NORTH SOUTH UNIVERSITY
Executive Master of Business Administration
Spring-2022
EMB 690; Section-1
STRATEGIC MANAGEMENT
Quiz-ll
Business Case: Tata Nano
SUBMITTED TO
M. Nazmul Amin, Ph.D.
Department of Management
North South University
SUBMITTED BY
MD TAJUL ISLAM
ID: 2035137690
QUESTION-1: WHAT EXTERNAL AND INTERNAL FORCES INFLUENCED THE TATA
GROUP TO DESIGN THE TATA NANO? EXPLAIN.
ANSWER:
The Tata Nano is a compact city car that was manufactured and marketed by Indian automaker
Tata Motors over a single generation. TATA NANO started aiming the concept of making world’s
cheapest car. Keeping in mind about the people of middle class they started their four wheeled
vehicle project. Internal and external forces are very important for any business. External and
internal environment has many influences in business to run it effectively and efficiently. It
involves many factors outside and inside of the organizations that can give opportunities of
pressure to the business. The overall success of any business organizations depends on its
consciousness about its surroundings, environment and flexibility to cope up with the changing
environment.
External forces may be defined as combinations of some factors that cannot be controlled in nature
and its effects on organizational decision. These are economical, demographical, legal and
governmental, social and cultural and so on.
External forces influenced to design TATA NANO: A company’s external environment
includes all relevant factors & influences outside the company’s boundaries; by relevant means
important enough to the decisions the company ultimately makes about its direction, objectives,
strategy, & business model. The external environment of an organization are those variables
outside the organization that influence the organization's capacity to work.
The external factors that influence the design of TATA NANO are shortly discuss given below:
a. Economic factors: the economic changes in India are certain yet a developing country like
India has understood the importance of what manufacturing sectors can bring to the table.
India want to prove its worth in manufacturing sector and economic changes brought out
by the government will help in boosting the factor.
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b. Social, cultural, demographic factors: cheap labor available in India is an advantage of
any production related company in the country. Strategically the company has set up
production units are right locations for competitive advantage. Four wheel carries a status
that’s why TATA NANO keeping this emotion of middle class people in mind became
influence to launch the worlds cheapest car.
c. Availability of raw materials: one of the main reasons the Nano is the cheapest price in
the world due to its 97% of its parts locally sourced.
d. Political, government and legal factors: the company needs keep the changing itself and
adapt to the changing political environment. Government policies have a cascading effect
on the automotive factors in India. Budget allocated by the government and the taxation
rules are volatile.
e. Technological forces: the company has always been a foot ahead in developing the
technological innovation. With the own technological center and by adopting the new
technologies, TATA has the competitive advantage of being technologically ahead and its
influenced for their new projects.
Internal factors influenced to design TATA NANO: An internal environmental analysis is an
extensive review of all aspects of a company's operations, internal guidance and mission. Aspects
of operations typically reviewed are marketing strategy, production capacity, and the company's
vision and leadership. All of these things are examined with a critical eye to uncover those aspects
that may be problematic, yet go unnoticed in daily operations.
The internal factors that influenced the design of Tata Nano are shortly discussed given below:
a. Gross functional team: some skilled engineer and labor team up for Tata Nano project.
Working in a friendly environment gave them very good output.
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b. Brand culture: Tata group usually carry a brand culture so that their products are a little
different from their competitor. That’s the another reason of Tata Nano projects.
c. Involvement: in Tata Nano project Ratan Tata was highly involved. Including guidance,
he observed everything closely which acted as important internal factors.
From the above discussion we can understand how the internal and external factors influenced to
launch TATA NANO project.
QUESTION-2: WHAT ARE THE REASONS BEHIND THE FAILURE OF THE TATA
NANO? DESPITE THIS, IS IT A VERY WELL DESIGNED VEHICLE? WHAT ARE YOUR
THOUGHTS ON THE ISSUE? EXPLAIN.
ANSWER:
The Tata Nano was the crown jewel of Tata back in 2009, it was Tata’s Tesla Model 3 in the sense
that it was Tata’s effort in bringing a car down to a ridiculously low price to make it accessible to
everyone. But Tata’s project was way bigger!
The Nano was Tata’s dream! It launched with a base price of just Rs. 1 lakh, making it the cheapest
production car in the world. In fact, documentaries were shot on Tata’s triumph. But Tata in 2009
did not know that the Nano’s woes were about to begin.
But today the traces of that ‘dream project’ is nowhere to be found since Tata Motors pulled the
plug on the Nano during the 2018-19 fiscal year as sales started to plummet. Here’s what went
wrong with the Tata Nano.
a. Strategic shortcomings: Tata Nano during its debut was able to garner a tremendous
amount of accolades as this was simply unheard before. It was considered to be a great
invention during the time. But unfortunately enough, this invention couldn’t become a
‘game-changer’.
