6/10/2009
MARKET ENTRY STRATEGIES
FOR MEXICO
IBUS 357 | Sasha Oness, Myrosha Daley, Cecile Wong
Table of Contents
Executive Summary......................................................................................................................... 3
Target Market ................................................................................................................................. 4
Uncontrollable Environments ......................................................................................................... 4
Political and Government Factors........................................................................................... 4
Economy.................................................................................................................................. 4
Labour ..................................................................................................................................... 5
Competition ............................................................................................................................ 5
Product ............................................................................................................................................ 5
Product-Adaption Decision Factors ........................................................................................ 6
Entry Mode ..................................................................................................................................... 7
Internal and External Factors .................................................................................................. 7
Industry and Competition ....................................................................................................... 8
Marketing Mix ................................................................................................................................. 9
Product and Promotion .......................................................................................................... 9
Product Positioning Chart ..................................................................................................... 10
Price .............................................................................................................................................. 10
Place and Distribution ................................................................................................................... 10
Bibliography .................................................................................................................................. 12
Executive Summary
Tata Motors of India has introduced the Tata Nano; a new breed of 21 st century cars that is a
smaller, lighter, affordable, rear-engine, 4-passenger, fuel efficient car. We intend to market
the Nano to the Mexican middle class which is rising and booming very rapidly. Multiparty
elections has made the political and economic factors of Mexico much more stable, and along
with new free trade agreements, this market is one to watch.
In order to take advantage of economies of scale we intend to standardize and use dual
adaption for the product and promotion. Branding the car is simple – the Tata Poco will create
loyalty and will help to differentiate ourselves from international competition – it will hit home
with our consumers. We will focus on a hierarchical form of entry mode and will make use of
sales and production subsidiaries with R&D in the home country and marketing efforts in the
host country; creating better ownership, avoidance of tariffs and shipping costs.
To promote the Poco we will focus on 2 key attributes: strong family values and a passion for
soccer, along with incentives for consumers such as the Tatalana – “lana,” cash, back into
consumer hands. Pricing for the Poco will take two forms: price penetration and low cost in
order to be highly competitive in the market. To distribute the Poco we will build Trial and
Order centers where consumers can drive and place an order for a Poco. The JIT strategy will
enable us to take advantage of intensive market coverage through our unique distribution
model.
Additionally, we believe Mexico will become our Lead Country for future expansion into the
Americas. Tata will adopt a polycentric orientation recognizing that Mexico is socio-culturally
unique in order to best exploit our advantage.
Target Market

Targeting the Mexican middle class. The class is rising and booming very rapidly.

The middle class is defined as $7,000-$50,000 a year. The number has risen to 10
million families. The percentage has risen to almost 40% opposed to 30% of Mexican
households.

The reason why we are targeting Mexican middle class is because wages have gone up,
women are having fewer children, and more of them are joining the workforce.
Uncontrollable Environments
Political and Government Factors

Their political and government factors are much more stable due largely to the
successful transition from a single party rule to multiparty elections.

Mexico has signed several free trade agreements with Japan and the European Union,
an agreement that the US doesn’t have, which gives them an advantage.

Mexico already has a free trade agreement with North America as well.
Economy

Mexico’s economy has been on a steady rise over the past decades, mainly because of
other American car manufacturers in Mexico.

This has helped the middle class more prominent because of higher wages.

Mexico has grown to become the world’s 14th largest country with a GDP of $840, 012
in 2006.

However with the recent recession, Mexican stock markets are dropped 35%. The Peso
has depreciated by 40% since March 2008.
Labour

There is already a skilled labour force with the automotive industry, with Ford’s
manufacturing plant.
Competition

Not a direct competition, however it is a threat. Another form of personal motorized
transportation would be scooters.
Product

The Nano name will be changed to the Poco which means little in Spanish – Mexico’s
dominant language.

We will be manufacturing the Nano CX variant which is the middle of the 3 variants
being produced in India right now. It has all the features of the Nano but includes AC
which is extremely important to our Mexican Market.

The steering wheel will be adjusted to the opposite side which is the standard in Mexico
and will not be producing the car in the color yellow for in Mexico yellow means
mourning and this would negatively affects that particular colors’ sale.

We will be standardizing the product along with a dual adaption of product and
promotion (see marketing mix) – will adapt the product slightly for our international
market.

Because we are integrating into the Mexican Market we are standardizing to take
advantage of economies of scale and research and development but will hope to gain a
balance of standardization and adaption to take advantage of the marketing concept
and to meet the differing consumer needs.
Product-Adaption Decision Factors
Market Characteristics

The market in Mexico is rising very quickly along with the number of potential
consumers – economic status is in good standing

Will not be dealing with too many barriers since we are not exporting into the country
but instead are manufacturing there – so government regulations will take effect
Product Characteristics

Brand – will be focussing on the Tata Poco which our consumers can relate to easily – it
is identifiable and will differentiate us from competition

Packaging – as mentioned above will be package the Poco as the CX variant and it will
come in White, Blue, Red, and Silver – not yellow.
Company Considerations

Resources – labour will not be an issue since there are numerous engineers and
experienced auto-industry workers in Mexico – land is available and inexpensive which
makes creating a plant there a good option
Entry Mode

Tata will use a Hierarchical Mode to enter the market of Mexico with its product, the
Poco and will make use of sales and production subsidiaries. Tata will maintain R&D in
the home country in order to benefit from economies of scale.

