Loyola institute of business administration

TATA MOTORS

STRATEGIC MANAGEMENT

Submitted by Ajoy Infant Raj A (F14004)Submitted to U Srinivasa Raghavan

Introduction -Automobile Market in India

The automobile industry in India, the tenth largest in the world with an annual

production of approximately 2 million units, is expected to become one of the

major global automotive industries in the coming years. A number of domestic

companies produce automobiles in India and the growing presence of

multinational investment, too, has led to an increase in overall growth.

Following the economic reforms of 1991 the Indian automotive industry has

demonstrated sustained growth as a result of increased competitiveness and

relaxed restrictions

In 1953, the government of India and the Indian private sector initiated

manufacturing processes to help develop the automobile industry, which had

emerged by the 1940s in a nascent form. Between 1970 to the economic

liberalization of 1991, the automobile industry continued to grow at a slow pace

due to the many government restrictions. A number of Indian manufactures

appeared between 1970-1980.Japanese manufacturers entered the Indian market

ultimately leading to the establishment of Maruti Udyog. A number of foreign

firms initiated joint ventures with Indian companies.

Following the economic reforms of 1991, the automobile section underwent

delicensing and opened up for 100 percent Foreign Direct Investment. A surge

in economic growth rate and purchasing power led to growth in the Indian

automobile industry, which grew at a rate of 17% on an average since the

economic reforms of 1991. The industry provided employment to a total of 13.1

million people as of 2006-07, which includes direct and indirect employment.

The export sector grew at a rate of 30% per year during early 21st century.

However, the overall contribution of automobile industry in India to the world

remains low as of 2007. Increased presence of multiple automobile

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manufacturers has led to market competitiveness and availability of options at

competitive costs

India’s car market has emerged as one of the fastest growing in the world. The

number of cars sold domestically is projected to double by 2010, and domestic

production is skyrocketing as foreign makers are setting up their own

production plants in India. The government’s 10-year plan aims to create a $145

billion auto industry by 2016.

According to McKinsey, the auto sector’s drive to lower costs will push

outsourcing. The auto sector could be worth $375 billion by 2015, up from $65

billion in 2002. McKinsey thinks India could capture $25 billion of this amount.

Out of 400 Indian suppliers, 80 percent have the ISO 9000 certificate—the

international standard for quality management.

Tata Motors

Introduction

Tata Motors Limited, formerly known as TELCO (TATA Engineering and

Locomotive Company), was formed in 1954. It is the only fully integrated

automobile manufacturer that now stands as India's largest and the world’s 5th

largest passenger automobile and commercial vehicle manufacturing company

with a product range designed to meet national and international transportation

needs.

Tata Motors has a wide portfolio ranging from a Tata Mercedez Benz truck to

diversifying into passenger cars like Tata Sierra,Tata Estate,Tata Indigo and

Indica, concept vehicles like Aria Roadster and Tata Elegante, commercial

vehicles like Tata heavy trucks and military vehicles.

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Tata Motors was first listed on the NYSE in 2004. It created wealth of Rs.

320bn during 2001-2006 and stood among top 10 wealth creators in India. It has

its manufacturing bases in Jamshedpur, Lucknow and Pune. Tata Motors has

recently had a couple of important mergers and acquisitions like with JLR in

UK, Daewoo in South Korea, Hispanso and a JV with Fiat.

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SWOT Analysis

STRENGTHS

Post liberalization, in order to expand rapidly, the company adopted the

route to joint ventures (JV):

21% stake in Hispano Carrocera, a Spanish bus manufacturing company

and introducing its high-end inter-city buses in the country.

Acquisition of Jaguar and Land Rover of UK, help complete its portfolio

in the premium segment

A 70% JV with Thailand’s Thonburi (auto assembler) which will set up a

plant to manufacture pick-ups and will sell them in Thailand.

The 25MT GVW Tata Novus launched from Daewoo’s platform (TDCV

Tata Daewoo Commercial Vehicle Company).

