Innovation Strategy for Tata Nano

original appearance Strategy for Tata Nano1. INTRODUCTIONSeldom do we see autos that alteration the history books even before they ar seen running around on the roads. And hardly invariably do we see automobiles that vow to put the realm on quaternity wheels. The Tata Nano is one much(prenominal) simple machine that has been in the tidings for quite a few years, for understandings good and evil. Nano is a gondola which has surd into support due to one man. Give credit to Mr. Ratan Tata for his role to build a lowly salute family car that has come true, fin whollyy. Took keen-sighted it did, precisely the Nano came in a beautiful form. Touted as publics cheapest car by a far cry, Nano has been the talk of the town around the globe. Head honchos of queen-size organizations get been pouring in by numbers to motive a look at this engineering master piece. Nano as a piece of music of a forward- feeling breed of 21st-century cars that em automobile trunk a contr arianphilosophy of smaller, lighter, cheaper and prefigure a ein truthplacebold era in inexpensive personal merchant vessels and potentially, global gridlock. The Wall Street Journal confirms a global slip toward small cars, led by the Nano. The prefix Nano derives from the Greek root Nanos, convey dwarf as with nanometer. Nano besides federal agency small in Gujarati, the indwelling language of the Tata family, founders of the Tata Group.The communicate to stimulate a 1 lakh rupees (3000SGD) car began in 2003, under the Chairman of Tata Motors, Ratan Tata. The strategy behind the throw away was the aw argonness of the number of Indian families who had ii wheeled transport, besides couldnt run into a quartetsome wheel car, and was based on the associations success in producing the low make up 4 wheeled nail worst truck in May 2005.To discuss the k straight offledgeability strategy for Tata Nano, we archetypal discuss the const come downts as per which the co mpany had to operate.In pursuit of honor and to abide by up to the initial promise made to hatful thatTata leave behind come out with a compact, quality car deep down a charge tag of Rs. 1 lakhs(3000 SGD), Tata Motors came up with a bearing, tradeing and operational strategy keeping in my mind the constraints ofPriceMarket Scal mogulCustomer aspirationResource aptitude2. COMPANY PROFILETata Motors Limited is Indias largest automobile company, with consolidated revenues of USD 14 one million million million in 2008-09. It is the leader in commercial fomites in all(prenominal) segment, and among the elevation iii in passenger vehicles with winning reapings in the compact, midsize car and usefulness vehicle segments. The company is the worlds fourth largest truck bring into beingr, and the worlds second largest bus manufacturer.The companys 24,000 employees argon guided by the vision to be scoop in the demeanor in which we operate best in the products we deliver and best in our value system and ethics.Established in 1945, Tata Motors front man indeed cuts across the length and breadth of India. Over 4 million Tata vehicles ply on Indian roads, since the first rolled out in 1954. The companys manufacturing base in India is spread across Jamshedpur (Jharkhand), Pune (Maharashtra), Luck today (Uttar Pradesh), Pantnagar (Uttarakhand) and Dharwad (Karnataka). Following a strategic alliance with ordination in 2005, it has see up an industrial joint venture with fiat Group Automobiles at Ranjangaon (Maharashtra) to produce both Fiat and Tata cars and Fiat powertrains. The company is establishing a impertinently plant at Sanand (Gujarat). The companys dealership, sales, utilitys and spare split net feat comprises over 3500 sense of touch points. Tata Motors also distributes and foodstuffs Fiat branded cars in India.Tata Motors, the first company from Indias engineering sector to be listed in the radical-fashioned York Stock Exchange (Septe mber 2004), has also emerged as an world-wide automobile company. with subsidiaries and associate companies, Tata Motors has operations in the UK, southern Korea, Thailand and Spain. Among them is Jaguar Land Rover, a occupation comprising the two iconic British brands that was acquired in 2008. In 2004, it acquired the Daewoo commercialised Vehicles Company, South Koreas second largest truck maker. The rechristened Tata Daewoo technical Vehicles Company has soak uped some(prenominal) new products in the Korean market, while also exporting these products to several international markets. Today two-thirds of heavy commercial vehicle exports out of South Korea are from Tata Daewoo. In 2005, Tata Motors acquired a 21% stake in Hispano Carrocera, a reputed Spanish bus and coach manufacturer, and subsequently the remaining stake in 2009. Hispanos presence is being expanded in other markets. In 2006, Tata Motors formed a joint venture