Introduction Of Tata Motors Marketing Essay

A manager was considering buying a new car. He had driven Jaguars for some time. However, he thought it would be a good idea to review the options systematically. He obtained the brochures for a range of luxury car makes, identified the major factors that were important to him and considered all the performance indicators for each of the cars against these. He even allocated a weighted score to the factors that meant most to him. The analysis told him that a BMW or a Mercedes might be a better choice that a Jaguar.

This surprised him and he didn’t much like the answer. He had always driven a Jaguar, he was used to it, felt it had an especially English character and that it suited his personality. He was also looking forward to having the new model. So his inclination was to buy another Jaguar.

Actually he ended up buying a convertible Mercedes sports. This was because his wife thought he needed to liven up his image and liked the idea of driving it on holidays. With some reluctance he bought the new Mercedes. This proved to be a good decision. They both liked the car and it depreciated in value much slowly than a Jaguar.

So what are the lessons? The planning and analysis was there; and if it didn’t end up informing directly, it did indirectly. His wife justified the purchase of the Mercedes in part on the basis of that analysis. He would have ended up with another Jaguar; a continuity of what he was used to. He actually chose what (to him) was a novel, innovative option that, in the long run, significantly changed his approach to car buying, Of course, if his wife had not intervened, his inclination to the Jaguar based on past experience would probably have prevailed. This depended on him and his circumstances-the context. Some ideas get through, some do not, depending how attractive the ideas were to him. Or it could have been that the power of analysis had been such as to overcome this. All these had to do with the strategy formulation, planning, evaluation and selection, and finally, the implementation. So it is with organizations.

Source: Adapted from Johnson and Scholes (2004) Exploring Corporate Strategy. 6th edition, pg. 25.

Tasks:

Select an organization of your choice and present critical internal and external environmental analysis based on the following tasks:

Give a meaningful definition of the contexts of business strategy and discuss a company’s external environment using Porter’s 5-Force Analysis and PEST analysis.

Discuss the company’s internal environment using value chain analysis and SWOT analysis.

Review the existing strategy or strategies practiced by this company and propose a better strategy for this company based on available options.

Table of Content

TITLE

PAGE

Introduction

4

Task 1

5 – 13

Task 2

14 – 20

Task 3

21 – 24

Conclusion

25

Bibliography

26 – 27

Introduction

Organizations are very much a part of our environment. Not only do they exist but operate, survive and grow by interacting with us and attempting to manipulate their environment. The managers, staff and the divisional heads of an organization aim to achieve their objectives, sometimes with the help of the environment irrespective of its external influences. It is the role of the manager in particular to cope with change in manner that is compatible to the business purpose strategy, structure and values of the organizations. The intensity of the environmental influence and the management of this determine the success or the failure of the organization.

Business environment may define as a set of conditions which including social, legal, economical, political and institutional that is uncontrollable in nature and affects the functioning of the organizations (The Gemini Geek, 2013). Business environment may divide into internal environment and external environment. Internal environment is the environment that a direct impact on the business. Here there are some internal factors which are generally controllable because the organization has control over these factors. Examples of internal environment include the value system, vision, mission and objectives, the management structure and the nature of the organization.

On the other hand, external environment refers to the environment that has indirect influence on the business. The factors are uncontrollable by the business. There are two types of external environment which are micro environment and macro environment. Micro environmental forces have a direct bearing on the operations of the organization. Macro factors are generally more uncontrollable.

Task 1: Give a meaningful definition of the contexts of business strategy and discuss a company’s external environment using Porter’s 5-Force Analysis and PEST analysis.

1.0 Definition of Business Strategy

A business strategy is a set of guiding principles that, when communicated and adopted in the organization, generates a desired pattern of decision making. A strategy is therefore about how people throughout the organization should make decisions and allocate resources in order accomplish key objectives (HBR Blog Network, 2013). An organization’s strategy shows what the organization wants to achieve and how it will achieve it. It includes the purpose of the organization, goals and objectives, plans and methods to achieve these goals and objectives. Strategy involves the determination of basic long term goals and objectives of organization, the adaption of courses of action, the allocation of resources necessary to achieve the goals. There are a few influences on strategy such as stakeholders, values of owners and managers, external environment, market opportunities, the culture of the organization, corporate skills and resources. There are a few factors to consider when deciding the strategy including SWOT analysis, skills and resources, mission and objectives, risk involved, expect return, stakeholders and preferences (tutor2u.net, 2013).