51:49 JV with Brazilian based Marcopolo (bus building). This JV is to

manufacture and assemble fully-built buses and coaches targeted at

developing mass rapid transportation systems.

In 1993, it started manufacture of high horsepower and emission friendly

diesel engines in an effort to reduce the pollution in the existing Tata

engines and to produce more environmentally friendly engines.

In 2000, it launched CNG buses and filled the product line gap through

the introduction of the 1109 vehicle which is an intermediate commercial

vehicle and is useful for medium tonnage loads.

Its Ex- series vehicles have high tonnage capacity and high pick up and

the LCV (207 DI) with direct ignition technology caters to the customers'

requiring one and same vehicle for commercial as well as personal use.

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Tata Motors has a high domestic exposure of ~94% in the MHCV

(Medium & Heavy Commercial Vehicles) segment and ~84% in the LCV

segment.

The latest hit of Tata Motors is its mini truck Ace which is India's first

indigenously developed sub-one ton mini-truck. Ace has rapidly emerged

as the first choice for transporters and single truck owners for city and

rural transport.

The only major engine manufacturer in the world to express any formal

interest in the turbulence-boosting cylinder head grooves

There is definite cost advantage as labor cost is 8-9 per cent of sales as

against 30-35 per cent of sales in developed economies.

Tata motors have extensive backward and forward linkages and it is

strongly interwoven with machine tools and metals sectors. Also, India is

an excellent source for IT based engineering solution for products &

process Integration.

WEAKNESSES

Tata Motors' range of passenger cars is still not comprehensive by

industry standards. It has a limited product portfolio which has given its

key competitors (Hyundai motors, Maruti Suzuki) an extra edge.

Even after being in the passenger cars market for quite some time,

somewhere in the minds of consumers Tata motors is still synonymous

with heavy and commercial vehicle makers and not passenger car makers.

Also because of this consumers may think the passenger cars can lack

aesthetics and are more built for robustness.

According to auto experts, low cost is a stronger motive at Tata Motors

that sometimes makes quality take a backseat.

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The company is overstaffed and hence human resource utilization is sub

optimal.

Also decision making gets a hard hit due to extensive hierarchy prevalent

at Tata Motors.

They do not have a presence in high volume markets like America and

most parts of Europe.

Not very high car sales volume which hampers their future plans like

increasing their production and expansion.

OPPORTUNITIES

Tata plans to leverage on the strong presence of TDCV in the heavy-

tonnage range and introduce products in India at an appropriate time.

The JV with Marcopolo will be beneficial to both companies since the

latter will absorb technology and expertise in chassis and aggregates from

Tata Motors, and Marcopolo will provide know-how in processes and

systems for bodybuilding and bus body design.

JV with Fiat, it is likely to gain access to Fiat’s diesel technology and to

the latter’s strong overseas distribution network for its passenger cars.

Tata Motors may extend this relationship to other segments like pick-ups

and MHCVs.

Launch of the global truck will mark the entry of the company into

developed markets like Europe and the USA. Working with Iveco means

that the designs will be in sync with the needs of sophisticated European

customers.

GOI policy for modernizing of vehicles to arrest degradation of air

quality and move toward international taxing policies linked to age of

vehicles, are steps which will lead to increased sales for TATA motors

Commercial vehicle division.

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The cut in excise duty that enabled manufacturers like TATA Motors to

reduce prices

The need to transport higher volumes of agricultural and industrial goods.

The cut in tariff on petroleum and diesel from 8 per cent to 6 per cent will

make commercial vehicles more competitive in the export market.

Development of the national highway development program will increase

TATA sales in the long run.

Tata has developed a car it aims to sell for about $2,500 USD, which

would be considered the cheapest vehicle ever made in real terms.

There is huge demand in domestic markets due to infrastructure

developments and Tata Motors is able to leverage its knowledge of Indian

market. There are favorable Government polices and regulations to boost

the auto industry i.e. Incentive for R&D.

