DE LA SALLE UNIVERSITY

Ramon V. del Rosario College of Business

Master of Business Administration

Tata Motors: Can It Become a Global Contender in the

Automobile Industry?
I. Background

Tata Motors, Ltd., was a leading automobile company in India by its revenue and
manfacturing capability that it able to maufacturing number one in commerical vehicle and
number three passenger vehicle in 2012.

It was ranking fourth-largest medium-and large-sized bus maker and fourth-truck

maker in the world. Moreover, its pasenger car portfolio ranged from the world’s least
expensive four-wheel automobile, the Nano, to luxury brands Jaguar and land Rover. The
company manufacturing all over the world inculding India, U.K., Thailand, South Africa ,
Morocco, South Korea, and Spin. Company hired more than 1,400 engineers and scienttists
in six R & D centers in India, Italy, the UK, and South Korea.

The problem of Tata is most likely more external factors than internal factors,
becasue of the poor macroeconomic conditons that would be impact of performace of
company that which it need to study for each head of divisonal management.

Another things, if government is not longer to subsidies the diesel vehicles, with
which would effect the diesel vehicles sales in India. In additon, company need a expanding
strategy for its low cost model-Nano brand, and to initial the substaintial investment for
product development.

History

1. Tata motors was one of Tata Group, which consist 90 companies divided seven
business sectors, that is, chemicals, information technology and commuications,
consumer products, engineering, materials, services, and energy.

2. Corporation had operated in 80 countries with gross revenues 83.5 billion in 2011;
roughly 60% of revernue were come from outside of India; it was biggest private
corpoation with employees over 425,000.

3. Tata motor began in 1945 for made maufacturing locomotive and engineering
products by it Engineering and Locomotive company.

4. In 1948, Tata started making steam road rollers, in collaboration with UK

maunfacturer Marshall Sons.

5. Tata had agreeed with Daimler Benz AG, Germany, to manufacture medium-sized
commercial vehicles for 15 years in 1954.
6. Company produced hydraulic excavators for Japan’s Hitachi with assistance of their
technology know- how in 1985.

7. In 1986, Tata built independly of 407 “pickup” and Tata 608 light truck of the light
commercial vehicle.

8. Tata manfactured passenger cars joining agreement with Cummins Engine Co. in
1991 and made high horsepower and low-emission diesel engines for cars and trucks
in 1993.

9. In 1994, Tata both sign a join-venture with Daimler-Benz/Mercedes-Benz to produced

Mercedes-Benz passenger cars in India, and with Tata Holset Ltd., UK, to made
turbochargers for the Cummins engines.

10. Tata Safari was the first sports utility vehicle launched in 1998 and design
independently the V2, that is, number one car in india in 2001. Meanwhile, Tata
discontineue join venture with Daimler Chrysler and found the new partner wtih
UK-baased MG Rover in 2002.

11. In 2003, Tata made a record of three millionth vehicle and replaced the company’s
name from Tata Engineering to Tata Motors limited

12. Tata look for new partner with Daewoo commercial Vehicle Co. Ltd. for join venture
for manufactured the heavy-duty commerical trucks in South Korea.

13. In 2005, Tata motor acquired 21 percent share in Spanish bus maker, Hipo Carrocera
SA that which produced small trucks and SUVs.

14. Tata reach the vehicle recore to four millionth vehicle in 2006; and join venture with
Brazil’s Marcopolo for buses for India and foreign markets; expanded Tata Daewoo’s
product line to include LNG-powered tractor-trailer trucks, and join ventures with
Fiat; and join veture with Thonburi Automotive Assembly Plant Co. in Thailand to
make assembely plant and market pick trucks.

15. In 2007, Tata sold all its share in Tata-Holset to Cummins, Inc.

16. Tata bought the British brands land Rover and Jaguar, and sell the passenger cars and
pickup trucks in the D.R.Congo and name it Nano, exporting to South Africa, Kenya,
and around Asia and Africa countries at price $2,250 won India’s Car of year award
in 2009. Moreover, Tata bought 70 % of Hipo Carrocera and 50.3 % share in Miljo
Grenland innovation, a Norwegian firm specializing in Electri vehicle technology.
 17. Meanwhile, Tata made a deal with Motor Development International (MDI) from
Luxembourg to develop an air-powered car. Also in 2010, the Tata devloped Nano
Europa to export the Europe market.

