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The Tata Nano. The Analysis of India's innovative automotive industrie

Seminar Paper 2012 18 Pages

Economics - Innovation economics

Excerpt

Table of Contents

1. List of Illustrations

2. Introduction
2.1 The Tata Group
2.2 Disruptive Technology

3. Developing and Marketing Concept
3.1 Product
3.2 Price
3.3 Promotion
3.4 Distribution

4. Failure Analysis
4.1 Product
4.2 Price
4.3 Promotion
4.4 Distribution
4.5 Market

5. Conclusion

6. Bibliography

Abstract

The purpose of this work is a critical analysis of an innovation in the automotive industry, the Tata Nano, the world’s cheapest car unveiled by Tata Motors in 2008.

It describes the disruptive product innovation and the company marketing strategy with regard to the fact that the Tata Nano was launched in a low-income country. The focus is on the product design, pricing, promotion, and distribution.

The work also includes a failure analysis and examines the reasons why the predicted sales of 20.000 cars per month were not achieved. It also investigates which measures were taken to eliminate those failures.​

1. List of Illustrations

Picture 1: The Economic Pyramid

Picture 2: The Impact of Sustaining and Disruptive Technological Change

2. Introduction

2.1 The Tata Group

The Tata Group was founded in 1868 with its headquarter in Mumbai, India. The company operates its business in seven sectors: communications and information technology, engineering, materials, services, energy, consumer products and chemicals. The Tata Group comprises over 100 operations in more than 80 countries worldwide.[1]

According to Bloomberg’s Businessweek, the Tata Group was ranked at the 17th place at the list of the 50 most innovative companies in the world in 2010.[2]

One of the major Tata companies is the Tata Motors. Tata Motors Limited was established in 1945 and grew into the largest automobile company in India, with consolidated revenues of INR 1,65,654 (USD 32.5 billion) in 2011-12. The company engages over 55,000 employees. About 4,500 engineers and scientists are involved in research and development in the company’s Engineering Research Centre that was founded in 1966. The new technologies and innovative products enabled Tata Motors to expand abroad and to establish its operations in the UK, South Korea, Thailand, Spain and South Africa.[3]

2.2 Disruptive Technology

In January 2008, Tata Motors unveiled its People's Car, the Tata Nano, which is a small and cheap car designated for the emerging market of India. Its development was conditioned by using of disruptive technologies and on that account it was tagged as a disruptive innovation.

The disruptive technologies are the opposite of the sustaining technologies, which are typical for most technological advances.

According to Christensen, the sustaining technologies improve the performance of established products, along the dimensions of performance that mainstream customers in major markets have historically valued.[4]

On the other hand, the disruptive technologies result in worse product performance. Christensen explains, that the disruptive technologies underperform given products in mainstream market. The products are typically cheaper, smaller, simpler, and more convenient to use. But they offer other features that some new customers appreciate.[5]

The products of disruptive innovations are typically designated to the emerging markets that are also classified as the Bottom of the Pyramid market.

Prahalad used the term “The Bottom of the Pyramid” to bring attention to the 4-5 billion poor people who were ignored as a target market by the large organisations and multinational firms.[6]

The economic pyramid of the world at the picture 1 shows, that more than 4 billion people live at the bottom of the pyramid. It represents the largest and fastest-growing markets in the world.[7]

illustration not visible in this excerpt

Picture 1, The Economic Pyramid. Source: Prahalad, C.K. (2010), p. 28

The automotive industry usually targets the customers on the top of the pyramid. The Tata Nano is, however, a disruptive innovation produced for the emerging market of India, where 95 percent of the population belong to the Bottom of the Pyramid.[8]

The Tata Motors developed new technologies to produce the Tata Nano in conformity with the specific needs of low-income consumers. The following part continues with the description of the developing and marketing concept of the Nano.

3. Developing and Marketing Concept

In 2008 Tata Motors released the Tata Nano, a small and cheap car made for India’s poorer population.

The firm created a new concept for developing and marketing of car. It had to rethink the production, marketing, and distribution strategy.

Following articles analyse the Tata’s developing concept for the Tata Nano in focus on product design, pricing, promotion, and distribution keeping in mind, that the Tata Nano was launched in a low-income country.

3.1 Product

The idea of the Tata Nano started when Tata’s chairman, Ratan Tata, observed families riding on motorcycles: the father driving, his child standing in front of him, his wife sitting behind him holding a baby. Ratan Tata asked himself, if there could be a safe, affordable, all weather means of transport for such a family.[9]

The company targets the customers who own a motorcycle but could not afford a car. The objective was to offer them a new product that would be better and safer than the mean of transport they currently use and affordable at the same time.[10]

The car would be compatible with consumer needs, experiences and values of potential consumers. They already have experience with transportation and are holders of a driving licence and a number plate. According to this assumption, illiteracy or lack of education should not be a barrier for selling the Nano.[11]

The ultimate goal by developing the Tata Nano was a low price tag without compromising on safety and comfort. The development team of Nano worked four years to design the car at low costs. The benchmark of the Nano was the Maruti 800. The result was a vehicle that was 8 percent smaller externally and 21 percent more spacious internally than the Maruti 800. The Nano was designed in conformance to Indian and European emission standards. Passing the full frontal crash test obligated for India and the offset and side crash test required internationally was a condition.[12]

All Nano’s components had to be designed from scratch, without using any parts of other cars produced by Tata Motors. This circumstance made possible to develop new production technologies and design features that were in accordance with the Nano's specification and production volumes.[13]

[...]


[1] Tata Sons (n.d.), [accessed November 1, 2012]

[2] Bloomberg (n.d.), [accessed November 1, 2012]

[3] Tata Motors (n.d.), [accessed November 1, 2012]

[4] Christensen (1997), p. XV

[5] Christensen (1997), p. XV

[6] Prahalad (2010), pp. 6-7

[7] Prahalad (2010), p. 28

[8] Van den Waeyenberg/Hens (2008), pp. 439-440

[9] Tata Motors, [accessed November 2, 2012]

[10] Van den Waeyenberg/Hens (2008), p. 441

[11] Van den Waeyenberg/Hens (2008), p. 442

[12] Van den Waeyenberg/Hens (2008), p. 442

[13] EngineerLive, [accessed November 2, 2012]

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Title: The Tata Nano. The Analysis of India's innovative automotive industrie