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Introduction To New Product Development

Meaning Of Product:E.g.:- milk, computer, shoes, service after sales, railway services etc. a

product can be divided into two categories

o Tangible goods

o Intangible goods

Tangible products are known as goods that can be touched, felt and seen.

E.g.:- computer, mobile phone etc

Intangible products are known as services that cannot be touched and

seen as the customer can feel and experience only after utilizing it. E.g.:-

service after sales

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New Product Development:

A product can be considered new under the following situations:-

New-to-the-world products

New product lines

Additions to existing product lines

Improvements and revisions of existing products

Repositioning

Cost reductions

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Stages Of New Product Development

Before the introduction of a product into the market, it goes through

several stages of development. These stages are known as stages of new

product development. It includes the following:

Idea Generation:

Companies seek new ideas to enhance the performance of the existing

products and to innovate new ideas. This stage is called idea generation

stage. There are many sources for idea generation. It may be from

customers, dealers etc.

Employees throughout the company can also be a source of idea. Toyota

claims that its employees submit two million ideas annually over 85% of

which are implemented.

Companies also find good ideas by researching competitor’s products

and services. They can find out what the customers like or dislike about

their competitor’s products. Ideas can also come from investors. External

research, surveys industrial publications research and development etc.

But the main source of idea generation is the customers by their

grievances and complains and feedback. However, although ideas can

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flow from many sources, it is not feasible to implement all the ideas

generated due to lack of time and capital.

Idea Screening

The main purpose of idea generation is to collect a larger number of

ideas. However, not all ideas can be commercially viable. Therefore, the

companies filter the less viable ideas with the help of systematic process.

Companies can use various parameters to screen the ideas such as

market size, technical capabilities, potential competition etc.

Addressing the following issues will also help the companies to analysis

the attractiveness of ideas.

Whether the product idea match the existing

products of the company.

The degree to which the new product can

cannibalize the sale of the existing product.

Company’s ability to produce and market the

product.

Buying behavior and the probable changes in the

environment.

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While screening the ideas, an organization may commit two types

or errors.

Drop error where the firm rejects a very good idea.

Cro error where a company selects a poor idea.

Concept Testing And Development:

All ideas that survive in the process of screening will be studied in

details. They will be developed into mature products. At this stage, the

idea is submitted for the external evaluation to get a feedback from the

market. It helps a firm are organization to collect important information

like customers initial reactions towards the product development. During

this stage, new product idea is described in the form of one or more

benefit that is then presented to a sample of potential customers for their

reactions.

Marketing Strategy:

Following a successful concept test, the new product manager will

develop a preliminary strategy plan for introducing new product in the

market. The plan consists of three parts.

The first part describes the target market size, structure and

behavior for the first few years.

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The second part outlines the planned price distribution strategy and

marketing budget for the 1st year.

The third part of marketing strategy plan describes the long run

sales and profit goals and the marketing mix strategy over time.

Business Analyses .

After management develops the product concept and market strategy, it

can evaluate the business attractiveness. Business analyses are the first

in-depth financial evaluation of new product to be developed. Here

management needs to prepare sales cost and profit projections to

determine whether they satisfy company objectives. If they do, then

concept can move to the development stage. SOWT analysis will be

conducted at this stage by the organization. It also includes the

following:

Total sales estimation:-

These are the sum of estimated first- time sales, replacement sales and

repeat sales. Its method depends upon whether the product is one time

purchase(an engagement ring), an infrequently purchased products like

toaster, auto mobile etc. or a frequently purchased products like

consumer and industrial non durables.

Estimation costs and profits .

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The R&D, manufacturing, marketing and financial departments

estimates the costs. The profitability of the new product is estimated

through various financial tools. The simplest technique is the breakeven

analysis in which the management estimates how many units of the

product the company would have to sell to break even with the given

price and cost structure. If the management believes that sales could

easily reach the break even number, it is likely to move the project into

development stage.

Product Development

In this stage, detailed technical analysis is conducted to know whether

the product produced at costs is low enough to make the final price

attractive to the customer.Here a working model or a prototype is

developed to disclose all tangible and intangible attributes of the

product. A product protocol is prepared which is a detailed downiest

containing the important attributes that are expected in the product. Once

the protocol has been developed, it is handed over to the research the

development department to develop the prototype of the product.

