Building World Class Competence
TATA Motors
21 April 2006
Contents
1. Overview
2. Building World Class Competence
3. Results
TATA Motors
India’s largest Automobile company
• 2nd largest company in Private sector
• Globally ranked as:•2nd largest Bus manufacturer
•5th largest Bus & Truck manufacturer
Strong Domestic Position
• Market leader in Commercial Vehicles
in domestic market with ~60% MS
• 2nd largest player in Passenger Cars in
domestic market with 16.5% MS
Robust Financial performance
• Sales
400,000 vehicles
• Revenues
USD 4.7 Bn
• Profit
(Post Tax)
USD 0.3 Bn
• Largest Indian Exporter of Automobiles
• Largest portfolio of products by an
Auto major:•Mini, Light & Heavy Trucks
• Nation wide Sales, Service, Spare parts
and Auto financing network with over
1,200 customer touch points
•Range of Buses & Coaches
•Passenger Cars & Utility Vehicles
• Indigenously developed & India’s 1st
•Light Commercial Vehicle (1986)
•Sports Utility Vehicle
(1998)
•Passenger Car
(1998)
•Mini Truck – ACE
(2005)
• Largest R&D network in India with
offshore centers in :•Korea (Gunsan)
•Spain (Zaragoza)
•UK
(Midlands)
• 1st Engineering company to be listed
on NYSE (2004)
(All figures are for FY 04-05)
Evolution of TATA Motors:
challenges
Liberalization brings greater opportunity &
Economy opening Liberalization
USD
Entry of MNC players
Bn
Developed suppliers
4.7
Product complexity
19400
Protected Economy
Protected environment
Less developed supplier base
Limited domestic competition
Collaboration with Daimler Benz
1st vehicle rolled out within
6 months of contract (1954)
Stage 1
Vertical Integration
Focused Vendor Dev
Very little outsourcing
Increase inOutsourcing
Outsourcing
Stage 2
Stage 3
Stage 4
14400
Stage 5
USD 2.3Bn
L
O
C
O
M
O
T
I
V
E
S
9400
USD 0.7Bn
USD 35.9Mn
4400
USD 0.05Bn
USD 0.2Bn
0.3
PBT (Rs Cr)
Turnover (Rs Cr)
'03-04
04-05
'01-02
99-00
97-98
95-96
93-94
91-92
89-90
87-88
85-86
83-84
81-82
79-80
77-78
75-76
73-74
71-72
69-70
67-68
65-66
63-64
61-62
59-60
57-58
USD 1.8Mn
55-56
45-50
New
Strategy
Cyclical
impact
Self Reliance
-600
-0.1
Cyclic nature of Commercial Vehicle Industry required
de-risking of Company’s business model
Domestic CV Industry Sales
350
CAGR: 6%
250
200
150
100
50
0
70
-7
1
72
-7
3
74
-7
5
76
-7
7
78
-7
9
80
-8
1
82
-8
3
84
-8
5
86
-8
7
88
-8
9
90
-9
1
92
-9
3
94
-9
5
96
19 -97
98
-9
9
00
-0
1
02
-0
3
04
-0
5
Nos in '000
300
Indian CV Industry
Similar with Global CV
Industry
Dis-similar to Global
CV Industry
Characteristics
• Cyclical
• Low Volume (in ,000s)
• Secular long term growth trend
• Early stage of road development
Increasing intensity of competition required building World
Class competencies
40
36
28
Competition in LCV Market
15
All Models
4
6
Indian
1970s
'1985
'1995
'00-01
'04-05
58
'05-06
59
52
48
37
Competition in Passenger Car Market
42
All Models
36
Foreign
12
22
Indian
24
00-01
'01-02
'02-03
'03-04
'04-05
'05-06
Contents
1. Overview
2. Building World Class Competence
3. Results
Building World Class Competence
1. Offsetting cyclicality & de-risking
business model
2. Increasing Competitiveness
1. Offsetting cyclicality & de-risking business model
a. Entering new segments & increasing presence in less cyclical segments
• Personal transportation - Passenger Car
TML Passenger Car Market Share
16.9%
16.5%
04-05
05-06
14.7%
• Size of Zen
• Interior space of an Ambassador
• Economy of a Maruti 800
10.7%
6.8%
98-99
00-01
02-03
Bus Industry growth
50,300
43,500
• Fully Built Buses & Coaches
• Controlled market
• Less fluctuation in sales
