Tata Motors : Can it become a Global Contender in
the Automobile Industry?
KAVYA SENTHILKUMAR
The last five years were really tumultuous for the automobile vehicle
industry because the price of the fuel and other growing concerns have
changed preferences away from big pick up vehicles to more fuel-
efficient cars.
1. Describe the There are many manufacturing industries embraced the change by
economic characteristics increasing their small car profile and started production of hybrid
electric motor vehicle but there are some car companies did not focus
of the global motor on the trend, because when fuel prices fell in the year 2008 but due to
vehicle industry. the US financial crisis stabbed the whole global economy mostly
because of US financial crisis. There are many big automotive
companies across the globe, each and every with their significant share
of the vehicle industry market, but concentration has been declining
over the past five years as companies in emerging economies ramp up
production a good example would be Tata in India.
Pricing pressure: I think pricing pressure is really an important part
because nowadays it’s very difficult to make cheap cars and earn profit
from a cheap car so companies have to keep this thing in mind while
manufacturing cars for the customers, they have to keep all the
parameter in mind.
Consumer spending trend: As people are spending more on new
different variants of the car and a wide number of several variants are
launched every day and Customers are spending a lot on their choice of
2. What are the key cars. So, industries should understand their needs and turn into their
success factors for a profit by giving the customers what they need.
successful firm in the
global motor vehicle
Broad differentiation strategy: Well vehicle industries should adopt a
industry? different strategy for their products in the market so they could sell
more and earn more. There are various ways by which vehicle industries
can adapt and can get results.
Market analysis & innovation: To keep making market analysis is really
important for any type of industry but all the time making market
analysis so they could understand what the customer wants from them
is really essential and innovative ideas will always give success to the
global motor vehicle industry.
Strengths:
Tata motor was a big division of the Tata group which is one of the
3. What are Tata biggest corporations and fourth-largest truck manufacturer corporations
Motors’ internal of India and also the second-largest bus manufacturer in terms of the
strengths and volume. Tata has introduced the Tata Nano car which is the world’s
cheapest car and this was for the potential market for low-income
weaknesses? Identify people of India and more than 30 million consumers were captured by
competencies and this Tata Nano. Because the Nano price was less than 2000 US Dollars.
capabilities that the So, the potential in the global automobile market was really high and
company’s major Tata Nano has many several benefits which include reduce fuel
consumption, enhance stability and a lot improved safety.
competitors are lacking.
What market Weakness:
opportunities does the Tata motor's main market just focuses on India but now the company
company have and what wants to expand into more countries to attract more customers
especially customers from developed nations such as China USA or
threats can you identify Europe. So, different types of vehicles mean a big production chain and
that may negatively it means a big investment as well and it would be a huge expenditure
impact the company’s and a lot of human resources would be required to expand business in
future? developed countries. However, India is the second-largest population on
the earth but still, there are only 11 cars per thousand people.
3. What are Tata
Motors’ internal Opportunities:
strengths and As cooperation with ford’s company Tata motor has successfully bought
the jaguar and range rover which was from ford. That means Tata motor
weaknesses? Identify has a chance to expand the market in the luxury segment which will
competencies and attract the big consumer group.
capabilities that the
company’s major Threats:
As India has the biggest population so, it is obvious that the Indian
competitors are lacking. market is already a favorite market for motor vehicle industries such as
What market Toyota, Skoda, Honda, and general motors. Although vehicle
opportunities does the manufacturing plants highly impacts the environment so there is also
company have and what government policies which control the automotive industries such as
noise, emissions level and ecofriendly parameters So following all eco-
threats can you identify friendly parameter enlarge the cost of the inputs so which can make a
that may negatively vehicle bit expensive and to compete with other big companies is a
impact the company’s challenging task.
future?
4. Would you describe Tata Motors’s international strategy as multi-domestic because Tata
Motor emerges from India and they know well about the needs and
Tata Motors'
information about their country’s people and also the vehicle market
international strategy as there in India. As in India most of the population has a low-income level
a global, transnational, so that’s why Tata motor introduced Nano car for the people of the
or multi-domestic country so everyone could afford and get a vehicle to their home. This is
one of the points which makes the Tata multi-domestic strategy more
strategy? Explain your
successful in India as they know what people want and how much they
answer. want to pay so they work accordingly.
The driving force in the global motor vehicle industry is the customer’s
demand for motor vehicles. As time changes customers demand and
need from the motor industry will continue to innovate or change so
what motor vehicle industry should do is to follow up on the needs and
5. What are the driving demands of the customer so they could pace up with the expectations
of the customers. And another driving force would be international
forces in the global imports and exports as the vehicle industry will always need to import
motor vehicle industry? raw materials from different parts of the world so they could easily
import and export between vehicle industries in order to get desired
profits and also smoothen the import-export between countries. Motor
vehicle industries should also focus on today's market trend and also
future market trends so they could understand the desire of potential
customers.
