Tata Motors Limited Comprehensive Strategic Analysis

7/27/2019 Tata Motors Limited Comprehensive Strategic Analysis

1/70

Team Tata Motors pg. 1 of 70

Tata Motors Limited (TML)Team Project

C562 Developing Strategic Capabilities

November 24th 2008 February 29th 2009

Indiana University Kelley School of Business

Team Members:Krishna TavvalaMatthew BrinkerPeter Eshelman

Andrew Matuszak

Rahul Shankar

C562 Developing Strategic Capabilities Team Project: TATA MOTORS LIMITEDKrishna Tavvala, Matthew Brinker, Peter Eshelman, Andrew Matuszak, Rahul Shankar


2/70


TABLE OF CONTENTS

TATA MOTORS CORE IDEOLOGY........................................................................................... 5

TMLs BIG, HAIRY, AUDACIOUS GOALS (BHAGs) .............................................................. 7

TMLs PROMINENT STRATEGIC BUSINESS UNITS (SBUs) ................................................ 8

PROJECT SBU............................................................................................................................. 10

TATA MOTORS LIMITED......................................................................................................... 11

FINANCIAL PERFORMANCE .................................................................................................. 11

COMPETITIVE ANALYSIS ....................................................................................................... 15

A New Playing Field................................................................................................................ 16Marquee Brands....................................................................................................................... 17Overall Competition ................................................................................................................. 18Other New Entrants ................................................................................................................. 19Supplier Relationships ............................................................................................................. 20Strategic Alliances.................................................................................................................... 20

BRUTAL FACTS ......................................................................................................................... 21

CORE COMPETENCES.............................................................................................................. 24

Corporate Governance, Management & Human Resources ................................................. 24Research & Development......................................................................................................... 25

Purchasing & Supplier Relations............................................................................................ 26Manufacturing ......................................................................................................................... 26Distribution Process ................................................................................................................. 27Social & Environmental Initiatives ......................................................................................... 28Information Technology .......................................................................................................... 29Brand Image & Marketing ...................................................................................................... 30

DEFICIENCIES............................................................................................................................ 31

Government & Public Relations Influence ............................................................................. 31

FOX OR HEDGEHOG?............................................................................................................... 32

CUSTOMER PERSPECTIVE...................................................................................................... 33

PERFORMANCE IN MEETING CUSTOMERS NEEDS ........................................................ 36

SWOT ANALYSIS ...................................................................................................................... 37

Strengths: ................................................................................................................................. 38Domestic Stronghold............................................................................................................. 38



3/70


4/70


Recommendation IV: The Nano.............................................................................................. 65Rationale............................................................................................................................... 65Anticipated Benefits and Consequences ............................................................................... 66Anticipated Resource Requirements ..................................................................................... 69

APPENDIX................................................................................................................................... 70

Tatas Core Values and Purpose at the SBU-Level................................................................ 70



5/70


TATA MOTORS CORE IDEOLOGY

To define the Core Ideology of Tata Motors Limited (TML; traded on NYSE as TTM;

a public subsidiary of Tata Sons Limited) we should begin with defining TML by what it is not:

TML is not justan automotive manufacturing company. How is TML not just an automotive

company? To better understand this we need to look at TML in two respects. The first thing you

will notice when you read a description of TML is the breadth of its operations. While the

company succinctly states that the companys operating segments consist of automotive

operations and other operations,1 the other operations include diverse businesses that range

from financial investment companies to factory automation, from IT services to the production of

construction equipment.2 While this may show how TML is not just an automotive

manufacturer, to really understand the rationale behind this diversity we need to consider the

corporate values and purpose of TML.

Undoubtedly TML has made a name for itself through its success in the automotive

industry, but look closer and you will see a company with a strong social conscious looking to

bring benefit to peoples lives. TML ascribes to the corporate values and purpose of its parent

company, the Tata group. On its website, the Tata group clearly states the company purpose:

At the Tata group our purpose is to improve the quality of life of the communities we serve.

We do this through leadership in sectors of economic significance, to which the group brings a

unique set of capabilities. This requires us to grow aggressively in focused areas of business.3

Thus, the diversified portfolio of TMLs operations is not mere coincidence; it is the result of

Tatas purpose to better peoples lives through its business operations. One example of how

1One Source Report; Tata Motors Limited, 18 December, 2008.2Ibid.3http://www.tata.com/aboutus/articles/inside.aspx?artid=CKdRrD5ZDV4=

http://www.tata.com/aboutus/articles/inside.aspx?artid=CKdRrD5ZDV4=http://www.tata.com/aboutus/articles/inside.aspx?artid=CKdRrD5ZDV4=http://www.tata.com/aboutus/articles/inside.aspx?artid=CKdRrD5ZDV4=


6/70


TML is currently achieving this purpose is the creation of the new line of automobiles named the

Nano, deemed by Forbes Asia as the Next Peoples Car. 4 It has received this title because it

was created to be the worlds cheapest car, with an estimated sale price of $2,500 USD. This

will make automobiles accessible to vast sections of the population who could not previously

afford them. Not only will this revolutionize the automobile industry, but it will transform the

lives of many poorer individuals and families, first in India and then in the subsequent countries

into which TML hopes to expand. The Nano will also exceed safety and environmental

regulations, consistent with the companys stated social ideals.

Behind this driving purpose to improve quality of life are core values that are important

to TMLs culture and organization. These values align to TMLs overarching vision of being the

best in the manner in which we operate, best in the products we deliver, and best in our value

system and ethics.5 The Tata group provides the following five main core values behind the

organizations culture which help to direct TML and its business units in day-to-day operations,

as well as in multi-billion dollar investment ventures:

Integrity: this includes honest business practice that can stand up to publicperceptions of ethical and moral conduct; Tata companies aim for Leadership

with Trust.

Understanding: this includes looking out for the well-being of others andworking for their benefit.

Excellence: this includes achieving high standards of quality in TMLs products

and services.

4http://tatanano.inservices.tatamotors.com/tatamotors/index.php?option=com_content&task=view&id=36&Itemid=175 5http://www.tatamotors.com/our_world/profile.php

http://tatanano.inservices.tatamotors.com/tatamotors/index.php?option=com_content&task=view&id=36&Itemid=175http://www.tatamotors.com/our_world/profile.phphttp://www.tatamotors.com/our_world/profile.phphttp://www.tatamotors.com/our_world/profile.phphttp://tatanano.inservices.tatamotors.com/tatamotors/index.php?option=com_content&task=view&id=36&Itemid=175


7/70


Unity: this includes creating a strong, amiable relationship across all SBUs andcustomer bases, as well as ascribing to Corporate Values all the way down to the

SBU-level (see Appendix for examples within TML).

Responsibility: this includes a strong social responsibility to ensure that whatcomes from the people goes back to the people many times over.6

Briefly put, as part of the Tata group, TML finds value in being a company that can be

trusted in all areas of business relationships, as well as by society as a whole. While it finds this

value important to the general sense of the greater good, it also finds it important specifically for

the good of the sustainability and success of the company itself. TML recognizes that in the

long-run, this trust will provide the greatest platform for national and international success.

