Tata Motors Strategy: Business Management & Growth Rates

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In this paper, you will find a thorough analysis of Tata Motors strategy. The author reveals Tata Motors growth strategy, marketing policies, pricing management, and other business factors.

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Introduction

The automotive industry is one of the world’s most competitive business areas. As a result, strategic management has remained an important aspect of this industry as companies strive to review, redesign, manufacture, and supply vehicles that meet varying customer need around the world. To adapt to the ever-changing market demands, this industry requires supportive industrial policies. The automotive industry goes far beyond the production of vehicles to encompass activities such as sales, logistics, and aftermarket stages. Consequently, companies operating in this field need suitable frameworks that support the trends of a competitive business environment.

Founded in 1945, Tata Motors (a subsidiary of Tata Group) is one of India’s leading producers and suppliers of utility, commercial, and passenger vehicles. The global automotive industry is extremely competitive. Tata Motors faces strong rivalry from other vehicle manufacturers in the respective markets in which it functions. In the midst of continued globalization and consolidation of the international automotive industry, competition is predicted to intensify.

Various factors that determine the level of competitiveness in this industry include inventiveness, quality, dependability, safety, fuel efficiency, pricing, and customer service, among others. Intensified rivalry can result in reduced vehicle unit sales and a bigger inventory. This situation can bring about subsidization of prices, thereby affecting Tata Motor’s financial conditions. Therefore, the company’s ability to uphold its competitiveness through proper strategic management plans will be paramount to its success in both existing and emerging markets.

Tata Motors Business Indicators

Tata Motor’s Mission & Vision & Strategy

Tata Motors has devised a new organizational plan that has been underpinned by changes in its mission, vision, and strategy. The new plan is aimed at realizing sustainable financial performance by manufacturing and supplying nerve-racking inventions. An inquiry into the company’s mission and the vision reveals that it is focused on creating a noble brand image that will attract more buyers. Tata Motor’s new mission states, “We innovate mobility solutions with a passion for enhancing the quality of life” (Gupta and Malhotra 111). The company strives to be among the first three leading producers of commercial automobiles in the global market by 2019.

Its vision statement shows that Tata Motors is seeking improved product quality, efficiency, and value in a way that will boost esteem amongst its clientele, personnel, business allies, and stockholders. Recently, the company revamped its strategy with the aim of gaining a larger market share in the global automobile industry. The new plan entails the introduction of a sub-brand TAMO besides the other two modular platforms (Pathak and Pathak 17). Various improvements will also be made to the passenger car segment to counter competition arising from other players in the industry. The innovative modular platforms will help the company to launch more products across its various business segments.

Company Size and Growth Rate

Tata Motors Limited is the largest designer, manufacturer, and supplier of trucks, vans, passenger cars, construction equipment, coaches, and buses in India. It leads to the supply of commercial vehicles, which are deemed the best in all business segments in India. In addition to Land Rover, Tata Motors owns Jaguar, a famous British automobile company that manufactures luxury vehicles (Pathak and Pathak 16)

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Tata Motors is a sprawling conglomerate that has spread over many countries across the globe. Figure 1 below shows that Tata Motors has a steady upward trend. Increasing financial performance in each year shows improving sales for vehicles and spare parts. The percentage change from the previous year implies that Tata Motor’s growth rate is steady.

Revenue and Net Income, EPS Growth Rate.
Figure 1: Revenue and Net Income, EPS Growth Rate.

Market Size

The company looks forward to regaining its 10% market share in passenger vehicles by the fiscal year 2019/2020. Currently, it has dropped to approximately 5.4%.

Products/services

Tata Motors Limited manufactures and supplies trucks, vans, passenger cars, construction equipment, coaches, and buses in India. The company is planning to introduce new brands to meet the prevailing market demand for passenger cars globally.

Profitability

In the 2016 fiscal year, the company’s profitability was significantly affected by turbulence in financial markets and volatile exchange rates. Nonetheless, the company’s revenues are nearly 9 billion US dollars.

Internal Resources & Capabilities

Various resources and capabilities that underpin competitiveness at Tata Motors include its highly skilled employees, unified corporate culture, entrepreneurial spirit, and brand equity. However, the company is incurring high initial capital to deliver the Tata Nano, which will be the world’s most economical and cheapest car. As the largest manufacturer and supplier of both passenger and commercial vehicles in India, the company boasts approximately 9 million Tata branded vehicles plying worldwide. The success of the company is underpinned by outstanding human resources who have excellent management capabilities to take it through economic slumps.

Tata Motors is currently focused on future auto technology capabilities that will improve various automobile aspects such as fuel consumption and high performance. Investment in auto technology will result in reduced capital expenditure as customers will now have a chance to choose vehicles of their choice from a wide range. The sub-brand TAMO, which is an open platform, will create an opportunity to integrate modern technology into new designs; hence, it will underpin the introduction of a low-volume niche product.

External Market Environment

Tata Motors has established a strong brand image in countries such as the UK. The government has enacted various reforms that have liberated the economy. This situation has reduced entry and exit barriers significantly. As a result, the company stands an opportunity to leverage its brand equity and financial resources. The global market for Tata Motors is seemingly attractive. The company should aim at tapping unseen opportunities, especially in the designing, production, and delivery of relatively cheap electric cars in both local and international markets.

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Tata Motors falls in the highly fragmented automobile industry. As such, it has, in the past, user acquisition strategies to boost its growth rate. In 2008, Tata Motors acquired both Jaguar and Land Rover from the Ford Motor Company at a discounted price. This situation increased the firm’s market power and position in the international arena significantly. Indeed, the integration of Jaguar and Land Rover into Tata Motors has improved the company’s sales revenues besides providing an opportunity for a better presence in international markets. Overall, acquisitions have significantly increased Tata Motor’s growth rate, enabling it to gain access to luxury markets.