with the Brazil-based Marcopolo, a global lead er in carcass-building for buses and coaches to manufacture fully- create buses and coaches for India and select international markets. In 2006, Tata Motors entered into joint venture with Thonburi Automotive group Plant Company of Thailand to manufacture and market the companys pickup vehicles in Thailand. The new plant of Tata Motors (Thailand) has begun production of the Xenon pickup truck, with the Xenon having been launched in Thailand in 2008.Tata Motors is also expanding its international footprint, established through exports since 1961. The companys commercial and passenger vehicles are already being marketed in several countries in Europe, Africa, the Middle East, South East Asia, South Asia and South America. It has franchisee/joint venture assembly operations in Kenya, Bangladesh, Ukraine, Russia, Senegal and South Africa.The foundation of the companys growth over the make it 50 years is a deep understanding of economic stimuli and customer admits, and the ability t o translate them into customer-desired offerings through leading edge RD. With over 3,000 engineers and scientists, the companys Engineering investigate Centre, established in 1966, has enabled pioneering technologies and products. The company like a shot has RD centers in Pune, Jamshedpur, Lucknow, Dharwad in India, and in South Korea, Spain, and the UK. It was Tata Motors, which developed the first naturally developed Light commercialised Vehicle, Indias first Sports Utility Vehicle and, in 1998, the Tata Indica, Indias first fully indigenous passenger car. Within two years of launch, Tata Indica became Indias largest deal outing car in its segment. In 2005, Tata Motors created a new segment by launching the Tata Ace, Indias first indigenously developed mini-truck.In January 2008, Tata Motors unveiled its Peoples Car, the Tata Nano, which India and the world encounter been looking forward to. The Tata Nano has been subsequently launched, as planned, in India in March 2009. A victimisation, which signifies a first for the global automobile industry, the Nano brings the comfort and safety of a car within the reach of thousands of families. The standard version has been expensed at USD 2500 (excluding ad valorem tax and transportation cost).Designed with a family in mind, it has a roomy passenger com postment with generous leg space and head room. It can comfortably shadower four persons. Its mono-volume inclination will set a new bench mark among small cars. Its safety instruction execution exceeds regulatory requirements in India. Its tailpipe emission performance excessively exceeds regulatory requirements. In basis of overall pollutants, it has a degrade pollution level than two-wheelers being manufactured in India today. The lean design strategy has helped minimize weight, which helps maximize performance per unit of energy consumed and delivers juicy fuel competency. The high fuel efficiency also ensures that the car has low carbon dioxid e emissions, thereby providing the twin bene capables of an affordable transportation solution with a low carbon footprint.In May 2009, Tata Motors introduced ushered in a new era in the Indian automobile industry, in keeping with its pioneering tradition, by unveiling its new range of world standard trucks called Prima. In their power, speed, carrying capacity, operating(a) economy and trims, they will introduce new benchmarks in India and match the best in the world in performance at a commence life-cycle cost.Tata Motors is equally focus on surround-friendly technologies in emissions and alternative fuels. . It has developed electric automobile and hybrid vehicles both for personal and public transportation. It has also been implementing several environment-friendly technologies in manufacturing touch ones, significantly enhancing resource conservationThrough its subsidiaries, the company is engaged in engineering and automotive solutions, construction equipment manufacturing, automotive vehicle agents manufacturing and supply scope activities, machine tools and factory automation solutions, high-precision tooling and plastic and electronic components for automotive and reckoner applications, and automotive retailing and service operations.Tata Motors is committed to improving the quality of life of communities by working on four thrust areas employability, education, health and environment. The activities touch the lives of more than a million citizens. The companys support on education and employability is focuse on youth and women. They range from schools to technical education institutes to authentic facilitation of income generation. In health, our intervention is in both preventive and curative health care. The culture of environment protection is achieved through tree plantation, conserving urine and creating new water bodies