On a recent weekend Mr Jatin Gera was shopping in the crowded market of Rajouri Garden, Delhi India with his wife, two kids, 6 and 12 who were hanging to his $1200 Motorcycle. Like Many Indians Gera, 42 can't afford a Car of $5000 Maruti 800 which is the cheapest car in the country that's why he is planning to buy the revolutionary car by Tata's which is going to be launched by this fall. It will be interesting to see how TATA NANO, that has already created so much hype go ahead and become a benchmark in the history of Indian automobile or will shift from page 1 to page 2 to page 3 and slowly disappear as a piece of news as happened to Ford's Pinto in 1970. Nano has some other sides as well for example Mr Gera who is planning to buy nano has done the calculations and on second thoughts realized that to buy the Nano including other insurance costs totals amount which comes out to be little in excess of $3000. For an extra $500 he can buy a decent used car unlike Nano which would be air conditioned as well which nano won't have explains Mr Gera but my wife is forcing us to save for nano but it will be wise to wait and see what others think.
All this comes for Tata's at a Tricky time when the $2.3 billion Jaguar and Land Rover acquisition has just taken place and after the not too long Corus Deal has been in the media and public's mind for a long time.
No matter, the Nano, a 623cc-engine compact that will get 50 mpg, instantly won kudos as a showcase of frugal Indian engineering. It sent shock waves through the auto world as car makers reassessed how cheaply they could make small vehicles. For Ratan Tata, the car symbolized something much grander than just another product. We hope it will be seen as the car which will change the manner in which people in rural and semi-urban India travel.
It will also tell us about the different perspectives about different people for example:
Tata's are a company which don't need to prove anything to anyone and also that they are a first class innovator, they have already introduced "ACE" a durable low cost half ton Pick-up truck that sells in India for just $5000.
Also, the feasibility study of nano being accepted as a public transport will be also studied under this (An Auto rickshaw-a form of Indian public transport costs $3000 which is costlier than $2500 worth of nano) and decision will be made that if given a chance and permit would the auto rickshaw drivers be interested in replacing their auto rickshaws with nano as a taxi in order to form a better revenue model.
This study of mine will also contain an in depth analysis of the preparations by financial institution such as banks for the arrival of nano.
It was quoted that the interest rates for Tata nano will be lower than that of two wheelers whereas higher than that of other cars seeing the risk involved. Through this study I have also analysed the buying behaviour of the individuals from the salary bracket of $300-$600, who ride a motor cycle and want to graduate from a two wheeler to four wheeler.
I have analysed TATA NANO through the use of various models and approaches:
- Boom's & Bitner's 7P's (Product, Price, Place Promotion, People, Process & physical evidence)
- STP (Segmentation, Targeting & Positioning)
- Porter's 5 Forces Model
- Porter's value chain model
- GE Window
- Ansoff Matrix For the Tata Motors
- The Integrated Marketing Communications Model
- Red Ocean & Blue Ocean Strategy
1.1 Objectives of the Reseasrch Study
- To understand prelaunch dynamics of TATA NANO.
- To gain an insight knowledge of TATA NANO's target segments.
- To have a holistic view of the environment of TATA NANO.
- To throw a light of perception of individuals from different societies.
- To have an understanding of the various preparations done by showroom owners, bankers and the company to enhance the sales and maximise profits.
1.2 A Breif Insight into Tata Motors
When talking about India's largest automobile company, Tata Motors Limited is what comes to mind. Established in 1945, not only is it a leader in commercial vehicles, but it is also the world's fourth largest truck manufacturer and second largest bus manufacturer. Tata employees around 23,000 people, has several manufacturing bases all over India, and an alliance with Fiat to manufacture, distribute and market Fiat branded cars in India. In the year 2004, Tata Motors became the first Indian company from the engineering sector to list its securities on the New York Stock Exchange. Tata is emerging as a well known name in the international automobile market. It has been marketing its commercial and passenger vehicles in several countries across Europe, South East Asia, Middle East, South Asia and South America, and has franchisee assembly operations in Malaysia, Kenya, Bangladesh, Ukraine, Russia and Senegal. Over the span of the last 50 years, the company has acquired an impressive insight and understanding of the economic stimulant and has become very sensitive to the customer's needs. The company employees 2500 scientists and engineers who work in research, development and design in Pune, Jamshedpur, Lucknow, South Korea, Spain and the UK. These engineering research centres have enabled Tata to be pioneers in automobile technology. (Sanghvi, 2001)
1.3 Internal Analysis of Tata Conglomerate
The Favourite Boast of the executives of Tata group is that there is so much of "Tata" in their lives. They Wake up to the Titan Watches, drink Tata Tea or Coffee for Breakfast wear Westside cloths from the house of Tata Wear the Bracelet or Neck chain From Tanishq, pick up the Laptop Bought from "CROMA- A Tata Store" get out of their Tata properties home, sit in a Tata car or bus and reach the office, sit in the building which is built from Tata Steel, have food in a Tata hotel, talk to people on their Tata phone and yes when the day is over they go to star bazaar to buy grocery and use Tata power at their homes. (The Observer Sunday may 04 2008 page 4).
This is the power of today's Indian Conglomerates whose influence is not restricted only to the home country. From the time that Great Jamshedji Tata formed his first trading company in 1869 with a capital of 27 GBP he never thought that his company will be a benchmark. In whatever industry the company has entered it has created turbulences and has given nightmares to the competitors. Tata Group is a private conglomerate headquartered at Mumbai headed by Mr Ratan Tata who took Over from Mr JRD Tata in 1991.
"The statistics and figures of Tata Group speak for themselves. Its revenue touches $967,229 million or $21.9 billion in 2005/06. This is equal to 2.8% of India's GDP. There are about 246.000 employees in the Tata group as per records of 2004. Market capitalization figure is $57.6 billion. There are ninety-six companies operating in seven business sectors. Only twenty-eight of the ninety-six in Tata Group are publicly listed. Tata operates in more than forty countries across six continents. It exports products and services to one hundred and forty nations. The Charitable Trust of Tata holds 65.8% of the ownership of Tata group". (www.theoriginof.com)
1.4 Current Status
As on 25th august 2008 due to problems in the west Bengal plant (997.7 acres of plant which will be known as mother of all nano plants) and political exertions in West Bengal the chairman of Tata Group has threatened to withdraw the project from the state. The Rs. 1500 crores project will not only be a setback to the budding economy of the state but also the state will lose two things one: employment opportunities for thousands of people as this Tata project was expected to generate thousands of jobs, Two: Generation of lack of trust of other business houses due to the political turbulences while there is not much of a reaction from West Bengal protesting parties whereas other states like Maharashtra, Uttrakhand, Punjab etc have tried to cash on to the situations and have promised to give a red carpet welcome to the plant and promised to give them all necessary infrastructure and facilities required. (Times of India 24th august 2008 Page 1).
This chapter will be outlining the existing literature on prelaunch forecasting of new automobiles, analysis of active search by consumers, dealer visits, word of mouth, communication, magazine reveiws issues that are important in understanding consumer response to the new car. I have illustrated how the model evolved to meet management needs and provided support for advertising, dealer training and consumer incentives decisions.
