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Tata Nano Case Study
Tata Nano Case „5 C Analysis and STP“
For Marketing Strategy & Customer Management
By: Sebastian Schmickler
As of 20. March 2013
Customer
The core benefit for the potential customer can be seen in the extremely cheap availability of a 4 seats offering individual transportation opportunity with a certain level of safety and comfort. This benefit will satisfy the pursuit of an affordable, individual and independent way to travel and transport things.
The Customer therefore can be defined as individual that only can afford a limited small amount of money in order to buy a car (smaller household income). This leads to the conclusion that the potential buyer can be seen as part of the lower income class of the population (Indian middle class). The buyer of a Tata Nano will additionally generate in interest for those who search for more safety for example while transporting family members from a place to an other. Looking at this concern a consumer is a person not having a similar opportunity for same transportation. This can result from the absence of a car or the use of a scooter or bike (public transportation in some region can be seen as dangerous too).
The customer could likewise have the need for a more convenient alternative to travel (for example during rainy or cold weather conditions).
Company
As core competence of Tata Motors Ltd. (Tata Group)(former TELCO) the good worldwide experience of manufacturing cars must be taken into
account. TML (short: Tata Motors Ltd.) has already acquired international Brands such as Lad Rover and some more. The purchased knowledge and the manufacturing facilities will help to improve and maintain the quality and realization opportunities for TML and lead to more advanced organizations management ( The idea to let entrepreneurial engineers manufacture the Nano as Kit Car and sell it individually). The transfer of knowledge will strengthen the management skills of the management system within TML. The synergetic effects in combination with the production in India as low-income sector enable TML to gain the margins of its products (est. Manufacturer Margin 15%/ Dealer Margin 4-10% ). The pure size of TML and the Tata Group will also set the suppliers under pressure (pressure in combination with potential economies of scale leads to cheap supplies). The good overall business management of the Tata Group with its wide spread businesses will stabilize TML and could lead in order with a higher credit-worthiness to lower refinancing costs. The technology development can be underweighted in this analysis because the Tata Nano is a low technology product without any revolutions.
The good business infrastructure as strategic asset enabled TML for example to distribute the Nano within its 214 dealership including sales network and its numerous other group connected stores in 30.000 locations such as Outlets and Banks over 1.000 Cities
Collaborators
As all car manufactures (excl. the handcrafting manufactures) TML will have to work together with suppliers to keep the margin levels in a profitable range. Only companies with a certain high level of specialization and high-scaled production could meet this requirement. For this reason TML works tightly together with a large number of suppliers creating a high percentage of the overall value of the Nano. For example in the vertical view:
Lumax Industries lighting
Sona Koyo Steering Systems
Looking into the two- and three-wheeler segments TMl will have to face the products coming from Bajaj (Two- and Three-Wheeler) and Piaggio (Three- Wheeler) and Honda (Two-Wheeler). The two wheelers have two massive advantages at the domestic market (India). They offer a higher maneuverability and a better fuel efficiency.
Context
The Nano is a car produced for a fast expanding market (PasVehicl.: 1,2Mio 2004 1,8Mio 2008 ) directly connected to the exploding middle class development and its household income (5% in 2005, 19% in 2015, 41% in 2025 ). Because referring to part “Customers” the Indian middle class will make out the majority out the potential buyers in the future. The economic trend in India could therefore project the future sales figures of TML.
The second influencing factor can be found in the development of the infrastructure in India. With the growing amount of cars and related traffic jams on India’s streets the attractiveness of a car will loose its key driver function for potential buyers.
The key question in this context will be about the future of public mass transportation. With large federal investment in trains und busses, offering a more economic transportation alternative, the car industry would have to face a major problem.
The worldwide price for gasoline could also harm the incentives to buy a car instead of buying a scooter.
In the future the technological evolution will disadvantage the Nano in an accelerated speed. The materials used for the Nano as well as its techniques (drum brakes) are already back in time today and will be a complete no go in the future. In the long run the technologies of today will also define the state of the art for ULC.
The biggest problem that I personally identify for the Nano is its key competence. A car has ever been a status symbol in every culture all around the globe. Why should someone buy a cheap new car that
represents the car for people having less money than others? With a increasing welfare and a growing income the pursuit for social symbols could lead the India middle class away from the ULC Car right into the direction of larger cars with at least a minimum of “social status flavor”.
What sales goal for the Nano will you recommend?
Looking at the sales figure I would recommend to set a sales goal slightly under the achived numbers of 2007-2008. The market in India will slightly grow but with the reallocation of household incomes the demand for the Nano will decrease. The growing middle class will search for alternative cars representing a higher social status as the Nano does. I would suggest to calculate with around 120.000 to 130.000 cars sold by TML. In my option TMl could probably sell more Nano LX with its fully equipped come up.
How Will You Position The Nano to Achieve That Goal. (Position statement)?
The goal set in the text above is found under an unchanged placement strategy. To achieve a maximum in sales I would recommend the following positioning statement:
Generic position strategies:
Uniqueness is a key factor and TMl is one of a very few companies originally founded in India offering a car that enables the customer to travel safely and confortable for a record braking little amount of money. But even so its not a cheesy cheap car but a price worthy solution for the young India middle class searching for a new modern and up to date way to move.
The car must not be seen only as cheap; because the LX Version offers many features and some luxury add ones. I would suggest differentiating horizontally and offering the current Nano LX under a trendier brand to approach the younger generation of the middle class. The Nano and Nano CX could be distributed by TML own brand as direct competitors of the current ULC Cars of Suzuki. If the new outplaced Nano LX could be seen as outstanding non ULC Car but with the price of one the customer might