TMLs BIG, HAIRY, AUDACIOUS GOALS (BHAGs)

In researching TML, several BHAGs are apparent. The first BHAG involves rapidly

increasing its global footprint. Ravi Kant, TML Managing Director, has stated, Over a period

of timein about three to five yearswe will be able to match the standards of international

automobile manufacturers.7 This rise to the level of a world-class automotive manufacturer

would involve a large quantifiable increase in revenues from outside India with a focus on

certain foreign markets. The percentage of TMLs current international revenues is 18.4%.8 A

stated goal of increasing international revenues by 200% is certainly audacious. However, this

would be an appropriate strategic goal as it would reduce its dependence on one single economy

and one single business cycle, according to Datamonitor.9 Over the last decade, this BHAG

6http://www.tata.com/aboutus/articles/inside.aspx?artid=CKdRrD5ZDV4= 7http://www.tata.com/article.aspx?artid=q63wqXlx5rc= 8One Source Report; Tata Motors Limited, 18 December, 2008.9Ibid.

http://www.tata.com/aboutus/articles/inside.aspx?artid=CKdRrD5ZDV4=http://www.tata.com/aboutus/articles/inside.aspx?artid=CKdRrD5ZDV4=http://www.tata.com/article.aspx?artid=q63wqXlx5rc=http://www.tata.com/article.aspx?artid=q63wqXlx5rc=http://www.tata.com/aboutus/articles/inside.aspx?artid=CKdRrD5ZDV4=


8/70


has led to numerous joint ventures and increased activity in countries like the U.K., South Africa,

South Korea, Thailand, Brazil and Spain, as well as the companys listing on the NYSE.10

Additional BHAGs arise in TMLs operations in the passenger car segment. With the

recent acquisition of Jaguar Land Rover (JLR) from the Ford Motor Company in early 2008, the

company has entered into the world of high-end luxury brands.11

Customers of high-end luxury

brands value image and exclusivity factors, while image and exclusivity conflict with the

proposition of TMLs other recent venture, the inexpensive Nanoa BHAG in and of itself. In

this manner, the decision to compete in both the high-end luxury and the low-end economy

markets certainly creates a big and audacious task ahead for TML. If proven successful, this

strategy would provide the company with high margin (Land Rover and Jaguar) as well as high

volume (Nano) revenues. These two revenue streams, if proven compatible, could mitigate each

others risks.

TMLs PROMINENT STRATEGIC BUSINESS UNITS (SBUs)

TMLs current strategic business unit (SBU) structure has rapidly evolved through

acquisitions, joint ventures, and partnerships over the half-century history of the company.

While TML has operations in other categories as previously stated, its main focus has always

been in the automotive industry. TMLs business in this sector is further segmented by demand

criteria, into the following list of major business units:12

Commercial vehicles (from light-weight trucks to multi-axle 40-ton vehicles) Passenger cars, economy and luxury (such as TMLs original economy car, the Indica;

todays Nano; and TMLs new luxury line, the recently acquired Jaguar)

10http://en.wikipedia.org/wiki/Tata_Motors 11Ibid.12http://www.tata.com/company/profile.aspx?sectid=a4Nd8IHyrqI=

http://en.wikipedia.org/wiki/Tata_Motorshttp://www.tata.com/company/profile.aspx?sectid=a4Nd8IHyrqI=http://www.tata.com/company/profile.aspx?sectid=a4Nd8IHyrqI=http://en.wikipedia.org/wiki/Tata_Motors


9/70


Utility vehicles, standard and premium (such as the jeep-like Sumo and Safari, in thestandard segment, and the recently acquired Land Rover line, in the premium segment)

Spare parts, components and accessories (from HV Transmissions and HV axles to highhorse power engines via Tata Cummins)

Financing for customers and channel partners (via Tata Motors Finance)This wide range of operations in the automotive industry allows for several opportunities

for synergies. One prominent synergistic opportunity that has received much attention recently

is the acquisition of the Jaguar and Land Rover brands from the Ford Motor Company. At first

glance, the opportunity does not seem evident: JLR and TMLs other products compete at

different ends of the spectrum, and materials, components and technologies do not at face value

have any synergies. However, recent reports indicate that cross functional teams from TML and

JLR are working to identify opportunities for synergies through TMLs operations in

engineering, sourcing, IT and other areas.13

This acquisition also increases access for TML to

the European markets, an important consideration for its primary BHAG.

Other opportunities arise with Tata Technologies Limited and TML Distribution

Company Limited, both wholly owned subsidiaries. TML Distribution focuses on providing

logistical support and distribution of TML products in India, and consolidation of logistics under

this subsidiary will add to efficiencies between TMLs commercial and passenger SBUs. Tata

Technologies, in a similar light, offers synergies for all business units by providing outsourcing

opportunities for IT applications.

14

In addition to synergies, TMLs diverse portfolio of SBUs can be evaluated by their

relative contributions to and changes in revenue. Using the well-known growth/share matrix of

13Tata Motors Q2FY09 Review: http://ir.tatamotors.com/pdf/2008/Q2FY09-Review.pdf14http://documents.bmc.com/products/documents/98/29/89829/89829.pdf

http://ir.tatamotors.com/pdf/2008/Q2FY09-Review.pdfhttp://documents.bmc.com/products/documents/98/29/89829/89829.pdfhttp://documents.bmc.com/products/documents/98/29/89829/89829.pdfhttp://ir.tatamotors.com/pdf/2008/Q2FY09-Review.pdf


10/70


Boston Consulting Group and referencing the TML Q2FY09 Review, we believe TMLs SBUs

can be divided as follows:15

Cash flow generator: As a world leading manufacturer, the commercial vehiclesegment of TML can be viewed as its staple source of cash flow, with a revenue

growth of 4.2%.

Potential top performer: Jaguar, with a revenue growth of 17.5%, shows potentialto be a potential future top performer if it manages to tackle other challenges.

Top performer: Two candidates for the top performer quadrant in the matrixcurrently appear to be Tata Technologies and the light commercial vehicle segment

with growth of 24.8% and 17.9% respectively.

PROJECT SBU

Due to its strategic significance in advancing the TML BHAGs we discussed, our team

has chosen to focus our term project on the passenger vehicle business unit (PCBU) of TMLs

automotive business.

15Tata Motors Q2FY09 Review: http://ir.tatamotors.com/pdf/2008/Q2FY09-Review.pdf

http://ir.tatamotors.com/pdf/2008/Q2FY09-Review.pdfhttp://ir.tatamotors.com/pdf/2008/Q2FY09-Review.pdfhttp://ir.tatamotors.com/pdf/2008/Q2FY09-Review.pdf


11/70


TATA MOTORS LIMITED

Tata Motors Limited (TML or the company) entered the passenger vehicle segment

in 1991 with the production of the Indica, the first passenger car indigenously manufactured in

India, and is now a top seller in the passenger car market segment in India.16

Maruti Suzuki

India Ltd. is TMLs biggest competitor in the Indian passenger car segment followed very

closely by Hyundai, Ford and GM. TML has already expanded its commercial vehicle segment

into worldwide markets, and recently it has been increasing its passenger car footprint globally

through acquisitions, such as Jaguar Land Rover, and joint ventures, such as with the Italian

company Fiat Group and Koreas Daewoo.17

FINANCIAL PERFORMANCE

Over the past five years, the company has been able to achieve higher returns in

comparison to the rest of the industry and about the same return on equity (ROE) as compared to

that of Maruti Suzuki India Ltd, its main competitor.

Return on Equity:18

Year End Date 2004/03 2005/03 2006/03 2007/03 2008/03

TML 23.8% 23.5% 18.5% 19.8% 13.5%

% ROE of TML compared toindustry

188.9% 297.5% 313.6% N/A N/A

Maruti Suzuki India Ltd.19 15.2% 19.5% 21.8% 22.8% 20.6%

Year End Date 2003/12 2004/12 2005/12 2006/12 2007/12

Ford Motor Company 6.5% 21.7% 17.6% 0.0% 0.0%

General Motors 15.1% 10.1% 0.0% 0.0% 0.0%

16 http://www.tata.com/company/profile.aspx?sectid=a4Nd8IHyrqI=17 http://en.wikipedia.org/wiki/Tata_Motors#Joint_ventures18 http://www.advfn.com19 http://www.money.rediff.com



12/70


TML has been fairly efficient at converting sales into profits during the 2003-2007 time

periods and achieved decent profit margins when compared to the rest of the industry. However,

the margin did drop slightly to 4% in 2007 from 5.5% a year earlier.