Consumer durable goods (example: automobile, appliances, cameras) represents a huge market in india, but there is relatively very few successful studies implemented in this area of business. I have taken the help of the measurement system developed for and used by the automobile industry managers. Following to India's openness in 1991, the arrival of newand existing companies is really common. Easy availability of finance at relatively low rate of interest and price discounts offered to the dealers and manufacturers all have stirred the demand for cars and strong growth of Indian automobile industry. In the data obtained by the ministry of commerce and industry, share prices had risen since 2001-02 continuing in the first three quaters of the 2004-05. An increase of 16% in april to december 2004, was noticed with the growth rate in 2003-04 was 15.1%. The automobile industry is growing at a compound annual growth rate (CAGR) of 22% between 1992 to 1997. This kind of potential rewards encourages firms to invest large amount of capital to design, production and selling of new models. Ford spent 3 billion dollars developing the Taurus/Sableline.(Mitchell 1986)
General motors also spend one billion on a new model Buick Electra. Most of this investment occured before launch. If the car fails in the market, the companies has to bear significant losses. But the rate of failiure are not published in any magazines, but many cars have indeed fallen short of expectations. Many failiures are not as dramatic as the Daewoo's Matiz in India. Matiz felt losses when sales went below forecasts, there was a excess production capacity and inventory. In this case capital costs was excessive and prices must be discounted or other marketing actions undertaken to clear inventories. Losses also occurs when the forecast of sales is below the market demand. Under this scenario, not enough cars can be produced, inventory is to be kept low, and lossses is the firm. Profit would have been higher if the forecast had been more accurate and more production capacity had been planned. (Urban, Hauser, Roberts 1990)
Important application related to prelaunch of cars are:
Search and Experience: in automobile sector, consumers reduces risk by doing research before finalising a car. Appoximately 75% of buyers go for test drive of one or more cars before buying. It is the task of marketing manager to convince the customer to consider their car, get the prospect in the showroom, finalise the car and result in a purchase.
Word of Mouth Communication/ Magazine Review: An important source of information in automobile sector is the other consumer. Independent magazine also play an important part. Their weekly reveiws of cars, help take the important decision of buying a thousands of dollar vehicle.
Importance of Availability: Maximum sales of cars if through its showroom, so its important to have inventory, otherwise consumer will gor for other alternatives.
Replace Existing Model Car: Many times it happenes that auto industry produces a new car (like tata nano in our case), in this case the major issue is the design a new car altogether. Past record of sales of competitors automibiles provide with the important information for forecasting.
Production Contraints: The production capacity level has to be set much before the actual launch. The production capacity is calculated according the plants capacity in all shifts. Example maximum calculated in 3 shifts each being of 8 hours. The production commitment desicion is to be taken be the management. It undergo two stage sequence, first market strategy is developed, engineering designs are revised, consumer reaction is gauged and the production commitment is made. In the second stage the premarket forecast is done. Marketing plans are revised i.e. targetting, positioning, advertising expenditure, dealer training promotion, every process is gone through.
2.2 Price Forecasting Problem
Production & Supply Forecasts: Production capacity is calculated by the best available information, but as engineers and manufacturers develope the prototype car, changes are done based on external conditions in the economy. Calculations are made of sales at planned price and marketing expenses. The number of vehicles that would be sold if there is no production contraints is known. The demand at the level of price and marketing efforts should be more than the production minimum, to maximise profits. (Urban, Hauser, Roberts 1990)
2.2.1 Market Science Literature & Industry Practice
Market Science: Market science is likely to describe the life cycle diffusion models which help in describing sales of durable goods (cars) via phenomena such as innovations, imitation and diffusion of innovation ( Mahajan & Muller 1999 ). But for forecasting, these models require experience with national sales. But due to being a prelaunch period no national sales figures are available for the new auto model. The parameters for initial penetration, diffusion, and total sales is calculated over the life cycle on the basis of judgment, market research and analogy to other product catogories (Heeler and Hustad 1980). Another model of individual multi attribute utility, risk and belief dynamics has been proposed for use in prelaunch forecasting in automobile industry. This is based on market research before launch. This model also have some limitations as it does not deal with production contraints and the price forecasting problem. (Roberts and Urban 1988)
Industry Practice: It is included market research to abtain consumer's response to the new automobile. It the auto industry concept tests, focus groups, perceptual mapping, conjoint analysis and consumer clinics have been utilized (Urban & Hauser 1990). The consumer clinic helps the management have a better view of its likes and dislikes, and buying intentions with respect to currently available cars. A fibre glass mock up is done to find out which model and make consumer would have prefered and purchased. The clinic measure the percentage of these consumers who would now puchase the new car. These analysis are used before production commitment, but do not include research and experience, word of mouth, magazine reveiws, life cycle dynamics and availability contraints. Thus it is difficult to use consumer clinics to identify the best marketing strategy. (Urban, Hauser & Roberts 1990)
2.3 Prelaunch forecasting
To address the managerial problems of prelaunch forecasting, i would analyse the marketing science literature and industry practice. "In keeping with the magnitude of the investment and the potential profit impact of prelaunch decisions, our analysis are based on a heavy commitment to measurement to get consumer based estimates of the relevant input". (Urban, Hauser & Roberts) To build industrial experience a clinic format is used, however a control group is added to minimise the biases. Usually the control group sees the existing car in the market which is being replaced. The new model is not shown. If the car is not replacing any car the most similar model is used.
Marketing science is applied to consumer information flow (dealer visit, word of mouth , promotion activities) ad production contraints. The method used in the study is Macro flow model. This process is a discrete analog of a continous time markov process.(Hauser and Wisneiwski 1982) and also represents an expansion in the number of stats and flow of diffusion models.(Mahajan, Muller and Kerin 1984) This process includes positive as well as negative word of mouth. This is done by sampling scheme and consumer measurement method.
Sampling Scheme: The cost is always an issue while segmenting an automobile market and selecting a random sample. However there are large number of automobiles available, and its market is highly segmented on the basis of luxury, sports, family etc with a very frequent sales. Random samples would be inefficient and expensive as well. A sample is taken by grouping consumers by a car model that they purchased previously. "To get a representative sample that has a good chance of being interested in the automobile category (segment) being studied, we select the size of the strata in proportion to past switching to the target category". (Urban 1970) Example: if there were 2 per cent of the category of buyers who had previously purchased BMW 3 series cars then 2 per cent of the sample is drawn from these BMW owners. Managerial teams are also interested in getting samples of outside target category, random and targeted strata. The names and numbers are easily available from many commercial sources. Once selected sample consumers are contacted via telephone. All the ones interested in purchasing the car next year are invited to a pre set location. The interview goes for around one hour. Each person is given some incentives monetary or non monetary for their participation. If the spouse also holds decision in buying a new car, then both of them encouraged to come.
Basic Clinic Design: As selected consumers are invited for participation. On arrival, around two third of them are shown assigned randomly to the test group and rest left are assigned to the control car group. In both the cases consumers are told that they are evaluating the next year's models. In the second step questions are asked from consumers regarding the car they own, including model, make, design, colour, mileage, options, maintenance and service cost etc. this give them valuable information. In the next step they are given a list of more than 200 cars of different makes, models, along with information about price, mileage, engine size, servicing cost and is asked to choose which they would consider. In addition they also indicate the cars that would be their second and third choices. (Juster 1966) These questions allow us to estimate the percent of consumers who are intended to purchase another car, who will now purchase the target car.