and, last but not the least, by introducing appropriate technologies in our vehicles and operations for constantly e nhancing environment care.With the foundation of its rich heritage, Tata Motors today is etching a refulgent future.2.1 TATA GROUP AND ITS SUBSIDIARIESTATA groups portfolio includes wide range of businesses which are leading in their fields. Its total revenue in 2006-07 is $ 28.8 billion which is 3.2 % of Indias GDP. TATAs business empire extends to over 80 countries across 6 continents. Similar to Jack Welchs opinion that the business should either be first or second else it is collapse to sell the business, TATA groups companies excel it the fields wherever they started the business. TATA group has ninety eight companies that are basically operating in seven sectors.3. ORGANIZATIONAL INNOVATIONS SYSTEMInnovation in Tata Motors is not a recent phenomenon, but is a part of its legacy. The Companys culture of perpetual search for excellence is extremely attributed to the Tatas ethos and incessant efforts of its employees in the ultimo several decades to serve the customers by brin ging continuous alteration in its products and workes.The three major(ip) areas to illustrate how Tata Motors has effected innovation in the past few years. productionsProcessesPeople3.1. PRODUCTSTata Motors created several breakthrough products in the past which changed the market dynamics and helped in providing a new customer experience.407 weapons platform in 1980s Nipponese LCV players had made inroads into the Indian automobile market inthe 1980s. Tata Motors came out with its mod 407 platform which was designed to suit the Indian conditions. It cursorily became the bestseller in LCVs and the platform still continues control 2/3rd of the market even in the third decade of its existence.Indica in the late 90s-This was the first indigenously designed passenger car in India and it was innovative in the sense that it provided more value for money in scathe of intimate space (comparable to theAmbassador which was the benchmark in the country for internal space), modern featu res (comparable to Maruti Zen) and all that at a truly competitive price.ACEAce was Indias first mini-truck launched in 2005. While heavy trucks ply on the High ways, look into showed the deprivation for a small sub one-ton truck for intercity and truck terminal-to-nearby locations connectivity. The vehicle offered 4 wheeler functionality at 3 Wheelers price. The unconventional design features used in the vehicle wereInnovative 2 piston chamber Indica engineSemi-monocoque body to withstand abuseRigid front axle and rear wheel jam for low costFlat deliver vs. semi-forward face to enhance the cargo space.NANOThe target price itself became the source of innovation, as you all essential have read that the big names in the industry just rubbished it as false claims and commented that it was impossible to make a CAR at that price. However, you all know that the promise was kept. This was made possible through series of innovative conceptions which led to acquisition of 37 patents by Tata Motors.Engine was packaged on the rear side.2 cylinder engine (conventionally there are 3-4 cylinder engines)Identical handles and mechanisms for left and right side doorsInstrument cluster in the middle of the dashboardUnconventional seatsInterior space was maximized by pushing wheels to the corners and power train below the rear seat.Product created was very contemporary andIt has sufficient Space inside to accommodate 4 persons comfortably.highly fuel efficientExceeds the current Safety requirementsComplies with the current emission requirements. earthly concern TRUCKThe new generation range of trucks which would match with the best in the world in performance at a lower life-cycle cost is being unveiled in just a few hours from now. It will create a new benchmark in India in terms of power, speed, carrying capacity, operating economy and trims and a new experience for the drivers in terms of drivability and comfort.3.2. PROCESSSustainability of innovation in products nee ded to be complemented with innovative changes in the organizational processes too. Some examples areAdoption of the Tata Business Excellence arche oddball (TBEM)It is based on Malcolm Baldridge Award for business excellence and Balance progress to Card. This has created a culture of exploring various innovative ways to achieve excellence in all the organizational processes.Use of IT systemsIt has been a benchmark and highly leveraged in the organization throughout the VALUE CHAIN.Supply SideFree-Markets for e-Sourcing, supplier Relationship Management (SRM).Product Development Process.Institutionalized Stage logic gate process in the organization is a benchmark in itself and ensures outgrowth of right product for the market and also an effective and efficient course of study management. Transition