CASE STUDY 8.1 Tata Nano: international market selection with the world's cheapest car The majority of growth in the glo

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Case Study 8 1 Tata Nano International Market Selection With The World S Cheapest Car The Majority Of Growth In The Glo 1 (721.49 KiB) Viewed 13 times

CASE STUDY 8.1 Tata Nano: international market selection with the world's cheapest car The majority of growth in the global automobile indus- try in the coming decade will come from emerging economies such as India, China and Eastern Europe, and the largest contribution to growth of auto markets in these countries will be the fast-growing small car segment. The increasing disposable income of the middle-class population is the key driver of small car markets in developing nations. However, in developed regions like the US and western Europe, stringent environmental standards are increasing the need for more fuel-efficient cars. Tata Motors Indian conglomerate Tata Group (www.tata.com) employs nearly 300,000 people in 85 countries and is India's largest conglomerate company, with revenues in 2006-07 equivalent to US$28 billion (equal to 3.2 per cent of India's GDP), and a market capitalization of US$73 billion at the end of 2007. The Tata Group comprises 98 companies in seven business sectors. One of the companies in the Tata Group is Tata Motors. Tata Motors is gearing up for the global market as one of India's largest automobile makers, manufacturers of buses, commercial trucks and tractor-trailers, passenger cars (Indica, Indigo, Safari, Sumo and the ultra-cheap Nano), light commercial vehicles and utility vehicles. The company sells its cars primarily in India, but about 20 per cent of sales comes from other Asian countries and Africa, Aus- tralia, Europe, the Middle East and South America. In 2008 Tata Motors bought the Jaguar and Land Rover brands from Ford for about US$2.3 billion. Tata Motors has a workforce of 22,000 employees working in its three plants and other regional offices across the country. Tata Motors has a lower than 20 per cent share of the Indian passenger car market and has recently been suffering a sales slump. In 2007 the company produced 237,343 cars and more than 300,000 buses and trucks. Outside India Tata Motor is selling only a few cars so their international marketing expe- rience is weak. They do, however, have some distinct advantages in comparison to other multinational company competitors. There is definite cost advantage as labour cost is 8-9 per cent of sales against 30- 35 per cent in developed economies. Tata Motors have extensive backward and forward linkages and it is strongly interwoven with machine tools and metals sectors from other parts of the Tata Group. There are favourable government polices and regulations to boost the auto industry including incentives for R&D. The acquisitions of Jaguar and Land Rover created financial pressure for Tata Motors, with the company stating that it wanted to spend some US$1.5 billion over the next four years to expand the facilities manufacturing the luxury brands. In addition to giving Tata a globally recognizable product, the Land Rover and Jaguar deal also gives them an entry into the US. Through a deal with Fiat, Tata is already distributing the Italian cars in India and may expand the offering into South America, a Fiat stronghold.