range

Can hit in global market

Weaknesses

Low power

Not a status symbol

Threats

Company rivals

Not sure to hit in rural and semi urban areas

Limited features

TATA has come up with a one lakh rupee car that may create a unique marketposition for the “Nano” brand and operate in a Blue Ocean market. The Value aNano will bring to its customers will be totally different from a high end car say aMercedes S Class. But, because the value is as perceived by the buyer, it will beunique. Value flows from the customer to the supplier. This is contrary to asupply chain where the flow is from the supplier to the customer. Value can becategorized in various layered levels. At the core is the “Product Value” or thetechnical value derived from a source of supply. For e. g. let us again consider theTATA Nano. The product value for the buyer may be access to an economic modeof four wheel transportation. The second layer consists of the “Service Value”or the value provided by the services surrounding the product. The service valuefor the Nano may be the warranty the car will carry which in turn will provide anownership experience free of maintenance costs. The third and the penultimatering will be the “Wow Value” or the factors leading to customer delight.

These may consist of factors such as space (which is said to be considerably morethan theMaruti-800, its nearest competitor) and ergonomics of the car, given the price point it will operate in. The interesting thing here is to note that these factors will be completely different for a Mercedes customer. The “Wow Value” i.e. spacein the TATA Nano won‘t excite such a customer. May be a beer cooler as a standard accessory will !! Toyota launched its luxury sedan “Lexus” as a different brand (not as another Toyota car) because they felt that to compete with the BMW and Mercedes brands, they need a brand which will provide a greater“Snob Value” which the “Value for Money” image of Toyota brand couldn‘t afford.

When TATA Nano was announced the publicity and curiosity it had aroused was phenomenal without getting into details of how much buzz it created and how almost everyone wanted to have Nano, how booking went soaring. There were few jokes that TATA will recover Nano’s R&D cost just from the interest of booking deposit of Nano. Time passed people grew impatient TATA couldn’t deliver on time and then some unwanted, undesirable incidents happened. Due to such events its demand fell but the question is how can the company bring back its desired demand. Let us discuss some useful recommendations.

1)     Target Market : Promotion Stratagy TATA Nano can be marketed as niche segment product. Market segmentation will be done age wise from the age 18 to 30 year and above 55 years. > 65% population is below the age of 35 years so there is lot of opportunity available in 18 to 30 years segment. Such things are steadily increasing; people are in need of a car which fulfills their wishes like mileage, performance, safety, easy parking and etc. Nano can be the best for them. Grabbing this niche market and producing Nano for this Oppotunity can bring up the demand.
Remove the tag of cheapest car & promote it as small car with no compromise
2)     Add Luxury – (Change Price preposition )
TATA got totally wrong is Indian mindset regarding low cost model, For Most Indians, car is not a necessity or about convenience, for them it is a luxury and a sense of pride is attached to it. When Nano was marketed as cheapest car with minimalist approach whole fun and excitement of buying a first car got killed. People don’t really feel proud about showing off Nano, which is a big factor behind purchasing a car. A movie like Do Duni Char has rightly reflected the sentiments of middle class family purchasing their first car. Instead of selling it at dirt cheap rate sell it at a higher price with lot of cool and safety features. High end model of Nano can be sold at around 3.5 lacs this will improve profit margin for TATA and for the dealers as well.
3)     Make it Powerful and Safest Small Car – (Change in Product)
if TATA really want Nano to be successful it has to be reengineered, with current engine no amount of marketing or promotion is going to help Nano.Instead of making it poor people’s first car, make it at rich people’s first car. First thing that requires a change is an engine, rather than having 750 cc engine, equip Nano with powerful high cc engine probably Vista’s engine can be used here that will save lot of cost also. Second Make it two seater car remaining space should be used for safety features and for boot space. This will also increase lot of boot space. So even if it is a small car it will have very powerful engine, international level of safety standards and unmatched boot space, thus three primary concern of consumer is being taken care of. Infact there are no such cars available in the market. In a true sense it can be small car with no compromise
4)      It’s Urban car – (Place)
Success has lot to do with its scarcity. Unavailability of a particular product creates demand as everybody wants to have it but very few will get it. Here Urban area should be focussed. Even the demographic segmentation suggests that target group is more urban i.e. Top 50 cities, roughly around 150 million people it is more than Germany and UK put together. Marketing Nano in few cities will mostly reduce the cost of marketing as well. TATA can think of Marketingting Nano in tourist spots like Goa, Dehradun, Shimla etc TATA Nano can be used there for lease and rentals hence it will be the one of the unique way to promote it. Once people experience it, feature rich Nano will be an attractive buy for them.

Maybe if TATA follows a good mixture of the above strategies then it might achieve good sales and increase its demand eventually. A good thought of introducing a car at affordable prices should also have a good strategy so as to survive and grow in the competitive environment.