TATA Motors The Leader In Automobile Manufacturing Industry Marketing Essay

Tata motors Limited is the largest automobile manufacturing company in India with its revenues of Rs. 92,519 crores (USD 20 billion) in 2009-10 [1] . It is the world’s second largest manufacturer of buses and world’s fourth largest truck manufacturer too. It is the leading commercial vehicle company in India and ranks among the top three in passenger vehicle companies of India. The company was established in 1945 and grown into a large corporation with 24000 employees till now and over 5.9 million Tata vehicles produced and used in Indian roads. Mr. Ratan N. Tata, Chairman of the Tata Group and Tata Motors is in charge of the whole Tata group of companies at present. Tata motors manufacturing base is situated wide across the nation and the places include Jamshedpur (Jharkhand), Pune (Maharashtra), Lucknow (Uttar Pradesh), Pantnagar (Uttarakhand) and Dharwad (Karnataka). It has alliance with world leading automobile companies and Tata motors became the first company from Indian engineering sector to be listed in New York Stock Exchange (NYSE) during September 2004 and its international venture started to establish after this achievement. Tata motors production branches, sales, manufacturing units and other networks comprises of more than 3500 units throughout the world [2] .

1.2 THE HISTORY [3] 

Tata motors forms a part of the Tata group of companies, and its share-holdings were managed by the Tata Sons. Right from their start in 1945 as a locomotive manufacturing unit, Tata motors started to expand their operations over commercial vehicle sector. In 1954, they made a joint venture with Daimler-Benz AG of Germany to make their presence felt in global arena. Even after their success in commercial vehicle manufacturing sector, Tata motors always interested in diversifying their products to remain a global competitor. So they analysed the local consumer market and decided to build a small car which would be useful for the consumers and it will be of mutual benefit for both the company and the society. So, they launched Tata Indica, the first Passenger Car in 1988, which is designed to be inexpensive and simple to built and maintain. This product of Tata motors was a big hit in Indian automobile industry sector, which was also later exported to Europe, that too especially in United Kingdom (UK) and Italy (TATA MOTORS,2010).

For more than six decades of its operations, Tata motors growth rate in the consumer market was enormous. They introduced innovative model cars and astonished their competitors locally as well as globally. In 2004, Tata motors bought Daewoo’s truck manufacturing unit in South Korea which is followed by many acquisition in various countries such as South Africa, UK and Italy. In 2008, they acquired Jaguar and Land Rover from Ford Motor Company and this was considered as an important milestone in Tata motors history, since then they gained brand value and power in the global community (TATA MOTORS,2010).

1.3 TATA MOTORS BUSINESS STRATEGY DEPENDING ON PERIODS

From 1945 till now Tata motors has changed a lot and this is due to their timely recognition of opportunities and threats in the market. When they first launched a passenger vehicle in 1988, the demand for their product was enormous and they continued to concentrate more on that particular product with demand. But when they incurred loss at 2002, and their profits were reduced Tata motors started analysing the consumer markets need and why their commercial vehicle product was no more successful. They identified the demand for innovation, which is must at that point of time, and so they started thinking about acquiring or signing Memorandum of Understanding (MoU) with international automobile industry partners to uplift their brand name and value. They succeeded in that mission too and by 2005 their presence was felt in South Africa, Senegal, Turkey, Europe, Thailand and West Asia (TATA MOTORS,2010). This innovative strategy in planning and execution helped them to create the world’s cheapest car in 2009 which is called “Tata Nano”. Thinking beyond the borders and acting quickly to the market change has taken Tata motors to high limits in world’s automobile sector.