from in-house product development to a collaborative product development, utilizing the capabilities of suppliers, design houses, subsidiaries and associate companies specializing in opposite verticals. Internalization philosophyofTata Motors made several(prenominal) major global acquisitions like TDCV, JLR, Hispano, etc. Unlike many other Japanese / US players, they followed an innovative approach to be seen as a local anaesthetic company in the country of operation, i.e, as a South Korean player in South Korea and as a Spanish player in Spain. This has helped them to appreciate the need and importance of all the stakeholders and they achieved this in four stages. This involves Initiating, by understanding the language and basic facts of the country, Familiarization with their culture, Harmonization and finally Synergizing by sharing the best practices and work ethics.3.3. PEOPLEThe changing business environment and increasing complexity of business posed a huge scrap in achievement of business plans. Tata Group, of which Tata Motors is a part of, is well know for identifying and nurturing leaders. Tata Motors in the past has adopted several innovative m eans to leverage its human resource capabilities for achieving extremely challenging goals.Identifying leaders through legal opinion centers This process has been effectively utilized by Tata Motors to identify young managers with very high potential. This process was started some 20 years back and has more and more created a pool of very strong and effective leaders who have proven their capabilities in some very challenging assignments give to them. This process has now been replicated by many other organizations too.Putting them into challenging assignments and freehand them International exposure Key projects like ACE and NANO are examples of some challenging projects which constituted of young leaders and engineers.Breaking the functional silos by shifting from a hierarchical organization to a more CFT approachAll these experiences have helped us to redefine the way we have looked at innovation. And while innovation is normally understood as introduction of new and radical ideas in the area of products and services, our experience says there are several other areas that also require innovation in tandem, so as to effect an innovation in a company. Three of them I have already mentioned, that is, product, process and populate.Four other areas of innovationSource of inhalant/ Purposefrom which the concept emanated, which stresses upon the fact that agility and understanding the unstated/ unfulfilled need of customers is the most important source of innovation. Tata Nano In this case the idea taken with(p) in the mind of our Chairman when he saw a family of four (a man, his wife and two kids) riding on a scooter on a rainy day. He felt that there was an unfulfilled need of safe, affordable and an all weather alternative.PriceThe price of Nano got fixed at Rs 1 lakh (2500USD). The achievement of price target was definite to create a major disruption in the car market as it fell midway between the price of a scooter and the cheapest car available which was priced at Rs 2(5000USD) lakh. Product design was choked for options because of the price target. wherefore the setting the price as target triggered a series of innovation which involvedTarget Cost approachwhich involved breaking down the cost targets to sub-system and then to component level.Suppliers were challenged with the stringent cost target devoted to them, but they accepted the same and the result is in front of you. progressionInnovation lies in reaching the right customers always and communicating in a simple and effective manner. Tata Motors in case of Nano developed a portal, which got as high 30 million hits even before the launch of the car. After the launch there were another 30 million hits in less than a month. This helped the customers in becoming more aware of the product features. They received around 2 lakh(.2 million) applications, which is a good response by all standards. stern/ReachConscious of the fact that demand for such cars would be substantial from the remotest corner of the country, the sale of form for booking were facilitated through several banks. New insurance schemes were co-designed with the insurance companies, and now we are in the process of enhancing the sales and service network for better reach and service to the customers.To summarize the experience, path breaking ideas, conceived and implemented in one or more of the 7 Ps, leads to INNOVATION.PurposeProductPricePlace forward motionPeopleProcess4. INTRODUCTION TO THE NEW PRODUCT DEVELOPMENT sooner the introduction of a product into the market, it goes through several stages of development. The stages of the product development includes the pursuitidea GenerationIdea ScreeningConcept examen