Highly Competitive Market:
In a pursuit to become an industry leader, every automobile
manufacturer aggressively prices its product. The automotive industry
solely depends on the Brand value, which in turn favors existing
companies. Hence the competition in the Automotive industry is strong.
New Entrants:
New Entrants always pose a greater threat to the existing market
6. What are the relative players. In order to gain a share in the market, entrants usually use the
strategy of lower-priced products. This can adversely affect the industry.
strengths of the five But there are barriers, which keep these threats very low. Factors like
competitive forces huge capital investments, scalability, product differentiation, and
affecting the global government regulations make it harder for a new entry into the
automobile industry? industry.
Bargaining Power of Suppliers:
Supplier's bargaining power is low and suppliers depend on the
Automotive industry to buy their raw materials. Different parts of the
automobile like engine, glasses, frames, etc. are supplied by various
vendors. Chassis and Frame highly comprise of Iron and Steel, which are
provided by the suppliers from countries like China, UK, Italy, etc.
Bargaining Power of Buyers:
The automotive industry has been keen on manufacturing products
making the power of buyers their priority. The segmentation of products
to fit the various needs of the customer shows that the bargaining
power of the buyers is strong. The factor affecting the purchase is the
6. What are the relative Individual’s Socio-Economic status and criteria like color, quality,
strengths of the five features, and add-ons.
competitive forces Substitutes:
affecting the global Substitute products or services like the introduction of a new category
automobile industry? or a whole new lineup are moderate in the Automobile industry. To
compete with rivals, the existing market players at times launch a
substitute which is priced aggressively to that of the competitor's
substitute. The customer might prefer a different means of transport
like Two-Wheeler depending on the geological location and economic
conditions.
The fiscal year 2011-12 has been very strong for Tata Motors when
compared to its competitors. Though there is an increase in the
expenses incurred, Tata Motors has seen a revenue hike of 35.7%. The
Jaguar & Land Rover has seen a rise in sales in China by 56% in China,
51% in the US and up to 20% in the UK. Few financial ratios have
improved when compared to that of the previous year.
Debt to Equity ratio has been improving over the year. The operating
7. What is the financial profit margin has also seen a rise of 0.3%.
condition of Tata Motors
as indicated from case Looking at Exhibit,
• The cost of employees has risen and it is advisable for the
Exhibits 3 and 4? What management to curb this cost.
is its ability to meet • The cost of materials consumed is higher by 30 Million, while in
short-term obligations? return Tata only made 4 Million more at the end of the financial year.
What advice can you • While the concern is the Current Ratio which is still at 0.9 compared
to previous years Thus, Tata Motors must pay off their liabilities.
offer to Tata’s • Tata Motors seems to be dependent on JLR for its majority of the
management based on profit. It is good for Tata if they quickly clear their inventory which
the information in the majorly comprises of Tata Nano to improve their Current Ratio.
financial statement? • Management of Tata Motors must be more focused on investing
more in R&D and release a passenger automobile domestically and
globally to sustain in the long run. The Tata Nano has been doing
good in Indonesia but has proven to be a failed product in India. So,
it is advisable for the management to come up with new products to
compete with the existing market players. Technology transfer from
JLR might help them reduce the cost of R&D.
8. What do you
consider to be the most
important problems and
issues facing Tata Tata Motors is one of the subsidiaries of the Tata Group. With the
availability of funds, resources, and brand loyalty they can climb up the
Motors, based on your ladder in Global Automotive Industry. Every organization is looking for
analysis of the company Globalization but the major issue with Tata Motors with a limited
and the global motor international presence is that they want to be the leader in the
vehicle industry? Domestic Market specifically Low-Price Segment. Although Tata is doing
good in the Reports, the deep inspection of it shows up the underlying
Prioritize these issues. Tata motors need to control their expenses.
problems and issues
beginning with the most
important.
9. What actions would
you suggest to the In terms of Commercial Vehicles and JLR Tata Motor has been
company’s management performing well in Domestic Market & International Market. However,
team to help Tata regarding passenger vehicles, Tata has to improve to sustain itself in the
market. Tata Motors must leverage acquisitions and mergers to transfer
Motors sustain or new technologies. Joint Ventures in new countries would make it easy
improve its competitive for Tata Motors to expand its operations. It is suggested that Tata
position in the domestic Motors come up with a new brand which comply with trend targeting
market and global entry and mid-range customers to suit their needs and offering them
value for money. Products with better designs, features, fuel economy
markets, and its long– and eco-friendly under a new brand name would help them to sustain in
term financial this competitive industry.
performance?