2. ORGANIZATIONAL STRUCTURE AND GOVERNANCE

Tata motors is largest and one of the biggest automobile industries in the world. They have operations in many parts of the world, and they are successful in their business sector for a long period of time. This requires an effective organizational structure, which is maintained and followed unanimously (Refer Table 2&3 in appendix). In my analysis, I could see that Tata motors international partners and Executive officers are from various parts of the world, working together to reach a common goal. Thus illustrates they are adopting an “international organizational structure” with the power is created and monitored from the centre and then dispersed equally to all other subsidiary parts of the organization (TATA MOTORS ANUAL REPORT, 2010).

From the Appendix, it is clear that they have a CEO who is taking in charge of the entire committees that have been formed to share the leadership activity in a big corporation like Tata motors. They have committees for sales, marketing, human resource, auditing, financing, manufacturing, strategic planning and for their business operation models. So with the help of these committees they gather critical information, which is the main source of income generation for the company. After this, they start discussing about the issues and goals to be achieved in the fiscal year and the years to come. This was done with the presence of Board of directors who govern the company with the shareholders. They make critical decisions when they meet together, and it will be on behalf of the value maximization for the shareholders which forms the main goal for any business development [4] .

In the table 2& 3 in appendix, it is mentioned that the CEO Carl Peter Forster, is responsible for all the organization’s management and he has eleven board of directors including the Chairman Ratan Tata, who is the proud owner of more than half the amount of shares of Tata motors. So, every time when the organization faces a problem, they gather together for a meeting to discuss the problem in ethical manner, and they come with new decisions to solve the critical situations.

The international Organizational structure is turning out to be an important aspect of leadership and governing process for Tata motors. The implications of international organizational structure are “type of strategy driving the firm’s foreign operations; product diversity; extent to which the firm is dependent on foreign sales; and structures used to manage international operations” (Cape Breton University, MBAD630 PowerPoint for text by Dess, Lumpkin and Paradis. Ch10, slice 16 and 17.) . Leadership activity is shared with different personalities from different parts where the company is operated and they are concentrated towards value maximization which brings all of them united and becomes the part of internationally organized structure.

3. CORPORATE GOVERNANCE AND LEADERSHIP [5] 

Tata motors are at its best when it comes to their governance structure. They follow a fair, ethical and transparent business activity with high standard of professionalism. They share their financial details and their market share value information once in every six month in their company website (TATA MOTORS,2010). Tata motor has implemented Tata excellence code of conduct model which is about being loyal and transparent for the company benefits. They are strictly against the whistle blowing, which they believe that it will cause damage to their brand name and value. This is the reason behind their brand value in Indian domestic market and indeed their recognition at international level too. Their activity as an organization in the field of community development is enormous too. They maintain excellent corporate social responsibility (CSR) (TATA MOTORS,2010) and the areas they cover to perform CSR includes environment, energy and water conservation, education, health and livelihood.

Ratan Tata, who is the Chairman of Board of Directors, has tremendous vision and in depth knowledge about the Domestic market. He has great dreams like producing world’s cheapest car for middle class society of India. He is a good learner too. He joined the organization when his father was in charge of the whole organization. He started form the scratch phase and gained knowledge about the whole community, business and improved his skills to a reach position where he is placed now. His charisma and will power are best known for taking bold decisions, an example would be Tata Nano project, where he could able to manage the opposition from the government as well as the financial sector to create world’s cheapest car. He is a man of innovation and his works portray them very efficiently.

4. INDUSTRY ANALYSIS OF TATA MOTORS

4.1 MICHAEL PORTER’S DIAMOND MODEL

Porter’s diamond model was helpful to analyse the competitive advantage of any business activity and it provides a room for research and development. Here Tata Motors limited is placed well in Porter’s Diamond model as an automobile company and their strategies are analysed as follows;

FACTOR CONDITIONS:

Tata motors have the huge opportunity to avail the human resource power of Indian economy. A country of more than 1 billion population with the growing Information technology economy, Tata motors holds the power to recruit young minds from various parts of the country from various universities of the nation and bring them all together to disseminate knowledge and to utilize the environment and infrastructure perfectly. Thus they have an excellent atmosphere with people highly educated and willing to work for their corporation. This can reduce the capital for labour which is usually being invested in large amount and thus provides an opportunity to reduce their production costs.

