Tata Cross Culture Analysis - Essay Example

? Case Study of Tata Cross Culture Analysis Case Study of Tata Cross Culture Analysis Introduction Among various cars, the onewhich had been in news for a many years was the “Tata Nano.” The person whose efforts brought this model was Mr. Ratan Tata as he decided to make a car to target the low cost families and finally has become existent. Although being a lengthy procedure and time consuming option but due to strong will and decisive efforts of Mr. Ratan Tata, it was finally designed with an attractive shape. Since being advertised in strongly positive terms as cheapest car of the world, it has been the idle gossip around the world (Stokes, Wilson, & Mador, 2010). Significant people of large organisations have been driving in by numbers only to take a look at the most outstanding work of creative engineering in the shape of “Tata Nano.” Nano is a new form of cars of this century which represents a philosophy of an investor who deliberately decided to go against the prevailing wisdom of other investors of lighter, smaller, cheaper and signify a new age in cheap private transportation and with a possibility of becoming actual, "worldwide deadlock." The word "Nano" is derived from the Greek word ‘Nanos’ which means "small" in the Indic language spoken by the people of India who live in Gujarat in western India which is also the language of the Tata Group’s founders (Stokes, Wilson, & Mador, 2010). In 2003, under the Chairmanship of Mr. Ratan Tata, the project to manufacture a car while keeping the price to one Lac rupees was started. The main aim of this “Tata Nano plan” was the demand and requirement of many families of India who could not afford 4 wheel cars instead utilized Motorbikes and bicycles for the purpose, and was grounded on the successful project of low cost four wheeled “Ace truck” by the company in May 2005 (Boone & Kurtz, 2011). Company’s Profile In 1945, Tata Motors was established. At the beginning it operated as a manufacturing unit of automobile (EconomyWatch, 2010). In 1954, with the partnership of Germany’s Daimler-Benz AG, Tata group ventured commercial motor vehicle. It is considered as one of the India’s biggest automobile company. Tata Motors became the chief producer in the production of entire segments of automobiles commercially (EconomyWatch, 2010). Among the 3 best companies in the segment of a vehicle carrying passengers, Tata Motors is also included. Tata Motors has manufactured several outstanding cars in utility, compact and medium-size segment. It furnishes its services and products on a worldwide ground. Within India it offers 5 different categories of services and products namely trucks, commercial passenger carriers, passenger cars, defence vehicles, and utility vehicles. Why Tata Nano Is Important The Chairman of Tata Group perceived the thought behind the Tata Nano, when he saw a four member family was travelling via motor scooter in rain. At that time the idea of Nano came in his mind and he desired to manufacture an automobile that could be safe, affordable and could be used in all weather condition (Byron, 2008). (Byron, 2008) This desire of Mr. Ratan Tata emerged as the most inspirational plan of Tata motors till time when the Chairman of Tata Group Mr Ratan Tata stated his thought of Tata Nano to Mr. Ravi Kant, his managing director. From his managing experience Mr. Ravi Kant had discovered that citizens desire to shift from 2 wheelers vehicle to 4 wheelers vehicles but they have not got enough money for it. Automobile industry of India has an average growth rate of twelve percent for the past decade. Despite that this industry sold only 1.3 million vehicles for passengers in the financial year ending on March 2006. This shows that a billion of peoples of India purchase approximately the equal quantity of cars in a year as three hundred million peoples of US purchase in a period of month. However, this situation could be changed only when the cost of 4 wheels vehicle could be lowered to the extent that equals that of a motor bike. In India, approximately seven million peoples had bought motorcycles and scooters last year, in general for prices between thirty thousand rupees and seventy thousand rupees which are approximately equal to six hundred and seventy-five dollars to one thousand and six hundred dollars (Stokes, Wilson, & Mador, 2010). As India is one of the most favoured sale and manufacturing centre for the automobile companies, throughout the world has furnished vast chances to the low cost car and Ultra Low Cost Car (ULCC) manufacturers. The customers in India are cost responsive; therefore the demand for low cost car and ULCC has been rising heavily in the country regardless of raising disposable and per capita income. Accordingly, the low cost car and ULCC in Indian market is expected to grow at a compound annual growth rate of about twenty five percent during 2010-2020 (Laura, 2011). (Laura, 2011) The above diagram shows the worldwide sales estimated for ultra-low-cost cars which show the increase in the people’s demand for ULCC, which is also one of the reasons for Tata market to enter in global ULCC market (Laura, 2011). Competitive Advantage As Tata Motors brought out the cheapest car throughout the globe, that is Nano of 2,500 US dollars, they stunned sceptics who doubted regarding Tata Nano’s invention could emerge from India, which is a country well-known for its weak infrastructure rather than for its environment friendly manufacturing (Mahadevan, 2010). A country with feebly maintained roads, power shortages, problems in supplier management, and a mass of other restraints that lead to a common impression within multinational companies (MNCs) which are installing their manufacturing processes in emerging markets like India is of an uncertain business. (Mahadevan, 