Asset Turnover:20

Year End Date 2003/12 2004/12 2005/12 2006/12 2007/12

TML (Average)21 2.65 1.45 1.33 1.40 1.14

Ford Motor 0.5 0.6 0.6 0.6 0.6

General Motors 0.5 0.4 0.4 0.6 1.1

Net Profit Margin:22

Year End Date 2004/03 2005/03 2006/03 2007/03 2008/03

TML 6.4% 6.7% 6.2% 5.5% 4.0%

% of net profit margin-to-industry

213.3% 372.2% 516.7% -392.9% -571.4%

Year End Date 2003/12 2004/12 2005/12 2006/12 2007/12

Ford Motor Company 0.5% 2.0% 1.3% -7.9% -1.6%

General Motors 2.1% 1.4% -5.4% -1.0% -21.4%

TML has also been able to generate more sales per every dollar of asset employed when

compared to its competitors. TML has been able to achieve higher profits for assets employed

when compared to Ford and GM but lesser than its biggest Indian competitor, Maruti Suzuki

India Ltd.

Return on Assets:23

Year End Date 2004/03 2005/03 2006/03 2007/03 2008/03

TML 7.8% 8.3% 7.4% 6.7% 3.8%

Maruti Suzuki India Ltd. N/A 19.9% 23.3% 24.0% 20.6%

Year End Date 2003/12 2004/12 2005/12 2006/12 2007/12

Ford Motor Company 0.2% 1.2% 0.8% -4.5% -1.0%

20 http://www.advfn.com21 http://www.money.rediff.com22 http://www.advfn.com23 Ibid.



13/70


General Motors 0.9% 0.6% -2.2% -1.1% -26.0%

TMLs debt to equity ratio compared to the leverage ratio of its competitors was less

than 52% until 2006 but it increased slightly to 65% in 2007.

Leverage Ratio:24

Year End Date 2004/03 2005/03 2006/03 2007/03 2008/03

TML 3.0 2.8 2.5 3.0 3.5

% of Leverage to industry 45.5% 41.8% 41.0% 51.7% 64.8%

Year End Date 2003/12 2004/12 2005/12 2006/12 2007/12

Ford Motor Company 27.1 18.2 20.8 0.0 49.6

General Motors 17.8 17.3 32.6 0.0 0.0

TML maintained healthy cash flows during the 2003 to 2007 periodmore than

sufficient to have covered its business obligations during this period.

Net Cash Flow:25

Cash end of period 2004/03 2005/03 2006/03 2007/03 2008/03

TML (US $ in Millions) 150.0 111.7 142.0 177.5 284.7

Cash end of period 2003/12 2004/12 2005/12 2006/12 2007/12

Ford Motor Company 21,770.0 23,511.0 31,499.0 28,894.0 35,283.0

General Motors 32,554.0 35,993.0 30,726.0 24,123.0 24,817.0

In spite of increasing the number of employees (primarily due to acquisitions during the

2004-2008), TML was able to increase its revenue per employee until 2006. TMLs revenues

per employee remained healthy while its competitors have become bloated.

Productivity (change in revenues per employee):26

Year End Date 2004/03 2005/03 2006/03 2007/03 2008/03

TML (Income Per Employeein US $Millions)

7087 10307 10061 12398 9765

24 http://www.advfn.com25 Ibid.26 Ibid.



14/70


Year End Date 2003/12 2004/12 2005/12 2006/12 2007/12

Ford Motor Company 2317 10734 7583 -44569 -31049

General Motors 11724 8657 -31218 -7064 -145609

Based on its financial performance, TMLs share price to earnings ratio (PE) is much

higher than its competitors. This indicates that the market perceives greater wealth generation

potential in TML than in its competitors.

PE (Price/Earnings Ratio):27

Year End Date 2004/03 2005/03 2006/03 2007/03 2008/03

TML (Close PE Ratio) 0.0 12.1 23.2 14.7 17.4

% P.E to industry 0.0 55.5% 61.4% N/A N/A

Year End Date 2003/12 2004/12 2005/12 2006/12 2007/12

Ford Motor Company 39.0 8.5 6.7 0.0 0.0

General Motors 7.5 8.1 0.0 0.0 0.0

TMLs production is well distributed geographically, and its current position in a

growing Indian automotive market should serve well for the companys future financial

performance as it expands worldwide. This geographical dispersion positions the company to

minimize consumer demand from one particular market. Although certain regions currently

dominate (the EU in 2004), this global footprint may position TML to weather storms (such as

the current drop in demand) better than companies with highly concentrated exposures. The pie

graph below shows the production rates of automobiles in different parts of world at the end of

2004, along with the previous years values.

27 http://www.advfn.com



15/70



World Automobile Production Rates in 2004

Source: VDA Statistics, 2005

COMPETITIVE ANALYSIS

Gaining a complete understanding of the market context of the TML passenger car SBU

is an interesting challenge due to the various areas in which the SBU now competes. In general,

competition is primarily either a differentiation strategy or a low cost strategy.28 However, TML

has taken the more challenging route and has chosen to compete on both strategiesas

demonstrated by its recent decision to offer the ultra-low cost Nano as well the high-end Jaguar

and Land Rover brands. Where the Nano targets the common man who is extremely price

conscious, the Jaguar Land Rover deal shows us that TML is now targeting brand conscious,

high-end consumers. This challenge of serving both ends of the market, together with increased

competition from players like Maruti, Hyundai and Ford will make for a challenging period

ahead for TML.

28 Scott, Mark C. Value Drivers: The Managers Guide to Driving Corporate Value. John Wiley & Sons, Ltd,Chichester, England, 2004.


16/70


17/70



a large market for the Nano. The key is the companys ability to produce a car that can compete

with the two wheelers on price.

Source: http://www.siamindia.com/scripts/market-share.aspx

Of course, although the Nano is the first in this arena, it will face competition. Whenever

a market opportunity is created, firms will undoubtedly rush to fill this need. In addition to

Maruti, the company might also face competition from Renault, which plans to launch a car

priced at around $3000 in the Indian market.30

This competition is evidence that the market

segment is viable.

Marquee Brands

The Jaguar Land Rover deal presents new challenges for TML. This acquisition, as is the

case with the Nano project, presents TML with a number of opportunities. An important big

hairy audacious goal (BHAG) for the Tata Group is broadening its global footprint and this

acquisition is a step in the right direction. TML will benefit from new found access to the

30 http://www.forbes.com/markets/2007/07/10/tata-motor-capex-markets-equity-cx_rd_0710markets3.html


18/70


19/70


also had a decline in market share while competitors GM and Mahindra & Mahindra showed an

increase in their market share.36 While the Indigo and the Indica are established brands the lack

of introduction of new models in the first half of the year seems to have hurt TML. Additionally

company officials blamed the lack of available finance and increasing interest rates for the

decline and said that the growth of the segment would be tough.37

Other New Entrants

Apart from the traditional competition, Tata Motors sees competition from China as a

significant challenge in the years to come.38

China has five major auto firms that could

potentially compete with global brands. While the Chinese market is still dominated by foreign

automakers (to an extent that the domestic players control 30% of the market), industry insiders

feel that the domestic companies will soon compete globally given the strong manufacturing

base capable of great cost effectiveness.39 Competing with the Chinese on cost may be a

challenge that Tata Motors might have to face quite soon.

