Tata Nano Case Analysis

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  • Topic: Tata Nano, Tata Motors, Automobile industry in India
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  • Published : February 27, 2013
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Tata Nano Case Analysis
Ratan Tata, chairman of Tata Motors Ltd., hoped to raise the status of Middle class families in India by offering the Tata Nano. Expectations were increasing amongst the customers regarding the product features and its efficiency. Competitors were eagerly waiting for its arrival to find out what they were going to be up against. It had strong and convincing features and was actually a good product. Unfortunately there were too many strategic marketing problems that kept it from being as big as they thought it was going to be. We will explain the problems it met and showcase some alternative solutions that could be implemented.

Strategic Marketing Problems
Tata Nano tried to position itself in the two-wheeler market. Tata Motors thought they should go after the young college kids or anyone who currently owns a motorbike. They believed that if they created a car that could match the qualities that make the motorbikes so attractive: the fuel efficiency, low purchase and maintenance costs, and small size. What they didn’t realize was that they priced themselves out of the market. While the Nano was set at the lowest price for an automobile it was still expensive compared to the motorbikes. They were never effective in their efforts to target or market to any group and never seemed clear on who they were really going after. They had so many options to choose from when trying to position itself in the market. But in the end they went half way and never fully committed to a single group. They tried to go after the two-wheeler market but priced themselves out of that market, while they marketed themselves as “the world’s cheapest car.” Which brings up the next problem it was marketed as a cheap car. It’s hard to understand the reason they marketed the Nano this way. Why would anyone want to buy a car they thought was cheap? They should not have played up the “cheapest car in the world” sound bite that the chairman loved to say. In a country like India, where status and class is so important, where, there is still a caste system, why would anyone buy the “cheapest car in the world?”

Production delays, waiting lists, reports of the cars catching fire. These were the big things that hurt the initial launch and set them back. Tata Motors planned to produce 350,000 Nanos in the first year at a plant (Singur). Unfortunately protest broke out from the farmers whose land was taken to build the plant. They were upset that their land was taken from them without compensation. They had to move to a new site, which meant taking substantial financial losses. Also they had to delay production 18 to 24 months and the initial production went down to 50,000 Nanos. Waiting lists were set up, where people had to pay to pre-order and put down a hefty deposit. Then the problems began to surface. The reports of cars catching on fire, the noise and heat problem because the engine was in the back. There were also installation issues as well as other technical issues. Ratan Tata called his shot way before he got to the plate. He hyped up too much without fully knowing what the customers really wanted and how much they were willing to spend. He said they could undertake this feat and ended up going through with it to prove they could. Expectations for the Nano grew and it soon got out of control. So in the end when the Tata Nano was launched and the initial problems were discovered, it took a long time to gain people’s trust back. Looking at Figure 1 you can see the sales from 2009 and 2010 by months. You can see the slow start and the ups and downs because of the problems that surfaced after the initial launch. There was a great quote from an article by Matthew J. Eyring about the Tata Nano: “A cheap car that’s not really cheap, a safe car whose safety was questioned, and a poor people's car that people weren’t buying.” I think that this is a great nutshelling of the problems with the Tata Nano.

Alternatives Analysis...
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