The main experiment starts here, two third of the consumers are shown rough ad copiers (concept boards) for the test car to stimulate advertising exposure. Rest are shown concept boards for the control car. Both the groups rate the concept on same probability and preference scales as the car they consider. After the advertising exposure, some consumers will visit showroom for test drive or further information, other will spread it with the word of mouth.
2.4 Probabilistic Flow Model for Dealer Visits, Word of Mouth, Advertising and Production Constraints
Probabilistic modelling is done to forecast the effect of increased advertising, repositioning, dealer incentives which provides management tools to evaluate strategic decisions. This kind of modelling also helps in monitoring and also fine tune marketing decision made throughout the period of the car launch.
Basic Modelling Methodology: This structure is based upon probabilistic flow model that is used to test market and launch analysis of consumer frequently purchased goods and innovate public transport services. (Urban 1970) The modelling concept is very simple, each consumer is represented by a behavioural state that can describe his or her level of information about his or her potential purchase. It is done to represent consumer behaviour as how it is affected by managerial decisions.
In each time interval, consumer flow from one state to another. "For example, in the third period a consumer, say John might have been unaware of the new car. If in fourth period he talks to a friend who owns one, but he does not see any advertising, the "flows" to behavioural state of "aware via word of mouth"."(Urban & Hauser 1980) This kind of model is called 'macro flow model' because track of the consumer behaviour is to be kept probabilistically of the market. There are cases where percent of consumer/period is the parameters. Assume x percent of consumers who are aware of the car through ads visits dealer in given period. In other cases, the flows are functions of other variables. For example "the percent of consumers, now unaware, who become aware in a period, is clearly a function of advertising expenditure. The exact function chosen for a given application are chosen as flexible yet parsimonious parameterized forms." (Urban, Hauser & Roberts 1990)
Through use of this model, the company can establish a casual relationship between the awareness factor and the sales factor. This will help in developing a probability for different situations and the estimating outcomes in such different situation.
Production constraints: The forecast for the new car can be below planned production capacity. In the auto industry free expression means forecast above production. Ultimately in a model year through incentives, rebates etc the car model's sales will equal production. However one probabilistic flow model makes forecast mouth by mouth. Thus I used some special characteristics of the auto market to analyse production constraints.
As stated earlier in my essay, about 80 percent of domestic sales are done through dealer inventory. If any case inventories are kept low, there are chances that consumer will not find specific colour, features, options they want and the sales are lost.
Expenditure on inventory includes interest, insurance and storage cost. It may be expensive and at this level of inventory, the dealers allocate efforts and sales incentive to switch consumers to overstock models.
"The numeraire for inventory is accepted by all concern as 'day supply', the number of units in stock divided by the current sales rate; it is this stimulus that dealers react."(Urban 1970) day supply of a control car is observed from historical data and calculated for a new car. In the beginning supply of a test car is based on a management judgement and then it is calculated by the results in the later periods. This judgement must be consistent with both macro flow forecast and their own projected fine tuning.
2.4.1 Managerial Application of Flow Model
The projected short fall of sales can put pressure on management to develop strategy that can improve sales, to free expression. According to Urban, Hauser and Roberts (1990); three marketing strategies are considered. Under first strategy advertising expenditure is doubled in an attempt of an increase in advertising awareness, this will increasce in sales. The second strategy was to improvement in advertisement, further encouraging more dealer visits. Decisions are made to devote resources towards encouragement of dealer visit. The advertising agencies are directed to start thier work on such copies, especially for the identified segment . The final strategy was to evaluate the effect of incentives designed to increase the conclusion from visits from sales of cars to potential buyers, who visited the dealer's showroom. The management can also go for dealer training within advertising improvement; this would help in increasing the sales economically. The production of new car can be delayed if the forecast sales don't increase after these efforts.
2.5 Subsequent Applications
Under this, I will discuss three other major car introductions. The first is the luxury car that replaced its larger predecessor. Clinic data indicated that the new car will be more preferable then the old car and dynamics forecast indicated increases 25 percent in sales. But this increase was less as desired because clinic data indicated that the old buyers of the cars like the new one, the marketing was also oriented through increase in advertising expenditure and copies towards import buyers as they are high potential group. All these improvements help the car to be successfully launched increasing the sales by 25% as compared to its old model.
The second car is the full size luxury two door sedans, which has been down-sized assuming double sales and corporate fuel economy standard. The clinic data indicated that the car wasn't liked by the old users. The import buyers gave a bit of positive response, but they preferred the old model. The forecast sales were 50% of its predecessor's. To improve it, advertising and promotions strategies were changed but doesn't proved well. The forecast was correct as just 45 percent of sales took place. The third and final car is a two door sports car which was successfully launched. The clinic data showed free expression demand to make an exclusive and efficient launch. It was also suggested that large advertising expenditure can be ignored. Private car showings were arranged for target group. Test drive were also encouraged as clinic data showed consumer's will be attracted by its comfortable, sporty, roomy and handling features. It also suggested that higher price can be supportive, as the production was limited to increase profits but was avoided. After 6 months of launch, sales were within the set standards deviation of prediction. (Urban, Hauser & Roberts, 1990)
2.6 Sales Promotions
"Several frameworks, including the product life cycle and the growth share matrix, postulate the needs for new product that generates the future profitability and prevent obsolesce of the firm's product line."(Cooper, 1984) Sales are effective demand boosters. Sales promotion is easy to implement, have an immediate effect on sales volume. (Haussens, Parsons & Schultz,2001)
"The assessment of new product and promotional effects on revenue should distinguished short term effects (Immediate or same week) and long term effects of which can be temporary (adjustment dust settling) or persistent (permanent)." (Pauwels, 2004) there are various models of marketing. Every model should fulfil the four given requirements. Firstly, it should provide with flexible treatment of both short term and long term effects. (Dekimpe and Haussen,1995). Secondly, "the model should reboot the deviations from stationary, particularly the presence of random walks in stock prices, which can lead to spurious regression problems" (Granger and Newbold,1986). Thirdly, the marketing should provide a forecast of expected baseline for the each performance variable, so that the deviation due to expected events can be captured and rectified. Lastly, the model should allow various dynamic feedback between marketing and business performance variables (Fried and Givoly, 1982).
The study of the longitudinal impact of new product launch, its sales promotions, promotional incentives require the detailed design system of equations that accounts both the time series properties of performance and marketing variables. I in my essay will explain one model satisfying the above mentioned requirements.
2.6.1 VAR MODEL (Vector- Autoregressive Model)
VAR model suites for the measuring the dynamic performance response and interaction between performance and marketing variables. (Dekimpe & Haussens 1999) VAR model also measure direct response to marketing actions and also capture the performance implications of complex feedback looks. For example, a successful introduction of cash may generate high revenue, which also helps the manufacturer to reduce sales promotion. "The combination of increased sales and higher margins may improve earnings and stock price and thus further enhance the effectiveness of the initial product introduction over time." (Dekimpe & Haussens, 1999)
VAR models are specified in levels. This model also includes refined forecast baseline, which include changes to construction cost index to firms specific earnings forecast and financial performance. This model is commonly used in many marketing and finance literature. In the marketing literature it is used to assess the long and short term effects of marketing activities for example, advertising, distribution, price promotion, product line extension (Bronnenberg, Mahajan and Vanhonacker, 2000). "In finance literature VAR models have been used to study the relationships within and between stock markets, capital flows and equity returns, the impact over time of monetary policy on stock markets returns and the effect of credit interruptions on the economy"(Thorbecke,1997).