• Explosive growth projected in
demand due to improvement in
road infrastructure
45,500
35,300
Small
Buses
22,300
Large
Buses
'01-02
'02-03
'03-04
'04-05
'05-06
2. Increasing Competitiveness
Being competitive with International competition in domestic & International markets
International Players
TATA Motors
Technology & Quality Gap
Maintain
Reduce
Cost Gap
Reduce
Maintain
TATA Motors Competitive Advantage:Providing vehicles with Highest Life-cycle Profitability to customers
Building World Class Competence
1. Offsetting cyclicality & de-risking
business model
1. Product Development
2. Supply Chain
3. Marketing & Sales
4. International Business
5. Human Resources
2. Increasing Competitiveness
6. Performance Systems
Towards building World Class Competencies
1. Product Development
A. Passenger Car
Indica
+
$0.55 Bn
Generation 1
Marina
Indigo
Generation 2
TML Market Share
In B & C segments
$1.1Bn
Indigo: 33% (#1)
17.1%
Indica: 19.5%(#2)
(behind Alto)
14.6%
Our 1st generation cars (Indica & Indigo) are
competing with competitions’ 5th or 6th
generation cars & are helping Company to
gain Market Share in Car segment
8.7%
'00-01
'02-03
'05-06
Towards building World Class Competencies
1. Product Development
B. Introduction of India’s first Mini Truck – TATA ACE for last mile distribution
Beginning May’05, ACE sales have grown to 50,000 nos (annualised)
Impact of ACE on 3 Wheeler Sales
Pkups
ACE
L3W
S3W
'01-02
'04-05
'05-06
Towards building World Class Competencies
1. Product Development
C. Moving from ‘Developing Products’ to ‘Managing Product Development’
Engg Research Centre
Pune, Jsr, Lko
Aggregate Suppliers
In house
Product Development
Outsourcing Partners
TATA Technologies
INCAT, UK
Management
of
Product
Development
needs
of
TML
Bus Body Building
ACGL - Goa
TATA Daewoo
Korea
Hispano Carrocera
Spain
TML-European Tech
Centre, UK
•
Product Life-cycle Management (PLM) system for effective product data management & analysis
•
Institutionalizing New Product Introduction (NPI) Process across the organization
•
Incorporating ‘Voice Of Customer’ – for meeting Customer expectations
•
Advanced Computer Aided Design (CAD) Environment for product design, virtual testing &
validations for reducing development time and enhance effectiveness
Building World Class Competence
1. Offsetting cyclicality & de-risking
business model
1. Product Development
2. Supply Chain
3. Marketing & Sales
4. International Business
5. Human Resources
2. Increasing Competitiveness
6. Performance Systems
Towards building World Class Competencies
2. Supply Chain
A. Manufacturing – Lean manufacturing, improvement in Quality & Productivity
Lean Manufacturing
• Single Piece flow
• Flexibility & Scalability
• Centre of Excellence (CX)
• SMED (Single Minute Exchange of Dies)
• JIT supplies / KANBAN
• KAIZEN / Poke-Yoke
Increase in Productivity
(Equivalent Veh /Man/yr)
Improvement in Quality
• Design Quality
X
2.2 X
• Build Quality
• Special emphasis on Visual Quality & Performance parameters
00-01
Enhancing People Capability
• Multi Skilling & Multi Tasking
• Small Working Groups
• Advanced & focused training
• Modernization of facilities
05-06
Towards building World Class Competencies
2. Supply Chain
B. Outsourcing & Global Sourcing
1950 - 1990
2000 & beyond
• Controlled economy
• Open economy
• Protected environment
• Entry of International players
• Less developed supplier base
• Developed supplier base
• Limited domestic competition
• Product complexity
Outsourcing
Highly Vertically
integrated company
Outsourcing content
1.