18. In the 50th operation celebration of 2011, Tata open a commercial vehicle assembly
plant in South Africa and Land Rover assembly plant in India. Tata Divo Luxury
Coach and the Tata Starbus Ultra, the two long-distance buses were lauching to
market, and Tata Sumo Gold and Range Rover Evoque which are SUV’s were also
introduced to market place. In addtion, upscale Tata Manza and Prime heavy truck
were introducing to South Africa.

19. In 2011, Tata’s Jaguar c-x75 won the Louis Vuitton award in Paris, and Ranger Rover
Evoque won Car Design of the Year. The new Pixel, Tata’s city car concept for
Europe, was displayed at the 81th Geneva Motor Show. Tata aslo were exporting to
Sri Lanka, for selling Tata Magic IRIS, a four-to-five seater four-wheel passenger
carrier. In addtion, Tata Ace Zip, a small “micro truck” for poor road condition and
new Tata Inica eV2, the most fuel-effcient car in India.

20. For its operation improving, Tata signed an agreement with Malaysia’s
DRB-HICOM’s Defense Technologies for its Anti-Terrorist Indoor Combat Vehicle
concept for three types vehicles in 2012 Expo: Tata Safari Storme, a large SUV; Tata
Ultra, a light commercial vehicle (truck) and India’s first five-axle rigid truck.

Product offerings

1. In 1986, Tata is selling 407 “pickup” and Tata 608 light truck.

2. Tata Safari was the first sports utility vehicle launched in 1998.

3. Sals British brands land Rover and Jaguar, and sell the passenger cars and pickup
trucks in the D.R.Congo and name it Nano in 2009.

4. In 2010, the Tata devloped Nano Europa to export the Europe market.

5. In 2011, Tata open assembly plant in South Africa and Land Rover assembly plant in
India. Tata Divo Luxury Coach and the Tata Starbus Ultra, the two long-distance
buses were lauching to market, and Tata Sumo Gold and Range Rover Evoque which
are SUV’s were also introduced to market place. In addtion, upscale Tata Manza and
Prime heavy truck were introducing to South Africa.

6. Tata’s city car concept for Europe, Tata aslo exporting to Sri Lanka, for selling Tata
Magic IRIS, a four-to-five seater four-wheel passenger carrier. In addtion, Tata Ace
 Zip, a small “micro truck” for poor road condition and new Tata Inica eV2, the most
fuel-effcient car in India.

7. Tata Safari Storme, a large SUV; Tata Ultra, a light commercial vehicle (truck) and
India’s first five-axle rigid truck.

II. Statement of the Problem

How should Tata expand the market for its commercial vehicles outside India?

III. Objectives

This paper aims:

● To identify strengths and weaknesses of Tata Motors and opportunities and threats
available or presented to it
● To thoroughly assess Tata Motors’ internal and external environments
● To provide strategies for market expansion
● To recommend to Tata Motors the optimal course of action and a strategic plan to
dominate the global market in internet advertising

IV. Areas of Consideration

A. Point of View

This paper focuses on the point of view of the management team of Tata Motors.

B. Company Vision, Mission, Culture, and Values

As illustrated below, the mission statement of Tata Motors is “to be passionate in

anticipating and providing the best vehicles and experiences that excite our customrs
globally.” The vision statement of Tata Motors is to be the “most admired by our customers,
employees, business partners and shareholders for the experience and value they enjoy from
being with us.”