Test Marketing:

The test marketing is the stage where the product is introduced in a few

selected cities. During this stage, the company has to fate the following

expense:

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High advertisement

High manufacturing cost.

High distribution cost etc.

For testing the product, marketer needs to make the decision on the

following issues.

The no. of cities in which the product is to be tested.

Geographic location of the cities.

Time to carry ort test marketing

Through this exercise, company can know the customers response,

feedback, suggestions, complaints and any other changes required to be

done for product modification.

After successfully laughing the product in selected cities the company

launches the new product in all other cities.There are certain methods of

product testing.

Alpha Testing

In this method, a group of target audience is selected from the employees

of the company.

Beta Testing:

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It is carried out at the customer’s site. Generally, it is applicable for

industrial products where the customization takes place.

Gamma Testing:

It is carried out on a long term basis where the customers uses the

product extensively and gives response after a long period of time. Say

six months.

Commercialization:

The results of the test marketing help marketers to decide the changes

that are needed in the marketing mix before entering into the market. It

also helps the marketer to decide the amount of production distribution

strategy, selling efforts and other issue like providing guarantees, service

after sales etc. the product enters the market during the

commercialization stage.

Introduction To Tata Motors:

Tata Motors was established in 1945, when the company began

making trains.

o It has its manufacturing base in Jamshedpur, Lucknow, Pune

and soon one more plant is going to established at Singur,

West Bengal.

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o Product Manufactured - Passenger Cars and commercial

vehicle

o Installed Capacity - 350,000-400,000 vehicles a year

o Investment - Rs 2,500 crore (Rs 25 billion)

o Turnover - $21.9 billion (Rs 967,229 million)

o Employees - 2,46,000/22001

o Tata Motors had created the wealth Rs. 320 billion during

2001-2006 and stood among top 10 wealth creators in India.

Tata Nano - ONE LAKH CAR PROJECT

“People’s Car”

“A promise is a promise,” said Rattan Tata, Chairman, Tata Motors,

on 10th January, 2008, when the Nano was first displayed at the Auto

Show in Delhi. The Nano project didn’t grab the attention of only

Indians; the entire world had their eyes glued to the world’s cheapest

car.

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A truly People’s Car, this time is from India. Though the dealer price

is Rs. 1 lakh, the price on road, when it will be launched, will reach

around Rs. 1,25,00 but it will be still more affordable and will be more

eco-friendly than most other cars giving a mileage of around

23km/liters. The price of the car is such that a lot of rich and HNIs, if

interested, can buy the car just by a single swipe of their credit cards.

Providing a car worth rupees one lakh car was the dream of the

chairman of Tata motors Mr. Rattan Tata. And with high qualified IT

skills people he has shown the Indian talents to whole the world.

Idea conceived by - Rattan Tata

Cost of development - 1700 crores

Manufacturing cost

(excluding dealer margin and taxes)- Rs 65,000 per unit

Development of Design - India

Time for designing the car - 4 years

Team - A team of 150 engineers , everyone below age 28

Biggest hurdle - To make a car cheap car

without Compromising design

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May western countries as well as many foreign countries

have accepted Indian IT skills.

Details Of Nano

Specs:

Engine: 624 cc / 33 bhp

4 door, 5 seater (and yes 4 Wheeled too)

Rear Engine

Weight: 600 kgs

Mileage - 22-23 km/liter

Variants:

Standard

Deluxe (with AC)

Future:

Diesel Variant

Exports outside India or assembly plants outside

Comparison

8% less in length (bumper to bumper) with respect to Maruti 800

21% more in inner space with respect to Maruti 800

Looks:

Front side looks more like Matiz (or Spark as we now call

it)Back side looks more like India with those long tail lights.

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Insight:

People often criticize something that is making waves

everywhere. This has also been the case with Tata Nano.

Competitors, safety regulators, environmentalists and most

others conceived the problems that India will face, when such a

car is available, much before the actual launch of the car.