82%
75%
57%
60%
1990 2000 2005
M&HCVs
2. Global Sourcing : Steel, various aggregates & other components
2005
ACE
Towards building World Class Competencies
2. Supply Chain
C. Vendor Management
1. Source Selection
2. Development
3. Management
4. Partnering
• Past performance
• Process development
• 2 way communication
• Rating performance
• Managerial capability
• Quality
• Change adoption
• Improvement
• Technology
• Capacity rate
• New Technology
• Relationship building
• Knowledge
• Training
• New business
• Rationalization
Features
• Early involvement of Vendors in product design & development
• Focus on ‘overall least cost’
• Self Certification of Vendors
• e-Commerce/ e-auctions & other IT tools (PLM , SRM)
Towards building World Class Competencies
Leading to reduction in Break Even Point
BEP was brought down to 1/3rd of capacity by:• Direct Material Cost Reduction
65%
TML’s BEP as % of Capacity
• Variable Conversion Cost Reduction
41%
• e-Sourcing – Largest e-Sourcing company &
33%
among Benchmark companies in
Auto Industry
• Alternate Sourcing / materials
• Benchmarking, tear down & design changes
'2000
2003
2005
• Negative working capital – Unique distinction for an
Engineering Company
Lowering of BEP has prepared the Company to withstand severe demand fluctuations
Building World Class Competence
1. Offsetting cyclicality & de-risking
business model
1. Product Development
2. Supply Chain
3. Marketing & Sales
4. International Business
5. Human Resources
2. Increasing Competitiveness
6. Performance Systems
Towards building World Class Competencies
3. Marketing & Sales
A. New Customer Segmentation approach - To develop products as per target
customer requirements
Example: Pickup
Customer Segments
A
B
C
D
India Today
India Tomorrow
Towards building World Class Competencies
3. Marketing & Sales
B. New Sales Planning Process
Inquiry
Stage 1
Stage 2
Sale
•
Non uniform Sales processes at various dealerships
•
Sales process Benchmarking
•
Addressing gaps / modified Sales process / Standardization
•
Embedding Sales process in IT enabled CRM system
•
CRM data analysis for sales trends & sales process improvements
•
Largest deployment of CRM (Siebel) system world wide in Auto Industry
covering all TATA Motors Dealerships & Workshops
Towards building World Class Competencies
3. Marketing & Sales
C. TATA Motors Corporate Identity Program
Uniform TATA Motors identity
Towards building World Class Competencies
In FY 05-06, TATA Motors achieved all time high domestic sale of > 400,000 vehicles
TATA Motors Sales
CV Market Share ~ 60% (# 1 )
Car Market Share ~ 17% (# 2 )
188,900
28,600
Cars* (17%)
CV Market Share – 51%
Car Market Share – 0%
42,900
85-86
Cars (47%)
214,900 CVs(53%)
136,800 CVs(83%)
CVs (100%)
95-96
CV
PV
'05-06
* Sumo, Sierra, Estate, Pickup
Building World Class Competence
1. Offsetting cyclicality & de-risking
business model
1. Product Development
2. Supply Chain
3. Marketing & Sales
4. International Business
5. Human Resources
2. Increasing Competitiveness
6. Performance Systems
Towards building World Class Competencies
4. International Business
A. De-risking business from cyclicality of Domestic market
Strategic importance of International Business