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•
The reason behind it was the lack of a correct strategy for a product like this. Firstly,
Tata motors couldn’t reach out to its target market since their dealer network was
situated only in the urban areas while the target market was situated in towns and
villages. Their target market wasn’t familiar with the car-buying experience and the
company was not able to bridge that gap.
•
This situation was further worsened when the project faced an eighteen-month
delay as the production unit had to be shifted from Singur, West Bengal to Sanand,
Gujrat.
•
The Nano was marketed as the “One lakh Rupee” car but after some time Tata was
not able to keep up with that price and the on-road price for a base variant Nano
started to come around 2.59 lakhs which defeated their marketing campaign for the
car.
b. Mediocre Marketing: Marketing was not Tata’s cup of tea back then and the marketing
was not up to the mark for this car. A car priced this low needs adequate marketing to cover
costs, and, well, advertise the car.
Tata went full beans on their marketing initiatives but they were too aggressive on using
the term ‘cheapest’. Unfortunately, the car landed upon us when we were using the word
‘cheap’ as a metaphor to criticize the bad quality of something. This created a stigma that
caused the public to perceive the car as inferior, which it certainly was not.
c. Financial Errors: Tata invested a lot of money into this project. They engineered an
entirely new engine, a two-cylinder unit and built the Sanand plant in Gujarat primarily for
the Nano. As one can imagine, these investments were not cheap.
Now, these costs are quite normal for a car in general. But when this car costs just a lakh,
the margins are quite low, hence recovery of investments is solely dependent on the volume
of sales, which is dependent on proper marketing. See how these are interlinked?
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Tata also made another error by launching the Rs. 1 lakh variant from the get-go. This
caused some serious stability problems in production, as sales initially skyrocketed for the
base model. Tata could have waited and slowly released the base model of the Nano a few
months after the launch of the car. This would have given them time to stabilise their
production and remove the build quality issues the car initially had.
d. Customer’s perception: Unfortunately, the word “Cheap” or “Lakhtakiya” (worth a lakh)
didn’t go down well with potential buyers. Tata Motors while developing the Nano thought
that they have hit the bullseye when it came to comprehending what the Indian Market
needs but as it turns out, they needed to be more ambiguous while interpreting the consumer
needs.
•
Tata Nano right from the beginning was a product that Tata Motors thought is
something that the customers need and was never the outcome of an assessment
program of what the customers possibly needed. This approach didn’t bode well
for the sales of Nano.
•
Tata Nano was marketed as the “cheapest car in the world”. Unfortunately, this
strategy didn’t work in favour of the Nano as it immediately gained a reputation of
a “cheap car” amongst the consumers who don’t want to get associated with a lowend car especially in the urban sector.
•
To avoid being associated with a ‘cheap car’, the Indian consumers were witnessed
going for a used car from a segment above than buying a Nano.
e. Shoddy build-quality: The Tata Nano had impressive features like a small fuel-efficient
engine, enough room to seat four adults abreast with ease, high ground-clearance, and
being sturdy and robust enough for long journeys.
However, the car faced a lot of technical issues in its initial production run which further
contributed to its failure.
•
During the first two years, several Tata Nano cars were reported to catch on fire
due to faulty wiring.
•
The Nano had poor ride comfort and stability issues due to the lightweight body.
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•
Tata focused on making the car as affordable as possible, so much so that it
influenced the use of cheap and inadequate materials which resulted in a very poor
built quality.
The Tata Nano failed to be the innovative car it was aspired to be and is still considered
one of the biggest tragedies in the history of the Indian Automotive Industry.
QUESTION-3: WHAT LESSONS CAN BE LEARNED BY OTHER COMPANIES
CONSIDERING THE TATA NANO’S FAILURE? EXPLAIN.
ANSWER:
Tata Motors recently decided to shut down the production of the Nano owing to poor demand. The
Nano, often hailed as the “World’s Cheapest car” globally, had its fate sealed after selling just a
single unit in the whole of 2019.
There are no shortages of reasons for the Nano’s poor showing: production delays, fires, the stigma
attached to buying a “cheap” car. But the real problem is not with the car; it’s with the hype
surrounding it that tied Tata’s hands.
Since the Tata Nano is on its way out, it’s time to learn lessons from the brand's fall from grace.
