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Tata Nono Solution

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Asad Hameed
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17 views

Tata Nono Solution

Uploaded by

Asad Hameed
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Step 1: Summary of the Tata Nano Case Study

Tata Nano: A People’s Car That Failed to Reshape the Auto Industry

The Tata Nano, launched in 2008 as "the People’s Car," aimed to revolutionize the automobile
industry by providing a safe, affordable car for India's lower-income population. With a price of
just 1 lakh INR (approximately $2,000), the Nano was expected to replace unsafe two-wheelers
and target non-customers of the automobile industry.

Key Highlights:

 Vision: Ratan Tata conceptualized the Nano to provide affordable, safe transportation for
families using two-wheelers.
 Innovations:
o Cost-saving engineering innovations, such as a rear engine, tubeless tires, and
simplified dashboards.
o Partnerships with suppliers to reduce production costs and ensure affordability.
o Distribution plans through unconventional channels like hypermarkets and
assembly kits for local factories.
 Challenges:
o Rising commodity prices in 2008 disrupted cost projections.
o Political resistance forced a costly relocation of the manufacturing plant.
o The Nano became labeled as the “cheapest car,” damaging its aspirational value.
 Outcome: Despite initial hype and record-breaking pre-orders, the Nano failed to deliver
on its potential. Sales dropped year after year, and the project ultimately floundered.

Step 2: Solving the Questions in the Case Study

Question 1: Blue Ocean Idea Index (BOI) Assessment

 Exceptional Utility: Yes, the Nano offered affordable mobility for families reliant on
two-wheelers. Its features such as better safety, fuel efficiency, and low maintenance
created utility.
 Strategic Pricing: The Nano’s price point of 1 lakh INR made it affordable for its target
audience. However, its aspirational value was compromised due to the “cheap car” label.
 Target Costing: The team achieved remarkable cost reductions, but rising commodity
prices in 2008 impacted profitability and delayed production.
 Adoption Hurdles: The Nano’s brand perception alienated its intended audience.
Traditional distribution channels failed to reach non-customers effectively.

Question 2: Tata Motors’ Response to Rising Commodity Prices


 Response:
o Reassessed every production item for further cost reductions.
o Negotiated with suppliers to maintain pre-agreed prices.
 Success Factors:
o Supplier cooperation and innovative cost-cutting allowed Tata Motors to achieve
the cost target despite rising input costs.

Question 3: What Went Wrong?

 Key Issues:
o Political resistance in Singur delayed production and increased costs, disrupting
the original plan.
o Using traditional car dealerships instead of alternative channels alienated the
target audience (two-wheeler owners).
o The car’s branding as a “cheap car” clashed with buyers’ aspirations for upward
mobility.
 Framework: Using the Blue Ocean Strategy framework:
o Tata failed to effectively raise aspirational value and eliminate its association
with being a low-cost, low-value product.

Question 4: Steps for Revival

 Shift focus from “cheap” to “value” by emphasizing Nano’s safety, innovation, and
reliability.
 Expand partnerships with hypermarkets and non-traditional channels to reach non-
customers.
 Create aspirational marketing campaigns to reposition Nano as an affordable but
desirable car.

Step 3: Solving Using the Requested Tools

Competitor Analysis

 Key Competitors:
o Maruti 800: Known for its reliability and brand loyalty in India.
o Two-wheelers: The primary mode of transportation for the Nano’s target
audience.
 Competitive Advantage: The Nano was cheaper than both its automobile competitors
and many high-end two-wheelers. However, it failed to establish a premium perception.
As-Is Strategy Canvas

The current state of the Indian automobile industry:

 High costs: Passenger cars were priced beyond the reach of low-income households.
 Low accessibility: Traditional dealerships failed to engage two-wheeler owners.
 Limited safety: Two-wheelers posed significant safety risks for families.

Tiers of Customers

The Nano aimed to capture:

 1st Tier (Existing Customers): Two-wheeler users aspiring to upgrade to safer vehicles.
 2nd Tier (Refusing Customers): Lower-middle-class families who perceived cars as
unaffordable or impractical.
 3rd Tier (Unexplored Customers): Rural populations relying on public transport or
walking.

Buyer Utility Map

Below is the Buyer Utility Map for the Tata Nano:

Utility Levers Purchase Delivery Use Maintenance Disposal


Customer Low-cost Accessible Fuel Low Durable
Productivity financing showrooms efficiency maintenance parts
Traditional Few service Long
Simplicity Simple pricing Easy driving
channels needs lifespan
Compact Ready
Convenience Online booking Local factories -
size availability
Partnerships Proven Reliable
Risk Reduction Affordable EMI -
with banks safety performance
Lacked
Negative
Fun and Image aspirational - - -
perception
marketing
Environmental Low
- - Fuel efficiency -
Friendliness emissions

ERRC (Eliminate-Reduce-Raise-Create)
 Eliminate: High pricing, unnecessary luxury features.
 Reduce: Production costs, reliance on traditional dealerships.
 Raise: Safety features, brand appeal, fuel efficiency.
 Create: A market for families using two-wheelers, alternative distribution channels.

To-Be Strategy Canvas

The future state for the Nano should include:

 Enhanced accessibility through hypermarkets and local assembly plants.


 Improved brand image through aspirational marketing.
 Higher emphasis on safety, reliability, and cost-effectiveness.

Two Pathways to Create New Market Space

 Look Across the Chain of Buyers: Reposition Nano to appeal to families by


emphasizing safety and social mobility.
 Look Across Substitute Industries: Focus on converting two-wheeler users with
affordable financing and aspirational branding.

Let me know if you’d like me to create visual strategy canvases or elaborate further! 😊

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