1. Products meeting Global Standards
• Entry of Global Players in India
• World Class Road network
350
Nos in '000
300
250
CAGR: 6%
200
150
100
50
• International Emission & Safety norms
2. To offset domestic cyclicality effect
• Greater share of IB can dampen the
effect of cyclicality in domestic market
70
-7
1
72
-7
3
74
-7
5
76
-7
7
78
-7
9
80
-8
1
82
-8
3
84
-8
5
86
-8
7
88
-8
9
90
-9
1
92
-9
3
94
-9
5
96
19 -97
98
-9
9
00
-0
1
02
-0
3
04
-0
5
0
3. Economies of Scale
• For advanced products, IB markets
provide economies of scale
4. Accelerate Growth
• Growth opportunities in
International markets
Domestic leadership image to be leveraged effectively for building relationships in global markets
Towards building World Class Competencies
4. International Business
B. Organic Growth
1
Market Attractiveness & Potential
High
Low
2 Regulatory Environment
Emission, Safety, Entry regulations
3 TML’s ability to address markets
Based on Stage of Market development
• Cyclicality of these markets was out of phase with the Indian market
• Product offerings were developed/ customized as per market requirements
e.g. South African market required vehicles with
Higher Power to Weight ratio as roads are highly developed
•
South Africa
•
South Korea
•
Sri Lanka
•
UK
•
Italy
•
Bangladesh
•
Nepal
•
Saudi Arabia
•
Ukraine
•
Malaysia
& others…
Towards building World Class Competencies
4. International Business
B. Organic Growth – TATA Motors I B Sales
50,500
35
30,500
40
9,500
45
No of countries
'02-03
'04-05
'05-06
Today, entire range of automobiles from Mini Truck to Heavy Trucks to Buses
to Passenger Cars under TATA Motors Brand is exported to 35 countries
Towards building World Class Competencies
4. International Business
C. Inorganic Growth – TML acquired Daewoo
Korea in Mar’04
1. Addition to Topline
2. Enhanced Product portfolio
3. Growth in South Korea
4. Managing business in a developed country
5. Operating high quality manufacturing plant
6. Lead change in domestic market
Complementary Product Range
TATA Novus was launched in India in Dec’05
TML range
a HP
b HP
Medium Truck was launched in Korea in Dec’05
Daewoo range
b HP
c HP
Towards building World Class Competencies
4. International Business
C. Inorganic Growth – Daewoo acquisition provided us with valuable learning to initiate
Brand building in Korea (even before the acquisition happened)
1. Be prepared for being evaluated
• Entire Daewoo team was closely monitoring TML team’s
work practices & behavioral traits
2. Collect first hand knowledge from market & customers
• Interactions with customers & local transport associations
Customer reaction… “No existing Company management
has bothered to ask me how I feel or what I want…and
here you are doing so even before taking over the business…”
3. Focus on human integration & communication
• Overcoming the language barrier
• India considered low on technology
TATA Motors
Brand Building
Towards building World Class Competencies
4. International Business
C. Inorganic Growth – Evolution of Cross Cultural partnership with Daewoo
Synergizing
•Sharing of best
practices
Harmonization
•Work Ethics
•Corporate Governance
•Fine tuning
Familiarization
•Music, movies, food, ..