Marketing actions may also have deviations in sales volume. To avoid it at the initial stage the FEVD (forecast error variance decomposition) method is used. Under the system impulse response function traces the effects of marketing change FEVD helps in determining to what extent performance is affected due to the change in each marketing variable. "The variance decomposition of firm value provides information about the relative importance of previous firm value bottom line (profit) top line (revenue) performance, new product introductions and promotion in determining of the firms value from baseline expectations." (Hamilton 1994) The comparison of FEVD long term and short term is very important. This comparison reveals the initial movement in stock prices that are due to the promotional activities and thus with time the contribution of new product introduction become stronger. (Haussens 1998) FEVD also notify the role of intermediate performance matrix. The new product introductions through performance of revenue and profit or may also have a direct effect beyond the performance impact. For example, Haussens (1998) "uses FEVD on channel order and consumer demand data to show that sudden spikes in channels order have no long term consequences for the manufacturer, unless movement in consumer demand accompany them."
2.7 Tools Used for Analysis
2.7.1 Ansoff Matrix for Tata Motors
Ansoff Matrix is a very important marketing tool in order to understand the marketing strategies of organizations. It was introduced by Igor Ansoff who wrote an article in 1957 Harvard Business Review. This matrix allows the organization to grow their business through new or existing strategies. On "Y" axis we have new and existing market whereas on "X" Axis we have new and existing product which have different strategies.
Existing Product-Existing Market: In this area there are already several players in the market and to survive in this situation the "Market Penetration" can be used for example: In case of Tata motors is Tata Indigo in which there is already a market of sedans which cost within in a range of INR 4,00,000 to INR 6,00,000. And targeting higher middle class families. The only way to survive in this situation is the market penetration strategy in which Tata motors can fight with its competitors on the basis of applying new promotional strategies.
New Product-Existing Market: In this area there is an existing market for the prospective products and to compete in that market a new product is introduced the strategy which helps organizations sustain themselves in the market is "product development strategy". An Example of this with respect to Tata Motors is introduction of the low cost truck ace now in this situation there was an existing market for the load carriers but a new product which is low cost (approximately $4000) and also fulfils all the needs of a load carrier.
Existing Product-New Market: Existing product new market is the situation in which there is a product for which there is no market; in this case a whole new market is developed. The only strategy that can help any organization in this case is the market development.
New Product- New Market: New product new market is a situation in which the product is new whereas there is no market for that product The strategy which is useful in this case is "Diversification". An example in this case of Tata Nano may be the new hybrid car which Tata nano is coming up in with the help of a joint venture with a French car company. In this case of hybrid car which runs on electricity there is no such product like this as well as if now there is no developed market on this as well
2.7.2 7 P's of Tata Nano
The 7P's given by Boom's and Bitner's is a marketing strategy that helps in expanding the number of controllable variables from 4 to 7. Though this model is used in service industry but I am mentioning this and relating this model with Tata nano because the research is not only about manufacturing car and adding more target markets but also to provide better after sales service to this car whose service should not be low frilled as its price. ()
The 7P's Are:
- Physical Evidence
Relating the 7P's model with Tata nano;
Product: In the vast country like India, it's not easy to reach the masses, and as it being a developed country where more than 50 percent of the population doesn't owns a car. The product is a common man's car Tata Nano.
Price: $2500 or GBP1250 or INR 1,00,000.
Place: Initially India and then export to countries like Europe, Thailand etc. it would be the mark of Indian engineering on the map of the world. It will prove the point that India is coming fast and should no longer be considered a third world country.
Promotion: Tata's has been known to be wise in terms of choosing their advertising and promotion strategies. So far Promotion has been through print medium, and interviews etc, word of mouth has been the best mode of promotion for them. Ever since the announcement of Tata nano it has already created so much of hype for it that people have already started to wait for the Car. The other reason for the publicity is the Singur plant incident which has further added to its publicity.
People: The car is basically designed to focus the vast population of India who cannot afford a car. This car is designed to link the rural India to the fast moving world. The people who are directly or indirectly involved in the usage of the car, they may be knowledge workers, employees or managers. The low price of the car has also formed an important part of this element of marketing mix.
Process: Procedure, mechanisms and flow of activities which are involved in the whole process right from the procurement of raw materials to the consumption of final good by the customer. In case of Tata Nano it defines the whole process as well as the distribution model of the Tata Nano. Tata has worked on the economy of scale as well as the economy of scope to minimize the price. The managerial expertise, the engineers has been the best.
Physical evidence: It implies the ability and environment provided by Tata Nano to their customers which includes tangible goods that help to communicate and perform the service as well as the intangible experience which includes the after sales experience which will be given to the customers. As being the cheapest car the sales would be much higher, so Tata has preinformed their show room owners to hire more personnel so that the service time is the same as before.
2.7.3 STP (Segmentation, Targeting & Positioning) of Tata Nano
Segmentation: The ultra low cost of the car has made it in everyone's reach. Indian automobile market is a family driven. Car is still seen as luxury product than just a mode of transport. Tata nano will change the scenario. Now the middle class would also be able to afford a car, and thus can change the scene from it being a luxury to a mode of transport.
Targeting: The target market of Tata nano is the 4 person family who cannot afford a car today. The big Indian rural sector is considered as the targeted consumer. All humans from a age group of 18 to 55 years with a monthly income of more than Rs 10,000 is considered as prospects. Another major target market are the auto rickshaw owners. The car will be modified accordingly for commercial use. TATA NANO is also considering to target used car market. As many Indians opt to wait for Nano rather than buying used cars such as Maruti 800, Alto, Zen etc.
Positioning: Tata nano has been positioned as the family car. Seeing the rising prices of the fuel, the car is designed to be very much fuel efficient and environmental friendly. It is positioned as the 'Green Car'. (Kotler & Armstrong 2007)
2.7.4 Blue Ocean Strategy & Red Ocean Strategy
Blue ocean strategy was introduced by W. Chan Kim and Renee Mauborgne in which there is a strategy known as red strategy which implies that competitors compete in the same industry and trying to steal the market share. The blue strategy implies that rather than fighting for the market share of your existing rivals a company can survive by marking new markets, product discrimination etc. Blue ocean strategy according to this theory is used in competing in overcrowded industry where there is no way to sustain high performance. This Strategy when related to Tata nano shows that it clearly proves itself to be a blue ocean strategy as Tata nano is one of its kind and has created its own demand due to its low price and fan following amongst middle class family of India. Also Tata nano has created its own market space and till the time a new product is introduced in the similar segment they have uncontested market space. (Kim & Mauborgne, 2005)
However different rival companies such as Honda, Ford, Toyota are trying to adopt Red Ocean Strategy. These companies are now coming up with new models of their cars so as to compete with Tata Nano in the some industry and of low cost car.
There are certain competitors but honestly no other player no matter how big they are have even come up even close to clinch anywhere near the plans of Tata. However there are certain players, in June 2008, Hyundai scrapped plans for a $5,000 car for the Chinese market. And according to the Times of London article, Renault-Nissan and Bajaj Auto are said to be reconsidering their joint venture, which the two sides agreed to in May.
