Tata motors wanted to compete in the Indian automotive industry by creating a form of transport that could carry up to 5 passengers. One of the requirements of the car was to provide an alternative to a traditionally used overloaded motorcycle which was unsafe. The main feature of the car was definitely its low sticker price, making it affordable for the growing middle class family in India. So, Tata Motors priced the ultra low-cost car at 2500$.
But, how could Tata set the price of its product without even having done a study on production costs? They took the barrier of 2500 dollars as a challenge, so working closely with its suppliers should succeed in producing the car and also get some small margins for providers.
Now I am going to develop a SWOT analysis of Tata Motors and name a few key strategies:
International strategy based on the competitive advantage: a new product, Tata Nano; the cheapest car in the world. They took a smart approach in responding to the market demand.
Tata Motors is part of the Indian conglomerate Tata Group which comprises 98 companies in seven business sectors. That is a really positive point for future needs of Tata Motors, as it might have to do business or look for any necessities to develop the business inside the Tata Group instead of going outside the global market (other companies) to find out what it could be looking for. Therefore, Tata motors have extensive backward and forward linkages and it is strongly interwoven with machine tools and metals sectors from other parts of the Tata Group. But it must be said that Tata Motors is not self-sufficient in all products and raw materials it needs to develop the Nano.
Tata motors is gearing up for the global market as one of India’s largest automobile makers, however has a lower than 20 % share of the Indian passenger car market and has recently been suffering a sales slump. This can be changed with the favourable government policies and regulations to boost the auto industry including incentives for R&D.
With the acquisitions of Jaguar and Land Rover give Tata Motors an entry into the US and other potential markets. With another deal, with Fiat, Tata may expand the offering into South America, a Fiat stronghold. Alliances with key players that produce a transfer of knowledge from high end markets.
Other distinct advantages in comparison to other multinational company competitors is the cost advantage as labour cost is 8-9% of sales against 30-35% in developed economies.
One big strength of Tata Motors is the pricing strategy. There are various factors to determine a price of a car. These factors are such as market condition (it can’t be too low or too high with the prices of same vehicle from competitors, it has to be at par), cost incurred to build a car, profit by company, dealer profit. Important point of competitive advantage of the labour workforce in India compared to developed countries.
About the weaknesses; its medium-term goal is to export the Nano to Europe and North America and Tata Motors has weak of experience in certain new sectors as well global countries. Tata Motors didn’t diversify into carmakers sector and focusing all their efforts based only on ultra low-cost car market.
The main threats they face are: The environmentalists are concerned about the impact that exponential increase sales in ultra low cost car might cause in pollution ranges, replacing motorcycles, much less polluting. The other one is about the safety regulations. Thinking in exporting Nano in Europe and North America where the safety standards are much more advanced and strict than in emerging countries, Tata Motors will have to be aware of the latest updates in safety regulations. A part from those two main reasons, there also exist a high level of competition
The opportunities; the rise...