2.0 Economic Environment3
2.1 Global Business Cycle Trends:3
2.4 Fiscal Policies:4
2.5 Consumer confidence and consumer credit:4
2.6 Income, Expenditure and Savings:5
2.7 Income distribution:5
3.0 Cultural Environment:6
3.1 Hofstede’s Cultural Dimensions6
3.2 The Changing Shape of Culture8
3.3 Going Green8
4.0 Political and Legal Environment:9
4.1 Political Structure9
4.2 Political Risk9
5.1 Appendix A12
5.2 Appendix B13
5.3 Appendix C13
5.4 Appendix D14
TATA Motors Limited is India’s largest motor passenger automobile and commercial vehicle manufacturing company. Its annual revenue exceeds USD six billion, ranking it among the top ten companies in India. Unveiled in January 2008, their new TATA Nano passenger automobile was a much awaited car by the local and international markets. (Tata Motors, 2008) Production began later that year. Its distinct features and reasonable price boosts its popularity and demand. Excluding taxes, the TATA Nano is priced at USD 2500. It is compact (only 3 meters long) with enough space to comfortably seat four people. Fuel efficiency also plays a major role in its success; it does almost 50 miles per gallon of petrol. This highly fuel efficient, spacious car is also environmentally friendly, emitting less carbon dioxide than most two wheelers. (Tata Motors, 2008)
Currently Nano is undergoing modifications to cater to foreign markets. By 2011, a modified Nano Europa is to be launched in Europe as a more powerful car with better safety and regulation to fit European standards. (Business Line, 2009) Development of the Nano Europa creates an option to market a similar model for the United States with a mutually beneficial arrangement for both countries.
In order to penetrate the American market, the country’s economic, cultural, political and legal environment must be analyzed.
2.0 Economic Environment
The economic environment of a country describes the external environment a firm will be operating in. This section attempts to discuss some of the most important economic variables.
2.1 Global Business Cycle Trends:
The global financial crisis reflects falling purchasing power in the international market and therefore is of great concern to Tata. The crisis worsened in September 2008 in the United States with bankruptcies, credit freeze and panic (James, Park, Jha, Jongwanich, Terada-Hagiwara & Sumulong, 2008). From there it spread to the rest of the world; from the Eurozone to the developing economies of Asia. As a result consumer behavior has changed substantially. Understanding these changes will improve Tata’s competency in the new conditions. The sharp drops in US consumer confidence and expenditure “could hold serious consequences in a country where private consumption accounts for more than 70% of the GDP” (Datamonitor, 2009).
GDP is an important factor as it allows the company to estimate purchasing power in the wake of the global crisis. Falling GDP usually means falling purchasing power. According to (Euromonitor International, 2009), two or more consecutive quarters of negative real GDP growth indicate a recession. Appendix A shows that US Real GDP had been experiencing persistent negative growth since 2007.
Higher unemployment will act as a hurdle to Tata’s Nano’s success in US by reducing disposable income and therefore demand. Slow down in the housing sector has slowed down the construction industry and led to job cuts. With 82000 job cuts in the construction industry alone in November 2008, the US unemployment rate stood at 7.2% which is the highest in 16...