The culture of Tata Motors centers on accountability, customer and product focus,
excellence, and speed. Moreover, here are the values that Tata Motors uphold:

● Inclusion
● Integrity
● Accountability
● Customer
● Innovation
● Concern for the environment
● Passion for excellence
● Agility

C. SWOT Analysis

i. Strengths

● Tata motors is a market leader in Automobile Industry with high market share.
● Tata Motors have huge employee base.
● Tata Motors produce low price car with low fuel consumption.
 ● Tata Motors is the reputed brand in Indian Industry.
● Tata Motors Limited is India’s largest automobile company.
● Tata Motors has been aggressively acquiring foreign brands to increase its
global presence. Ownership of heritage of British motor brands like Land
Rover and Jaguar.
● Tata’s management is strengthened by the collective experience of its partners
and acquired companies – this includes general management, marketing, sales
and operations.
● Managerial Expertise – Experience of CEO, CMO & CFO.
● Successful New Products launched in last 5 years.
● Strong financial condition.
● The research and development team of Tata Motors is very strong.

ii. Weaknesses

● Despite buying the Jaguar and Land Rover brands, Tata has not got a foothold
in the luxury car segment in its domestic, Indian market.
● Return on Investment on Tata motors shares in low.
● Most of the automobiles Tata manufactures are based on older platforms.
● Missing some key skills/competencies.
● Low level of stocks in times of peak sales.
● Poor Product Design.
● No clear Strategic Direction.
● Weak marketing skills.

iii. Opportunities

● Tata Motors can take the advantage of their low cost car by entering into third
world countries where people have low purchasing power.
● Joint ventures in other countries allow Tata Motors to easily enter into new
market.
● Tata Motors should focus in developing luxury cars.
● Acquisition of rivals.
● The Nano could sell well in other geographic markets. Expanding markets
such as China may find the Nano just the answer.
● Favourable Government Policy
● Expanding to New Geographic Areas
● Expanding Product Line.

iv. Threats
 ● Rising prices in the global economy could pose a threat to Tata Motors
Limited on a couple of fronts. The price of steel and aluminum is increasing
putting pressure on the costs of production.
● Since the company has focused upon the commercial and small vehicle
segments, it has left itself open to competition from overseas companies for
the emerging Indian luxury segments.
● Slow Market Growth
● Rising Raw Materials Cost.
● Entry of Potential New Competitors.
● Powerful competitors for the luxury market including Honda, Toyota, Ford
and Mercedes-Benz are pushing into the Indian market.

D. PESTEL Analysis

i. Political Factors

India was the seventh-largest nation and its territory size as

one-thirdth-size of United States. It is second lagest population of 1.2 Billion
with its population growth rate was 1.3 percent, only next 1.3 Billion of
China’s in 2012.

ii. Economic Conditions

India’s 25 percent populaton was below property line in 2011. The

GDP of India was $4.5 trillion ranked as fourth in the world. The per capita
GDP of India was about $3,700 in 2011 and growth rate is 7.2 percent.

India has strong domestic demand that it enble to recover the global
recession, but the growth rate slow down due to the mssing of economic
reform of country, high interst rates, and inflation problem that is causing the
engergy subsidized by government including diesel. However, too much
subsidy expense increasing the fiscal deficit of government.

India Reserve bank report the inflation rates from between 7 to 10 %,

since 2009, and dropped to 6.6 % in early 2012. And it might not be impoving
because energy price increased for the unstable politic situation in middle
East.

When rupee was cheapter 12 % between 2011-2012 , that which given

the competitive advantage of India’s exporting.
 iii. Technological Factors

India’s education system has been cultivate many engineering, design,

and information technology services that rising India to an economic giant in
the world. Through many join-venture with foreign companies, Tata able to
upgrade its manufacturing capability and now-how.

iv. Sociocultural Forces

The problems of the poor infrastructure, lack of nonagricultural

employment, limited access to education, and rapid migration influx to crowed
uban area, which is causing by birth growth rates approaching 7 % , that is, it
result from young generation with average age 26.5 years. The low
dependency ratio and high annual savings with 30 % of income and
investment rates.

v. Environmental Forces

Economic improving made the environment degradation,

overpopulation in urban area where inadequate public facility fail to
accomadate crowed population.

In the 20 million population of Delhi city where is a notorious city of

most air pollution on earth casusing by coal energy consumption by indusry,
household, and vehicles.

vi. Legal and Regulatory Factors

The many corruption scandals of government officers making

legislative party delay passing the laws of the national economic reform from
2010-20112.

