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Tata Nano

US Market Entry Strategy

Nine Mile Management Consulting

on 5 February 2013

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Transcript of Tata Nano

Find out more
information at... Overview of Market Entry Strategy Tata Nano & US Market Entry Background of Tata Group & Tata Motors
Creation of Tata Nano
Part I - Strategy, Vision, & Advantage
Part II - Challenges in Transferability of Advantage
Part III - Transferring Advantage to Overcome Challenges & Re-positioning
Part IV - Recommendations & Risks Tata Group & Tata Motors Long-history of diversification, 7 business sectors, 80 countries
US$100 billion in revenues 2011
Tata Motors - Tata Engineering & Locomotive Company
Previous accumulated manufacturing experience (Daimler Benz, Mercedes Benz)
Tata Sierra in 1991
Jaguar Land Rover acquisition in 2007 Part II - US Market Entry Challenges
& Transferability of Advantage Tata Nano Rs. 1 lakh
Since Ratan Tata's 2003 announcement - $220 million in free-press & marketing
Based on popularity of 2-and-3 wheel transport in India
Safe, affordable, and all-weather form of family transport Part III - Overcoming Challenges,
Opportunities & Positioning Tata Nano Rs. 1 lakh Ultra-Low-Cost "Car ownership to
a completely new kind
of customer" From "Now You Can" to the "Poor People's Car" The Hype Fizzles Out Since March 2009 - sold only 175,000 units in India
Well-below all sales projections
3 main factors:
Ill-translated distribution strategy
Failure to reach their target market
Lack of available buyer financing And Now... The US US Entry 2012 announcement of US market launch in 2015
Estimated price-tag: US$8,000
56-66 mpg fuel efficiency
Low CO2 emissions Part 1 - Strategy, Vision, & Advantage Multi-Domestic Strategy Vision Firm-Specific Advantage 1 2 3 Strategy Vision Advantage "Our international business philosophy is to be seen as a local company in the country of operation" 65% total revenues - international operations Increased local responsiveness & catering to local customer needs "To develop Tata into a world-class
Indian car brand for innovative and superior vehicles." First-mover advantage
Becoming a global OEM Long-standing history of vehicle
manufacturing and know-how
obtained through Mercedes-Benz
partnership. Leverage Tata brand-name
Cooperative supplier relationships
Innovations - less expensive materials & lightweight components Strong-focus on R&D
Multiple research locations
2,000 engineers Country-Specific Advantage Solid reputation in vehicle manufacturing in India
Tacit-knowledge of institutional barriers
Extensive & collaborative local supplier network Now that we understand their advantage...

What about the transferability of their advantage? Challenges to US Market Entry Manufacturing Challenges Supplier Challenges Lack of localized manufacturing
Unionized work-force - 10% cost
30-35 man-hours per assembly
Additional safety, crash-tests, vehicle modifications
Price increase 60-90% Need to establish localized supplier network to remain cost-competitive
Responsive supply chain
One-half parts proprietary Distribution & Sales Challenges Poor distribution strategy in India
In US, "distribution model has been remarkably resistant to change"
Established franchised dealer networks
JLR - premium brand Marketing Challenges "Poor people's car that poor people aren't buying"
"Now You Can"
In India, 50% buy 2-wheeler, 50% second car
In US, compact-car sales are driven by many segments (price-conscious, city, eco) Competitive Positioning Challenges Environmental Challenges Institutional Challenges Compliance to safety and emissions standards
NHTSA, EPA, SAE Height of entry barriers and intensity of competition is high. Overcoming Challenges,
& Positioning Re-Positioning in View of Opportunities Mother Plants &
Knock-Down Kits Transferring Advantage to Overcome Challenges Hub-and-Spoke Model for
Distributed Manufacturing a) What advantage to transfer in order to overcome challenges
b) How to re-position themselves in order to compensate for liability of foreignness & lack of brand strength Operations
& Manufacturing Mother Plant Hub Spoke Spoke Spoke Spoke Spoke Greenfield manufacturing plant allows them to transplant company culture & low-cost model Modularized manufacturing & mass-customization Setup 'hub' in Mexico & 'spokes' in different geographical markets in US Factors to Consider... Supplier relationships
Responsive supply-chain to establish low-cost strategy Transferring Manufacturing Advantage... Establish a North American presence - Global OEM
Gain & establish supplier relationships
Perpetuate R&D & human resources strategy
Low-cost University Student Market 19.7 million students colleges & universities
$58,613 median income Bachelors
Local transportation needs
No-frills type of vehicle
Small market in comparison to 240 million vehicles (car ownership) City Resident Market Car ownership trends reversing in US
Unprecedented 2% decline in ownership
One-half NYC residents live without car, 63% own car in Washington
Transport bulky items -> vehicle sharing Families 132 million households, home ownership 67%
Median income $52,000
New families opt for cost-effective transport
Trend towards minivans for family growth, safety, comfort, reliability Eco-Friendly Market Important in areas like California
Low CO2 emissions Mass-Vehicle Sharing Market Vehicle sharing schemes growing in popularity
Attracting large investors
Yahoo! CEO Marissa Mayer + former Google CEO Eric Schmidt invest in Getaround (startup) Mass-Customization Market Adopt model similar to Dell Computers to transform market
Customize vehicle to consumer needs
Exterior features, interior features
Vehicle skins
Personalized vehicle - individual statement Recommendations & Risks Evaluated opportunities based on:
Size of market
Growth of market
Ease of re-positioning and marketing activities Partnerships with vehicle-sharing schemes
Meet needs of city-resident market
Leverage eco-friendly and good fuel economy position
Gain brand recognition Mass-Customization
Bold strategy supported by hub-and-spoke manufacturing
Differentiate from competitors Tata Nano's Tata's www.ninemileco.com Unique Market Positioning
Full transcript