This will result into:

OLD GENERATION NEW GENERATION

SOWT Analysis

STRENGTH

Brand name TATA

Cost price low

Fuel efficient

Safe

OPPORTUNITIES

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Large market for

selling

Awareness in the

market

First car in low

range

Can hit in global

market

WEAKNESS

Low power

Not a status symbol

Delay in manufacturing

Limited features

THREATS

Company rival

Not sure to hit in rural and semi-urban areas

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New Product Development And Nano

As seen before, A product can be considered new under the following

situations:-

New-to-the-world products

New product lines

Additions to existing product lines

Improvements and revisions of existing products

Repositioning

Cost reductions

As far as Nano is concerned, it falls into new to the world products in the

context that it has made a history for the cheapest car ever made without

compromising on quality. I.e. best way value analysis.

It can also be considered as new product in the since of cost reduction as

it’s the first time in the history that such a cheap car is produced.

The story of the Nano is not confined to its impact on the auto industry.

It's a tale that illuminates the India of today—an eager, ambitious nation

with a combination of engineering talent, a desire for low costs and

value, and the hunger of young managers looking to break from a

hidebound corporate environment. Indeed, the team that worked on the

Nano—on average aged between 25 and 30—has helped to flatten Tata

Motors' stodgy, multilayered management structure, which has resulted

in an unexpected side-benefit called "organizational innovation".

Idea Generation And Nano

A dream is born –

Says, “I observed families riding on two- wheelers -- the father driving

the scooter, his young kid standing in front of him, his wife seated

behind him holding a little baby. Add to that the slippery roads & Night

time too. It is downright dangerous. It led me to wonder whether one

could conceive of a safe, affordable, all-weather form of transport for

such a family.”

So when Tata Motors needed someone to take charge of the company's

most ambitious plan yet to build the world's cheapest car ever Ravi Kant,

who by then had become the company's managing director, again turned

to Wagh. Wagh remembers what he learned marketing the little truck.

"People want to move from two-wheelers to four-wheelers," he says.

"Today they can't afford it."

More and more can, but Indian car buyers today represent a tiny slice of

a potentially giant market India has just seven cars per 1,000 people.

India's auto industry has grown an average of 12% for the past decade,

but just 1.3 million passenger vehicles were sold in India in the fiscal

year ending March 2006. That means a billion Indians buy about the

same number of cars in a year as 300 million Americans buy in a month.

If four wheels cost as little as two wheels, that could change fast. About

7 million scooters and motorcycles were sold in India last year, typically

for prices between 30,000 rupees and 70,000 rupees, about $675 to

$1,600. Tata is targeting a price of 100,000 rupees one lakh, in Indian

terms of measurement or about $2,500 at current exchange rates, for its

small car. That sounds impossibly cheap in the West but remains three

times higher than India's annual per capita income. The average pay for

factory workers at Tata Motors is just $5,500 a year.

Idea screening

The next step was the screening of idea. How is this dream possible?

What should they make?

A scooter with two extra wheels at the back for better stability?

An Auto-rickshaw with four wheels?

A three wheeled car like a closed auto- rickshaw??

A four wheeled car made of Engineering Plastics?

A Four wheeled rural car?

Rolled up Plastic curtains in place of windows?

Openings like Auto rickshaws from the side

A four wheeled open car with safety side bars?

But the market wanted a car and if they build a people’s car it should be

a car and not something that people would say,“ Ah! That’s just a

scooter with four wheels or an auto-rickshaw with four wheels & not

really a Car.”

Trying to build a car cheap enough for motorcycle buyers seems to make

sense now but seemed crazy several years ago when Rattan Tata,

longtime chairman of Tata Motors and scion of the nation's giant Tata

Group conglomerate, first mentioned his dream of building a one-lakh

car in 2003. "They are still saying it can't be done," he says, insisting that

it can and will. "Everybody is talking of small cars as $5,000 or $7,000.

After we get done with it, there will hopefully be a new definition of

low-cost."

Concept Testing And Developing

Before starting the project, Wagh did something no one at Tata Motors

ever had: He talked to customers. The three-wheeler men inevitably

insisted on a cheap, dependable truck that could go from village to

market carrying, say, a ton of onions or potatoes, one night, as sunset

approached, Wagh stuck with one rickshaw driver. He says, "I kept

asking the question. Why? Why? Why do you want a four-wheeler?"