Currently, the lowest priced car in India is the Maruti 800, which sells for around $4,300. Last year, Shinzo Nakanishi, managing director for Maruti Suzuki, was asked if the company had plans to reduce the price of the Maruti 800 to better compete with the Nano. He said it wasn't viable. Bajaj Auto says its $2,500 car, which it is building with Renault and Nissan Motor, will aim at a fuel-efficiency of 30 km/liter, or twice an average small car, and carbon dioxide emissions of 100 gm/km. The Bajaj venture will have an initial capacity of 400,000 units, while Tata expects eventual demand of 1 million Nanos. Honda and Toyota are leading the way on cleaner gasoline-electric hybrids, and some environmentalists argue getting prices down on these technologies is where efforts should be concentrated. (Autocar March 2008)
There are some other ecofriendly and inexpensive electric cars which can pose a great threat to Tata Nano such as Oreva, Reva, Tara Tiny. Another major and nearest competitor of Tata Nano is the used car market. The Nano is alleged to have severly affected the used car market of India. Sales of new maruti 800 have dropped by 20% and used ones by 30% following the unveiling of the Nano.
Tata Nano is also targeting two wheelers marhet as their potential customer. However in india, where the roads are already conjested, it will be difficult to convince the customers and snatch the market share of this market.
2.7.5 Porter's Five Forces Model
Porter's five forces model was introduced by Michael Porter which tells us about the competitiveness about any particular product or organization in an external environment.
Components of Porter's Five Forces model w.r.t Tata Nano
Industry Competitors: Sometimes rivals aggressively compete in non-price dimensions such as innovation, marketing etc. In terms of Tata Nano there are certain competitors like Maruti 800 which are trying to compete with nano on non price dimensions, whereas hybrid cars or electric cars such as "Reva" which are proposing better mileage at almost the same price..
The Threat of Substitute Products: The existence of close substitute products increases the propensity of customers to opt for other products. Moreover it affects the electricity of price, the company cannot change price frequently in response to change in prices of inputs. In this case the substitute products may be have substitute competing on a non price dimensions as well which care about innovations etc.
The Threat Of new Competitors: If Tata Nano Works Well then there is a major possibility of entry of new players. There are already many players who have sensed the great potential of this segment and trying to exploit the situation. They also have announced about their entry in India. As mention above Bajaj and Renault have planned there entry in the same segment. There are no entry barriers and cost constraints in this industry unlike iron and steel industry, the customer bite industry is not much capital intensive. Any company can break even its investment within a period of 2 to 3 years only. Also there are no exit barriers, thereby giving opportunities to various companies to try out their competencies in the new market. However if Tata's are able to get patents on their innovation then they can restrict the entry to a great extent and maintain their leadership over the segment.
The Bargaining Power of Buyers: It is defined as the ability of the customer to put the firm under pressure and also affects the customer sensitivity to price changes in this case. In this case as Tata being the innovator and Tata nano being the first in its class, there is not much of bargaining power of the customers. But yes as further with the entry of new competitors, the customer's bargaining power will increase.
The Bargaining Power of Suppliers: The suppliers are another source which may be a source of competition. Higher bargaining power of the suppliers implies high input and raw material costs. Tata's have kept their contract with suppliers for short duration so as induce competitiveness amongst the suppliers and reduce their bargaining power. For example suppliers may reuse to supply raw materials to the customer etc.
Porter's five forces model with respect to Tata Nano
Threats of Entry: Moderate (Huge Capital Required, fewer profit margins)
Buyer's Bargaining Power: Very low (Low Cost Car, high switching costs)
Supplier's Bargaining Power: Low
Substitute Products: Available
2.8 Analysis of the Market Demand of Tata Nano
Tata Motors, which plans to launch its ultra low cost Nano model later this year, expects initial demand for the car to exceed supply. Tata will initially make about 250,000 Nanos and expects eventual annual demand of one million cars. Indian car sales are predicted to more than quadruple to $145bn by 2016. (Autocar 2008)
2.9 Classification of the Entry Level Segment Car Market in India
Not too long ago the lone car in the entry level segment was Maruti 800 but now due to the realization of the potential of Indian market by global giants the today's customer has lots of choices.
2.10 Analysing the Tata Nano Marketing
In the marketing front, Nano had a dream start. In fact Nano may need no ads but heavy dose of positive PR during the launch. The brand may have to counter the scepticism surrounding the performance. Another nightmare is managing the initial rush of the customers. Since this is a car for the common man, there is every possibility that the customers could be given a raw treatment at the dealership touch- points. Indian marketers are still to wake up to the possibilities of a good customer service. How Tata and its dealers handle the initial euphoria will be something to watch for in the Customer-relationship perspective.
Tata Motors is keeping the Nano's marketing plans close to its chest. It is clear though that it is looking to adopt unconventional ways and is looking for models outside the car industry to distribute this high volume, low margin car but service centers and dealers will also be integral to the new paradigm. It expects the Nano to have universal appeal that cuts across geographies and demographics. That snazzy launch event and the launch print campaign was handled by Showdiff and Rediffusion DY&R. But contrary to reports that say that Rediffusion has bagged the Nano account, it's not yet a done deal. Though don't be surprised if it does end up getting the Nano in addition to the commercial vehicles business it already handles for Tata Motors. After all they were chosen to handle the launch and Ratan Tata and Arun Nanda are known to be friends. Other roster agencies for the company are FCB Ulka and Ogilvy however at a time when Tata is thinking to cut costs on marketing. It will be interesting to see how Tata works on it . (www.tatanano.com)
2.11 The insight of the key Prospects of Tata Nano
2.11.1 Auto Rickshaw in India
Auto rickshaws or rickshaw is a vehicle for hire and is a popular and economic mode of public transport in South and East Asia. Auto rickshaws are economic and drivers of auto rickshaw earn considerable amount of money in spite of bottlenecks and minor glitches.
Auto rickshaw in India is mostly manufacture by Bajaj Auto. A typical Auto rickshaw will cost approximately INR 1, 25,000 ($3200) and another $ 700 to register it in order to run it on the road. A normal auto driver who drives 12 hours a day will get Rs 800 Per day ($ 20) which means $600 per month.
The cost of auto rickshaw with permit only for personal use will be around $3200 and there are more than 1,70,000 autos in Bangalore only and more than 1,50,000 in Delhi. The auto drivers are normally from lower middle class who are the sole bread winner for big families or from rural class who come from villages with seeding capital in order to earn some money for their families. The expected salary brackets for these auto drivers is somewhere between INR 6000-INR 15000 depending upon the fare charged and occupancy of auto.
The driver charges Rs 5 per kilometre and out of those $20 almost $8-$10 are the operating costs so that takes the auto driver 14 months to break even. As nano being cheaper than auto rickshaws, I consider it a potential market. Auto rickshaw driver can buy it cheaply and can charge a little higher as no one will mind going in an air conditioned vehicle for a little more.
2.11.2 Banks/Financial Institutions
Banks or financial institutions in India help in terms of providing automobile loans. Recently it was announced that the interest rate for Tata Nano will be more than normal entry level segment cars but less than two wheelers. But a problem is still there a problem from which the whole world is getting affected right now it's the problem of NPA (Non Performing Assets). This is the main problem of the highlighted financial crisis in USA.