Marketing efforts for the Poco will take place in the host country. We recognize that
this choice is higher risk and that we will have to commit more resources.

The benefits will be better control as well as ownership. In doing this we will avoid
tariffs and shipping costs which will offset the additional resource commitment of this
decision.

Additionally, we believe Mexico will become our Lead Country (LC) for future expansion
into the Americas. Tata will adopt a polycentric orientation recognizing that Mexico is
socio-culturally unique in order to best exploit our advantage.
Internal and External Factors

As a large scale enterprise Tata will take advantage of its resources when making its
move to market the Poco in Mexico.

Capitalize on international experience as we make this move. Socio-cultural distance will
not be considered a deterrent for this effort. The risk of conducting business in this
country is perceived as low and the market size and potential growth are attractive.

Recent agreements made between India and Mexico will minimize trade barriers for this
project and the automobile market is competitive but not so that it is a deterrent for a
Hierarchical mode of entry.
Industry and Competition
Barriers to entry
 Political barriers to entry are Low

Industry barriers are Med

Financial cost represents a Higher barrier
Supplier power

Supplier power is Med – High

Parts are specific

Few suppliers

Power adjusted via contracts and alliances
Threat of substitutes

Threat of substitutes is Med

Coach bus travel is common in Mexico, however public transit within
cities can be poor

Scooters are very common substitute and less expensive, but lack
utility/capacity
Threat of new entrants

Threat of new entrants is Low

Threat of start-ups is low, this is a capital intensive industry
Competition/Rivalry

Competition is High, most major auto manufacturers have a presence in
Mexico

Many competitors in a slow growth market
Other market players and comparable products include:

GM Aveo 167,207 pesos*

VW Pointer 92,060 pesos

Toyota Yaris 151,100 pesos

Nissan Aprio 101,700 pesos

Ford Fiesta 123,000 pesos
*All prices listed at Mexican market list price.
(All models listed are base models. Manual transmission and no A/C)
Marketing Mix
Product and Promotion

Tata will use a dual adaptation of product and promotion.

The product modifications made to the product will only be to satisfy regulations
and consumer expectations of the norm. Any other changes will be kept to a
minimum to avoid driving up the price, as this is our key competitive advantage.

Through familiarizing ourselves with the culture of our market we will use
effective communications to hit our target. Key components of our marketing
messages will include these key attributes:
1. Strong family values
2. A passion for soccer

Additionally we will use innovative and current successful promotions.

‘Tatalana’ will be a promotion that will put ‘lana’, cash, back into hands of purchasers.
We will offer cash to purchasers as an incentive to buy or finance a Tata Poco. These
kinds of promotions have proved highly effective in Mexico.
Product Positioning Chart
Expensive
GM Aveo
Toyota Yaris
Utility
Luxury
Ford Fiesta
Nissan Aprio
VW Pointer
Tata Poco
Affordable
Price

For the product of the Poco, Tata will use a combination of pricing strategies.

#1: Penetration Pricing. We recognize that we are entering a competitive market with
established brands.

To gain market share we will enter with prices below competitors. As we gain market
share and brand recognition we can raise the price in order to maximize revenues.

#2: Low Cost. Tata will offer a product similar to its competitors at a lower price. The
initial price that we will offer the Tata for in Mexico will be 50,000 pesos. This will leave
us with a very good margin and will be highly competitive in the market.
Place and Distribution

Tata will reinvent the conventional auto industry distribution model - build Trial & Order
centres. Purpose of these centres will be for consumers to test drive and place an order
for a Poco. These store fronts will simple, small and numerous.

Inventory units will be for customers who cannot wait for the manufacturing delay.

Customers will have the choice of model and color. An order will be placed and
manufacturing will begin.

Manufacturing delay will be minimal as car is very simple. The cars will be shipped to the
centres, and staff will deliver the car to the customer.

Cost of labour in Mexico is low, so staffing these centres will be inexpensive. Trial &
Order centres will be located in close proximity to banks so that financing will be
available within walking distance. One in five of these centres will be designed for aftersales service.

Made-to-order strategy because of the simplicity of this car. We will take advantage of
Intensive market coverage through this unique Distribution model.

Minimize our Channel length, preventing price escalation and preserving our
competitive advantage = high level of control over how our brand is managed and
product is marketed.

By eliminating the costs associated with maintaining inventory we will preserve our
competitive advantage, of price, even further.
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