Potential Innovation

The product life cycle for Indian manufactured cars has historically been longer, owing to

a smaller market that hinders investment recovery. Foreign manufactures have access to much

larger markets, which has allowed these other companies to recover investments much faster and

focus on newer brands with improved technology. TML has historically competed on price with

vehicle development costs roughly half that of their foreign competitors. However the

introduction of the Nano and Jaguar-Land Rover potentially change this scenario. If the Nano

can successfully enter foreign markets then the increased volumes and increased distribution

36 http://economictimes.indiatimes.com/articleshow/2962640.cms37 http://www.business-standard.com/india/storypage.php?autono=32700838 http://www.forbes.com/markets/2007/07/10/tata-motor-capex-markets-equity-cx_rd_0710markets3.html39 The home team; The Economist November 15th 2008



20/70


networks will potentially allow it to develop models at a faster rate and shorten the product life

cycles.40

The Jaguar Land Rover however might potentially be a challenge due to associated

technology changes. With new emerging emissions standards, hybrid technology might soon be a

necessity for these vehicles. Analysts predict that while Fords technology will help them in the

short-run, a merger with hybrid power-plant manufacturing firm may be a move that the

company will have to consider.14

Supplier Relationships

Tata have over the years shown that it have been successful at managing supplier

relationships. This was evident when it entered the passenger car industry and showed that it

could leverage existing suppliers innovatively to reduce costs and drive product innovations.41

TML allowed suppliers to follow their own process for the creation of parts including sourcing

materials and setting prices. The innovative use of reverse auctions is an excellent example of the

benefit of such relationships.42

Strategic Alliances

In an effort to expand its global footprint, TML has initiated several strategic alliances

with automotive companies around the world, notably Italys Fiat Group and Koreas Daewoo.

In July 2006, TML signed a Memorandum of Understanding with Fiat Group to explore the

possibilities of sharing development, manufacturing, sourcing and distribution of products,

aggregates and components for each companys passenger car segment.43 Mr. Ratan Tata,

Chairman of the Tata Group, stated, While Tata Motors will get technology to develop

40 http://www.tata.com/company/Media/inside.aspx?artid=DJHl+AUF0Ek=41 http://www.supplyexcellence.com/blog/2008/08/25/tata-motors-leveraging-their-suppliers-for-innovation/42 http://www.businessweek.com/innovate/NussbaumOnDesign/archives/2008/03/tata_buys_land.html43 http://www.tatamotors.com/our_world/press_releases.php?ID=184&action=Pull



21/70


22/70


example the instrument panel (odometer, speedometer, etc.) are located in the center of the

dashboard to make it easier to reposition the steering column to meet the demands of countries

where drivers drive either on the right or the left.46

However, the Nano faces many brutal facts

that hurt its marketability of lowest price, such as inflation on the prices of inputs (steel and

rubber in particular) as well as possible stiffening governmental environmental regulations and

political obstacles in setting up manufacturing locations.47

The purchase of Jaguar Land Rover is further demonstration of the companys strong

desire to promote itself internationally.48

By associating TML with such world renowned names

like Jaguar and Land Rover, this acquisition will help broaden the image of TML in terms of

product and demographic, most importantly providing it with an immediate and positive global

reach. The Jaguar-Land Rover deal is meant to fuel Tata Motors global aspirations. This buy-

out will establish its global footprint as a company with premium brands, 49 states the national

industry director of a management consultancy firm. As discussed earlier, this venture comes

with the risk of TML straddling too many segments of the marketplace; it is essentially

competing on both sides of the market. While this acquisition may also be an attempt to mitigate

risk through diversification of product segments, it presents additional challenges. While Land

Rover has currently seen healthy profits, Jaguar is said to have realized $500 million in losses for

the period prior to the acquisition.50 Not only will TML have to tackle the issues of working in

new markets with new product segments, the company will also have to work to turn around one

of the companies as well. In India the company seems to be working hard to promote the Jaguar

46 http://www.tata.com/company/Media/inside.aspx?artid=DJHl+AUF0Ek=47 http://www.tata.com/company/Media/inside.aspx?artid=DJHl+AUF0Ek=48 http://www.tatamotors.com/our_world/press_releases.php?ID=370&action=Pull49 http://www.tata.com/company/Media/inside.aspx?artid=DJHl+AUF0Ek=50 http://www.tata.com/company/Media/inside.aspx?artid=DJHl+AUF0Ek=



23/70


24/70


25/70


26/70


such as engine performance, reducing emissions, and improving passenger safety.63 The Nano

concept, inspired by the sight of a family of five riding together on a two-wheel moped, is just

one testament to Tatas commitment to developing products aimed at meeting the unique needs

of its customers.

Purchasing & Supplier Relations

Since 2001, TML has adopted a novel way of developing relationships with its suppliers.

Instead of using the conventional approach of dictating the specifications of each of the

individual components to be manufactured by the supplier, TML simply provided the expected

output from the suppliers. This gave the suppliers room to be creative with their designs,

materials and prices.64 For example, instead of giving the technical specifications for Indicas

wind shield wipers, TML simply described the goal of cleaning the windshield and let the

suppliers come up with ideas for meeting that goal themselves, by (1) using the most cost

efficient manner and (2) without compromising quality.

While using this approach for components and systems designed in-house, TML chose

suppliers with strong design and process capabilities who could give valuable input and

suggestions. By leveraging local design capabilities and avoiding reliance on high-end design

systems, TML has been efficiently able to provide low cost solutions.

Manufacturing

TML currently has state-of-the-art manufacturing facilities spread across India for its

Indian operations. The Jamshedpur unit was its first manufacturing facility established in eastern

India in 1945 and mainly serves the Tata Motors commercial vehicle segment; the other three

manufacturing units are located in Pune (in the west), Lucknow, and Pantnagar (in the North).

63 Ibid.64 http://www.supplyexcellence.com/blog/2008/08/25/tata-motors-leveraging-their-suppliers-for-innovation/



27/70


TML is also currently establishing a Nano manufacturing plant in the western Indian state of

Gujurat.

The Pune division, established in 1966, has expertise in the design and manufacture of

automated dies, fixtures, and welding equipment. The design group at the facility is equipped

with state-of-the-art CAD and manufacturing facilities, such as light and heavy CNC machine

shops, a jigs boring room, a plastic template shop, wood pattern and model pattern shops, five

axis precision machine tools, and laser control machines.65 The passenger car division located in

the K block of the plant manufactures the entire car over five shop floors through a highly

automated process which allows for minimum manufacturing process errors. The fully

automated iron foundries located in Chinchwad and Maval are considered to be the best at

producing cylinder blocks, cylinder heads, and gear box housing among other items.

Distribution Process

TML previously had 19 distributors and more than 1,000 retail dealers spanning the

entire breadth of India. However, as a part of keeping the distribution costs to a minimum, TML

has outsourced the logistics and distribution part of its business to TML Distribution Company

(TDCL), a wholly owned subsidiary of Tata Motors Limited. This arrangement would allow

TML to reduce its logistical costs by at least 1% and will allow it to concentrate on its core

business, while also allowing it greater flexibility in delivering the right product at the right time

and right place.66

At the same time, TML instituted a comprehensive CRM program for its

dealership networks, which has been recognized as the largest CRM initiative in India.67

65 http://www.tatamotors.com66 http://www.livemint.com/2008/07/18233746/Tata-Motors-may-outsource-dist.html67 Ibid.



28/70


Social & Environmental Initiatives

TML has shown its strength as a force of social and environmental change in many ways.

As a signatory, TML is committed to the United Nations Global Compact, and is involved in

developing environmental friendly technologies in emissions and alternative fuels.68 In

compliance with the Global Compact, TML is engaged in community and social initiatives on

labour and environment standards [and] plays an active role in community development,

serving rural communities adjacent to its manufacturing locations.69

In addition to the Nano concept for improving the standard of living for low income

families, an example of TMLs social and environmental commitment is the new OneCat.