In liberalizing economy banking and financial sector get high priority. The banking sector has achieved its mandate by providing loan for the one who need it. This enables the banking system to expand its network in a planned way and make available banking series to the large number of population and touch every strata of society by extending credit to their productive endeavours.
Indian banking sector of having a serious problem due non performing. The financial reforms have helped largely to clean NPA was around Rs. 52,000 crores in the year 2004. The risk of defaulters persists because of the low amount of the revenue earned by the banks and high amount taken by lower middle class and rural class of the country. A high level of non-performing assets compared to similar lenders may be a sign of problems, as may an sudden increase.
The Indian banking sector is facing a serious problem of NPA. The extent of NPA is comparatively higher in public sectors banks. (Reddy, 2002)
2.11.3 Middle Class Individuals
Clearly, the term "middle class" does not sit well in our country, It barely has any standing space. When we refer to the Indian middle class we are unconsciously thinking of those who can approximate the lifestyles of the common person in the west.
In India half of the population is middle class. It is a huge numbers of people who can be categorised into a large conception groups, and can be said as a large and growing market for many products and services for years to come. This enormous domestic source of demand is a major reason why so many people believe that India can sustain its current growth performance for years to come, despite anything the government may or may not do. it is speculate that the purchasing power of an average Indian which was $2149 will rise up to $16,500 by 2040.
According to a survey done by national public radio (NPR) the total number if two wheelers sale last year was 7 million which is 6 times more than the total sales of cars. Nano is certainly going to give competition to two wheeler industry but it is a long way to go about changing the perception of the customer about high maintenance costs and increased traffic. The study also will be evident to understand the customer perception (two-wheeler owners) about the four wheelers. (Tharoor, 2005)
2.11.4 Tata Showroom Owners
A showroom serves an important purpose by giving a feel of the car to the customer. The showroom promotes the product in a different way irrespective of the advertising and promotion strategy used by the company to promote the product. The showroom always plays a great role in promoting the product. Tata showroom has been placed all over the country and is strategically located in order to fulfill the demands of the customers from every nooks and corners of the city.
The total number of showrooms in any particular city depends on the basis of the size of the city, the number of potential buyers in any particular city and number of customers that Tata motors is already serving.
With the Arrival of Nano it will be interesting to know about how Tata's beef up their distribution model. Tata has issued a suggestion to its showroom owners to accommodate more personnel to fulfill the need during selling and servicing. Though it was announced in the newspapers that there will be different sales showrooms for Nano where the car could be assembled in the back yard in order to save the logistics cost. However same showrooms will be used to serve the customers where a customer who has two Tata cars can go to get his car serviced and tuned whether it is the Sedan "Indigo" or "Nano".
As knowing is considered to be an activity which is based on experience and it is quite evident that in order to understand knowledge we must learn to know the need behind the whole idea. As such the present study aims to find out the dynamics of the entry level segment cars due to arrival of Tata Nano and its feasible acceptance amongst different sections. To fulfil the above objective I will try to get the views about the individuals from different classes with different purchasing power, who want to graduate from two-wheelers to four wheelers, I will also interview Tata showroom owners, as said by Jack Trout (2004) that, "research your company and internal departments in order to perfectly position your product in the market."
One the other hand I would research on finding ancillary target markets, which will help Tata's to get ancillary revenue streams. For example: If government can give permit to use Nano as a public transport then this can create a new market for them and will pave the way for higher revenues and alternate variants in the market. Lastly I see how the financial institutions are preparing themselves for the arrival of Nano.
3.1 Research Process
Starting with the research, I prepared a research design and then according to that I carried whole of my research project.
I adopted exploratory research design. Exploratory research is used to generate basic knowledge, clarify issues and uncover the variables associated with a problem. This research is basically used to gain a deeper understanding of the objective in question. : Research is designed to allow the investigator to just "look around" with respect to some phenomenon, with the aim being to develop suggestive ideas. The purpose is to gather as much information as possible concerning a specific problem. Exploratory research is often used when a problem is not well known, or the available knowledge is not absolute. The research should be as flexible as possible and conducted in a way that provides guidance for procedures to be engaged during the next stage. This is undertaken when not much is known about the situation in hand. It involve extensive interview with many people to understand the phenomena better.
Further this research was divided into primary and secondary research.
Primary Research is the research where the researcher collects the information directly from the source according to his purpose and needs, taking into consideration various constraints as well.
Secondary Research is the research where the researcher collects the information from the already available data such as magazines, government publications, industry surveys, etc. Here the data is to be extracted very carefully because someone else has collected it from the source with a different purpose and objective. These data are generally less reliable and accurate as compared to primary research data.
In both the research i.e. primary and secondary, qualitative and quantitative data has been obtained and analysed.
A quantitative data is the approach which is characterized by selectivity and distance to the object of research. It is basically based upon numbers and frequency rather than meaning and experience. Example: experiments, questionnaires, psychometric tests. It implies the search of knowledge that will measure describe and explain the phenomenon of reality. It is associated with scientific and experimental approach.
A qualitative data is the research which is characterised by nearness to the object of research. These are ways of collecting data concerned with describing meaning rather than statistical interferes. The best approach depends on the purpose of the research and research questions. Qualitative approach is the search of knowledge that is supposed to investigate, describe and interpret by the means of an inside perspective. Example: case studies, interviews etc. They provide more rich in depth description. (Neill, 2007)
In this research project since the product and market were new I had to first get an indepth knowledge of the subject and after getting that I have tried to throw some light on the various factors associated with the launch of Tata Nano such as target market, consumer behaviour, financial institutions perceptions, etc.
3.2 Data Collection
According to Yin (2003), there are six sources of evidence that were the focus of data collection for this research project: documentation, archival records, interviews, direct observations, participant-observation, and physical artefacts. Each of these will be briefly explained as follows:
- Documentation: Documentations includes statistics, registrations, publications etc. Various secondary sources such as articles and publications have been studied and interpreted and the same is reflected in the Literature Review chapter of the project.
- Archival records: It includes the maps, charts, models etc. Different models have been used to analyse Tata's strategies for promotion, pricing, etc.
- Interviews: Interviews have been taken from people from different areas. Audio interviews have been conducted with the auto rickshaw drivers and person to person interviews have been conducted with the managers of the financial institutions. It plays an important part in understanding the research questions and answering them effectively. The interview with the managers in financial institution helped in understanding the new policies they had planned for the launch of Tata Nano. It also explained us the reasons for the increase in rate of interest a compare to other cars. Depth interviews were conducted with the Tata showroom owners and staff which allowed me to analyse the planning done by them for handling the initial rush for bookings and inventories.
- Direct observations: In this study observations are done through classroom sessions and mentoring that I got from my teachers about the latest topics about various industries.
- Participant observer: It is a special mode of observation in which the investigator is not merely a passive observer. In this study my mentor played an important role in providing me the important information and imparting the relevant knowledge and participated in various activities.
- Physical observer: A final source of evidence is a physical or cultural artefact, a technological device, a tool or instrument, a work of art, or some other physical evidence. Such artefacts may be collected or observed as part of a field visit and have been used extensively in anthropological research.
According to Yin (2003), there are three kinds of question methods: questionnaires, telephone interviews, and personal interviews.
- Questionnaires are an instrument for research containing series of questions. These are sent to the respondents who answer them without any explanations or influence from the researcher. Questionnaires cannot be too long or too exhaustive because this might lead to unanswered questions. This is an economical source of research.
