Tata Nano Analysis

Executive Summary

Tata motors is a multinational corporation company and its headquarters are located in Mumbai, India. Tata motors is well established organization and considered one of the biggest private corporate group in South East Asia in terms of revenue generated and market capitalization. Tata motors is widely popular for unique and reliable products. The unique selling point (USP) of Tata Motors lies in their compact design which offers a superior blend of performance and durability. It is known as the leaders in the automobile segment with a wide variety of cars.

The product we are focusing to launch in Canada would be Tata Nano. It has been awarded with Guinness world record for world’s smallest car. It has been a revolutionary product for Tata motor as well as in automobile industry. Tata Nano comes with all- aluminum, rear mounted engine with rear wheel drive. The capacity of the car is 623 cc with the power of 33 PS. It can be driven on patrol and diesel with a sitting capacity of 5 people. On the mileage part, Tata Nano justifies its performance with an average of 20-22 drive Kmpl with the top speed of 140 kmph. We would like to introduce two models that is manual and automatic.

As per the marketing strategy, we are expecting the launch date in June 2019 with a launch price of $7600- $9000 (excluding taxes) that would be a great impact on the Canadian market. The strategy is to launch an existing successful product of India by an existing top rated company Tata Motors in Canada. We would like to perform market penetration strategy with an advantage of competitive price. At the starting point, Tata Motors will be tying up with local dealers in areas of Toronto, Hamilton, Kitchener as the target audience lies in these areas. This would help to cut the extra cost that could potentially be incurred before the launch.

Situation Analysis

Source : Fieldwork

Tata Nano’s major strength lies in its pricing, lowest pricing range is the key to attract more customers to purchase the product. The compact and innovative design lets the car move freely with minimizing the space of utilization. It can be easily parked and also can be driven on busy roads during traffic timings hassle free. Due to low repairing cost and automatic suspensions the car is eco friendly and the pollution caused is very less

But, on other hand there are few draw backs of Tata Nano, In Canada there are already companies which have a strong base and Tata Motors don’t have their brand name in Canada. The car is made compact which possibly reduces the boot space in car making it difficult for the 5th person to sit in the car. As, there are small tires and low suspension its difficult for the car to climb hilly areas where there are slops and steep turnings.

Tata Nano will create a niche market for the students and lower, middle class income group who are the target audience for the purchase. The area selected (Toronto, Hamilton, Kitchener) meet the requirements and have the highest number of youth population and middle class income group. Once the Tata Nano is launched in Canadian market it will have a base for other Tata products which could be potentially launched in near future.

The major threat on Tata Nano is the government taxation changes which could be probably hamper the cost of production and export cost from India. Also, due to increasing inflation there can be changes in the pricing of raw materials which again can increase the cost of production resulting in more selling cost. As, the company will be new in Canada there will be lack of Research as per the Canadian expectations of customers which is a major threat on Tata Motors. Also, the giant players already settled in the automobile industry with huge brand name are threat on Tata Motors and Tata Nano.

2019 2020
•          Selling price $ 40,200,000/- $60,300,000/-
•          Cost Insurance Freight (CIF) $ 24,000,000/- $36,000,000/-
•          Contribution

•          -Margin

$16,800,000/-

41.79%

$24,300,000/-

40.30%

•          Advertising Expenses $4,000,000/- $4,200,000/-
•          Office Expenditure $510,000/ – $510,000/-
•          Salaries $1,500,000/- $1,800,000/-
•          Other expenses $ 500,000/- $600,000/-
•          Net profit $ 10,290,000/- $17,190,000/-

Financial Forecast

Source : Fieldwork

Tata Nano is the cheapest car on the planet and we rely on the economies of scale to achieve the business goals and marketing objectives. So, After the careful consideration of Canadian market, the ex-showroom pricing is set at $ 7600/- excluding taxes. The cost for one Tata Nano to reach Canada after paying all the transportation, freight, customs and duties is $4000/- (four thousand only) and we have a dealer or retailer in place in the distribution channel who will directly sell the cars to the end consumers at $7,600/- and will get a margin of $900/- as the company will sell it to the dealer at $6700/-. The sales forecast for the first year after the launch i.e. 2019 is 6000 cars and 9000 in 2020. The company’s contribution is $ 2700/- per unit or car and expects a revenue of $ 40 million for the first year and $6 million for the second year. Since, it is the first product of Tata Motors in Canada, we must market and advertise aggressively so that the brand is well set in the market and the minds of people. So, the variables expenses will be higher on the first year and will be slowly reduced over the years. The company expects a net profit of $10 million in the first year and $1.7 million in the second year.