Wagh remembered. Finally, he got the real answer. It turned out it wasn't

really a problem of transportation of vegetables “If I had a four-wheeler,

I would have better marriage prospects in my village," the young man

said. Drivers of three-wheelers are looked down upon in India. Wagh

realized that four wheels had emotional, not just practical, appeal.

Thus the new product was now to be developed.

But what type of product?

The car to cost Rs. 1 lakh on road.

The car should be built on a different platform than conventional

ones.

It must be meeting all the safety and regulatory requirements.

It has to be built on a scale which shall be more than double the

earlier launches of similar products and the ramp up must be

smooth.

The car has to be designed so that it can be exported to other

countries as the domestic demand may not materialize as per

projections.

The car must be a beacon for the Indian Automobile industry and

prove to the world that we are capable to take any challenge and

come out worthy winners.

That quest to build the world's cheapest car hasn't ended. The Nano

should be available this fall, but the mission began back in 2003, when

Rattan Tata, chairman of Tata Motors and the $50 billion Tata

conglomerate, set a challenge to build a "people's car". Tata gave an

engineering team, led by 32-year-old star engineer Garish Wagh, three

requirements for the new vehicle: It should be low-cost, adhere to

regulatory requirements, and achieve performance targets such as fuel

efficiency and acceleration capacity.

The design team initially came up with a vehicle which had bars instead

of doors and plastic flaps to keep out the monsoon rains. It was closer to

a quadricycle than a car, and the first prototype, even a bigger engine,

which boosted the power by nearly 20 per cent, was still dismal. "It was

an embarrassment," says Wagh.

But failure didn’t stop them

they quickly realized it was necessary to bring everyone on board, "else

it leads to last-minute heartache and delays". Every morning, he would

spend an hour or two on the floor of the Pune factory, insisting that

everyone involved—designers, manufacturing teams, and vendor

development people—be there to accelerate decision-making and

problem-solving.

Over time, Wagh's team grew to comprise some 500 engineers, an

impractically large group to gather on a daily basis. So instead, a core

team of five engineers gathered every day at three pm to discuss the

latest developments. Each engineer represented a different part of the

car: engine and transmission, body, vehicle integration, safety and

regulation, and industrial design.

The body had to be changed because Rattan Tata, over six feet tall

himself, wanted it to be easy for tall people to get in and out of the car.

"Imagine the plight of the body designer—he went through hundreds of

iterations, then at the last minute the car length was increased by 100

millimeters!" Wagh says. The attention to detail paid off: When the car

rolled onto the dais at the Auto Show in New Delhi in January, and

Rattan Tata stepped out of the driver's seat with ease, it made an

immediate impact.

What shook the automobile world most was the fact that the designers

seem to have done the impossible: The sleek, sophisticated Nano doesn't

look flimsy or inexpensive. If it had been an upgraded scooter on four

wheels, Tata still would have been applauded for making a family of

four safer on Indian roads. The Nano, however, affords both safety and

status. "The innovation wasn't in technology; it was in a mindset

change".

Business Analysis

Cost

Since the car had to be built within a cost of Rs. 1 Lac, no conventional

design would work as the costs shall be higher and so the entire car has

to be redesigned.

What makes Nano so less expensive can be well understood from the

following diagramThe design has to question the need of each and every

component from the point of view of its necessity of existence and also

the minimum requirements of its functionality. Value Engineering

concepts have to be deployed to finalize the minimum requirements.

Disruptive Technology:

Is a Technology that brings radical change by introducing new ways of

doing things usually at a Technology that is:

Significantly cheaper than existing Technology.

Is much higher performing?

Has greater functionality and

Is more convenient to Use.

Brings to market a totally different Value

proposition than the one available and can change

the Paradigm about a product.

The Guiding factor was that the cost has to be minimized for each

component yet maintaining its basic functionality.

The Alternatives are:

Reduce Consumption of Material being used.

Alternate Suppliers to get same material at fewer

prices.

Use alternate materials.

Eliminate use of Material.

Eliminate a process Or a Combination of the

above.

The design was outsourced to Italy's Institute of Development in

Automotive Engineering, but Tata himself ordered changes along the

way. Most recently he vetoed the design of the windshield wipers. His

solution: a single wiper instead of two, giving the car a cleaner look.