and DevelopmentMarket StrategyBusiness AnalysisTotal gross revenue EstimationEstimation Costs and ProfitsProduct Development examen MarketingAs far as Nano is concerned, it falls new to the world products in the context that it has made a history for the cheapest car eve r made without compromising on quality. i.e. best way value analysis. homePlayers200220032004200520062007AMaruti 80028242114107BAlto,WagnorR,Santro,Indica334147576475CEsteem, Swift,Indigo, Ikon, Ascent121518222633DMercedes-C, Skoda Superb1234P/LMercedes-E, BMw11111174818896104120 norm Monthly Category Sales4.1. idea generationThe main idea behind TATA NANO was perceived by the chair of TATA group himself who saw a family of four going on a scooter in rain he wanted to develop a transport which was affordable, safe and could face all types of weathers. This turned out to be the most ambitious project of Tata motors till date when Mr Ratan Tata told this to one of his managing directors Mr. Ravi Kant he was also enkindle astir(predicate) the idea. Mr. Ravi Kant had learned from his experience that People want to move from two-wheelers to four-wheelers but they cannot afford it. More and more can, but Indian car buyers today represent a tiny slice of a potentially devil market Indi a has just seven cars per 1,000 people. Indias auto industry has grown an intermediate of 12% for the past decade, but just 1.3 million passenger vehicles were sell in India in the fiscal year ending March 2006. That means a billion Indians buy about the same number of cars in a year as 300 million Americans buy in a month. If four wheels cost as little as two wheels, that could change fast. About 7 million scooters and motorcycles were sold in India last year, typically for prices between 30,000 rupees and 70,000 rupees, about $675 to $1,600. Tata is targeting a price of 100,000 rupees one lakh, in Indian 19 terms of measurement or about $2,500 at current exchange rates, for its small car. That sounds impossibly cheap in the western but remains three times higher than Indias annual per capita income. The middling pay for factory workers at Tata Motors is just $5,500 a year.4.2. IDEA wakeThe next step was screening of ideas. There were many ideas like to make a scooter with two extra wheels at the back for better stability, A three wheeled car like a unsympathetic auto- rickshaw but the market requirement was a car, the car should be such that it doesnt convey a message that its just an extension of a scooter it should be a proper car and likewise should also give the feel of a actual car. Trying to build a car cheap profuse for motorcycle buyers seems to make sense now but seemed unachievable several years ago when Mr. Ratan Tata, chairman of Tata Motors had first mentioned his dream of building a one-lakh car in2003 at that time the whole world thought that this gamble will never work out but ironically the whole world is now talking of small cars as $5,000 or $7,000 after TATA NANO was launched in 2009.4.3. conception TESTING AND DEVELOPMENTAfter surveying customers the end result was that people wanted a four wheeler which was cheap, dependable and strong enough to carry a load of 1 ton additionally four wheelers also increased the social status of the person who owns it .Four wheels not plainly practical appeal but also had a emotional appeal. then the new product was now to be developed but the pursuit considerations would have to kept in mind when developing it-The car should be built on a different platform than conventional ones.It must be meeting all the safety and regulatory requirements.It has to be built on a scale which shall be more than double the prior launches of similar products and the ramp up must be smooth.The car has to be designed so that it can be exported to other countries as the domesticated demand may not materialize as per projections.There were three main requirement of the new vehicle it should be low cost, cohere to the regulatory requirements, and achieve performance targets such as fuel efficiency and acceleration capacity. Nearly 500 engineers were involved in the development of the vehicle and everyday they had meeting so that the decision taking and the problem firmness process could be accelerated. Each engineer represented a different part of the car engine and transmission, body, vehicle integration, safety and regulation, and industrial design. The body of the vehicle had to go under a number of iterations because the Mr.Ratan Tata wanted that a person whose height is over six feet can also fit into the car without any discomfort and finally the length of the car had to be increased by 100mm but eventually. The hard work of designing the car paid off and the designers were successful in their attempt to design an actual car which did not look shabby and inexpensive but looked cunning and sophisticated.4.4. BUSINESS