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Source : ibisworld.com

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New vehicle deals commonly develop and contract alongside the economy all in all. Vehicles are solid products, which means customers for the most part just buy new vehicles when they feel secure with their money related condition. As the work showcase has enhanced and customer certainty has expanded in the course of recent years, new vehicle deals have likewise come back to development. Actually, new vehicle deals have expanded every year amid the present five-year time frame, achieving a record high of 2.11 million vehicles in 2019. In the meantime, vehicle deals development has contracted marginally lately, as both the Canadian auto showcase and the more extensive Canadian economy have changed in accordance with another normal dimension of oil costs and rising loan fees in the United States. Moreover, the sturdy idea of vehicles implies that customers who buy a vehicle may not purchase another for quite a long while. The spike in vehicles that were acquired amid the starting portion of as far as possible potential development in ensuing years. By and large, new vehicle deals in Canada are assessed to increment at an annualized rate of 2.2% over the five years to 2019, including expected development of 0.9% in 2019 alone.

Source : Ibisworld.com

Canadian small car or hatchback market is well set between many players as shown in above diagram. General motors lead the industry with 30% share with multiple brands like Cadillac, Buick, GMC and Chevrolet followed by Honda, Nissan, Ford and others. The automobile manufacturing companies have different brands which sell different segments of cars under different brand names and General motors has successfully achieved the majority of the market share through its multiple brands catering different segments of population.

Market Segmentation

Source : Fieldwork

Source : Superdemographics.com

Source : Superdemographics.com

Based on the data collected from Super Demographics we have Segmented the market based on 3 factors : Geographical, Economical and Demographics. As, compared to the Canadian Benchmark there are most number of college students and youth population along with middle income and lower income people living in Toronto, Hamilton and Kitchener. College students always dream of having a car but they can’t afford to have one due to their low income. But, as Tata Nano is the cheapest car on plant earth now it would be possible for students, middle class income group to have a car in their garage. Initially Targeting three major cities will help increase the brand name in other parts of Canada.

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Source : ibisworld.com

The major reason to launch Tata Nano in Canadian market is due to the high disposable income. Before spending money people think if purchasing the product is worth or not due to its money matters. As, money matters to Canadians and high disposable income group from year 2011 people can easily afford the cheapest car. The extra money could be utilized for buying car as there is worth for Nano and being so cheap in price there is no competition for its products in automobile by other companies.

Channel Strategy

Retail- opening physical locations to reach out to customers.

The distribution channel will be manufacturer to retailer to customer. Tata Nano will be manufactured in India as the company is India based it will be feasible to start the manufacturing  of cars for Canada in India. There will be one retailer in each strategically selected area we are targeting, the customers can either go to the retailer and buy the product or book it online and make the appointment to see the car at the retail store.  All the information about the product will be provided at the retail store and test drive option will also be available for the customers if they decide to buy the car. This type of distribution channel is the best for the Tata in Canada because it will help the company reach to the customers directly.

Marketing Objective

Short Term Objectives:

1) To Communicate The Product Information To The Target Market.

2) To Pre-book 1500 Units Before The Launch Date.

3) To Achieve 5% Market Share By The End Of 2019.

Long-Term Objectives:

1)Achieve Economies Of Scale By Acquiring 15% Market Share By 2020.

2) Penetrating Into All Major Urban Cities In Canada By 2020.

3) Setting Up Door Services For Clients In Long Term.

Marketing Mix of Tata Nano

Product – Tata Nano was launched in India , targeting students, middle class and lower class families who use bikes as their medium for travel. Tata Nano will be launched in Canada keeping in mind the students, and the lower class families who want a car for their day to day travel.  Tata Nano is a compact car which can easily run through everyday’s traffic, as Canada is a busy country it will be convenient for the people to get through everyday’s traffic. The car being compact, has enough leg space and head room for 4 people. Total of 4 doors make the movement comfortable and convenient . It has an engine capacity 623 cc power 33 PS.  The engine is built to provide the customers increase fuel efficiency.  High fuel efficiency helps customers reduce their fuel costs and also protect the environment by emitting less carbon dioxide.  Fuel efficient cars reduce pollution by minimum of 50 %.  The product will be launched in several colors like Esspreso brown, meteor Silver, Persian Gold, Damson purple, Sangria red, Dazzle Blue, and Royal Gold.  Tata Nano will have 2 option automatic gear box and a four gear box.  Being a compact car helps maintain its light weight and works effectively just like a normal car. The car is made of light steel but does not compromise in any way with customer’s safety.