- By using telephone interviews the interviewer can pose more complex questions and explain any misunderstandings. However, the time is often limited when using telephone interviews.
- Personal interviews give an even better chance to explain the questions and to avoid misunderstandings. The duration of the interview can be rather long but it's better to wind-up early before the person gets irritated.
3.3 Questionnaire design
There are 4 questionnaires in this project, each of the questionnaires are simple, easy to understand and is pragmatic.
3 different questionnaires were design to take the written perspective of common man (middle class), bank managers and showroom owners. The 4th questionnaire contains the audio interview format with the help of which the audio interview of the auto rickshaw drivers. All questionnaires were designed keeping in mind the importance of time of the answerer. All the questionnaires are pretty straight forward and easy to understand. I have attached the questionnaires in the end before the bibliography.
Questionnaire 1 - Tata showroom owners.
Data was collected from 20 showroom owners. Showrooms located in cities of Gurgaon, Delhi, Bangalore and Noida.
Questionnaire 2 - Individuals.
Data was collected from 50 potential customers who presently own a 2 wheeler and want to graduate to a 4 wheeler.
Questionnaire 3 - Bank Managers
Data was collected from 7 bank managers who had the branches of their Banks in Delhi.
Questionnaire 4 - Auto Drivers
Data was collected from a sample of 50 auto drivers in the cities of Delhi, Noida, Gurgaon and Bangalore.
Sampling is the process of selecting units from a population of interest. By studying the sample we can fairly generalize our results back to the population from which they were chosen. There many type of sampling, for example random sampling, stratified random sampling, systematic sampling, cluster sampling, availability sampling, quota sampling, purposive sampling, snowball sampling. In my essay I will be using random sampling and snowball sampling.
Random Sampling: under random sampling, the sample size is chosen randomly. The probability of selection is the same for everyone in the population. It can do as simply choosing x number of people from a size n of the population. I have used random sampling in the case of individuals and auto rickshaw drivers.
Snowball Sampling: Snowball sampling is one in which the researcher identifies one member of the population of interest, have an interview with him, and ask that person to identify others from the population whom researcher can speak to. This person is asked to refer the researcher to another person and so on. In my essay in the case of bank managers and showroom owners, I have used snowball sampling.
50 samples were used in case of individuals. The sampling done was on the basis of who have a bike or a two wheeler. The sample size taken in the case of bank managers was 7. I faced a lot of problems to convince them to fill the questionnaires. In the case of auto rickshaw drivers again random sampling was considered and the sample size was 50, and in case of store managers of Tata showrooms, the size of sample was 20 and direct interviews were conducted with them.
There was simple procedure adopted for the research. Firstly I hired two personnel to get the questionnaires filled by individuals and auto rickshaw driver. The questionnaires were sent by mails to bank managers after a personal word on telephone, and a personal interview was done by me with the showroom owners. Proper precautions were taken to avoid any biases. Data was collected and arranged in the tabular form and then the results were calculated.
3.6 Data Analysis
According to Yin (2003), "every case study or survey should begin with a general analytic strategy. These general analytical strategies, provide the researcher with a system by which he/she can set priorities for what it is he/she needs to analyze and why". Miles and Huberman (2002) state a qualitative data analysis focuses on data in the form of words, and that the analysis consists of three concurrent flows of activity:
Data reduction: The process of selecting, focusing, simplifying, abstracting, and transforming the data. It can also be defines as transforming the raw data into more applicable or useable form. The purpose is to organize the data so that final conclusions can be drawn and verified.
Data display: Taking the reduced data and displaying it in an organized, compressed way so that conclusions can be easily drawn. It can be done by using bar graphs, pie diagrams, histograms etc.
Conclusion drawing/verification: Deciding what things means - noting regularities, patterns, explanations, possible configurations, and propositions. It means coming to an end result of the research.
"Every good thing has a bad side" even though the study has been designed in such a way that it outperforms most of its limitations still it has some limitations which are as follows:
- Due to non-uniform and small size of samples taken there might be variations in the result.
- Due to geographical limitations I couldn't cover whole of India, in fact the research was done in Delhi and Bangalore. Delhi was chosen being the capital of the country and increased number of public transport, whereas Bangalore was chosen being the IT city and home of millions of young professionals who come away from their homes and stay with fewer facilities than what were they provided at home and also one of the fastest growing cities in the world. I also faced some problems in contacting bank managers and convincing them for my research.
- Due to the tight and hectic schedules of Tata showroom managers I wasn't given interviews easily. I really had to push hard, use many references to get their valuable time.
- Since the subject under consideration is new and no research has been conducted in this regard by public authorities, the internal data was not available which would have been useful to analyse Tata's strategies.
- The research question is largely qualitative and it was difficult to present the understanding of the subject in quantitative terms.
- The time and cost factors were also the biggest constraints in the research project.
Hence even after the limitations utmost dedication and integrity was given while understanding the findings of the study.
For the purpose of this research I have mainly used primary data as choice of data collection. As being the first research of its kind there was not much secondary data available. The primary data has been gathered through interviews and questionnaires. I tabulated all the information gathered through questionnaires and then analysed it from various angles with the help of graphs and charts.
I have also used secondary data from news media, databases accessible through library, Emerald full text, EBSCEO, academic textbooks. Marketing reports and case studies published by government department and agencies and also an array of web based resources also helped in providing an insight into the subject.
Use of secondary data helped a great deal for necessary background information. A text book by Robert K. Yin helped me a lot in understanding primary data and arriving at a conclusion.
The following are the findings of the research in the form of pie diagrams:
4.1 Perceptions of Auto Drivers
This question found mixed responses. The respondents who do not wish to replace their existing vehicles mainly attribute fuel costs and driving skills as the cause for the same.
4.2 Perceptions of Show room Owners
5.1 Discussion on General Data
Since the news of this car was out hype was created leaving doubt in minds of many people about the feasibility of the project keeping in mind about the rising prices and the inflation. But as told earlier in the project Tata conglomerate have the cushion to absorb all the losses and bottlenecks which arrive due to narrow profit margins and have the ability to sustain the project for a longer period of time and keep the quality that is required to fulfil the common man's dream.
The Dealers are already flooded with queries from prospective buyers 'Most believe Nano's price is very attractive and affordable'. People who own entry-level cars are now thinking of going in for either one Nano — in view of its fuel efficiency, or maybe two, which will cost the same as their existing car. (Economic times 12th January 2008)
Even after political turbulences in Left Dominated West Bengal and Tata's decision to withdraw from the principle plant for Nano at Singur. There are problems for Tatas but still the determination to provide the Indian middle class what no one has given till date is giving them the motivation to work better.
The political turbulences has brought all major business houses backing the Tatas for this project for instance the chairman of the largest business house "Reliance industries" has backed Tatas for the project "A fear psychosis is being created to slow down certain projects of national importance. This will be counterproductive for the country's economic growth, its global image as well as our ability to attract investments from across the world," (DNA Newspaper 27th August) he was quoted saying in an interview.
5.2 Findings and Analysis
About Auto Drivers
TATA NANO is cheaper than the auto rickshaw and most of the auto rickshaw drivers are unaware of this fact. This implies that the lack of communication (regarding price) in this segment can hinder the market growth of the company. There is a large population of auto rickshaws in India and the respondents knew exactly what Tata nano is. This perhaps is the first time when every class from every nook and corner of the country know about an upcoming automobile but people like them need to be made more aware about the pricing of the product and interestingly a major population of these people are interested in buying nano and replacing their vehicle with nano.
