ASSIGNMENT CA
NAME : SANJANA PAWAR
MBA FY
CASE STUDY: TATA NANO–ENVIRONMENTAL ANALYSIS
QUESTIONS:
1. What was the vision of Ratan Tata behind the launch of Nano
project? How did he analyse the environment?
(Hint: Low-income group people, safety, substitute for a
bike.)
ANSWER:
The Vision Behind Tata Nano
The idea for the Tata Nano originated with Ratan Tata, the then-
chairman of the Tata Group, who envisioned a low-cost, compact car
that could provide families in India, who were dependent on motorcycles,
a safer, more comfortable, and affordable alternative. The Nano was
designed to be:
A substitute for motorcycles: With safety being a prime concern,
particularly for families.
An affordable car: Priced low enough to attract low-income
families in semi-urban and rural India, a market traditionally
served by motorcycles.
The Nano was the result of extensive research and development,
including efforts to cut down production costs, reduce material usage, and
minimize vehicle size without sacrificing basic functionality.
Tata analysed the environment carefully and realized that India Ratan had
a significant number of low-income group people who had to rely on two-
wheelers as their primary mode of transportation. These two-wheelers
were often unsafe and uncomfortable, making commuting a difficult
experience for these people. He saw a market opportunity in providing an
affordable four-wheeled vehicle that would cater to the needs of these
people.
Additionally, he understood that safety was a significant concern for low-
income group people who often travelled long distances on two-wheelers.
Hence, the Nano project was designed with safety features like a strong
body, seat belts, and front and rear crumple zones to make commuting a
safer experience for the passengers.
Ratan Tata's Analysis of the Environment:
Target Audience - Low-Income Groups: Tata analyzed the
demographic landscape of India, where a significant portion of the
population depended on motorcycles for commuting. Motorcycles
were affordable, but they lacked safety and comfort for families.
The need for an affordable, safe, and family-friendly alternative to
motorcycles was clear. Ratan Tata recognized that if an automobile
could be priced at a similar range to a motorcycle, it would be a
game-changer
Affordability: The challenge was not just to create a vehicle that
was inexpensive, but to make it affordable for the masses without
compromising on basic safety standards. The Nano, often dubbed
as the "world’s cheapest car," aimed to keep costs down while
ensuring that the car was a viable alternative for people who might
otherwise only dream of owning a four-wheeled vehicle.
Safety Concerns: Tata was also very aware of the safety concerns
associated with motorcycles. In India, motorcycles were often seen
as unsafe for family use, particularly for women and children.
Ratan Tata's vision was to provide an option that would
significantly improve road safety for families, making car
ownership accessible to those who needed it.
Technological Innovation and Cost-Reduction: To make the
Nano affordable, Tata Motors had to rethink automotive
engineering, simplifying designs and using cost-cutting
manufacturing techniques. Tata worked with a dedicated team to
design a compact car that could still meet basic safety standards,
was fuel-efficient, and had low production costs.
Economic Environment: Tata's analysis also took into account the
larger economic environment in India, which was experiencing
rapid growth, particularly in urban areas. People were aspiring to
move up from motorcycles to cars, but the cost of conventional
cars was too high for many. The Nano filled this gap, providing an
entry-level vehicle that could be owned by families who otherwise
wouldn't have been able to afford a car.
Market Potential: Ratan Tata recognized that the Indian
automobile market had immense potential for an affordable, entry-
level car. He wanted to reach a wide customer base, and this meant
offering a car that was priced low enough to appeal to people in
rural and semi-urban areas, where motorcycle ownership was
prevalent but the desire for safer and more comfortable vehicles
was growing.
In summary, Ratan Tata's vision behind the launch of the
Nano project was to provide an affordable and safe four-
wheeled vehicle to the low-income group people in India who
relied on two-wheelers as their primary mode of
transportation. He analysed the environment carefully and
saw a market opportunity in catering to the needs of this
segment of society.
2. In spite of extensive research and development programme,
Nano was a huge failure. Why?
(Hint: Poor vision and mission, competition, quality, etc.)
ANSWER
Why Did the Nano Fail?
Despite the extensive groundwork, the Nano failed to live up to its
potential. Several interconnected factors contributed to its commercial
failure:
1. Poor Vision and Mission Communication
One of the primary reasons for the Nano’s failure was the misalignment
between the vision behind the car and how it was communicated to the
public.
