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Introduction: This report focuses on Tata Motors, the largest automobile company in India. The analysis will center around Tata's marketing environment, strengths and opportunities, as well as weaknesses and threats that need attention. Given the extensive nature of this report and Tata Motors' global presence, the main emphasis will be on the Indian market. Understanding this macro-environment is crucial as it accounts for a significant portion of their sales.
Consumer Profile: Tata targets a specific demographic consisting of individuals who are relatively new to the workforce and fall within their mid-20s to early 30s age range.
Additionally, they have a low to middling income level (Rahul).
According to Rapp, the younger generation of consumers have a tendency to make impulsive purchases and search for vehicles that not only reflect their youthful image but also provide reliable and affordable transportation.
They rely on various sources such as the internet, social media platforms, family recommendations, and frequently visit car dealerships for product research.
It is important to mention that male buyers outnumber female buyers in India due to the gender power imbalance.
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These consumers prioritize resale value and maintenance costs due to their lower purchasing power. The automobile market in India is globally ranked as the sixth largest, with an astonishing 3.9 million cars sold in 2011 alone according to Rapp. However, it should be noted that slightly over half of these sales could potentially be attributed to consumers since India is not categorized as a first world country.
Tata faces direct competition from Toyota, Nissan, Ford, Chevrolet, Hyundai, Skoda, and other automobile industry rivals who offer similar products.
In the moped market, Honda, BMW, and Audi serve more upscale customers as indirect competitors.
Additionally, any alternative mode of transportation has the potential to replace Tata's vehicles in the market. However, cheap public transport options pose the most significant competition for Tata since consumers with limited income may choose these alternatives over Tata's vehicles.
The information provided in the Tata Motors Annual Report, 2012 states that Tata Motors Limited is the largest automobile company in India. With revenues of Rs. 170,678 crores (32 billion USD) in FY 2011-2012, it was established in 1945 by Tata Sons, India's biggest conglomerate.
According to the same report, Tata Motors is the leading commercial vehicle manufacturer in India and the third largest passenger vehicle manufacturer. The company has manufacturing plants throughout India and R&D facilities across Europe, Africa, and Asia.
The diverse product portfolio offered by Tata includes over 30 vehicle models that range from basic passenger cars to commercial, defense, and homeland vehicles as mentioned in their annual report.
Tata Motors attributes its success to a culture of continuous innovation and a dedicated workforce with strong customer focus. They also emphasize a culture of accountability.
The 2012 Tata Motors Annual Report reveals that the purchase of Jaguar Land Rover and Daewoo has been a lucrative endeavor, showcasing Tata Motors' adept strategic leadership. Rather than creating their own high-end brand, Tata made a shrewd marketing decision by acquiring these struggling brands. Furthermore, in 2009, Tata introduced the Nano, an exceptionally budget-friendly and fuel-efficient car renowned as the world's most inexpensive production vehicle.
Tata's product line, which includes the Range Rover Evoque and the Ace, showcases their dedication to innovation and customer-centric solutions for transportation challenges in India. This reflects Tata's commitment to corporate responsibility and social consciousness. The Nano is a prime example of how Tata aligns their business strategy with their social strategy by offering an affordable vehicle option for those who cannot afford one. Additionally, Tata Motors has earned a positive reputation through their implementation of eco-friendly practices and support for local and global communities.
The text discusses the partnerships and alliances that Tata Motors has formed over time. In 2005, Tata Motors collaborated with Fiat to gain access to their diesel engine technology, which was beneficial for Tata Motors. They also established a partnership in the same year with the University of Warwick’s Warwick Manufacturing Group to focus on research and development in Low Carbon Vehicle Technology. This alliance aimed to reduce Tata's environmental impact and develop more fuel-efficient cars. In 2011, Tata joined forces with the New Energy and Industrial Technology Development Organization, the Government of India, and the Government of Japan to establish an eco-friendly dual-fuel power generation facility. Additionally, in the same year, Tata partnered with fashion designer Rajesh Pratap Singh to create a limited edition of the Manza range of sedans. This collaboration helped enhance Tata Motors' brand image and catered to a more upscale clientele.
In 2012, Tata Motors formed partnerships with the UK Institute of Mechanical Engineers, Jammu & Kashmir Bank, and the EXCEED program. These collaborations aimed to collect customer feedback and enhance customer satisfaction, ensuring dealer profitability. Such alliances are crucial for maintaining Tata's competitive advantage in the Indian car market, strengthening its stakeholder image, and driving its commitment to innovative transportation solutions. The company has consistently delivered strong financial performance that continues to improve. The growth in annual net revenue can be partly attributed to the expansion of the overall industry as more people in the country purchase cars due to favorable demographics and disposable income. Despite increasing sales, Tata Motors had anticipated higher passenger car sales but faced a decline in operating profit due to total expenditure rising at a faster rate than revenue. This could potentially be caused by increased manufacturing costs.