This 350kg (770 lbs) compact car which runs on compressed air is being developed by TML in

collaboration with MDI (of France). The 5-seater car can runs at speeds of 62 MPH for 56 miles

on a single fill up and needs engine oil changed only once every 30,000 miles.70 This futuristic

zero emission car, scheduled to be produced in 2009, is definitely a next step in the

manufacturing of green automobiles. Along with this cutting edge idea, TML is also working

on the promotion of the completely electric versions of their top selling models.71

68 http://www.unglobalcompact.org69 http://www.tatamotors.com70 http://business.timesonline.co.uk/tol/business/industry_sectors/transport/article3399532.ece71

http://www.autobloggreen.com/2008/09/06/tata-motors-unveiles-all-electric-versions-of-the-ace-and-indic/



29/70


30/70



allows it to share customer and vehicle data across the company and distribution channels.73

This not only supports internal sales, marketing, research and development divisions, but it

allows suppliers to understand the end customer more completely when designing and

developing their component parts and it allows distributors and dealerships to understand how

they can add value to logistics and customer support networks. Brand Image & Marketing

As a member of Tata group, TML shares a long history of strong brand imaging. In the

Indian market, Tata is known for its commitment to the advancement of Indian people by

providing them with quality products that meet their needs and which they can depend on. As a

company who aims for Leadership with Trust, Tata products share a brand name and logo in

which India takes great pride.74

For TML specifically, the Tata Indica, the first passenger car made completely on

Indian soil by an Indian company, has been ranked as one of Indias top 10 Power Brands, as

well as the Best Small Diesel Car by the TNS Voice of the Customer Awards. In 2007, the

passenger car SBU of TML received the Golden Key Award for the Best Value Engineering

Organization by the Indian National Value Engineering Society.75 Additionally, TMLs

advertising has been recognized by major media networks, such CNBCs Auto Awards, and

TML continues to be recognized as the Most Trusted Car Company in India by Readers Digest

73 http://www.moneycontrol.com/stocks/company_info/directors_report.php?sc_did=TM0374 http://www.tata.com/aboutus/index.aspx?sectid=pihbI04W7W0=75 http://ir.tatamotors.com/index.php?CardID=5


31/70


surveys.76 Most recently, with global press surrounding the launch of the Nano and the

acquisition of Jaguar Land Rover, TML has become a brand easily recognized around the world.

DEFICIENCIES

Government & Public Relations Influence

TML has experienced both positive and negative effects from the influence of the Indian

government on their business practices and ventures. On the upside, the Indian government has

been devoting a substantial portion of its budget to expand the countrys roadways and highway

systems over the last decade.77 Along with the rising middle class and growing national

economy, this should boost consumer demand for its passenger vehicles. Additionally, the

Indian government has established a ten-year Automotive Mission Plan (AMP) to continue

investment in infrastructure and to promote growth in the automotive industry through 2016.78

However, on the down side, just as it will help TML expand its business, the AMP will also

increase TMLs competition from national and international competitors. Indian automotive

manufacturers have benefited from a foreign-direct investment hurdle of US$50 million imposed

on foreign companies looking to set up shop in India; but with a change in Indian government

policy with the AMP, this protective benefit will soon disappear and TML will be faced with

many competitors, in not only the passenger car segment, but the commercial vehicle and

automotive parts segments, as well.79

Additionally on the downside, TMLs Nano project met a considerable setback when it

was recently forced to relocate, after two years under construction, one of its new production

assembly plants from Singur, West Bengal to the province of Gujurat. Singur had been selected

76 http://www.moneycontrol.com/stocks/company_info/directors_report.php?sc_did=TM0377 http://www.indianembassy.org/enews/econews(january99).pdf78 http://www.business-in-asia.com/countries/automotive_industry_india.html79 http://en.wikipedia.org/wiki/Tata_Motors



32/70


as a prime location for Nano assembly due to its vast industrial labor pool and its close proximity

to Calcutta and several major highway systems. However, in order to obtain the land necessary

to build the production facility, TML had to make arrangements with the local Bengali

government to remove 13,000 Singur peasants from 1,000 acres of fertile agricultural land. This

action by the local government incited protests and opposition from a small political Communist

party in the region, which resulted in a two-week public protest in September 2008. Unable to

quell the agitation, TML made the tough decision to abandon its facility in Singur for the safety

of its employees and relocate to Gujurat.80

FOX OR HEDGEHOG?

Examining the concept of the three circles, as developed by Jim Collins in Good to

Great, 81 one could easily compare TMLs general business practices with the ideals presented

therein. The stated company purpose to improve the quality of life of the communities we

serve82 is clearly reflected in many of the products they manufacture (Nano and OneCat, two of

the most progressive projects in this regard). What does not fit this ideal, however, has been the

recent acquisition of Jaguar Land Rover. For a market goal, TML has risen to be the best at

supplying transportation to the worlds low-income individuals with the Indica, and now the

Nano, and for an environmental goal they may be close to designing the worlds most

environmentally friendly automobile with the OneCat, as well as shifting the Indica to an eletrica

line.

However, TML has not demonstrated a passion to be the best in the luxury high-end

segment which makes the acquisition of Jaguar Land Rover somewhat of an anomaly to TMLs

80 http://www.wsws.org/articles/2008/oct2008/beng-o11.shtml81 Jim Collins. Good to Great; 2001.82 http://www.tata.com/aboutus/articles/inside.aspx?artid=CKdRrD5ZDV4=



33/70


three circles. Their social conscious hedgehog became a little more of a fox despite TMLs

reasoning behind the acquisition. Not only does this new segment provide challenges in and of

themselvesJaguar currently operating at a lossbut the unforeseen challenges of driving their

company over the learning curve into the high-end (as TML has no domestic experience with

this, let alone international) is a major weakness to TMLs driving force behind their objectives

and to their overall three circle focus. The major challenge they will face is not to siphon off

too much energy, focus, and funding from what they are passionate about doing.

While so far this venture has been described as a tool to increase TMLs global footprint,

as well as provide another source of funding for TML projects and vehicle design turnaround, it

seems like it will never fit into TMLs three circles and thus proves a weakness according to the

Hedgehog concept. Even though TML may one day develop the passion to become the best in

this luxury segment, it is still such a daunting task given the fierce competition from other top

manufactures like BMW, Mercedes, and raising the bar in luxury even higher: companies like

Aston Martin and Maserati. This would prove even more daunting, as well as sidetracking from

the companys main focus (as stated above in their company purpose statement), if they also plan

to begin to launch luxury models under the Tata name; as Tata is currently recognized as the

brand associated with commercial vehicles and low-cost passenger cars to the extent that it has

isolated itself from lucrative segments in a more aspiring India.83

CUSTOMER PERSPECTIVE

Consumers typically evaluate a product or service using the following six purchase

criteria:84

Price83 http://www.marketingteacher.com/SWOT/tata_motors_swot.htm84 Mark C. Scott. Value Drivers The Managers Guide to Driving Corporate Value Creation; 1998.



34/70


Quality Performance Characteristics Speed of Delivery After-Sales Support Brand Appeal and Endorsement

Each consumer segment, as well as each individual consumer, will weight each of criteria

differently. Based on our earlier analysis, weve concluded that TML now services both the low-

end, extremely price sensitive market (e.g. the Nano customers) and the high-end, luxury market

(e.g. Jaguar, Land Rover customers). Weve evaluated the six purchase criteria listed above in

light of the two vastly different markets.

Low-end, Price Sensitive High-end, LuxuryPrice Very importantthe primary

driver of the purchase decision.Alternative purchases couldinclude two-wheeler vehicles aswell as other automobiles.