2.0 Introduction of Tata Motors

Tata Motors Limited was founded in 1945 and it is the most successful automobile manufacturing company in India. With Tata Group as its parent company and Ratan Tata as its CEO, Tata Motors has sold almost 6 million vehicles nationally since their first launch in 1954 (UK Essays.com, 2013). In expanding their business internationally, Tata Motors has proven that they are qualified as another competitor in automobile industry. Their products are commercial vehicles like buses and trucks, and also passenger cars like Tata Sierra, Tata Estate, Tata India, Tata Nano and Tata Xenon. In India, Tata has operations in Jamshedpur, Pune, Lucknow, Patnagar, and Dharwad. Tata Motors was listed in New York Stock Exchange in 2004, followed by open their operations in UK, South Korea, and Spain (UK Essays.com, 2013). In 2004, Tata Motors joint venture with Daewoo Commercial Vehicles Company from South Korea and formed Tata Daewoo. Continue one year later they bought Hispano Carrocera, a Spain company and also in 2008, they bought Jaguar and Land Rover from Ford, a UK based automobile company

3.0 Introduction of Porter’s 5 Forces Analysis

This theory was found by Michael Porter. It is used to analyze competition between industries. It says that a company should not be only competitor oriented but also has a clear market vision, Porter explains that the potential competitors are those infant industries, suppliers, customers and buyers, and substitute product producers. Therefore have to know 5 forces that determine the character of one industry which are the threat of new entrants, rivalry among existing competitors, the threat of substitute products or services, the bargaining power of buyers, the bargaining power of suppliers (UK Essays.com, 2013).

4.0 Porter’s Five Forces Analysis of Tata Motors

(i). Threat of New Entrant

This force is usually influenced by barriers to entry. For example: laws and regulation, access to materials, tariff, and investment cost. If there are more barriers to entry, there will be more lower the threat of new entrants. Tata Motors must be aware for this threat if they want to come to Indonesia. Indonesia’s market for ‘Tata Nano’ seems good because most of the cities in Indonesia are crowded and often jammed so the small and cheap car like Tata Nano will be on demand. The new entrants which can give threat for Tata Motors such as: ‘Intelligent Geely’, a £1,500 car by China Geely Automobile and also ‘Maruti Ritz’ by Maruti Suzuki. So, Tata Motors must maintain the loyalty of its customers by always giving the best services and always produce not only cheap but also good quality cars.

(ii). Rivalry among Existing Competitors

This force is the most common in business world. If the business has many competitors, it could give disadvantages to the company because they share the same amount of customers. Tata Motors will have many competitors in Indonesia, such as: Honda, Toyota, Mitsubishi, Daihatsu, and many more. Each brand has their own competitive advantage, so Tata Motors have to make sure that they are strong enough to enter the market by keep innovate their cars, keep the low price, and promote more.

(iii). Threats of Substitutes Products / Services

This theory investigates how many substitutes that the product has in the market. The existence of substitute product will block up the producer freedom for price setting. The high prices of oil sometimes lower down the demand for car. People might substitute it with bicycle, motorcycle, or hybrid car which is popular recently. The strategies that Tata Motors should do are produce good quality cars, innovative products, and keep update with the latest technology.

(iv). Bargaining Power of Buyers

The more products that the company has will bring a more choices to the buyers which will make their position become stronger. Buyers or customers are the main key for company, because they bring sales and profit. The target customer for Tata Nano is moderate to low level because it is affordable. The cheap price will bring positive respond from Indonesia market.