Despite maintaining its market share, Tata Motors is aiming to improve it in the future. The growth of the automobile industry in India is closely tied to the country's current economic situation, and the impact on Tata's financials is not entirely within their control. Concerningly, Tata faces complications and restrictions in its debt instruments, requiring prior consent from lenders before making decisions. This can cause delays and hinder their ability to respond quickly to opportunities and threats. However, mandating certain debt ratios to be maintained may be a wise strategy given the unstable economic environment. Tata Motors will also face competition from international brands such as Mercedes-Benz, Volvo, and Navistar who offer high-quality vehicles for middle-class families.
The foreign auto manufacturers in India have either formed joint ventures with local partners or established independently owned operations, aiming to expand their presence in the country (Business Standard, July 4 2012). Tata Motors is facing a significant issue as it has focused too much on commercial and small vehicles, neglecting the emerging luxury car market. This market presents opportunities for overseas companies like Daimler Chrysler, Ford, Honda, and Toyota. On the other hand, Indian automobile manufacturers now have increased access to debt and equity financing in international capital markets. They also benefit from alliances that provide access to advanced automobile technologies. Mahindra & Mahindra is an example of this and they are prepared to intensify competition against Tata Motors in the mini truck segment. Currently, Tata Motors leads this market with its Ace model X (The Indian Express, July 29 2012).According to The Economic Times (January 28, 2013), Mahindra & Mahindra ranked fourth in passenger vehicle sales in India in 2013 with 227,104 units sold. However, Mahindra has seen a decline in ROI compared to Tata Motors (Tanver, 2012). The CDSTEP Analysis highlights the cultural importance of car ownership in India. Car ownership is seen as a symbol of status for the average Indian consumer, particularly among young individuals who rely on cars to maintain their social standing despite limited income. The Tata Nano, a compact and affordable car, caters perfectly to this demographic (A Little Car that Couldn't, 2011). In wealthier Indian families, it is customary for parents to financially support their children until they reach around 24 or 25 years old. This support includes funding their university education, rent expenses, and even providing them with living arrangements. Additionally, parents often ensure that their children have access to a car. This situation benefits Tata since parents are generally reluctant to spend a significant amount of money on their children's first car. Once again, the practicality of the Tata Nano emerges as an ideal solution (Culture of India, 2009).
The Indians have a cultural preference for low maintenance costs and are open to buying new products. They prefer quick and affordable solutions for their existing goods, which benefits Tata as their spare parts are cheaply available in India. Tata's organizational culture aligns with this cultural trend, focusing on value and reliability. In terms of demographics, India's population is growing at an average rate of 1.3% and is expected to become the most populous country by 2030 with a population of 1.5 billion. This presents Tata with a large market to expand its sales and potential future gains from the rapidly increasing population. Furthermore, 65% of India's population falls within the working age range (15-64), positioning India as one of the youngest nations by 2020.
The 2011 report on India's Demographic Outlook predicts that urbanization will positively affect the country's productivity and GDP. Currently, 30% of the population resides in urban areas, while 70% live in rural regions. However, it is estimated that by 2030, the proportion of people living in cities will increase to 40%. This shift towards urbanization will likely result in a higher demand for both commercial and passenger vehicles due to increased distances between families. Despite lower literacy rates, there are promising growth rates that continue to improve. As educated individuals seek better living standards in cities, Tata can expect its customer base to expand. Additionally, India's demographics are highly favorable for Tata as well. Furthermore, with higher disposable incomes, Indians have been able to travel and experience lifestyles similar to those found in more developed countries.
The influence of certain countries, such as India, has a significant impact on the purchase of common products like new automobiles. A noticeable social trend in India is the increase in working women who are financially independent, forming a substantial consumer base. This group not only influences marketing strategies but also values safety in vehicles more than men. Overall, safety awareness has grown among Indians, leading them to move away from mopeds and towards cars like the Tata Nano. However, this shift is hindered by the unfortunate safety issues associated with the Tata Nano. Tata places importance on technology, with substantial spending on research and development (R&D), which stands at just over 2% of inventory turnover. They have multiple engineering research centers and hold India's only certified crash test facility. Additionally, Tata has partnerships with reputable research labs worldwide.