Not important.

Quality A consideration in the purchasingdecision, but not a primary driver.

Very important; however, not asimportant as performance or brandappeal. Higher quality vehicle isseen partially as extension to

brand appeal.

Performance

Characteristics

Not very important. Very important. May be primarydriver for purchase decision.Closely tied to brand appeal asperformance also contributes tobrand appeal.

Speed of

Delivery

Not very important Somewhat important butcustomers are willing to wait forspecial-order vehicles. May beconsidered part of the price of thevehicle.

After-Sales

Support

Not very important. Somewhat important. May beconsidered part of the brandappeal as support caters toindulging owners with carownership experience.



35/70



Brand Appeal

and

Endorsement

Not very important. May be theleast important driver asfunctionality trumps fashion.

Very important. May be theprimary driver for the majority ofpotential customers. Vehiclesmay be seen as status symbols.

Alternatively, the weighting can be charted for the two markets. When sorted by the one

of the markets preferences (in the chart below is it sorted by the low-end markets preferences),

the two charts are almost perfectly mirrors of each other.

The two very different market segments targeted by TMLs passenger car SBU pose a

challenge. As is illustrated in the comparison above, the purchase criteria for the two markets

are diatonically opposed. Quite often a marketing message for one market may be seen as

offensive to the other market. For example, a potential Jaguar customer may perceive the Nano

marketing as undermining or diminishing the exclusivity of the Jaguar brand. Similarly, a

commercial for the new Range Rover HSE may be seen as ostentatious to a rural Indian farmer

that sees such extravagance as excessive.

The two markets may also be seen as representing either developing economies or the

advanced economies. For example, the purchase criteria weightings of the developing


36/70


37/70


with diesel, or (3) the indirect injection engine (IDI), which is more fuel efficient.88 Focusing on

fuel economy over performance, along with a price point below most of Marutis models and all

of Hyundais, TML should keep the Indica line strong.89

In the same light, the price point of the

Nano is less than the segment-leading Maruti 800, and targeting the household consumer, its

interior is larger and its fuel efficiency is significantly better.90

As fuel prices increase, Indian

consumers in the low-end, super-compact segment will be looking for price and fuel efficiency

over performanceand spaciousness is not necessarily an irrelevant factor for family consumers.

Apart from the actual product features, customers focus largely on the sale and delivery

process. A study conducted by J.D. Power Asia Pacific places TML second to last in this respect

(see below).91 The study focuses on identifying the degree of satisfaction of customers with the

sales and delivery process after looking into delivery process and timing, dealer facility, and

salespeople. TMLs rank on this study has in previous years been very similar.92 The only

consolation here is that some of TMLs key competitors like Maruti Suzuki and Hyundai have

also dropped considerably in the ranking. With increasing competition both in TMLs primary

market as well as their entry into international markets this needs to be an area that TML

management must pay adequate attention to.

SWOT ANALYSIS

We have performed a SWOT analysis for Tata Motors Limited (TML) to identify a list of

critical strengths, weaknesses, opportunities, and threats. Our analysis is primarily consistent

88 http://www.infibeam.com/cars/make/tata.html#TataIndicaVistaHatchback89 http://en.wikipedia.org/wiki/Comparison_of_cars_(India)90 http://speakindia.wordpress.com/2008/01/10/tata-nano-vs-maruti-800-head-on/91 http://www.jdpower.com/corporate/news/releases/pressrelease.aspx?ID=200813092 http://www.jdpower.co.jp/press/pdf2006/2006IndiaSSI_E.pdf



38/70


with findings in previous reports with their innovative spirit and primary market advantage being

major strengths, and conflicting segments being the major cause for concern.

Strengths: Domestic strongholdPositive brand imageAtmosphere of innovationLocation

Weaknesses: Straddling segmentsEmployee productivity

Opportunities: International growthNew product lines

Threats: CompetitionGlobal economic factors

Strengths:

Domestic Stronghold

Tata Motors Limited (TML) is unquestionably not only one of Indias key automobile

manufacturers but also relies on that same domestic market as the key revenue base for its

operations. In 2008, in terms of revenue TML was Indias largest automotive manufacturer

over $9.07 billion in revenues.93

Product lines such as the Indica have steadily placed amongst

the top selling vehicles over all of India, and while we are focusing on TMLs passenger vehicle

SBU, it is also hard to ignore the great success and popularity TML has sustained in their

commercial vehicle divisions in India, as well. These high revenue generating strongholds

provide a strength that is hard to match for competition as it also allows for TML to realize larger

economies of scale which in turn drive down expenses and lower costs subsequently increasing

93 www.datamonitor.com



39/70


the stronghold. Finally, as TML is part of the larger Tata Group, they are able to take advantage

of a vast resource of business networks, resources, and people that would not otherwise be

available.

Positive Brand Image

Committed in letter and spirit to Corporate Social Responsibility,94 TML has

consistently created for itself a positive public image over the years. Despite minor blemishes,

such as the violent West Bengal protests against the establishment of the new Nano

manufacturing plant (now relocated to Gujarat),95

overall TML still retains its desired image.

Now with the advent of the Nano, hailed as the peoples car, TML is only pushing that socially

conscious image farther. In todays world where corporations are becoming more and more

expected to be a positive social and environmental force, this positive image will be a strong

foothold for TMLs ambitions to make a real name for itself in the global marketplace. On a

related note, this mindset of holding corporations socially responsible is also very prevalent in

the United States and Western Europe, demographics with relatively high disposable incomes,

and an international area for TML to expand into. If TML can market itself correctly according

to individual country needs as they move international, it should prove very positive for them.

Atmosphere of Innovation

Research and development costs for TML in 2008 reached Rs. 9,906 million (over $200

million USD).96

Despite these high costs, TML is thriving on its R&D innovation with, most

notably, the Nano which caught the worlds attention back in early 2008 as the worlds least

expensive car. Innovation is hardly limited to the Nano though. TML, following its corporate

94 http://www.tatamotors.com/our_world/we_care.php95 http://www.ibtimes.com/articles/20081007/tata-motors-to-build-nano-in-gujarat_all.htm96 www.datamonitor.com



40/70


ideal, has put considerable focus into environmentally friendly projects. These easily insure that

their automobiles meet tightening emissions standards, while some other companies have

suffered in this regard having to raise prices to keep up with requirements. Also stemming from

R&D is their focus on vehicle safety initiatives which has helped TML hold to that positive

brand image, as mentioned above, that can be trusted in the buyers market. Most exciting in

R&D innovations, however, may be their cutting edge projects looking into alternative fuel

sources to common petroleum. Included among projects involving electric, CNG, and bio-diesel

alternatives is the creation of a vehicle which runs solely on compressed air, the OneCat.

These kinds of projects have been very important for putting TML in the international media

spotlight and will most likely prove to be a considerable factor in their sustained success.

Overall, high investment in R&D has helped TML to create a broader vehicle portfolio which

allows them to be more competitive in the market.97

While not stemming directly from R&D, TML also has been initiating innovative

programs such as the 24-7 On-Road Assistance Program which will be automatically available

on any vehicles purchased after February 1, 2009. This program will service such problems as

tire changes, electrical problems, towing, etc. regardless of the time or place.98 This is just one

more example of TML going beyond their proscribed duties and creating an even more enticing

purchase for the customer.

