Tata Motors - Innovation Strategy

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  • Topic: Tata Motors, Tata Nano, Automobile industry in India
  • Pages : 10 (2882 words )
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  • Published : April 25, 2012
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INNOVATION STRATEGY

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OCTOBER 2010

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TABLE OF CONTENTS

1. EXECUTIVE SUMMARY3
2. TATA NANO: LESSONS FROM AN INNOVATOR4
History of Tata Motors4
The Indian Automotive Industry 5
The Origin of the Nano 7
Tata’s Unique Business Model 8
Activities at Tata Motors 11
Effects on India’s Ecology and Economy 12
Risk of Imitation 13
Sustaining Competitive Advantage 13
3. REFERENCES16
4. EXHIBIT 117

1. -------------------------------------------------
EXECUTIVE SUMMARY

After years of research and development, Tata Motors stunned the worldwide automotive industry by manufacturing a USD 2.500 car, against expectations of market participants and consumers who argued that a car with these characteristics would never succeed or comply with safety and environmental regulations.

This car is nowadays highly demanded in the Indian market, and soon will be offered in many other emerging countries. These less affluent countries represent the base of the pyramid where the needs of billions of unsatisfied people can be met by this disruptive innovation.

The purpose of this case study is to evaluate the innovation strategy of Tata Motors, exploring their approach to the needs of the Indian market and the advantages and disadvantages Tata’s strategy yields.

2. -------------------------------------------------
TATA NANO: LESSONS FROM AN INNOVATOR

3.1. ------------------------------------------------- History of Tata Motors

Tata Motors’ long history started as a manufacturer of locomotives and engineered products in 1945. Tata is part of a well diversified group of businesses, Tata Group, which is active in industries including energy, information systems and communications, materials, services, consumer products, and chemicals. This industrial scope demonstrates a competitive strength of Tata Motors, which benefits from a well integrated and diversified parent company (see Eaton and Lemche, 1991). Having taken advantage of its association with Daimler Benz AG, the company grew into the largest automobile industry. According to Crainer (2010), the company is the world’s fourth largest truck manufacturer, and the world’s second largest bus manufacturer. According to Farris et al. (2009), news of the May 2008 acquisition of Land Rover and Jaguar by a non-western company surprised many, mainly due to the unpopularity of this company’s global success. In fact, in September 2004, Tata Motors was the first Indian manufacturing company to be listed in the New York Stock Exchange. Tata Motors operates with 18 subsidiary companies and eight affiliates. The company has presence throughout the world, with operations in the UK, South Korea, Thailand and Spain, and has joint venture or franchise assembly operations in Kenya, Bangladesh, Ukraine, Russia, Senegal and South Africa.

3.2. ------------------------------------------------- The Indian Automotive Industry

The Automotive Industry in India has been mainly dominated by the motorcycle, which is used in India for multiple purposes (See exhibit 1). There has always been a great difference between the prices of a two-wheel versus four-wheel vehicle. This plus traffic and road conditions and the lack of available financing for four-wheel vehicles, made it impossible for most Indians to afford even the cheapest car of the market, at US$4,800. For decades, the automotive industry in India lagged behind those of the United States and Japan. However, after the nineties, things changed dramatically, fostered by different means including Indian trends, credit access to customers, highly trained professionals and comparably low labour cost. Improvements were especially due to the Indian Government’s enabling policies that eased regulations on foreign trade and restrictions on private companies, thereby attracting investment and growth in a country whose population is around 1...
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