Tata is the first Indian automobile firm to adhere to European emission standards for pollution. While Tata has a strong online presence in certain areas, it is weak in others. Their website is of high quality, and their Nano marketing strategy includes innovative ideas like online Nano racing games. However, their social networking presence is limited, with only 2000 likes on their Facebook page. Nonetheless, Tata remains dedicated to environmental conservation.
With the best fuel efficiency and lowest emissions of any Indian auto company, Tata consolidates a strong stakeholder approval base whilst attracting customers looking for efficiency and reliability. Tata also has numerous CSR programs that achieve real, quantifiable goals in India, a country rife with over pollution such as increased recycling of water and plastic, makes sizeable donations to non-profit NGOs and has strict standards regarding the environmental friendliness of their vehicles- each of their plants are approved and certified to the ISO 1400 EMS Standard, a high international standard.
In the past decade, the Indian government approved foreign companies to have 100% ownership in Indian vehicle and component manufacturing entities (Department of Heavy Industry, 2002). This allows foreign companies to enter the Indian automobile market, potentially impacting Tata Motors' dominant position. However, Tata Motors has strong connections with the Indian government and is considered an Indian brand. Thus, the government has a vested interest in Tata's success. Overall, the political-legal aspect is favorable for Tata Motors in India. SWOT Table Positive Factors Internal Strengths - Strong market position and brand recognition in India - Diverse product portfolio - Manufacturing plants throughout India and R&D facilities worldwide - Strong financial performance - Established and growing partnerships with local and international businesses and R&D agencies - Ability to leverage the network of its parent company Tata Sons for access to different industries and economies of scale.
Tata can improve the perceived quality of their passenger vehicles by incorporating well-known brand names like Jaguar and Land Rover, which are widely associated with high-quality vehicles. This strategy has the potential to elevate the overall value of Tata's vehicle lineup.
Tata is a frontrunner in developing affordable, fuel-efficient, and environmentally friendly technologies. This positive reputation not only contributes to their corporate social responsibility image but also helps them garner support from local communities.
With an increasing number of consumers prioritizing eco-friendly and fuel-efficient products, Tata can take advantage of this trend by placing emphasis on these aspects during the development of their new passenger vehicles. By doing so, they can provide added value to their products.
Tata acknowledges the growing demand for diesel engines and has responded by introducing a product line dedicated to diesel-engine automobiles. Furthermore, they are actively conducting research on diesel engine technologies in order to maintain a competitive edge in the market.
- The India market is witnessing a growing thirst for low-cost passenger and commercial vehicles. Tata has recently extended its partnership with an R&D agency in Warwick, which enables them to develop more innovative technologies and products. - A couple of decades ago, it was uncommon for women to work and try to build careers. Women were expected to play the role of homemakers while their husbands were the breadwinners. However, this is changing rapidly, and it should be capitalized on. - India's population is steadily growing.
Negative Factors Weaknesses - Tata Nano experienced the largest recall of any passenger vehicle in the Indian market. This recall was due to the replacement of the starter motor, indicating to consumers that although it is cheap, it may lack the quality they value. This recall also resulted in enormous operational costs for Tata. - Low safety standards have negatively affected consumers' expectations of the brand name and have impacted the company's public image. - Tata Motors currently has a limited presence in the luxury car market, as their products are primarily targeted towards low and middle-income consumers.
Investors will be deterred from investing in Tata Motors shares due to the low return on investment, leading them to seek investment opportunities elsewhere. This will adversely affect Tata's ability to raise funds. Additionally, Tata has a weak presence on popular social media platforms, with only 2075 likes on the company's Facebook page. Insufficient investment in online marketing and branding has contributed to this issue. Moreover, restrictive covenants limit Tata Motors' borrowing flexibility, hindering their ability to secure funds for growth. Another threat faced by Tata Motors is intense competition in the Indian passenger vehicle market, with several competitors such as Nissan. The negative publicity surrounding a Tata Nano catching fire in recent years can be exploited by both domestic and international competitors to market the safety of their own passenger vehicles.
Domestic automobile manufacturing company Mahindra & Mahindra intends to increase competition in the mini-truck product sector. The growing brand consciousness among Indians, with a demand for luxury brands, is not beneficial for Tata Motors, as most of their products are not associated with a premium brand, except for Jaguar and Range Rover. Car ownership is seen as a status symbol for the average Indian consumer, and the higher the price of the car, the higher the status symbol. This trend could hinder the growth of the Nano.
India's population is growing externally at an average rate of 1.3%, making it expected to become the most populous country by 2030 with a population of 1.5 billion. This suggests that there will be a greater consumer base and increased demand for all products. Therefore, it is advisable for Tata to invest and expand in order to capitalize on this demographic explosion.