(v). Bargaining Power of Suppliers

This explains how important a supplier to a company. If let’s say there are only a few suppliers in the market, the material will become rare and the bargaining power for the suppliers will be higher. Tata Motors Indonesia will still depend on their suppliers in India, so they need to maintain close relationship to the suppliers especially when the demand increases.

5.0 Introduction of CPESTLE Analysis

The CPESTLE analysis looks at the external business environment and changes that occur or will occur on the national and international level which will affect the organization’s performance. CPESTLE is an acronym for the following factors: Competitive, Political, Economic, Social, Technological, Legal and Environmental (UK Essays.com, 2013). These factors are usually beyond the organization’s control and may present themselves as threats, but can also create new opportunities for businesses. The CPESTLE analysis is a good starting point for any organization when reviewing its strategy. For some organizations the results may have an impact on their expansion or even the alteration of their product offering.

6.0 CPESTLE Analysis of Tata Motors

(i). Competitive

Tata Motors face competition from various domestic and foreign automotive manufacturers in the Indian automotive market. Improving infrastructure and robust growth prospects compared to other mature markets is now attracting a number of international companies to India who have either created joint-ventures with local partners or have established independently owned operations in India. Global competitors bring with them decades of international experience, global scale, advanced technology and significant financial resources. Hence competition is likely to further intensify in the future. Tata Motors have designed their products to suit the specific requirements of the Indian market based on specific customer needs such as safety, driving comfort, fuel efficiency and durability. They believe that their vehicles are suited to the general conditions of Indian roads, local climate and they comply with applicable environmental regulations currently in effect. They also offer a wide range of optional configurations to meet the specific needs of their customers. They intend to strengthen their product portfolio in order to meet the increasing customer expectation of owning “world class” products.

(ii). Political

Tata Motors was established in India, so Tata Motors has to concern on laws, rules, regulation, and political stability in India. But since Tata Motors has many subsidiaries in many countries, Tata Motors has to obey the host country’s laws also. In 2008, Tata Motors bought over Land Rover and Jaguar from Ford Motor. Since then, Tata also has to concern on the UK laws and regulation. Moreover, as the first company to be listed in New York Stock Exchange, Tata Motors also has to concern on US politics. It is famous that India is one of the countries which have a complicated bureaucracy; this is one of the obstacles if establishing business there. Political unstable such as wars or conflicts also cause inflation and may affect oil price in one country. High inflation cause the government has to rise up prices, and oil price is the common price to get raised. And it is automatically the higher price of oil will affect the sales of cars.

(iii). Economic

Tata Motors has to understand the trend of economic growth in every single country that they do business with. This factor tells about the economical factor that surrounding the company such as: economy fluctuation, monetary and fiscal policy, government spending, unemployment level, interest rate, exchange rate and Gross Domestic Product (GDP) per capita. In the domestic market, Tata Motors has to pay attention to the economic condition of India. India is a developing country with GDP per capita = $ 3,200 and $ 3.68 trillion national purchasing power (UK Essays.com, 2013). As been affected by the depression of global economic, India’s automobile industry also has to bear the consequences. The increase of material price forced Tata Motors to increase its truck price of 3.5% which lead to decrease in demand (UK Essays.com, 2013). In the international market, Tata Motors has to concern in any changing of countries currency, especially US Dollar because Tata Motors also listed in New York Stock Exchange (UK Essays.com, 2013). Inflation is also one of the factors, because it affects the interest rate for doing investment in a country. The increase or decrease of inflation, will lead to a lower or higher interest rate. Looking deep to the economical macro environment may help Tata Motors in price setting, demand, cost and decisional making in the company.

(iv). Social & Cultural

Tata Motors must realize the type of customers in India as its domestic market. The attitude and life style of those customers affect the demand for Tata Motors which also influence its decisional making. Indian people are careful with their spending. They do not want to buy thing which is not worth it. Besides that, in doing business in 26 countries with 26 different cultures in each country, Tata Motors has to understand and apply different strategy. For example: Tata Motors cannot apply Indian culture to United Kingdom when they purchased Land Rover and Jaguar from Ford (a UK based company), because each place has their unique demographic.