Let the lessons now begin:
a. The 'Solution' lesson - The best of brands know they are in the business of solutions not
products. To get this right, businesses have to abandon the engineering mindset, one that's
focused on building products, not solutions. Once described as the powering force behind
the Nano miracle stands exposed today. Frugal cuts back on spending, thus cutting back on
building a solution. All frugal engineering does is build products that work. That is just the
default limited job done, and that's not good enough to step into solution territory. To me,
the Tata Nano was more a 'product' than a 'solution'. You see, buyers don't give a whit to
products, they seek after solutions.
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b. The 'Value' lesson - An extension to the solution lesson, value is about what consumers
seek and desire. Understanding value in its entirety requires businesses step outside the
limiting confines of viewing value only as utility. You see, value is way beyond mere
utility. Value encompasses elements that are sociological and psychogenic in nature.
Meaning, consumption has social and psychological contexts to it. A car is as much about
a place as it is about transportation. Again, a car is as much about persona exhibitions as it
is about mobility. Stepping into such zones of value is seeing value in its entirety.
Unfortunately for the Tata Nano, its delivery of value was merely utilitarian.
c. The 'Competition' lesson - An assessment of value by consumers is never an 'absolute'
one. In fact, value assessments are arrived at in a 'relative' fashion, in a competitive
marketplace. No buyer considers a car brand for purchase without pitching it against other
brands. When such comparisons happen, what may seem like value to the seller, may not
be the 'best' value to the buyer from among the choices he/she has. The Tata Nano may
have scored on the price parameter vis-a-vis competing brands, but on every other element
of value it under-performed. Buyers thus found better propositions in budget cars, and they
were willing to pay higher price.
d. The 'Positioning' Lesson - Many times marketers tend to believe positioning is only about
marketing communication. Dead wrong. Positioning is about occupying a distinct space in
the minds of consumers using every possible marketing stimulus available. In theory, that
means all marketing mix variables. The Tata Nano tried to advertise its way into
positioning itself. It just didn't work. First, the brand ran Ads to appeal to families, and
when it didn't do the job, it used Masaba Gupta and the 'Twist' avatar to appeal to Indian
youth. Again, it failed. What happened was that every other stimulus, including the product
itself worked at crossroads to what the Ads were trying to portray. Truth be told, the
unappealing looks of the product, to its lack of status value negated everything advertising
was trying to pitch. Such a pity all that advertising effort was wasted dollars.
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QUESTION-4: HOW TO DIAGNOSE THE CAUSES OF POOR PERFORMANCE?
DISCUSS GIVING EXAMPLES FROM TATA GROUP AND TATA NANO.
ANSWER:
Poor performance is legally defined as 'when an employee's behavior or performance might fall
below the required standard'. Dealing with poor performance is, however, a legal minefield. This
might explain why some employers tend to confuse poor performance with negligence, incapacity
or misconduct. To fix the problem of poor performance we need to diagnose the causes first.
Four factors to consider when analyzing poor performance:
a. Performance standard: Performance standards are guidelines the employers give to their
employees to outline what the company expects of them as a part of its team. They explain
job duties and qualities and to what quality the employee should complete them. Though
employers use performance standards for all employees, they typically give these
guidelines to new hires to help them understand their roles and responsibilities. Employers
may also use performance standards to help evaluate team members. Performance
standards should treat all employees equally and should be specific, measurable and easy
to understand. There are three common levels of performance management:
•
Strategic: This level refers to goals on the organizational, or company, level.
Strategic standards should align with the company's vision, objectives and values.
•
Operational: This level of performance management emphasizes how
departmental activities work to achieve the company's goals. Employers may make
performance standards that apply to the company's departments.
•
Individual: This level focuses on the individual employee to ensure that all
employees are performing their tasks well. Individual standards evaluate
employees' work and seek to improve the quality of their performances.
b. Authentic Sources: The sources should be actual and fact full from where the information
has been taken. And performance could be measured. The quality of being genuine, not a
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counterfeit, and free from tampering, and is typically inferred from internal and external
evidence, including its physical characteristics, structure, content, and context.
c. Analysis thereat: A threat analysis typically consists of identifying the assets to be
protected, as well as identifying and evaluating possible threats. It is a process used to
determine which components of the system need to be protected and the types of security
risks (threats) they should be protected from.
d. Feedback: Responsiveness from the customer known as feedback. Feedback is a tool that
can help people evaluate themselves and their work and also how others perceive them.
While employees and students need to receive feedback, it's also essential for leaders who
believe in growth to ask for an evaluation, to give an example, and be an inspiration for
them.
TATA group, specially TATA NANO should concern about the following things to minimize the
risk and maximize the performance standard. Their market surveying, opportunities, threats
(competitors) should be measured to fall apart from the market. And most importantly the customer
feedback is essential. The main hinders for the company is to maintain the cost and quality at the
same time.
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