Location

TMLs location provides many benefits that are unique to Indias economy and

government. In terms of cost, as India is a developing country operating there makes

manufacturing costs to sales much lower (roughly 9% of sales) than if they would be located in a

97 www.datamonitor.com98 http://www.tatamotors.com/our_world/press_releases.php?ID=411&action=Pull



41/70


developed country (where the ratio would be much higher, around 35%). 99 India is also a large

producer of the worlds automotive parts which provides TML with higher bargaining power

with suppliers because it is a local, not foreign, car manufacturer.100

As for the Indian

government, they have in place certain protectionist policies that strongly favor domestic

companies, such as a $50 million equity start-up investment for foreign automotive

manufacturers in India.101

Weaknesses:

Straddling Segments

It has been a question from the beginning of our project: what will come of TMLs

acquisition of Jaguar Land Rover (JLR)? As it seemed such a left-field move compared to their

regular course of business, will this acquisition prove injurious or beneficial in the long run? As

a major potential weakness, not only has Jaguar currently been operating at a loss but TML runs

the risk of losing the drive behind their primary company vision and focus and may inadvertently

siphon off too much energy and funding from their main business function. This specifically

touches upon the idea of the Three Circles by Jim Collins in his book Good to Great 102 which

will be dealt with more in-depth later in this paper.

Employee Productivity

Especially as TML is working to move onto the global stage as an automotive

manufacturer, improving their poor employee productivity will prove to be a challenge that will

have to be faced sooner or later. For 2008 TML realized approximately $0.24 million in revenue

99 http://www.managementparadise.com100 Ibid.101 Ibid.102 Jim Collins. Good to Great; 2001.



42/70


43/70


originally appear as threats can in fact prove to be a great opportunity in the end, i.e. the heads or

tails of risk.

New Product Lines

Alternative fuel research is currently believed by many to be very positive for the long

term success of automotive companies due to increasing fuel costs and uneasy global relations

with many oil producing nations, as well as environmental concern and increasing emission

regulations (just to name a few). TMLs OneCat (the zero emission air-powered car) is one very

good example of this. Originally created by MDI (a France-based company) back in 2002, there

was talk of this zero emission car replacing all the current taxis in Mexico City for a much

cleaner metropolitan area. However, nothing materialized out of the deal. Since then, MDI has

partnered with TML who has subsequently invested almost $30 million in the company and has

created the new OneCat automobile.104 Considering TMLs influence and positive position

domestically, they have a great opportunity to work with the Indian Government to try to

recreate the former plan. Replacing current taxis, government vehicles, and other petroleum

fueled vehicles in some of Indias major cities where pollution is a major problem, would not

only fit well with TMLs socially conscious ideology but provide an extremely strong revenue

generating situation as well.

The other new product line opportunity that cannot go without a mention is the Nano.

The possibility that the Nano holds could be tremendous not only for the low-income individuals

in India but individuals abroad as well. Not to belabor the point too greatly, as we have

discussed this product in detail in several previous reports, but the social and revenue impact of

the Nano holds a very strong opportunity for TML which they are very aware of.

104 http://www.technologyreview.com/energy/20071/



44/70


Threats:

Competition

TML faces stiff competition both in its primary market in India and an even greater

challenge awaits it abroad as it attempts to break into potential markets like Europe. As

mentioned in prior reports their biggest competition in India is currently from rivals Maruti

Suzuki and Hyundai Motors. A primary reason for TML lagging behind Hyundai this past fiscal

year was their failure to introduce new models of vehicles. With new introductions like the

Nano and the Indica Vista along with possible global scale efficiencies with the JLR acquisition

TML might just turn this situation around.

Global Economic Factors

While over the past year or so TML has seen a steady decline in overall sales, recently

that trend has begun to reverse itself. According to a TML press release earlier this year, sales in

the passenger vehicle segment were down 8% from the previous fiscal year and were down an

alarming 31% in December alone.105

While cumulative passenger vehicle results from January

began to look a little more promising as they were the highest this fiscal since May 2008, 86%

up over December 2008, they were still 9% lower thanJanuary last year.106

Exports, on the

other hand, have been at a constant downfall with January 2009 at a 70% decrease from January

2008, and a 32% decrease for the fiscal year 2008.107 The slight increase in domestic sales may

be attributed to a financial stimulus plan announced by the government but, as it is unable to

affect the international market demand, TML has some new obstacles to their international

aspirations. Like the case for many automotive companies, this economic downturn has

105 http://www.tatamotors.com/our_world/press_releases.php?ID=404&action=Pull106 Ibid.107 Ibid.



45/70


disastrous implications for business progress as well as sustainability, sometimes appearing that

the only option is to lower prices and make budget cuts. This next year will prove very

interesting to see how TML will react to the worsening economy especially looking at the two

ends of their business spectrum: the Nano and Jaguar Land Rover. Will the affordability of the

Nano prove helpful to TML during these times or will the segments who the vehicle targets

simply be even less inclined to buy? Likewise, will the high-end consumers continue to provide

demand or will they follow the similar path of the Nano less-inclined-to-buy market?

ALIGNMENT with MARKET needs

Now that we have performed a SWOT analysis of TML a brief discussion of how these align

with the needs of the customer is in order. As we have discussed in the previous report

consumers typically evaluate a product or service based on the following six criteria: 108

Price Quality Performance Characteristics Speed of Delivery After-Sales Support Brand Appeal and Endorsement

We have seen that our SWOT analysis is quite consistent with prior analysis performed with a

major strength being their stronghold in their primary markets and the level of innovation that

TML has constantly aspired for and achieved. These strengths will hold them in good stead

while they attempt to wrest away market share from key competitors while concentrating on their

key purchase criteriaprice, quality and performance and brand appeal. TMLs level of

innovation in terms of both technology as well as aspects like supplier relations and distribution

have enabled them to get to a winning position with respect to low prices and acceptable quality

108 Mark C. Scott. Value Drivers The Managers Guide to Driving Corporate Value Creation; 1998.



46/70


standards in the low-end market. If they are able to extend similar strategies to the higher end of

their product spectrum they could quite possibly turn the JLR acquisition to a successful venture

and open up opportunities in European and other international markets.

The brand appeal that TML possesses is another strength that cannot be overlooked. The

Tata brand as a whole has always been highly respected, and TML has continued with this

tradition. As we have mentioned earlier in the report this image that TML possesses is bound to

be an important asset in their quest for international growth. A challenge however will be

separating images of the Nano from their higher-end JLR products. If TML is successful in

making this distinction clear to their target audience they should have some very interesting

years of growth ahead of them.

BALANCED SCORECARD

We have developed the following balanced scorecard for Tata Motors Limited (TML).

The goal of the balanced scorecard is to measure both operational and financial performance.

The scorecard combines both leading and lagging indicators. In general, operational metrics are

leading indicators whereas financial metrics tend to be lagging indicators. Leading indicators

can be used to forecast financial and operational results in the future whereas lagging indicators

are historical in nature.

The balanced scorecard below is based on the Kaplan and Norton model109

. For the

Customer Perspective, Innovation and Learning Perspective, and Internal Business Perspective

the measures are listed for both the low-end market (e.g., Nano vehicles) and the high-end

market (Land Rover and Jaguar vehicles). This is because the internal and external business

109 The Balanced Scorecard, Robert S. Kaplan and David P. Norton. Harvard Business Review, July-August 2005.



47/70


drivers for these two markets can be very different. Weve also indicated whether the measure is

a leading, lagging, operational, or financial metric.

Customer Perspective

Goal Measures for Low-End Measures for High-EndNew vehicle sales Percentage of sales from new

vehicles (Leading

Operational Metric). For thelow-end market, managementwould expect this percentageto show considerable growthover the next few years as thecustomer numbers in thismarket grow and car

ownership rates increase fordeveloping economies.