- Tata faces a potential threat from environmental regulation, as consumers and stakeholders may view the company as environmentally negligent and outdated. Tata is dedicated to addressing this issue, but for any automotive company, the environment remains a sensitive subject due to the reliance on fossil fuels. - The increasing stringency of labor laws in India and the global recession have led to a decrease in purchasing power parity. This poses challenges for Tata in managing manufacturing and logistical costs, which could become burdensome and drain company funds. Overcoming these challenges is crucial for Tata to maintain competitiveness. - Despite claiming to have exceptionally high safety standards, Tata's reputation suffered due to incidents such as the Nano's fire issue. Other automobile companies take advantage of this by highlighting their own safety standards compared to Tata's. To overcome this, Tata needs to address this matter seriously and systematically.
Tata should adopt a dual marketing strategy to address its strengths and weaknesses while considering the future opportunities and potential threats in India. By focusing on and highlighting Tata's strengths, and concurrently addressing its weaknesses, Tata can maximize its marketing gains and minimize any negative impacts. It is important to tackle these strengths and weaknesses separately but in a cohesive manner. By emphasizing Tata's Indian roots, history of innovation, strong financial situation, and dominant position in the Indian market, Tata can sway potential customers who may be unsure about choosing Tata over other competitors.
Tata could significantly enhance its status symbol power by increasing awareness of its ownership of Jaguar Land Rover. Owning a car made by the same company that produced the iconic Jaguar e-type, known as one of the most beautiful cars ever made, is a distinct difference from owning the cheapest car in the world. However, Tata also requires extensive damage control to address the issues surrounding the Tata Nano's marketing strategy. Instead of positioning it solely as the cheapest car, which may not appeal to potential buyers, a complete revamp is needed. The advertising should emphasize the Nano's exceptional value, reliability, safety, and its suitability for urban practicality.
The issue should be dealt with seriously and comprehensively to ensure Tata's reliability. The SWOT analysis examines the Indian domestic automobile market and reveals some significant issues within a generally strong and stable firm. Tata is a well-established brand in the Indian market and has a significant market share in commercial vehicles, although it trails behind competitors in passenger vehicles, particularly with the notable Nano incident mentioned above. The macro environment of the company plays a significant role in its performance.
India's surroundings make Tata in India a vibrant, intricate, and rich environment. With growing populations, improving literacy rates, advancing gender equality, and increasing GDP per capita, Tata has great prospects. If Tata can strategically navigate its way, there is no doubt that it holds a strong and influential position in the Indian domestic market. Nevertheless, nothing is guaranteed as there is intense global competition, and Tata must resolve certain structural and financial challenges before progressing further.
TATA MOTORS - BIBLIOGRAPHY
Company Annual Report Tata Motors Limited. (2011 – 2012). 67 Annual Report. Retrieved from http://www.tatamotors.com/investors/pdf/2012/annual-report-11-12.pdf th
News Articles
Tata Motors will face competition directly, according to Tata's annual report. The report can be found on the Business Standard website, which provides business and finance news, world business updates, Indian stock market information, and more. The report was published on an unspecified date and accessed on February 4th, 2013.
The first post discusses Tata Motors' strategy to outperform the competition by focusing on fuel efficiency. The article comes from Firstpost, a website that provides the latest news on various topics such as politics, business, sports, Bollywood, and opinions. The article was accessed on February 4, 2013.
"India: Tata Motors forms partnership with Institution of Mechanical Engineers." Mena Report [New Delhi] 1 Sept. 2012: 1.
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Luthra, Sonia. "India's Demographic Outlook: Implications and Trends." The National Bureau of Asian Research. N.p., 29 Dec. 2011. Web. 4 Feb. 2013.
"Mahindra aims to increase competition with Tata Motors' Ace - Indian Express." Latest News, Breaking News Live, Current Headlines, India News Online - The Indian Express. The Indian Express, n.d. Web. 4 Feb. 2013.
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The article titled "Tata Nano recall shows product recalls are a risky exercise" from The Economic Times highlights the risks associated with product recalls.
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The Indian Express reports that Tata Motors has formed a partnership with designer Rajesh Pratap Singh.
The Sunday Times reports that DIMO and Tata Motors are celebrating a 50-year partnership. The article is titled "DIMO and Tata Motors celebrate a legendary partnership of 50 years." It was published by The Sunday Times Sri Lanka and accessed on February 4, 2013, via the internet.
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Tata Motors: Marketing Analysis and Consumer Profile. (2017, Jan 27). Retrieved from https://studymoose.com/swot-analysis-of-tata-motors-essay
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