"World's Cheapest Car" Branding: The marketing campaign
heavily emphasized the "cheapest car" aspect of the Nano. While
affordability was important, the term "cheap" created a negative
connotation. It made the Nano appear substandard or inferior, even
before potential customers had the chance to test it.
Failure to Position as "Affordable, Not Cheap": Tata failed to
position the Nano as a smart, value-for-money car. Instead of
focusing on the car’s affordability, safety, and efficiency, it was
primarily marketed based on its price, which detracted from its
appeal.
2. Competition
While the Nano was designed to be affordable, it faced fierce competition
from both:
Entry-level Cars: Established brands like Maruti Suzuki,
Hyundai, and Chevrolet already had a foothold in the entry-level
segment with cars like the Maruti 800, Hyundai Santro, and
Chevrolet Spark, which, though more expensive than the Nano,
offered better quality, features, and reliability.
Motorcycles: The Nano was meant to replace motorcycles, but
motorcycles remained a popular choice for families due to their
fuel efficiency, lower price, and greater maneuverability in
traffic. Even if the Nano was cheaper than most cars, many people
saw it as an unnecessary expense compared to upgrading to a
more expensive car or sticking with a motorcycle.
3. Quality Issues
While the Nano’s design was intended to keep costs low, it resulted in
several quality issues that affected its reputation:
Perception of Inferiority: The Nano was considered a low-
quality car, and this perception was reinforced by its simple
design, basic features, and lack of finishing touches. Consumers
typically associate affordable cars with compromised quality,
and the Nano was no exception.
Safety Concerns: Despite being marketed as a safer alternative to
motorcycles, the Nano had limited safety features. In its early
versions, there were reports of fire incidents involving the Nano,
which seriously damaged its reputation. Safety was a major
concern, especially since the Nano was intended to be used by
families.
Basic Design: The Nano’s minimalistic design, though cost-
effective, lacked basic amenities like power steering, air-
conditioning, and even power windows in the first versions,
which are standard in most entry-level cars.
4. Production and Distribution Issues
Land Issues and Factory Relocation: Initially, the Nano was to
be manufactured in Singur, West Bengal, but protests by local
farmers over land acquisition forced Tata to shift the production to
Gujarat, leading to significant delays and increased costs. This
disruption not only delayed the launch but also created supply
chain issues.
Limited Availability: Due to production issues, the Nano was not
available in large quantities across the country at launch.
Customers faced difficulty in accessing the car, which led to
frustration and loss of momentum.
6. Marketing and Targeting the Wrong Audience
The marketing campaign for the Nano was a double-edged sword. While
the idea of a low-cost car was appealing, the way it was marketed
alienated the very consumers it was trying to attract:
Wrong Target Audience: Tata initially targeted low-income
families, but many of these families were unwilling to spend
money on a car, even at a low price. Motorcycles, being cheaper
and more practical, remained a preferred option.
Aspirational Disconnect: The Nano failed to appeal to
aspirational buyers. People in India often purchase cars not just for
practicality but as a way to symbolize upward mobility. The
Nano, by positioning itself as a “cheap” car, lacked the
aspirational value that many consumers look for when buying a
car.
The failure of the Tata Nano project can be attributed to several factors:
1. Poor vision and mission: Although the Nano was intended to be a low-
cost car targeted at middle and lower income groups in India, the lack of
a clear and compelling vision or mission for the project made it difficult
to generate interest and demand for the product.
2. Competition: The Nano faced stiff competition from other low-cost
cars in the market, both domestic and foreign. Brands like Maruti Suzuki,
Hyundai, and Renault also launched low-cost cars at around the same
time, which affected the Nano's market share.
3. Quality issues: There were several reports of quality issues with the
Nano, which affected its reputation in the market. Early models had
problems with overheating and catching fire, which led to safety concerns
and negative media coverage.
4. Distribution and marketing: The Nano was sold through Tata's existing
dealer network, which wasn't adequately equipped to handle the sale of a
low-cost car. Additionally, the marketing and advertising efforts for the
Nano were minimal, which affected its visibility and appeal.
In summary, a combination of factors such as poor vision and mission,
competition, quality issues, distribution and marketing challenges, and
economic factors contributed to the failure of the Tata Nano project
despite extensive research and development efforts.