2010) The above figure though shows no luxury but this is a car (Tata Nano) which is according to the budget of people who cannot afford 4 wheelers and it is of low-cost for buyers in developing emerging markets. In general, companies react to such restraints in 1 or 2 ways. The first is to delay operating in such emerging markets until they seem more similar to their highly-developed vis-a-vises. Such type of strategy to “wait-and-see” goes with a clear weakness: in such cases competitors may set up themselves in these markets and build obstacles for new entrants. In addition to this, in these cases there isn’t any assurance that these emerging economies will develop to appear similar to those economies that are now developed; therefore the strategy of “wait-and-see” might be unsuccessful after a very long period of time (Parikh & Gupta, 2010). The second way is to determine the way in which other companies got success in such markets and become skilled from the most effective practices these companies do. This strategy is related to Charles Darwin's theory of organic evolution; however companies possibly get competitive advantage through utilizing the real restraints that others feel demoralizing. The mission for attaining the competitive advantage causes companies to gain both responsiveness and effectiveness to customers, however a trade-off may incur between them. Increase in the customer’s responsiveness means higher stock list, distributed depositing in a warehouse, and many channels for transportation which increases the cost and efficiency to cooperation. Companies consider such balance more difficult to attain in emerging markets due to external environment restriction like shortage of talents and infrastructural constrictions (Mcloughlin & Aaker, 2010). Success of Tata group is because of a support of the growing total output, indicates that in emerging market economies companies can take competitive advantage on institutionalised voids (Mcloughlin & Aaker, 2010). A Better Understanding of Constraints In India whenever the companies go wrong, they frequently portray two reasons for their problems, first is the external constraints like transportation high costs, lack of talent and abilities which impacts on their functions, and power shortages; whereas second include the consequences caused by the poor accessibility of services and products which influence their customers. Making a chart of constraints to the value of shareholder can assist companies in analyzing their earlier operations and to find out the reason behind their failure in achieving their business goals (Barrow, 2011). (Barrow, 2011) The above figure shows the constraints which derails the developmental plans of companies. Considering above constraints, companies consider that the effectiveness can only be achieved through the cost of customer responsiveness, and the other way around, so they plan their developments keeping in view the above limitations. For instance, improved service offers may occur at a higher cost to their customers. Therefore, multinational companies (MNCs) which attempt to repeat their worldwide practices within the emerging markets discover their limitation of being effective through external constraints, so they leave to assist only first-class customers. In order to get competitive advantage and be innovative, companies basically have 4 choices, grounded on whether its customer or any of the external constraints affect the company. In addition, another way by which a company gets competitive advantage over its competitor is the improvement in process or products. (Barrow, 2011) The above figure shows the 4 choices through which a company can achieve competitive advantage. All of these choices provide a chance to the company to shift towards a new field on the map of efficiency responsiveness. If a company manages to deal many options in the above matrix then it might originate a business model which creates difficulties for competitors to reproduce. Tata Group realised the function of innovation in competing in the new setting. Therefore, it launched the “Tata Group Innovative Forum” which includes the company’s senior executives (Koontz & Weihrich, 2010). According to Clayton Christensen, the Tata group follows the scheme known as “disruptive-innovation” (Koontz & Weihrich, 2010). This disruptive innovation theory allows the new entrants to attack the leaders of the market by utilising comparatively low cost and simple technical solutions in order to offer simple, cheaper and more suitable services and products. Such services and products are generally targeted at customers that are less challenging (Anonymous, 2008). An example of “disruptive” innovation strategy of Tata, it considered a car named as “Peoples Car” Nano which offers same operations with the objective of reducing the cost significantly. In 2008, this innovative creation of Tata was introduced in the market of India for the first time at the price of less than half of any other car in the market of India, as well as the cars from automobile companies of Japan, Europe and American that are being sold in Indian market. Initially the price of Tata Nano was around US$2500 (Stokes, Wilson, & Mador, 2010). Tata motor with this innovative Nano technology achieve the competitive advantage in the emerging market of India and with this product they target millions of peoples of India who wouldn’t have thought of purchasing a car and alternatively they would have settled for motor scooters or motorbikes. Now, Tata motor is preparing to introduce their innovative product to other emerging markets for example Middle East, Asia, Latin America and Africa. Tata Nano has won many awards of innovation. It also achieves the “Wall Street Journal Technology Innovation Award” in the transportation vehicles in 2008. Later on, it also