THE COST REDUCTION PARADIGM Value Engineering

Alternatives:

The target was very clearly defined that within the given cost structure

of 1 Lac all the components have to be allocated a maximum price and

the same had to be achieved using the available alternatives.

The Guiding factor was that the tax structure, on materials and

manufacturing, must support the final cost of Rs. 1 Lac

The Decisions were:

Establish factory in a tax free zone.

Get the tax advantages on infrastructure

development.

Get the suppliers to establish base near the

factory.

Get special concessions from State Govt.

In short select a manufacturing location where all

the advantages could be achieved.

In short select a manufacturing location where all the advantages could

be achieved.

Total sales estimation

Now the question was, “how much to produce”

It was estimated that the demand for the people’s

car shall be at least twice the demand for Maruti

800, the lowest end car. Initial projections were at

about 500 K cars per year.

The basic reason was the conviction that the target

price shall redefine the 4 - wheeler segment.

The price decision of Rs 1 lakh is definitely going

to make a lot many people transit to 4-wheeler

fold and that shall explode the demand.

F only 10% customers of 9 Million two wheeler

market transit to 4-wheelers it shall amount to

50% of the passenger car market share.

It was decided to set up plants with 5 lacs cars per

annum capacity and ramp the same up in stages,

in line with increase in market demand.

The initial response to the Nano has been overwhelming and the tiny,

Noddy-land car is expected to help the company cross several

milestones. With revenues at Rs 1,29,994 crore for the financial year

2006-7, and group companies enjoying a market capitalization of Rs

2,51,487 crore as on January 10, 2008, the Tata Group is on a strong

footing, contributing more than 3 per cent to India's GDP. Nano, being

the world's cheapest car, has made international players sit up in

amazement and the company has received proposals from some African,

Latin American and Southeast Asian countries to manufacture the car

there.

Product Development

And finally the product was developed with the following features.

Engine CapacityBosch 624 c.c. twin cylinder

Low capacity, Lighter, sufficient with better Power Rear Engine to

reduce the transmission length using a balancer shaft.

4 Speed Manual Gear Box

All Aluminum Engine

Higher thermal conductivity than cast iron, Lighter and so better

mileage

Engine Management System by Bosch

Superb control over emission and smooth acceleration.

Dimensions L: 3.1m, W: 1.5m, H: 1.6m

Less length but more inner cabin space due to height. Comfortable

leg room.

Independent Front & Rear Suspension McPherson Strut in Front &

Coil spring & trailing arm in rear.

Better ride than Maruti 800.

Single piece ribbed steel body with safety features such as crumple

zones, intrusion resistant doors, seat belts, strong seats &

anchorages.

Safety requirements are adequately met.

Single Wiper in place of two.

Cost effective yet functionality is met

Tube less Tires

Weight reduced by 2 Kg. Cost reductions 200 Rs. And in line with

modern vehicles

Instrument console in the centre

Elegant to look at and can be used both in Left Hand & Right hand

version.

The list goes on and on.

The Final verdict

THE CAR COSTS Rs 1 lac

Test Marketing And Commercialization

Nano is soon going to launch by the end of April. It will be

commercialized in whole of India. It is mostly targeted to the middle

class and lower middle class people. The effects of Nano and its

commercialization will be soon known after it comes into the market.

TATA NANO V/S MARUTI 800

Competitor

As we know the price of Nano car is much affordable for middle class

people. This car can be easily affordable by middle class people. In the

Indian market it will face only by one competitor that is Maruti – 800,

which produced by Maruti udyog.

The real question arise who will have the last laugh Tata or Maruti 800?

The answer is neither Tata nor Maruti 800 but they are the buyers who

will have the last laugh

Can Nano beat the popularity of Maruti 800. All the things depend on

their marketing strategy that how they will attract to Indian middle class

customers.Never mind the fact that what was touted as a Rs.100,000 car

will cost at least a fifth more and that's for the standard non-air

conditioned version.

Jagdish Khattar, a former head of Maruti 800 manufacturer Maruti

Udyog Ltd, says it's too early to say whether the Nano will overtake the

original.

"It's a good product but it's still too early to say whether it will overtake

the 800 because it caters to a totally new market segment," he said while

watching a live telecast of Tata's press conference after unveiling of the

Nano. But clearly, at least one other manufacturer was worried.