DEMAND CONDITIONS:

The rapid growth of urbanization in India and in world market has created a competitive advantage for the corporations. If innovation is the only key to achieve the demand of the consumers then, it is worth considering. Tata motors exactly do the same and they have created a brand name for innovation. They have produced the world’s cheapest car named Tata Nano [6] , which has now a huge demand in market and produced a healthy competition among the competitors.

RELATED AND SUPPORTING INDUSTRIES

Tata motors acquisition and internationalization strategies have been a huge success in the automobile sector as they started thinking of new developments with the help of these merging activities which provided a good supply chain management. Thus the components of their strategies and a strong industry association have helped Tata motors to remain unique to challenge their competitors.

FIRMS STRATEGY, STRUCTURE AND RIVALRY:

Globalization has brought a huge impact in the world economy especially in automobile industry, where global players begin to participate and compete with the local business providers. Thus the competition was huge and it is necessary for each firm should analyse the market environment and the necessity of their product to the local consumers. In such case Tata motors analysed the fact for the need of a family car in Indian economy and they laid out a plan for Tata Nano and adopted it, in which they are really successful .They also had partnership with Ford, and other major international companies to withstand in the market with competitors. It is clear that Tata motors have a plan and they have adapted to it really well with their business strategies (TATA MOTORS ANUAL REPORT, 2010).

GOVERNMENT:

The role government plays is very important for any business sector. According to Tat motors, the local provincial governments of Uttar Pradesh and Gujarat have given thousands of acres of land for its plant construction with incentives and tax benefits which are really huge for any corporation. Thus, government influenced their business promotion by financing them and created goodwill on their brand value.

CHANCE:

Tata motors are well aware of the fact that going global is the only way to survive in the market and they have adopted a strategy to acquire and develop their organization with global brands and get accessed to their suppliers and human resource in order to be a healthy competitor. Thus, Tata motors are good in acquiring and utilizing their chances and opportunities.

4.2 THE EXTERNAL OPERATING ENVIRONMENT OF THE INDUSTRY

The automobile industry is one of the growing industries today in the world with increasing consumers and their need for a vehicle. Almost every business depends upon the transportation and every family needs comfort in life. Both are vice versa. Automobile sector satisfies their needs with their product and I have highlighted some few points which are really essential to be discussed in analysing their operations. They are as follows;

RAW MATERIALS

The main source of raw materials used in automobile industry includes steel, aluminium and petroleum products like vinyl and plastics. These materials are bought from various suppliers all around the world with major parts are being produced from its branch operations Tata steel limited. They have internal as well as external raw material suppliers which make them strategically strong to produce more products. Tata motors carry out a vertical integration strategy to enhance their business. Thus it gives them the option to innovate, assemble and manufacture a product for huge quantity of consumers with productive supply chain management. (TATA MOTORS ANUAL REPORT, 2010)

ENVIRONMENT CONCERNED

Tata motors have joined with United Nations global compact to protect the environment from hazardous emissions and it plays a major role in corporate social responsibility by community development activities in near by regions of their manufacturing units. The company utilizes the world’s most highly equipped instruments for emission check and control. Their manifesto includes reduction in environmental pollution and restoring the ecological balance. Its combine effort with Cummins engine company, USA in 1992 helps them to adopt emission control technology and they have also implemented End of Life Vehicle (ELV) treatment for recycling old products. (TATA MOTORS,2010)

ECONOMIC UNSTABILITY AND GROWTH

The recession and economic downturn in 2008 resulted in reduced commercial vehicle production and other automobiles in India. India has the world’s highest proportion of people less than thirty five years of age. They are the working population (the potential buyers) for a community and they are expected to grow more in future. Thus, there is an opportunity for the companies to attract more customers with innovative products in automobile sector. Thus, Tata motors has decided to improve their productivity and their manufacturing units to avail the opportunity in their favour.