Price – Tata Nano will use market penetration with low pricing strategy. Market penetration is when a company sets the price of the product low to reach a wide base of customers. The price of the car will be set $7600 to $9000 , this price range will target students, lower class and middle class family allowing them to buy the world’s cheapest car. As it is focusing on targeting students and middle-class people the company has made sure to keep a low reasonable price. There will be several payment option, first being buying the car by paying the entire amount, second, by involving the banks and tying up with them so that they can provide the customers with low interest rates if they want to buy the car in installments.

Promotion –  there are several ways through which Tata motors will promote Nano in Canada, it will use the extensive market promotional policy for the product. Tata Nano in India has its own brand image because of its high publicity as the world cheapest car. Now lets talk about the different ways –

Host an event – as tata is coming up with a new product in a new country, hosting a huge event and letting customers know about the various features of the car including the prices will help attract a lot of new customers and most importantly will help the company convey their message to the general public.

Television – promoting through television is the most powerful medium to promote a new car, a lot of people watch television throughout the day and will help Tata.  tata has collaborated with a lot of celebrities and sports person in India, similarly, they could promote their product here in Canada by collaborating with one of the celebrities.

Newspaper – collaborating with one of the top newspapers like the Globe and mail or Toronto star will help tata motors a lot, this will target a lot of people and also for those of the people who don’t watch television or listen to radio newspaper is going to reach them and will let them know about the new Tata product. Having a huge size ad on the second page or the start of the newspaper will have a huge impact on the customers.

Social media – today’s world pays a lot of attention to social media and it is a very robust medium to target people, for example Facebook has 1.44 billion active users around the world which suggests Facebook is a window to a big market.

Place – Tata motors in Canada are going to launch the car in Toronto, Kitchener and Hamilton. They chose these areas because of two factors, first being the age group- all of these areas have a high number of people from age group of 20 to 35 which states that the 3 cities have a lot of teenagers and school going kids who want to have a car but cannot afford one because of the high prices of the car. The second factor is the high number of middle class people, middle class people will be easily able to afford the car because of its low pricing and will be best suitable for them they cannot afford an expensive car.

Communication Mix

Communication mix consist of sale and promotional tactics induced by the company to promote the product. For the communication, we would like to practice pull strategy to attract the customers. Pull strategy refers to the actions performed by the company to attract the customer inside the retail stores. Firstly, we would be offering pre introduction publicity that includes sales promotion for trials and online marketing. Secondly, we will practice public relations for awareness and advertising the product to our target audiences.

Contingency Plan

Possible threats and risks that the car may face in Canada-

·         Extreme climatic conditions – because of the brutal winters in Canada , Tata Nano may face issues with its battery failures.

·         Lot of competition with different cars having more beneficial features for customers can cause problems for the new entrants. This can hamper the growth of the product.

·         Many customers stick to the brands that are already established in the country instead of trying a new product. This will not help in widening the customer base.

·         Every car in today’s world focuses on safety, Tata Nano’s base model does not provide the customers with airbags which can be n issue for the company.

·         Risk of not achieving the desired sales target.

Mitigation

·         Invest more in battery quality and provide the customers with extended battery warranty and regular checkups for battery.

·         By adapting to the country scenario, the company can invest in its technology and provide the customer with what they need.

·         By extensive marketing and advertisement the company can make the population aware about Tata and its new product launch.

·         When it come to the safety of the car, higher end version will have a lot of features like airbags, traction control, tire-pressure monitors etc.

References

Tata Motors. Company Profile and Product Profile. Retrieved. https://www.tatamotors.com/

IBISWorld. Growth Rate. Retrieved. http://clients1.ibisworld.ca.ezproxy.humber.ca/reports/ca/industry/majorcompanies.aspx?entid=913

IBISWorld. Market Share. Retrieved. http://clients1.ibisworld.ca.ezproxy.humber.ca/reports/ca/bed/default.aspx?bedid=15016

Superdemographics. Age Group. Retrieved. https://www.superdemographics.com/demoReport.php?report_name=pi&viewRPT=ZHC59M2XKPPQ

Superdemographics. Income Group. Retrieved. https://www.superdemographics.com/demoReport.php?report_name=in&viewRPT=ZHC59M2XKPPQ

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