If Tatas get the permit from the government and promise to launch a variant meant for public utility vehicle then there must be a huge scope for Tatas because of all this a new market will be opened for them. To acquire new customers the Tatas will have to do a lot of homework that includes political lobbying as well. There is an element of doubt regarding the maintenance and operating costs of TATA NANO due to which some of the auto rickshaw owners do not wish to replace their existing vehicles.
About Showroom Owners
With showrooms already started cribbing over receiving commission as low as INR 2000 (GBP 25) for selling one unit Tata Nano. Tatas will have to come up with special scheme providing special incentives to the show room owners in order to keep them motivated and satisfied. With already request for the quoted price pouring in the show room owners should organize different point of sales where the complete information can be provided about nano and complete information should be utilized to make plans. Tata motor should help the respective show room owners in organizing these points of sales by training a dedicated team of sales representatives from the show rooms about the product.
"Out of sight is out of mind therefore this should be made sure and promotional campaigns should be made in such a way such that it should be on the savings plans of each and every Indian individual." (As said by a showroom manager)
A major population of India owns motorbike and motorbikes have a major market and Tata nano is all set to dent the two wheeler market in India but still there are motor bike lovers in the country who think that nano wouldn't be as stylish as their bikes. Some feel on busy roads like India where two wheelers provide substantial importance of time nano won't be able to provide the same utility.
Whereas still more research should be done in order to understand the consumer behaviour who want to buy Tata nano for instance more researches should be conducted in rural markets of India as major population of country still resides in rural areas. It should be found out what percentage of the total population has 4 wheelers and what percentage uses it for commercial or private purposes. It should be also found out that what percentage of the rural consumers are willing to spend over Tata Nano and what type of consumers are ideal for it.
Most of the respondents in my research were two wheeler owners and majority of them had 3 or maximum 4 members in their family. With new trends coming up everyday Tata Nano has begin to attract the youth segment and soon we may be able to see only nano outside colleges in India.
About Financial Institutions
With Nano arriving, and less of information given about the financial formula, it would be driving Nano to its success. It is much difficult to comment on it externally. However on the basis of research managers from financial institutions like ICICI Banks and HDFC Bank quoted that the public can expect some special offers from the banks, but had not disclosed about what offers are going to be there. Most of the managers and administrators had only one answer mostly "the mathematics is in progress and as soon as we will be able to finalize anything we will let the public know about it". But it was quoted in the newspapers that the interest rate probably is not going to be floating; it is going to be higher than other cars but lower than the interest rates charged from the two wheeler buyers. This statement had two implications: one Nano has major competition with two wheelers and plans to steal a major chunk of the two wheeler segment by creating a new segment, second two wheeler loan providers suffer under the threat of increasing NPA (non Performing assets) whereas this security will there with them in this case.
6 Steps to improve Nano's market positioning:
This concept was introduced by Jack Trout & Ries (2001) who continuously advocated that even companies with poor positioning also can be the market leader.
Six Steps to Improve the Positioning for Tata Nano
Step 1: Before Positioning the company should first segment the markets and then further target them by descriptions of the same. For example markets can be classified on the basis of 2 wheelers , 3 wheelers, 4 wheelers or they can be classified as commercial use or private use.
Depending upon the basis of segmentation, the positioning strategies of a company can be devised. Moreover target customers can then only be selected and further feedback can be obtained regarding their needs and perception.
- Individuals who do not own any vehicle.
- Individuals who own 2 wheelers.
- Individuals who own 3 wheelers.
- Individuals who possess 4 wheelers but of the entry level car segment.
- Used car market.
- Low price and an affordable car.
- Car of a small and happy family.
- Fuel efficient and low maintenance car.
Step 2: Research the Competition
Tata's should research the upcoming plans of all the competitors. For example: Renault, Bajaj & Nissan are trying to come up with a $2500 car. Similarly Toyota and Hyundai are also coming.
The Research will help them to understand about their position in this market so that whatever damage if any has been done by them can be controlled in time. This will allow Tata to map strategies according to their customers and will also help them hold the position of being pioneer, once the time about the entrance of other major player's. Entrance in the market is known major tactics can be mapped.
Step 3: Research Customers
According to Jack Trout (2004), "The most valuable assets you have is your share of mind and positioning with your customers".
It will be very important for Nano's management to research their customers before and after the sales. It's important for them to research their customers before making the sale as this will help them understand the needs of the customers and thus help in formulation of strategies as to how the needs can be fulfilled.
It's also important to research customers after selling them the car because this will help the management understand about what problems are the customers facing so that customer loyalty can be maintained because it's not about the loyalty of $2500 car it's about the loyalty of Tata group.
Research Your Company
Company research is done in order to find out the truth about your company and how it really works and what are the strengths and weaknesses of your company.
The most important question while doing a research on an organization is that what product lines account most revenue for the company.
This step will help TATA NANO in discovering the individual's perceptions and view about the company. The image of a company plays a huge role in determining the future sales of its product. Moreover it acts as a reminder to the public regarding the presence of the company and the integration of customer's needs with organisational objectives and policies.
Decisions to focus
Through the product is made to meet the needs of the masses, there is need to focus on different aspects of the field.
There are 5 Suggestions in this Step
- Look at where you make your money
- Leverage your differences
- Under-focus is much more likely problem than over focus.
- Try to avoid change
- Avoid obvious mistakes
If most of the money is being generated by selling Tata Nano to auto rickshaw drivers then it is the natural area to focus.
The uniqueness about the product (Tata Nano) will give you an advantage.
There is a problem where in a company like Tata motors which has vibrant product lines there might be a possibility that once the initial hype settles then the company might not be able to focus on Tata Nano as the profit margins are less but volumes are more.
Current strengths should be harnessed and utilized properly, there shouldn't be any speculative strengths which the company may feel might help them In future
Usage of technology is very important if you don't keep up with the continuously evolving technology then there might be a possibility that you might lose.
Step 6: Spread the Word
The fastest way to organize a good positioning strategy is to involve all the people in the decision making process.
So far Tata's has been successful in spreading the word and due to its company's repute it has not faced any kind of problems and if they want this Nano miracle to last long then a permanent positioning strategy should be applied. Sometimes even very high quality products fail in the market due to lack of effective communication.
TATA NANO needs to communicate and identify the mode of communicate, through which it is supposed to communicate to its customers, society, government, institutions, social institutions, supplies etc.
The source/sender/information source should be the Tata motors which have to send the message across to the customer. Promotions form the central part of the whole process of communication. It all depends on the promotion and the ability of the company to convey the message from their end to the customer's end.
The communication media should be selected on the basis of target segment. As the product is meant for lower income group and caters the masses. Billboards, T.V. and display at malls will be an appropriate promotional media. Moreover the company should aim at good and favourable publicity for the product as well as company.
The Singur case helped Tata's build, strong and favourable image for themselves. The communication is necessary not only with the potential customers but also with the stakeholders such as suppliers, government institutions, social institutions, employees, shareholders etc.
- Ansoff, H. I (1987), Corporate Strategy, Penguin Books, Harmonds worth revised edition.
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