ANALYSISCOSTSince the car had to be built within a cost of Rs. 1 Lac, no conventional design would work as the costs shall be higher and so the entire car has to be redesigned.The design has to question the need of each and every component from the point of view of its necessity of existence and also the minimum requirements of its functionality. quantify Engineering concepts have to be deployed to finalize the minimum requirements.DISRUPTIVE engineering scienceIts a technology which brings radical change by introducing new ways of doing things.Technology that isSignificantly cheaper than existing Technology.Much higher performing?Has great functionality andIs more convenient to Use.Brings to market a totally different cheer proposition than the one available and can change the Paradigm about a product.The Guiding factor was that the cost has to be minimized for each component yet maintaining its basic functionality. The Alternatives areReduce Consumption of stuff and nonsense being used.Alternate Suppliers to get same material at less prices.Use alternate materials.Eliminate use of Material.Eliminate a process Or a Combination of the above.COST REDUCTION PARADIGM measure Engineering AlternativesThe target was very clearly defined that, within the given cost structure all the components have to be allocated and the same had to be achieved using the available alternatives.The Guiding factor was that the tax structure on materials and manufacturing must support the final cost. Decisions wereEstablish factory in a tax free zone. return the tax advantages on infrastructure development.Get the suppliers to establish base near the factory.Get special concessions from State Govt.In short select a manufacturing location where all the advantages could be achieved.4.5. heart SALES ESTIMATIONThe total sales had been estimated based on the following decisionsIt was estimated that the demand for the peoples car shall be at least twice the demand for Maruti 800, the lowest end car.Initial projections were at about 500,000 cars per year.The basic reason was the conviction that the target price shall redefine the 4 wheeler segment.The price decision of Rs 1 lakh is definitely going to make a lot many people cover to4-wheeler fold and that shall explode the demand. provided 10% customers of 9 Million two wheele r market transit to 4-wheelers it shall amount to 50% of the passenger car market share.It was decided to set up plants with 5 lakhs cars per annum capacity and ramp the same up in stages, in line with increase in market demand.4.6. MARKETINGProductTata has a very wide range of products it has passenger cars, utility vehicles, Trucks, Commercial passenger Carriers and Defense Vehicles.Nano received media attention due to its targeted low price.The Tata Nano is a rear-engine, four passenger ,city car built by Tata Motors,It was first presented at the 9th annual Auto Expo on 10 January 2008, at Pragati Maidan in New Delhi, India.Aimed primarily at the Indian market.PriceThe prices of Tata motors are generally affordable acceptable by the general public at large. Tata always have something for the lower class people with Nano being their trump card. freehand discount every month and special promotion for certain type of vehicle also one of the strong strategy use by Tata Motors. Disc ount can be made from Companys value or from dealers profit at certain range.Pricing strategiesPenetration determineLow pricing policy with minimum profit margin.Though the one lakh price tag is not fixed by TATA group, it was the word of mouth of people which fixed that range. This expectation of people creates a big challenge for the company.PlaceTata Motors has an extensive dealer network covering Indian and International markets. wheresoever you are, there is a Tata Motors Sales and Service dealership close to you. The bank line of distribution, physical location, and dealership method of distribution and sales is generally adopted. The distribution of vehicle must be in a very domineering way, from the plant to dealership and to end user. This is not only in India itself but also to the world-wide dealership.PromotionTata motors promote their products via Advertising and after sales services. replete use of one of the most important element of promotion mix, advancement r educes the necessity of other promotional devices for Nano. furtherance as One lakh car by mouth to mouth.Auto expo 2008,New Delhi GenevaPublicity through print electronic mediaFor other type of promotional activities, cost factor that is 1 lakh price tag is to be keep in mind, nano watches, nano T-shirts available in retail clothing stores. Advertising TV other mass media will be less effective, thus too much money will not be invested in this regard. chiefly word of mouth advertising will get more emphasis. meshing will be a major media for advertising.