Whether or not the Nano will overtake the Maruti 800, one thing is for

sure: the current Auto Expo will be remembered for Tata's people's car

and for that product alone. It is the Nano that has captured the hearts

and minds of a majority of the spectators.

Price of Maruti in major city of India – 800 (a/c LPG)

(Figures in rupees)

Mumbai 245648Delhi 228858Bangalore 231407Kolkata 236826Lucknow 232542

TATA NANO V/S MARUTI 800

FEATURES OF TATA NANO COMPRAED TO MARUTI 800

COST:

The dealer price of Maruti 800 varies from city to city. The dealer

price in Delhi is 1.97 laths and the road price is approximately 2.28

laky Indian rupees.

The dealer price of Nano is just 1.00 lakhs rupees and the road price

is only 1.26 lakhs rupees.

So here we can put the equation 2 * Nano = 1* Maruti – 800

ENGINE:

Maruti 800: – 800 cc

Tata Nano :623 cc (better fuel than Maruti 800)

ENGINE TYPE:

Maruti 800 – petrol/LPG

Nano : petrol (diesel version will be later)

SEATING CAPACITY:

Maruti 800: 4+1 person

Nano: 4+1 person

FUEL TANK CAPACITY:

Maruti800 : 28 Lt (petrol), 19.2 (LPG)

Nano: 30 Lt.

WEIGHT

Maruti 800 – more than 690 kg (gross weight is 1000 kg)

Nano – more than 600 kg

TOP SPEED:

Maruti 800 : 120 km/hr

Nano : 90 km /hr

SEGMENT:

Maruti 800 – middle class people

Nano: lower and middle class people.

FUEL CONSUMPTION:

Maruti 800: city 13.6 and highway 17.6 km

Nano: city 22 km and highway 26 km

DIMENSIONS:

Maruti 800 Tata Nano Length 3.335 meters (131.3

inch

3.1 meters

Width 1.440 meters (56.7

inch)

1.5 meters

Height (55.3 inches) 1.6 meters

BREAKS:

• Maruti800: Front Disk, Rear Drum

• Nano: Front Disk, Rear Drum

COLOURS

Maruti 800

Tata Nano:

The Nano are not much taller and broader as compared to Maruti –

800 but it has 21 percent larger spaces in side but 8 percent short

than Maruti.

Disadvantages of NANO vs. Maruti 800

1. LPG/CNG version is doubtful.2. Top Speed will be laser than 800.3. Space for Language is less.

Views about success of Nano

the question asked here was,”do you think Nano will be successful” the

options given were yes no not sure.

It’s very interesting to note here that none of the respondent said that

Nano won’t be successful. As shown in the chart, the portion of purple

color which shows failure is not there at all.

But again every body does not believe in its success. As seen form the

chart, 50% of the respondent has a doubt about success of Nano.

Nano- A People’s Car !!!

in this chart, number of respondents is given on the y axis and some

features are given on x- axis.

The question asked here is, “What is it that makes Nano a people’s car?”

By analyzing the chart, we can say that people consider the cost factor

the most for Nano followed by the innovation. Even looks has got quite

positive reply. Nano is a product that is developed perfectly at minimum

cost without sacrificing .

Conclusion

MY OPINION

After the study of various aspects I found that –

Nano Car Is Definitely Not For:-

Someone looking for better performance

Someone who is looking to impress

Someone who want to speed trial on Sunday

Someone who is looking for long drives.

But Nano Car Is Defiantly For –

Someone who is looking to buy a car but cannot afford much price.

A students who want to go college, tuition instead of bike etc.

Someone who depends on second hand car.

For a house wife who can buy a car with her own savings.

Someone who depends on scooter.

So Nano is not a basically a luxury cars but it can fulfilled the all

capacity for middle class people.

Impact Of Tata Nano On Life Of Common Man

In India every one can afford a Nano, just as we buy any electronic

appliances for a home uses.

Decrease in price of second hand car.

High traffic on roads due to sale of exceeds car on roads.

Increase in loan on car installments.

And finally Nano is definitely better than Maruti 800.

tata has succeeded in value engineering of the product and its great

success for tata’s. It’s something on which India can feel proud of.

Nano has been developed effectively.