won award of the “Frost and Sullivan 2009 Innovation” for being a wonderful innovation and extraordinary involvement to auto Industry (Stokes, Wilson, & Mador, 2010). Screening Criteria for Tata Nano’s International Marketing Selection (IMS) Process Every country of the world has its own features in terms of attraction of market. In addition, after analyzing the literature related to the global market attractiveness, a good knowledgeable decision for selection must think about more than one hundred and fifty variables which calculate different features of every foreign market’s technical, cultural, legal, economic, physical and political environments, also with the organisation’s managerial capabilities, resources and preferences. Taking a small part of these variables into consideration for a practical quantity of countries would, in the vast majority of events, be outside the imaginations of the decision maker in terms of expertise, money and time (Hoyer & Macinnis, 2010). The criteria that could be best for the Tata Nano’s IMS process is the international market screening, as this criteria is a part of the process of internationalisation. The process of international Marketing selection includes the market screening. Many studies show that the process of international market selection ideally includes the following steps (Peng, 2009): Comprehending a negative or positive stimulants to internationalise; A choice to accept or explore internationalisation; Trying to accomplish market screening in order to make a list; Doing research comprehensively and completely examining the selected markets (Peng, 2009); Final choice for entering a market; Deciding the way to enter (Peng, 2009); A choice to carry on with market entry; Getting prepared for the selected market; Integration in the new selected market (Peng, 2009); Doing all of the previous steps again; Growth in a few of the entered international markets; Worldwide rationalisation (Peng, 2009). Tata Nano’s Business Expansion Tata Motors recorded its achievement with its “People Car Nano” which accomplishes the thoughts of the individuals, in charge with the plans of expanding the company. After conquering the emerging market of China and India, Tata motors is planning to increase Nano’s exports in areas like Myanmar, Bangladesh, Thailand, Indonesia, US, Africa and in South America (Irban, 2012). According to Mr Ratan Tata, the Chairman of Tata Company, now their main target is the markets in South America and Africa. In order to succeed in these areas as well Mr Ratan Tata announced Nano’s diesel edition which would be the ultra low cost car of the world, in addition to this a bigger gasoline edition having 3 cylinder units presently used (Daniel, 2010). There are large number of people present in Africa and South America who want to have a car but they are not able to afford it. Therefore in these areas it may be successful in the similar manner as it achieved in India and China. Within a period of one year since its introduction fifty thousand Nano cars were sold. Reports show that Tata motor is spending approximately six hundred and forty one million dollars every year on its new plants and products. Presently, Tata Motors has increased its plans of expanding Tata Nano exports to the markets of America. They are also planning to make some modifications to this car in order to satisfy the standards of international safety. It is necessary for the Tata Nano to fit these standards of safety if they have the opportunity to market the Nano in US and Europe. According to reports Tata Motors is also making plans to establish a manufacturing plant in Mexico in order to construct Tata Nano along with other passenger cars (Nithyanandh, 2012). Current report of CNBC confirms that the Tata motor is preparing a plan to invest one billion US dollars on a manufacturing plant in Mexico, in order to capitalise the tax incentives that the government of the Mexico is providing and additionally to merge their company in the Latin American countries. This plant will provide Tata Motors a firm grip in the area and will be in sequence with the expansion plans of the company (Amrit, 2012). Conclusion Tata Nano is one of the innovative products of the world which specifically targets the poor people who cannot afford car. Mr Ratan Tata’s successful product Tata Nano is the ultra low cost car offered at two thousand US dollars. Emerging markets like India provides a productive base for innovative products. These innovations are encouraged due to the widely dispersed low income households. With increased authority the targeted customers will require additional features within the designed vehicle leading to innovations in the presented model and introducing a new product-line to cater all segments of the low income market. After having a prosperous year Tata Motors due to its product, “Tata Nano” in markets of India and China, the Chairman of Tata group is planning to expand its product in Europe, America Mexico and in many Asian countries. References Amrit. (2012). Tata Nano Looks To Enter United States Market. Available: http://newupcomingcars.com/tata-nano-looks-to-enter-united-states-market/. Last accessed 3rd Dec 2012 Anonymous. (2008). A Nano Car In Every Driveway. Available: http://www.atkearney.com/paper/-/asset_publisher/dVxv4Hz2h8bS/content/a-nano-car-in-every-driveway/10192. Last accessed 3rd Dec 2012. Barrow, B., (2011). The 30 Day MBA: Your Fast Track Guide to Business Success. 2nd ed. London: Kogan Page Publishers. Boone, L.E & Kurtz, D.L., (2011). Contemporary Business. 14th ed. John Wiley & Sons. Byron Pope. (2008). Ultra-Low-Cost Cars Pose Opportunities, Risks, Study Shows. Available: http://wardsauto.com/ar/ultra_cars_study_080828. Last accessed 3rd Dec 2012. Daniel Patrascu. 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