•Sister City Concept
•Cultural familiarity
Initiation
•Basic understanding
•Language familiarity
•Country visits
Towards building World Class Competencies
4. International Business
C. Inorganic Growth – TATA Motors in Korea
Synergy of key attributes
for making a Global Company
Good Corporate Governance
Cost effectiveness
Strong Engineering base
Work Ethics
Quality
Productivity
Tata Motors, India
DWCV, Korea
• Integrity
• Understanding
• Excellence
• Unity
• Responsibility
• Big
• Modern
• Reliable
Towards building World Class Competencies
4. International Business
C. Inorganic Growth – TATA Daewoo brand received very well in Korean market
Towards building World Class Competencies
4. International Business
C. Inorganic Growth – Increase in TDCV Revenue & Market Share
TML
TDCV Revenue
TDCV Market Share in Korea
1.5X
1.2X
X
62.4%
54.1%
48.8%
FY03-04
FY 04-05
FY 05-06
X
29.1%
DWCV
Acquisition
TDCV Sales (Nos)
TML
Heavy
Trucks
25.5%
13.5%
1.3X
21.5%
X
Introduced
in Jan’06
Exports
Mar'05
Mar'04
FY03-04
FY 04-05
FY 05-06
TATA
Competitor X
Mar'06
Medium
Trucks
Towards building World Class Competencies
4. International Business
C. Inorganic Growth – Learning from Daewoo helped in our 2nd acquisition - Hispano
Hispano buses
Sales (Nos)
3.5X
TML
X
Q1
Q1
Q2
Q3
Q4
4X
Revenue
X
Q1
Q1
Q2
Q3
Q4
Towards building World Class Competencies
4. International Business
TATA Motors International Business template
To be seen as a local Company in the country of operation
• As a South Korean Company in South Korea
• As a South African Company in South Africa
• As a Spanish Company in Spain
• Brand ‘Japan’
- Electronics, High Tech, Innovative, Efficient, Trendy, Process oriented
• Brand ‘Germany’ - Automobiles, Engineering excellence, robust design, heavy duty, meticulous
• Brand ‘India’
-?
Building World Class Competence
1. Offsetting cyclicality & de-risking
business model
1. Product Development
2. Supply Chain
3. Marketing & Sales
4. International Business
5. Human Resources
2. Increasing Competitiveness
6. Performance Systems
Towards building World Class Competencies
5. Human Resource
Awarded India’s Best Employer
2004
1. Right People
•
•
•
•
•
Customer focus
Quality focus
Cost focus
Innovation
Agility
2. Challenging assignments / International exposure
3. Meritocracy
4. Changes in Organizational Structure
Hierarchical
Organizational Structure
Cross
Functional
Team
Cross
Functional
Team
Cross
Functional
Team
Building World Class Competence
1. Offsetting cyclicality & de-risking
business model
1. Product Development
2. Supply Chain
3. Marketing & Sales
4. International Business
5. Human Resources
2. Increasing Competitiveness
6. Performance Systems
Towards building World Class Competencies
6. World Class Performance Systems
Tata Business Excellence Model (TBEM)
Balanced Score Card
• Financial & Business perspective
1.
Leadership
• Customer perspective
2.
Strategic Planning
3.
Customer & Market Focus
• Process perspective
• Learning & Growth perspective
4.
Information, analysis & KM
5.
Human resource focus
6.
Process management
7.
Business Results
Awards & Recognitions
• JRD QV TBEM Award for 2004-05
• ‘Hall of Fame’ for 2003 for effective
deployment of BSC
• CII-EXIM Bank Award for Business
Excellence for 2004-05
• 2 Case studies published in ‘HBS
Review’ on BSC deployment at Tata
Motors
Contents
1. Overview
2. Building World Class Competence
3. Results
Business Results
1. Negative Net Working Capital
11
8
0
'00-01
'01-02
'02-03
'03-04
'04-05
-20
-26
(Days of Sale)
2. Low Debt/Equity Ratio
0.94
0.92
0.61
0.56
0.35
'00-01
'01-02
'02-03
'03-04
'04-05
Business Results
454,300
(’05-06)
TML Sales
TML Turnover (USD Bn)
400,000
220,000
170,000
4.7
1.9
'00-01
'02-03
'04-05
TML PBT (USD Bn) & EBIDTA Margin (%)
'00-01
2.4
'02-03
TML Market Capitalization (USD Bn)
TML
13.3%
12.7%
'04-05
Ford
GM
TML
13.4
11.6
7.9
(NYSE 19 Apr’06)
0.3
TML
Maruti
M&M
ALL
3.9
7.2%
8.1(#1)
5.7
3.3
1.1
(BSE 31 Mar’06)
0.1
0.9
'00-01
(0.1)
'02-03
'04-05
Mar’02
Mar’04
Mar’06
EBIDTA (%)
1 USD = Rs 44
Thank You