(v). Technological

As one of the giant automobile company, Tata Motors has to adapt and develop their product to the technology. The adaptation is not only in the factory machines but also in the car parts. Tata Motors allocate 2% of their Sales to Research & Development Department (UK Essays.com, 2013). Now, they are working to make environmental friendly buses such as hydrogen fuel cell buses and hybrid cars. Not only in the ‘real world’, but Tata Motors also expand their services through internet. Tata Motors has on Online Booking Services which allow customers who has problem with their car to book date to send their car to their workshop. Now, customer also can purchase Tata Nano through internet, Tata Motors expand their business to e-commerce marketing.

(vi). Legal

Since it has its company’s presence in many countries it has a lot of law, rules and regulations to follow. Tata in recent years have been adhering to the government’s laws and taxations that the Indian government has awarded Tata Motors as the best car manufacturer. There have been serious frictions in the state of Bihar where it planned to build its new car Nano’s manufacturing plant but the state government insisted the Tata motors to shift its base to some other state, which Tata motors did by moving its plan to the state of Gujarat. These are some of the legal issues faced by Tata Motors.

(vii). Environment

Tata motors have a good standard of manufacturing vehicles adhering to the euro and Indian standards of emission and it also invested into creating greener cars by researching in alternate fuel methods and low consumption of fuel which creates a balance between the eco systems. All the vehicles come with low emission a filter which convert and reduces the carbon monoxide content emitted by the vehicles.

(2008 words)

Task 2: Discuss the company’s internal environment using value chain analysis and SWOT analysis.

1.0 Introduction of Value Chain Analysis

Value Chain Analysis

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The value chain approach was developed by Michael Porter in the 1980s in his book “Competitive Advantage: Creating and Sustaining Superior Performance”. All organizations consist of activities that link together to develop the value of the business, and together these activities form the organization’s value chain. Such activities may include purchasing activities, manufacturing the products, distribution and marketing of the company’s products and activities. The value chain framework has been used as a powerful analysis tool for the strategic planning of an organization. The aim of the value chain framework is to maximize value creation while minimizing costs. The primary activities of the company include the inbound logistics, operations, outbound logistics, marketing and sales, services. The support activities of a company include the procurement, human resource management, technology development and infrastructure.

2.0 Value Chain Analysis of Tata Motors

2.0.1 Primary Activities

(i). Inbound Activities

Tata Motors buys raw materials and spare parts from many suppliers based on the specific standards which guarantee that high quality products are being delivered to it. Tata Motors also having long term contract with service provider’s which are transporters and agents.

(ii). Operations

Tata Motors has excellent production base and processes which add value and quality to its products. During operations, there has a capital equipment manufacturing division which is the tooling development capabilities of global standard. Tata Motors also provide the apprentice trainee course to ensure that there is stable source of skilled manpower.

(iii). Outbound Logistics

Tata Motors tries to strengthen its dealership to secure its product by increasing amount of dealers as well as establishing service points to provide quality service after sales and thus adds value to its products and services. Besides that, there has efficient security system for prevention of any kind of pilferage.

(iv). Marketing & Sales

Tata Motors has its structured approach to understanding the requirements of individual customers. Besides that, it has clear identification of product requirements will lead to development of innovative products. Tata Motors has adopted different strategies such as, creating brand image, packaging, innovations, and quality control. Along with all these pricing strategy, place of dealership, maintenance and support, after sales services provided by Tata Motors plays very crucial part in marketing and sales.

(v). Services

Tata Motors has set up customer service help line, dealer helpline, and service programs for dealers. They have also set up spare parts warehouses to provide genuine spare parts to the customer at economical prices. Tata Motors is efficient in collection of data from field and communication to the respective plants.

2.0.2 Support Activities

(i). Procurement

E-procurement is initiative now in Tata Motors. It has global sourcing team such as China is a key destination for sourcing essential items like tires and power steering units. Tata Motors has long term relationships with stable and loyal pool of suppliers. There are group resources for Tata Motors which are Tata Steel and Tata International.