V. Theoretical Framework

This paper uses the Ansoff Product-Market Matrix as its framework. It is a

standard Business Plan tool that provides four common Growth Strategy options by analyzing
the relationship between Products (existing and new) and Markets (existing and new).
Market Penetration

This strategy focuses on continuing to sell existing products or services into

existing markets. The goal is to increase market share in the current marketplace by winning
a higher percentage of new business opportunities, and/or taking customers from competitors.
Typically, this strategy is most effective when the overall market is growing, and it is done by
implementing one or more of the following competitive tactics:

a) New targeted marketing campaign(s),

b) Increase sales force / refine sales process,
c) Aggressive pricing changes (undercut competition),
d) Value-added services aimed at dominating high growth market segments.

Product Development

This is the strategy of introducing new products / services into existing markets.
The goal is to increase market share in the current marketplace by increasing revenue per
customer, and attracting new customers in the current marketplace with new product options.
This strategy is often part of the natural growth of organizations, however it requires the
development of new competencies (often done through acquisition or strategic partnerships),
which inevitably brings new risks and expenses.

Market Development
 This is the strategy of selling existing products into new markets. The goal is to
increase revenue by moving beyond the immediate customer base, attracting new kinds of
customers for existing products. Typically, this involves identifying new vertical market
segments that have not yet been served, developing new distribution channels, or
international expansion. New pricing or packaging strategies can be effective with this
strategy.

Diversification

This is the strategy of diversifying into new businesses by introducing new

products into new markets. This is the most risky of the four strategies, and the least
attractive option unless there is a unique circumstance that would warrant such a move. Also,
Diversification can be a move into either a related business or completely unrelated business,
but the former is almost always preferable.

An ideal way to use the Ansoff model is to consider each of the Growth Strategy
options above from the perspective of your own organization. For each strategy describe
likely scenarios for the current, near-term and long-term product-market situation, then rank
them in order of the strategy most likely to see tangible results in the near term. While it’s
possible (and common) to pursue more than one of these Growth Strategies simultaneously, it
is often recommended to pick one (or two), and focus company resources on supporting that
strategy.

The standard models for Horizontal and Vertical integration are also helpful tools
for formulating Growth Strategy:

Horizontal Integration

This strategy (a.k.a Horizontal Expansion) has similarities to Market Development

(described above) in that it seeks to expand by selling a product (or variation of that product)
in numerous markets, although generally Horizontal Integration is on a larger scale than
Ansoff’s Market Development strategy. Horizontal Integration often refers to a firm merging
with or taking over another firm in the same industry, and often in the same stage of
production of a similar product. (e.g. car manufacturer merging with another car
manufacturer). The primary goals of Horizontal Integration strategy are to increase market
share for a particular product or service, and build economies of scale.

Vertical Integration

This strategy (a.k.a. Vertical Expansion) is a method of expansion by owning

upstream suppliers and / or downstream buyers in the supply chain. It’s a variation of
Ansoff’s Product Development strategy (described above) in that seeks to expand by
introducing new products / services in an existing market, although Vertical Integration tends
to be on a larger scale and is focused on the supply chain. There are variations of vertical
integration including “Backward Vertical Integration” which seeks to control the production
of products, and “Forward Vertical Integration” which seeks to control distribution.

Finally, when formulating a Growth Strategy, it’s always a good idea to look at the
history of organizations your firm wishes to emulate — specifically, those firms that have
recently been successful in similar industries. While there is no guaranteed Growth Strategy
blue print, understanding the path these firms took with consideration of their unique
timeframe and business environment can be very helpful in formulating your own Growth
Strategy.

VI. Alternative Company Strategies

A. Develop market segmentation strategy (ACA #1)

Tata Motors may segment its products into groups which will enable the
market to identify products based on functionality, such as premium cars, affordable
cars, and industrial and commercial vehicles. Through this strategy, Tata Motors can
become a global contender where its brand name will be associated to its product
lines. Moreover, it would result to easier recall of its products. Unfortunately, the
classification can also be limiting and would incur additional costs.