SAFE AND SECURED

Tata motors provide a safe environment with housing facilities for its employees, and they have attractive incentives and employee appraisal programmes to make their labours comfortable as well as secured. (Refer table 8 in appendix) This makes them feel like they are bonded with the company and make them to work and perform better for their organization.

4.3 TATA MOTORS MARKET SHARE (COMPARATIVE ANALYSIS) [7] 

Tata motors are known for its quality automobile products at reasonable price. This takes them one step ahead from its competitors. It is a known fact that Tata Motors leads the Indian domestic market with its more than half of the total automobile products sales. It is portrayed in the recent financial report released by the firm. Its market share remains steady even after economic recession in 2009 which shows it credibility and hard work. ( Refer table 4&5 in appendix)

FIG 1: MARKET SHARE ESTIMATE FOR COMMERCIAL VEHICLES PRODUCED IN INDIA DURING 2008-09

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Source: SIAM (Security of Indian Automobile Manufacturers)

Tata motors share in the domestic market is massive when comparing with the local competitors but it faces a stiff competition from global players since globalization makes life easy for the international firms. Thus Tata is making acquisition and alliance with global companies in order to face the competition worldwide.

5. FINANCIAL ANALYSIS OF TATA MOTORS

5.1 FINANCIAL PERFORMANCE [8] 

Tata motors revenue crosses $15000 million in financial year 2009 which records an increase of 95.2% over the previous year. Tata motors acquire revenue in 3 genres. Tata Jaguar land Rover, Tata motors vehicles, spare parts and Tata financing. Comparing with the previous year’s sales and revenue, there is a slight dip in its profits but it was recovered in the recent fiscal year after the economic recession. India’s large geographical market helped Tata motors to achieve 37.8% of the revenue in its domestic market while the rest came from international level. UK accounted for 23.2% revenue through Tata’s Jaguar Land Rover acquisition. This creates a large customer target for Tata motors to expand their territory. U.S accounted for 8.3% while Europe provided 12.6% revenues and the remaining came from its various other joint ventures and global partners.

5.2 FACTORS AFFECTING FINANCIAL PERFORMANCE

Arrival of global players into the local Indian market is creating challenges for all domestic automobile industry in India. Indian roadways are most suitable for two wheeler passenger vehicles and the market for two wheelers was covered by Maruti Suzuki, Hero Honda and other local producers. Tata motors face a stiff competition here due to availability of more two wheeler vehicles, four wheelers are replaced by them.

FIG 2: DOMESTIC PASSENGER VEHICLE MARKET SHARE

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Source: SIAM (Security of Indian Automobile Manufacturers)

The analysis released by the Indian automobile industry clearly shows the stiff competition between domestic and global players in Indian market. Tata motors need to find itself a better chance to overtake and withstand itself in local market with innovative products and models. A perfect example for its effective strategy is Tata Nano which was introduced to compete with these international players for cheap cost. It attracted the whole middle class working group and their product created a revolution in automobile market, although it has few defects.

6. TATA MOTORS INNOVATIVE PROJECT [9] 

Tata motors are known for its innovative strategies in the automobile industry. They are the first to develop light commercial vehicle in India named it as Tata Indica in 1998, which was a huge hit among the car admirers, and within two years of launch, Tata Indica became the India’s largest selling car in its segment. Their innovation was carried out in all their sectors with new products and they were all successful. Mr.Ratan N.Tata had a vision and dream to produce a people’s car in such a low cost in order to make life easier for the middle class community to develop and prosper. The idea for making this dream was laid out during 2003 and it required lot of Research and design activities to be carried out before establishing this innovative plan. So, Tata motors started working on this project in their R&D centres mentioned in the above paragraph. They had international alliance and joint ventures with other countries that helped them in providing the raw materials which is essential for the evolution of Tata Nano so called the people’s car.