(ii). Human Resource Management

Tata Motors vast pool of technically competent engineers and managers. It focus on development of technical capabilities by provide training in Technical Training Centre and Alliance with technical institutes. It also focus on development of managerial capabilities by provides the executive training programs at premier business schools.

(iii). Technology Development

Tata Motors is using the advanced and the latest technology for its company. It has the excellent engineering employee with the high level of engineering knowledge. Tata Motors also has the knowledge portal to help employees keep abreast with the latest technologies.

(iv). Infrastructure

Tata Motors is India’s largest automobile company. Manufacturing base of Tata Motors is spread across the various cities in India along with joint ventures in various countries. Their main strength is world class in-house research and development centers and laboratories. It has also the strong leadership in the company and best in class prototype building facilities.

3.0 Introduction of SWOT Analysis

Internal environment factors can be classified as Strength (S), Weaknesses (W), Opportunities (O) and Threats (T). SWOT analysis is useful tool to auditing company and its environment. It is a business or strategic planning technique used to summarize the key components of the strategic environments. Strengths and weaknesses are company’s internal environment factors and opportunities and threats are company’s external environment factors. SWOT analysis is useful to collect information about company’s resources and capabilities, so we can easily make strategy formation and selection.

4.0 SWOT Analysis of Company

(i). Strengths (S)

Tata Motors excels when it comes to innovation through intensive research and development. Their ability to make the least expensive car on the market which is the Nano, is far beyond what any other car dealership has created. This innovation gives Tata Motors their main competitive advantage. Tata Motors makes everything from tractor-trailers to the world’s least expensive car. This product diversity grants them a competitive advantage over their competitors because they can satisfy more markets and customer needs. Another strength that Tata Motors possesses is high corporate responsibility. They donate a portion of their profits from stock increases towards a specific charity. This highlights Tata Motors overall desire for community improvement while also emphasizing Tata Motors’ high morals and values which is something money cannot buy.

(ii). Weaknesses (W)

One weakness that Tata Motors faces is its inability to meet safety standards. Although they have made the most inexpensive car out on the market, it has yet to pass all the safety standards which are a legal factor. Some consumers and pessimists inquire as to how Tata Motors can make such a cheap car and withstanding a car accident or not just falling apart after hitting something once. Pessimistic people also want to believe that car manufactures are already doing everything they can to keep costs low for the consumer, and if that is the case, then putting the cheapest car out on the market automatically questions if it is safe to drive. Another weakness that Tata Motors faces is within its domestic market. Car sales in India are less than 1 million annually. This draws a problem because Tata Motors may not get the sales that the company hopes for and how can they sell cars to people who are not buying cars?

(iii). Opportunities (O)

One of the major opportunities that Tata Motor faces is that as of right now 90 percent of China and India’s adult population do not own cars, partly because cars are costly and require more expenses after purchased. So the market for a low-priced car is huge which benefits Tata Motors perfectly since they produce the lowest priced car on the market. With Tata Motors in the market with the cheapest car, China’s demand for cars will probably increase even more significantly which will in turn increase sales for Tata Motors. This demand for smaller cars is a great window of opportunity for Tata Motors because not only are their cars small, but they are cheap and environmentally friendly as well. Once people in other countries get Tata Motor automobiles then their automobile sales will continue to rise.

(iv). Threats

The obvious threat to Tata Motors is intellectual property rights. Tata invented the cheapest car on the market and every automobile manufacturer wants to know how Tata did it. Headhunters are soon going to find out this valuable information and make it available to their own company. This is a huge threat to Tata Motors because at first they had low competition, but once other car manufactures find out how they invented such a low cost car, and then these companies too will jump on board and design their own line of low cost automobiles. Another obvious threat is that dealing with petrol prices. Petrol prices continue to rise and for sure that the Nano requires petrol , but those who purchase the Nano probably do not have a lot of money and so if petrol prices keep jumping up then that market of consumers will not be able to purchase the car. Another main concern that Tata Motors faces is that cheap cars in India will have an adverse effect on pollution and global warming because most of the population will be able to afford the cars. With more people driving cars there will be more accidents and deaths, as well as higher fossil fuels leaked into the environment causing even more pollution then there already is.