B. Partner with other companies (ACA #2)

Tata Motors can enter into joint ventures with other companies to strengthen
its competitiveness in the world markets and its ability to gain global foothold in other
markets such as the U.S. and China. It can improve its promotion efforts by
highlighting its name and contribution to the partnership. Here, Tata Motors can
benefit from other companies’ capabilities and increase market awareness through
increased promotional effort. Additionally, it can strengthen its global position.
However, other companies may also benefit from its resources and capabilities as
well. It may also incur additional costs. Moreover, it may have adverse effect on its
brand and might crease customer dissatisfaction.

C. Promo Tata own brands in foreign contries (ACA #3)

Since 2009, Tata Nano was promoted in D.R. Congo, Africa, developed Nano
Europa to Europe Market in 2010, sales serval type vehicles to South Africa in 2011,
and exporting Tata Magic IRIS to Sri Lanka. Therefore, to accumlate the previous
promotion and sales in different continents or countries, company shall keep going to
join any vehicle exhibit in the world for products promotion and sals.
Disadvantage: It would take time and energy and costly for developing company own
products. However, the indepand steps of company to world market is not a easy task, It
might take years to sow the seeds and havest it with indefinite future.

VII. Recommendation

As limited resouce and company capacity, how Tata can develop strategy to fit its
competitive advantage to win more maket share in international market.

In ACA # 1, Company will develop its strategy for market segment, according the
criteria of increase profit: it was only weight as 15 % over 30 %, becasue company is not so
sure the profit will be 100 percent returning ; Increase competitive advantage: in this catalog,
Tata definite to get high score 25% over 30 % because the market segmatation is good for
company for utilized its resource and capacity; Cost savings: only score with 10 % over 20
%, becasue the proposal will be having many trial in market place before implement it, that
will be increase the cost too; next one is Ease of implementation: the score is 5 % over 10 % ,
as previous mentioned it the outcome will be know after many try and error; the finally, the
feasibility of idea: that is only 5 % over 10 %, because the new experiment of proposal, no
one can gureentee it’s working. fianlly, total score is 60 %.

In ACA # 2 Partner with other companies, increase profit: 20 % over 30 %, because

company whether used join-venture, or partnership with other company, the profit either
share one half to your partner, or divide the loss to your partner; Incrase competitive
advantage: most likely two or three companies join together are more powerful than single
company doing along, score is 28 % over 30 %; Cost saving : as expenditure and loss
company can share to the partners, and score is 18% over 20 % ; Ease of implementation: the
partner might be is a local company, they has more competive advantage than us for knowing
the market, thus, it’s score 8% over 10 %; finally, feasibility of idea: becasue this was
collective ide and the brain storming of two partner therfore, company can get much brilliant
idea, hence, the score we got 8% over 10 %, total score is 82 %.

In ACA #3, Promo Tata own brands in foreign contries, incrase profit: company is
fighting along in the foreign market, they go to a totally different market from India, then, it
will take time to familar the maket and earn back the investment, so we score 10 % over 30
%; Increase competitive advantage: socre 23 % over 30 %, because no one know that Tata
can perform their competitive advantage in foreign land, it all depends how relative strong of
market players in foreign country; Cost saving: the score is 5% over 20 %, because all the
operation expanses, marketing, and advertising fee are considering as investment before
profit returing: Ease of implementation: 3 % over 10 %, every move in the market is a virgin
trying of company; feasibility of idea: the socre is 3 % over 10 %, once again, company has
check the market response to see whether the proposal shall continue to do it or abort it. And
the final score is 36 %.
 Based our analysis as below table, our group chosen the ACA # 2 Partner with
other companies by its reason of with relative higher score of 82 % as best way to Tata motor
to expan its products to international market.

CRITERIA WEIGHT ACA 1 ACA 2 ACA 3

INCREASE PROFIT 30% 15 20 10

INCREASE COMPETITIVE ADVANTAGE 30% 25 28 15

COST SAVINGS 20% 10 18 5

EASE OF IMPLEMENTATION 10% 5 8 3

FEASIBILITY OF IDEA 10% 5 8 3

TOTAL 100% 60% 82% 36%

IX. References

http://www.tatamotors.com/investors/financials/68-ar-html/mission.html
https://vpofstrategy.com/growth-strategy/
http://money.cnn.com/2016/02/17/news/economy/india-new-delhi-air-pollution/