THREATS WITHIN THE INDUSTRY

There are a lot of new competitions coming up in the commercial vehicles

segment which threaten the huge market share which Tata Motors has garnered.

Some of the new Joint Ventures and competitions have been listed below:

M&M has formed a 51:49 JV called Mahindra International with ITEC,

USA, (parent NAVISTAR), to manufacture commercial vehicles. ITEC is

the leader in medium and heavy trucks and buses in North America, and

is the world's largest manufacturer of medium-duty diesel engines.

Force Motors: JV with MAN for manufacturing high-tonnage vehicles

Force Motors has paired up with MAN in a 70:30 JV to manufacture

high-tonnage and specialty vehicles. Further, the two companies have

formed another JV to manufacture buses in India from end-2007.

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Ashok Leyland: Acquisition of Czech Republic-based Avia Ashok

Leyland (ALL) recently acquired the truck unit of Czech Republic-based

Avia.

Volvo, a leading manufacturer of trucks, buses, cars, construction

equipment, and aero engines has a main focus in the area of fully built

buses. In India, it has focused on providing economical transport

solutions in consonance with its values of safety, quality, and

environmental care. Its trucks are reputed for their performance and

economy and are the flag bearers in their production activities in India.

THREATS OUTSIDE THE INDUSTRY

Farmers are agitating against the land acquired by the firm in Singur for

its ambitious Rs 1, 00,000 car project. The protest is being lead by Mamta

Banerjee of the Trinamool Congress. Farmers are protesting that the land

is fertile land and the government acquired the land without their consent.

Presently this matter is lying in the court of law and is still a contentious

issue.

An Indian cabinet panel will soon consider a new automobile policy that

aims to set fresh investment guidelines for foreign firms wishing to

manufacture vehicles in the country. The policies adopted by Government

will increase competition in domestic market, motivate many foreign CV

manufactures to set up shops in India.

Increased interest rates have a potential to hit the sales. Auto loans have

become costly causing customers to defer their purchase which has

impacted the sales of Tata Motors.

The strengthening of the rupee against the dollar has made their cars less

attractive in the foreign market.

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PEST Analysis

POLITICAL

Since Tata Motors operates in multiple countries across Europe, Africa, Asia,

the Middle East, and Australia, it needs to pay close attention to the political

climate but also laws and regulations in all the countries it operates in while also

paying attention to regional governing bodies. Laws governing commerce,

trade, growth, and investment are dependent on the local government as well as

how successful local markets and economies will be due to regional, national

and local influence. In accordance, Tata’s headquarters in Mumbai, India,

strictly controls and regulates operations in all dealerships and subsidiaries, in

addition to knowing and abiding by all labor laws in the multiple countries

where they have manufacturing plants it has to watch political change.

ECONOMIC

Operating in numerous countries across the world, Tata Motors functions with a

global economic perspective while focusing on each individual market. Because

Tata is in a rapid growth period, expanding or forming a joint venture in over

five countries world-wide since 2004, a global approach enables Tata Motors to

adapt and learn from the many different regions within the whole automotive

industry. They have experience and resources from five continents across the

globe, thus when any variable changes in the market they can gather

information and resources from all over the world to address any issues. For

instance, if the price of the aluminum required to make engine blocks goes up in

Kenya, Tata has the option to get the aluminum from other suppliers in Europe

or Asia who they would normally get from for production in Ukraine or Russia.

Tata Motors also has to pay close attention to shifts in currency rates throughout

the world. Currency fluctuations can equate to higher or lower demands for Tata

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vehicles which in turn affect profitability. It can also mean a rise in costs or a

drop in returns. But they also have to pay attention to not just the domestic

currency, the rupee, but also to the dollar, euro, bhat, won, and pound, to just

name a few. Just because the rupee is strong against the dollar does not mean it

is strong against all the other currencies. Attention to currency is important

because it influences where capital investment will develop and prosper.