(1395 words)

Task 3: Review the existing strategy or strategies practiced by this company and propose a better strategy for this company based on available options.

1.0 Introduction of Ansoff’s Product-Market Matrix

Ansoff’s Market-Product Matrix

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Ansoff Product-Market Matrix was founded by H. Igor Ansoff in 1957. This marketing tool is used to help company to find the best strategy that should they choose to reach the objectives (UK Essays.com). Output from this Ansoff Matrix is a growing strategy which is appropriate for every part of business. Igor Ansoff stated that there are 4 strategies in Ansoff Matrix, which are Market Penetration, Product Development, Market Development, and Diversification.

2.0 Ansoff’s Product0Market Matrix of Tata Motors

(i). Market Penetration

Usually, companies use this strategy to attract their competitors’ customers. Tata Motors used this strategy when they reached UK market by take over Jaguar-Land Rover, Tata Motors did not just concentrate on the new products line that they can produce from the two companies above but instead, Tata Motors still producing Tata Indica in the market.

(ii). Product Development

The first product development of Tata Motors was ‘Tata Sierra’, their first passenger vehicle. Tata Sierra was marketed in 1991. And that was the first step of Tata Motors to develop their product and future strategy. Tata Motors also did product development when they started to produce ‘Tata Nano’ in 2008, Ratan Tata thought about making the world cheapest car and produced it in the domestic market first, India (UK Essays.com, 2013). The strategy was to sell affordable car to the people in the same time, expanding their market. Before that, Tata Motors developed the first mini-truck in India called Tata Ace. Tata Ace came to the market in 2005 and in 2 years time, they have sold 96,000 units of Tata Ace. By marketing this product, Tata Motors expand their market to mini-truck segment and become market leader.

(iii). Market Development

Tata Motors has developed their market overseas; they reached South Korea market in 2004, Spain market in 2005, Thailand market in 2006, UK market in 2008 and many more. Tata Motors sells their existing products like buses, trucks, and cars in those markets. Tata Motors is planning to make their market even wider by opening new companies in developing countries such as Indonesia, Philippines, and Turkey.

(iv). Diversification

This is a strategy whereby the company makes a new product and offers it to the new market. Diversification has higher risk than another strategies because the market and the product is new, but in the other side it could bring more profit to the company as it will bring new customers. Tata Motors diversified their products when they entered UK market and took over Jaguar-Land Rover in 2008. It allowed Tata Motors to produced new products line, for example, Jaguar X-Type and Land Rover LRX.

3.0 Purposed Strategy – Ansoff’s Product-Market Matrix (Product Development)

Tata Motors had produced many types of vehicles. For an example, the Tata Nano is the one of the cars produced by Tata Motors in 2008. From the information of SWOT analysis of Tata Motors, there can be seen that Nano is a cheapest car in Tata Motors but it is give to the consumers that unsafe opinion due to the probability to produce such cheaper car. There can be seen that Nano is purchased by many people that do not have their own car. At the same time, there is some competitive environment of Tata Nano due to some manufacturers of cars may quest for the methods of manufacturing such cheaper car. Besides that, there will also have threat of petrol prices keep on increases which may influence the sales of Nano.

As all the information above, I may propose the strategy to Tata Motors for the product development parts. In my opinion, Tata Motors may continue to produce the lower price cars like Nano. This is because it may help the poor consumers or the consumers that unable to purchase the expensive car for their own as cars can be consider as one of the important transportation for human being.

Tata Motors may produce the new model of low-price of cars. At the same time, it can show some prove to the consumers about the safety of the cars which can be letting the consumers know that not necessary that low-price cars are unsafe. This strategy may give the confidence to the consumers to purchase the low-price cars and to show to them that the low-price cars can be such low price too.

The new model of low-prices cars may produce with the characteristics of petrol-effic