Percentage of sales from new

vehicles (Leading

Operational Metric). For thehigh-end market, managementwould expect this percentageto be steady, withoutsignificant deviation.Developed economies, theprimary marketplace for these

vehicles, would have steadygrowth and large variations innew car sales

Vehicle availability Vehicle availability surveyresponses (Leading

Operational Metric). Low-end vehicle buyers wouldvalue vehicle availability. Thismetric must be consideredseparately from the high-endvehicle availability metric

because acceptable time-horizons may be significantlydifferently.

Vehicle availability survey

responses (Leading

Operational Metric). Thehigh-end market valuesavailability but may be morewilling to wait for special-order vehicles. This metricmust be considered separately

from the low-end vehicleavailability metric becauseacceptable time-horizons maybe significantly differently.

Vehicle quality andperformance

Customer and industry

survey responses (Leading

Operational Metric). For thelow end market performancecharacteristics are lessimportant. Minimum requiredquality considerations must bemet.



Operational Metric).

Performance characteristicsand quality considerations areextremely important for highend vehicles. Customers viewthis as a necessary extensionto the associated brand appeal.

After sales support excellence Customer and industrysurvey responses (Leading

Operational Metric). Thismetric while important is lessof a purchase criterion in thelow-end market due to



Operational Metric). Themetric applies more to thehigh-end market due toincreased focus on quality and



48/70


reduced performancecharacteristics and qualityconsiderations.

performance. Managementshould expect this metric toremain relatively stable withlittle variation.

Innovation and Learning Perspective

Goal Measures for Low-End Measures for High-EndDevelopment Technology Time to develop next

generation of vehicles

(Leading Operational

Metric). Although the low-end market may not place ahigh value on cutting-edgetechnology, the underlyingmanufacturing process is

dependent on developing andimplementing technology thatlowers the unit cost of newvehicles. This metric shouldcapture the incrementalimprovement inmanufacturing technology,and may be measured in howquickly and how cheaply newlow-end vehicles can bebrought to market.

Time to develop next

generation of vehicles


Metric). The high-end marketplaces significant value onimprovements in vehicleinnovation and a high value onthe regularity of new vehicle

releases. For the high-endmarket, this metric should bebased on the degree to whichthe current years vehicles areimproved. This may bemeasured by customersatisfaction surveys.

Product Innovation Customer Perception ofVehicle Innovation (LeadingOperational Metric). Buyersin this market are lessconcerned with productinnovation than with vehiclecost and reliability. Thismetric may be less importantfor this market than for thehigh-end market.

Customer Perception ofVehicle Innovation (Leading

Operational Metric). Thismetric can be measured bycustomer surveys. The high-end market buyers place a lotof value on the vehiclesinnovation and use oftechnology. Customer surveysand market research should bemeasured to determine the

perception of the vehiclesinnovation and use oftechnology.

Internal Business Perspective

Goal Measures for Low-End Measures for High-EndManufacturing effectiveness Manufacturing cycle time Manufacturing cycle time



49/70



Metric). A primary driver oflow-end vehicle viability is theeffectiveness of themanufacturing cycle.

Management should monitorthe cycle time and the goalshould be maintaining orlowering the cycle time.


Metric). High-end marketparticipants expect newvehicle models each year. Inconjunction with the metrics

above, the technology shiftmust be more than justincremental. An importantconsideration is the cycle timemetric as product innovationcan have the unintended effectof lengthening cycle times ifadditional complexity isintroduced.

Worker utilization andeffectiveness

Number of employees

required to produce the

vehicles (LeadingOperational Metric). Thenumber of employees requiredto produce one vehicle willhave a direct effect on unitcost. Unit costs, in turn, drivethe purchase price, which isthe primary driver forcustomers purchasedecisions.

Number of employees

required to produce the

vehicles (LeadingOperational Metric). Thismetric will be less significantfor the high-end market asvehicle costs are lesssignificant to customers thanother purchase criteria.Management should expectthis metric to remain relativelystable with little variation.

Operational excellence Supplier relationshipsurveys and logistical cost

reduction (Leading

Operational Metric). Thesemetrics are especiallyimportant in the low-endmarket due to the importanceof innovative and strongsupplier relationships andstrong focus on reducing costswith vehicles like the Nano.

Supplier relationship

surveys and logistical cost

reduction (Leading

Operational Metric). Thismetric will be less significantfor the high-end market asvehicle costs are lesssignificant to customers. Theimportance of supplierrelationships though isessential; however lessflexibility may be possible toincreased performanceconsiderations.

Financial Perspective

Goal Measures for Low-end and High-endSurvive Free Cash Flow (Lagging Financial Metric).Net income +

depreciation or amortization changes in net working capital



50/70


capital expenditures. This metric provides a measure for notonly company viability but also for future growth.Credit Rating (Lagging Financial Metric). The credit ratingof the organization has a direct impact on the cost of borrowingand therefore affects capital investment decisions. This metric

is measured by obtaining and monitoring the companys creditrating from one or more agencies, such as Standard & Poors.Succeed Compounded Annual Growth Rate (CAGR) (Lagging

Financial Metric). It represents the smoothed annualized gainearned over the investment time horizon110. Managementshould monitor this metric to determine whether growth targetsare being met and whether future growth trends are realistic.Market Share (Lagging Financial Metric). For both high-end and low-end markets, a significant financial metric is themarket share. Management should set and measure marketshare growth rates.

Return on Investment (Lagging Financial Metric).Annualized rate of return on investments in capital. Thismetric can be used to measure the effectiveness of managementin investing in the business operations.Return on Equity (Lagging Financial Metric). This metriccan be used to measure the rate of return on shareholders'equity of the common stock owners.

Three Circles of Tata Motors

TMLs focus on its consumers has been reflected in their development of products like

the Indica, Nano and the OneCat. Their endeavors in this regard have led us to believe that their

ideology is more akin to a hedgehog. However as we have noted the JLR acquisition has

compounded this picture with the focus now being shifted to the other end of the market.

However as we have also noted in our study of the three circles for TML below, they may be

able to use this acquisition positively to continue to adhere to their primary ideals and vision.

110 http://en.wikipedia.org/wiki/CAGR



51/70



Image source: http://theleadershipbook.com/

What is TML passionate about?

The Tata groups stated mission is to improve the quality of life of the communities [it]

serves.111

In this mission, TML finds what it is passionate aboutmaking the lives of its

customers better through the products and services it offers. This takes the form of a variety of

strategic business opportunities for TML due its desire to develop a deep understanding of

economic stimuli and customer needs andtranslate them into customer-desired offerings

through leading edge R&D.112

To meet the personal transportation needs of Indias rising lower and middle classes, as

well as those in other developing and third world countries, TMLs new Nano aims to be the

lowest cost passenger car available. TMLs desire with the Nano is to improve the lives of a

population currently dependent on bicycle or motorbike transportation by making automobile

transportation an accessible and affordable option to almost everyone. In the same light, Tata

Motors Finance desires to make financing the purchase of a vehicle even easier with direct

111 http://www.tata.com/aboutus/articles/inside.aspx?artid=CKdRrD5ZDV4=112 http://www.tatamotors.com/our_world/profile.php


52/70


53/70


segment in which TML competes. As a result, a measure of profit per product line is most

suitable.

Profit drivers for the Jaguar line are much different than profit drivers for the Nano or

Indica lines. In the high-end passenger car segment, TML will need to focus on differentiation,

quality and performance in order to create high margin products that drive profits. In the

economy car segment, TML will need to reduce costs across the entire value chain in order to

deliver a product at the right price to increase sales volume and drive profits. However, at the

top-level, TML can evaluate performance across the company by measuring the end result for

each product, profits per line. No matter which segment, TML will need strong profits in all of

its product lines to push into international markets, and looking at profits per line, TML will be

able to determine which lines will be able to reach into new markets and which should be phased

out.

What can TML be the best

Documents

Tata Motors Limited Comprehensive Strategic Analysis