SOCIAL

Undoubtedly, the beliefs, opinions, and general attitude of all the stakeholders

in a company will affect how well a company performs. This includes every

stakeholder from the CEO and President, down to the line workers who screw

the door panel into place, from the investor to the customer, the culture and

attitude of all these people will ultimately determine the future of a company

and whether they will be profitable or not. For this reason, Tata Motors tends to

use an integration and rarely separation technique with foreign companies they

acquire. In 2004, Tata Motors acquired Daewoo Commercial Vehicles

Company, which was at the time Korea’s second largest truck maker. Rather

than using de-culturation or assimilating Daewoo, Tata took an integrated

approach, and continued building and marketing Daewoo’s current models as

well as introducing a few new models globally just as it had been done under

Korean management

TECHNOLOGY

Tata Motors and its parent company, the Tata Group, are ahead of the game in

the technology field. “The foundation of the company’s growth is a deep

understanding of economic stimuli and customer needs, and the ability to

translate them into customer-desired offerings through leading edge R&D”

(Tata). Employing 1,400 scientists and engineers, Tata Motors’ Research and

Development team is ahead of the pack in India’s market and right with the rest

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of the field internationally. Among Tata’s firsts are “the first indigenously

developed Light Commercial Vehicle, India's first Sports Utility Vehicle and, in

1998, the Tata Indica, India's first fully indigenous passenger car,” as well as the

increasingly famous Tata Nano, which is projected to be the world’s cheapest

production car (Tata). In the automotive industry, it is becoming increasingly

crucial for manufacturers to stay on top of the technology curve with new

problems always rising such as escalating gas prices and pollution problems.

Tata recognizes this and dedicates lots of resources and time into research and

development to be even with or preferably ahead of other competitors, global

trends, and changing economies. In all, an automobile manufacturer must

change, adapt, and evolve to stay competitive in the automotive game, and this

is exactly what Tata is doing with their rapid growth, and extensive research and

development.

THREE YEARS FINANCIAL ANALYSIS OF THE TATA MOTORS

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IFE Matrix

INTERNAL FACTOR EVALUATION (IFE) MATRIX

STRENGTHSKEY INTERNAL FACTORS

WEIGHT RATINGWEIGHED SCORE

GLOBAL PRESSENCE 0.06 3 0.18NEW VISION & STRATEGY 0.07 3 0.21LARGEST MANUFACTURER IN INDIAN MKT 0.08 4 0.32STRONG BRAND MANAGEMENT 0.07 4 0.28RESEARCH AND DEVELOPMENT 0.08 4 0.32LARGE SCALE OF EMPLOYEES & QUALIFIED ENGINEERS 0.07 3 0.21WIDE RANGE OF AUTOMOBILES 0.07 3 0.21FLEXIBLE PRICE RANGE AS PER VEHICLE TRAITS 0.06 3 0.18

WEAKNESSESKEY INTERNAL FACTORS

WEIGHT RATINGWEIGHED SCORE

SENSITIVENESS TO FUEL PRICES 0.07 3 0.21CUSTOMERS PREFERENCE CHANGE 0.07 3 0.21COUNTRY POLITICAL SITUATION 0.06 4 0.24GREEN CAR DEMANDS AND DEVELOPMENT 0.07 4 0.28TECHNICAL PROBLEMS 0.09 4 0.36RAW MATERIAL PRICE INCREASE & INFLATION 0.08 4 0.32

1.00 3.53

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EFE Matrix

EXTERNAL FACTOR EVALUATION (IFE) MATRIX

OPPORTUNITIESKEY EXTERNAL FACTORS

WEIGHT RATINGWEIGHED SCORE

LOW PRICE BUT PROFITABLE 0.07 3 0.21LARGEST MARKET SHARE 0.08 4 0.32DIVERSIFICATION IN VEHICLES 0.08 3 0.24COULD PENETRATE IN RURAL MARKET 0.07 3 0.21NEW ACQUISATION CAN BOOST IN UK, CHINA AND OTHER COUNTRIES SALES 0.09 4 0.36VERTICAL INTEGRATED INTEGRATION FOR BETTER CONTROL 0.08 3 0.24