FIG 3: COMMODITY CHAIN ANALYSIS FOR TATA NANO

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The above figure indicates how People’s car project was undertaken efficiently utilizing alliance and its commodity chain is represented in a simple form to explain their innovative strategy.

Later in January 2008 at New Delhi Auto expedition, Tata motors unveiled its new invention to the world and named it as Tata Nano. Nano brings safety and affordable to reach millions of families and it was priced at Rs. 100,000 as a base rate which is merely around US $2200 [10] . This was a great breakthrough in the whole automobile industry in the world and Nano was referred as the world’s cheapest car [11] .

7. OPERATIONAL ANALYSIS FOR TATA MOTORS

Tata motors as a successful organization, has numerous aspects to compare and contrast. It’s merits and demerits are analysed and discussed as follows;

7.1 SWOT ANALYSIS [12] 

STRENGTH

The expansion of their products worldwide has provided Tata motors a chance to compete globally and increased market share and benefits for Tata motors. Internationalism gained success and opportunities in the local market for Tata motors. They also have a strong domestic market due to acquisition as well as product developments. Tata motors products were of different range and their variety in producing different models was amazing. They have a wide range of products which gives the customer an option to choose best among the list. They have intensive R & D practice which continuously enhances their product developments.

WEAKNESS

Tata motors huge market share is concentrated domestically, and for a company to expand with acquisitions and alliance, they should try to be a global player in the automobile market. Huge competitions in the passenger vehicle production in India may be a considerable threat and still it remains a major weakness since Tata motors innovative projects were delayed due to lot of local political problems.

OPPORTUNITIES

There is huge need for passenger vehicles in India due to roadways new development projects. People may wish to have a passenger vehicle for convenience. Nowadays customers expect cars to be more preferable to avoid any accidental problems since the population in India is increasing a lot every year and it is a must now to be safe and quick accessed vehicles to be owned. The need for environment friendly vehicles is a must and Tata motors can concentrate on producing more green products that can emit less gas fuels and Company’s CSR( Corporate Social responsibility) should avail this opportunity to produce more fuel efficient vehicles with less gas emissions.

THREATS

Increase in the global competition is threat for any automobile company global wide, and Tata motors need an extra attention on processing raw materials too. The parts required in making desirable products for Tata motors must be processed as quickly as possible since they are manufactured locally and shipped worldwide. So the need to satisfy customers should be the prime objective for the company to prosper in future. Apart from these due to global warming Tata motors need to be very careful in producing green products to ensure the maintain the environmental regulations properly. These attributes are need to be addressed otherwise they form a possible threat to the organization.

7.2 TOWS MATRIX

FIG 4: SWOT AND TOWS ANALYSIS TABLE

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7.3 BCG MATRIX

This matrix gives an overall idea to fix priorities for the product portfolio of a business unit based on their product life cycle. [13] It helps in long term value creation for the organization and helps to increase their market share and market growth.

FIG 5: BCG MATRIX FOR TATA MOTORS

Here, in the graph drawn above, Tata motors heavy and light commercial vehicle products were placed under Cash cows, where these products have high market share but low growth due to increased competition. To avoid these problems, the company should concentrate on customer retention. Meanwhile passenger light vehicle were the stars for Tata motors in which they are the leading company in domestic market. In their financial analysis it is clearly visible that Tata motors generate high revenue for their low priced passenger vehicle products. Tata motors new innovative and interesting product is Tata Nano and it is placed under question mark in BCG matrix along with Jaguar and Land Rover products. It is because they have low market share but still expected to perform well in market and reach high market growth. Tata motors need to invest more money in these products to make them as stars. In addition to that Tata motors don’t have a mentionable product that is doing really bad for them. Their strong market analysing team analyse and recover the under performing product as soon as possible so that they wont face a drastic loss in market.

