Tata Nano Expands to Indonesia

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Why Indonesia?

a. Market summary
It is well known that with the global crisis and down-play in economics, the Indonesia automobile industry still remains a vigorous expansion rate. Indonesia has become a new emerging prosperous car market in the world. According to The Economist (2012), Indonesia's market is even increasing more rapidly than Chinese and its sales boosted approximate 900, 000 new vehicles from 2010 to 2011, by 17%. What is more, the sales volume of Indonesians automobile had overtaken Thailand in 2011, now the largest market in south-east Asian nations (The Economist, 2012). For 2012 first half year’s sales, ‘Car sales rose to 534,876 units in the first six months compared to 417,672 in first half of 2011 and according to Joko 2012’s sales could reach 920,000 to 950,000 units’ (JakartaGlobe,2012).

b. Reasons lead to the boom industry
The phenomenon of Indonesia automobile industry’s flourishing development results from a lot of combined social reasons. Firstly, the population of Indonesia is huge, ranked 4th in the world population and According to the national census (2010), the population of Indonesia is 237.6 million, with high population growth at 1.9% (WASPADA ONLINE, 2011). Then, the population growth accompanied with Indonesia’s economy dizzying ascent rose by 6.5% 2011 and it is optimistic that it will maintain its GDP growth percentage (Farida, 2012; Andreas, 2012). What is more important is that ‘Despite record sales, only 4% of the population has a car, a relatively low figure (see Figure)’ (The Economist, 2012).Finally, the labour force in Indonesia is cheap and wholly-owned foreign subsidiaries in Indonesia is permitted by the government (Foreign Capital investment Law No.1, 1967). In conclusion, since the huge population base, low car-owning percent, dramatically increasing income and cheap labour, the automobile industry in Indonesia is promising. Indonesia has become a new competing market for vehicle brands all over the world.

From another perspective, nowadays GDP per capita of Indonesia is relatively low, ranked 116 in the world (World Development Indicators database, 2012), with the growth of GDP per capital, it has turned to a point that economic and small-size cars will gain their great fortunes in this new land, therefore Nano can be sold there.

Figure 1:

Source: The Economist
Figure 2

Source:  World Development Indicators database, 2011

How to manage Tata Nano Indonesia?

For Tata Nano in Indonesia, the crucial management parts could be cost control, distribution and how to acquire their customers. These three points are of great difficulties to handle and can be the constraints (Demil, 2010 & Lecocq, 2010) of their business model if they are not able to get the key resources and deal with it properly. We will discuss the major parts of Tata Nano Indonesia’s management routines in the following texts.

a. Target market

In Indonesia, Nano’s target customers can be a wide range of people, various categories, exploiting the potential markets and try the best to gain more sales volume. Firstly, as mentioned in the foregoing paragraphs, public transportation in Indonesia is poor or unavailable and the big families usually travel by motorcycle which is a highly unsafe way to carry several people on one motorcycle, hence Nano is a suitable wheeler for the family to use as a MPV (multiple purpose vehicle). Then, for high school and university students, they can consider it as a cool and trendy way to drive to school. The third, selling it to female workers because Nano’s appearance is tiny and adorable. Fourthly, Tata could obtain the opportunities to sell Nano to some companies and organizations. Take a company as an example, the corporation can give Nano as a prize to some employees at the end of a year as incentive for their good performance.

b. Positioning

One main reason why Nano did not acquire its customer in India is that the company...
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