THREATSKEY EXTERNAL FACTORS

WEIGHT RATINGWEIGHED SCORE

GLOBAL RECESSION AND POOR ECONOMIC CONDITION 0.08 4 0.32LONG TERM FINANCING PROBLEM 0.07 3 0.21HIGH FUEL PRICES 0.08 4 0.32NEW ENTRANTS WITH BETTER TECHNOLOGY 0.07 4 0.28POLITICAL PRESSURE 0.08 4 0.32GOVERNMENT POLICIES 0.08 3 0.24FAILURE OF NEW TECHNOLOGY 0.07 3 0.21

1.00 3.48

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TOWS MATRIX

SPACE MATRIX

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Porter's 5 Forces Model

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Competitive Profile Matrix (CPM)

Critical Success Factors WeightTata Motors Maruti Suzuki

Rating Score Rating ScoreMarket Share 0.12 1 0.12 4 0.48Product Quality 0.12 3 0.36 4 0.48Management 0.08 4 0.32 3 0.24Financial Position 0.08 4 0.32 3 0.24Global Expansion 0.07 4 0.28 3 0.21Price Competitiveness 0.12 4 0.48 3 0.36Customer Service 0.08 2 0.16 4 0.32Product portfolio 0.10 1 0.1 4 0.4Promotion Strategies 0.10 1 0.1 4 0.4Sales Distribution 0.08 2 0.16 3 0.24Production Capacities 0.05 4 0.2 2 0.1

Total 1.00 2.60 3.47

Current StrategiesMARKETING

• Focus on customer retention in order to continue their good marketing strategy.

• Their strategy should be in merging and acquisition.

• They need collaboration to withstand against global players and to stabilize their organization during economic recession.

FINANCIAL

• Frame a financial strategy that can avoid them from failures in future business.

• 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

RESEARCH & DEVELOPMENT

• First class R&D support enables TATA Motors in producing high quality products.

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• 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.

• They introduced very recently in 2008 the people's car Tata Nano which created huge market domestically and attracted the world's attention.

HOW EFFECTIVE IS THE STRATEGY

• Tata Motors Group had a successful fiscal year 2012 with net revenues increasing by 36% and profit after tax increasing by 46%.

• Market share now captured 62.2%

• 19% domestic sales increased with commercial vehicles and dominating increase of market share in light vehicles up to 60% well.

• Domestic passenger car grew about 4 % according to industry growth rate.

• Domestic passenger car prices increased about 3.3%.

• Acquired of Jaguar/Land Rover increased growth in this segment about 29%.

STRATEGIES which they can implement

Cost cutting strategy would be the first and foremost option Tata motors should possess in order to compete with global leaders.

They already have Goodwill over their products and it will be an added advantage if they could reduce the manufacturing and raw material costs through efficient commodity chain development.

The next important factor to be considered would be the sustainability risks each and every product developed by Tata motors must be multifunctional, so that customers may have their options to utilize and explore their product much more than normal.

Major strategy of Tata motors is its ability to exploit information technology. For e.g. In case of Tata nano it was an early adopter of CAD and CAM systems to speed design of Tata nano.

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Strategy of outsourcing noncore activities, it has outsourced its IT technology to Tata tech. ltd. And its IT infrastructure to IBM.

In TATA SAFARI 4*4 DICOR it has installed “reversed guide system” i.e. weather proof camera is fixed to rear car to help driver while reversing car.

PRICING STRATEGY- giving discount every month & special promotion technology.

GRAND STRATEGY

PRODUCT DIFFERENTIATION STRATEGY

Tata Motors new launches like Aria and the new 2011 Safari to regain its lost market share.

Tata is looking at doubling SUV annual volumes to over 70,000 units in the next 12-18 months, including exports.

Tata Motors is set to offer utility vehicles at every price point right from Rs. 6.5 lakh to Rs. 15 lakh.

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