7.4 TATA MOTORS DIRECTIONAL STRATEGY

It is very essential for any organisation to be updated with resource and information about their competitors and global scenarios. Tata motors have resource and human power in India where they have their basic operation. In geography wise, they are the leading manufacturing company for light passenger and commercial vehicles which gives them high priority among their customers. Meanwhile they have variety in product diversity which has four wheelers and heavy trucks with various functions and accessibility. It shows how specific and diversified they have products for the customers. In creating a strong global player Tata motors upstream and downstream value chain strategy helps them in achieving their target they are looking for. They get construction support services from their acquisition companies and in addition to that they have strong distribution service locally which strengthens up their upstream and downstream integration. Thus, Tata motors directional strategy is right on target to achieve their goals.

7.5 ADVANTAGES AND LIMITATIONS

The SWOT and TOWS analysis clearly described the internal opportunities and external threats that may follow drastic changes in the market for Tata motors. They must be aware of all these activities so that they can take actions to minimize the risk and maximize opportunities to make profits. The BCG matrix clearly showed which product the company should spend their money for better future. It also helps to identify the room for improvement areas in which Tata motors should concentrate in future. Their market strategy with market share and market growth was determined based on their products and analysing each aspect gives Tata Motors a clear idea to approach its future market trends.

8. STRATEGIES

It is really important to analyze a firm’s marketing, financial and research capabilities in order to make a proposal on their strategies. They are discussed for Tata Motors as follows;

8.1 MARKETING

Tata motors are already stable and they have matured in domestic market in which their company market share is vibrant with good market growth. Their main focus should be on customer retention in order to continue their good marketing strategy. In addition to that the company’s main strategy should be in merging and acquisition which they are doing efficiently. They need collaboration to withstand against global players and to stabilize their organization during economic recession. Further to be competitive among the competitors more greener and innovative products were need to be developed like Tata Nano which created waves among the working middle class society.

8.2 FINANCIAL

Tata motors faced a threat of huge loss initially during early 90’s and during 2001 fiscal year Tata motors heavy vehicle truck products faced a major decline due to fall in demand which shook the whole organization since it was their first major drawback. So, they have decided to frame a financial strategy that can avoid them from these failures in future business. By that time, they framed an approach which involves cost reduction methods by efficient manufacturing, being a strong domestic player to strengthen their market share and expansion with acquisition to form global network in order to face the competition. These strategies worked on their favour and they could remain successful still with these appropriate strategies.

8.3 RESEARCH AND DEVELOPMENT

A leading automobile company in India, Tata motors for more than 50 years is producing high quality products and that is mainly due to first class R&D support. It has 3000 employees and research scientist who work for R&D department with centers almost all over India along with Spain, UK and South Korea internationally. Tata motors hold the prestigious achievement of introducing indigenously developed light commercial and passenger vehicle in India for the first time and sports utility vehicle in 1998 added to its achievements. They are always innovative in market and a perfect example for this is they introduced very recently in 2008 the people’s car Tata Nano which created huge market domestically and attracted the world’s attention.

9. TATA MOTORS STRATEGIC ALLIANCES ANF JOINT VENTURES [14] 

Tata motors, the first company to be listed in the New York Stock Exchange have been an international company through its strategic acquisition and alliances. Its international operations include Europe, South Korea, South America, Middle East and south Asia. They have joint ventures in Senegal, Ukraine, Bangladesh, Russia, UK, Thailand and Kenya. They merged with Jaguar Land Rover which gives them an excellent market in UK. Meanwhile they have Bus coach manufacturing unit’s alliance in South Korean Daewoo Company and a Brazil Body building company Marco polo, which gives Tata Motors a worldwide recognition and support.

10. MEASURING BUSINESS PERFORMANCE

The company releases its financial report in 4 quarters to its stakeholders as well as the public to educate about its progress every 3 months. This will keep the investors and the customers updated with its performance every quarter of the year. Its 2010 march report indicates 34.3% increase in market grow