Customer characteristics at Tata Motors are significantly influenced by its lean production strategy that has led to various issues on safety standards, especially with the introduction of the Tata Nano. As a result, some customers (whose priority is safety) prefer purchasing brands from other automobile companies.

The industry’s driving force for Tata Motors is the urge to deliver midsize cars and utility vehicles (UVs) that are becoming popular in the automobile industry. The company also needs to tap huge profits that accrue from aggressive pricing of these vehicles, especially sedans and small UVs.

Tata Motors Vs. Fiat SWOT Analysis

Strengths

At the outset, Both Tata Motors and Fiat enjoy a strong presence in their Indian and Italian home markets respectively. Tata Motors is the leading manufacturer of commercial automobiles in almost every business segment. It also falls under the top three companies that provide passenger vehicles in India. Besides acquisition and expansion strategies, Tata Motors has invested in an intensive management development program with a view of creating junior leaders to perpetuate the company to future generations. In addition, the company has a wide range of automobile products from passenger cars to commercial vehicles and trucks. On the other hand, Fiat is the leading automobile manufacturer in Italy. First, the company has qualified staff members provide accurate and timely market forecasts. In addition, customers enjoy purchasing cars with relative fuel efficiency as compared to those offered by competitor companies.

Weaknesses

Tata Motor’s weaknesses include its absence in the luxury car segment despite its acquisition of Jaguar and Land Rover businesses. Furthermore, the firm concentrates on its home market and neighboring countries such as Sri Lanka, Pakistan, and Bangladesh. This situation limits its presence in overseas countries. Besides, the design of Tata Motor’s cars does not conform to safety standards anticipated in the automobile industry. This situation has slowed the company’s return on investment. The greatest weakness of Fiat is the existence of inadequate investments that make its industrial units inflexible. As compared to Tata Motors where unified corporate strategy is followed, there is lack of cooperation from Fiat’s workforce due to a failure to understand consumer trends and needs.

Opportunities

The acquisition of Jaguar and Land Rover businesses has resulted in additional value to the product portfolio of Tata Motors. Moreover, there is an increased demand its cheap passenger cars. Unlike Tata Motors, Fiat stands a chance to tap the market for performance cars in the international arena.

Threats

Tata Motor’s negligence to conform to safety standards will eventually lay down public trust on its wide range of products. With the emergence of new car models with high-end technology and appealing shapes, both Tata Motors and Fiat are challenged to catch up with rivals such as Volkswagen, Peugeot, and Citroen.

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Tata Motors: Porter’s Five Forces

Barriers to Entry

Tata Motor’s has been in the automobile industry for a long time; hence, there are seemingly no barriers to introduction of its sub-brand TAMO. However, there gaining the trust of customers in its new innovation will be challenging, particularly due to the firm’s poor adherence to safety standards (Bhatia 113).

Threat of Substitutes

Railways and airlines are the only substitutes for automobiles. However, these modes of transport are only substitutes for a considerably small number of customers worldwide in some situations.

Bargaining Power of Suppliers

The manufacturing of an automobile demands various inputs including cushions, steel, tires, and technology. In India, the demand for steel surpasses its supply. Since this raw material is most imported from abroad, the bargaining power of suppliers is high (Bhatia 113).

Bargaining Power of Buyers

There is an increased demand for cheap passenger cars that are also fuel efficient. As a result, Tata Motors may have a say in the setting of the price for its sub-brand TAMO. However, the company has a good relation with its suppliers and, thus, buyers enjoy stable prices for its products.

Industry Rivalry

Tata Motors enjoys a large customer base in the Indian market and in neighboring countries. However, there is still high competition in the international market from other companies such as Eicher Motors, Ashok Leyland, and Mahindra that manufacture commercial vehicles.

Tata Motors Current Position

Worldwide, Tata Motors takes the second position in the manufacture of buses and fourth position in designing and production of trucks. It is ranked the sixteenth biggest designer and manufacturer of automobile globally with production and assembly plants in various parts of India. Since its establishment, the company has supplied over 9 million vehicles in India alone. It has more than 6000 branches worldwide that offer dealership, sales, auxiliary parts, and services (Bhatia 116).

Tata Motors Future Outlook

In its plan to be among the top manufacturers of automobiles globally, Tata Motors looks forward to the introduction of a range of innovations that will address various mobility solutions in the near future. The firm is currently setting up several innovation centers in various parts of the globe that will increase its presence in the international arena. In line with its mission to manufacture innovative automobiles, the firm is profoundly discovering opportunities that will enable it to deliver seamless mobility solutions to its diverse clientele worldwide. By diversifying its product portfolio, the company anticipates becoming a big player in the mass car market by 2019.

Business Strategy Recommendation

Tata Motor’s strategic plan aims at finding seamless solutions to operational challenges with a view of increasing its share in the international market. In the 2015/2016 financial year, the company’s market share reduced to about 44% and 5.4% in commercial and passenger vehicles respectively. To gain about 50% of the market share, the company will have to restructure its strategic plan in both the commercial and passenger vehicle segments. To achieve this objective the company should ensure that its anticipated new vehicles are launched in good time with adequate inventories kept to meet the prevailing market demand.

Currently, the firm is facing stiff competition from companies such as Ashok Leyland and Eicher Motors in the design, production, and delivery of commercial vehicles (Kumar 21). As it seems, capturing 50% of the automobile market in this segment could be challenging. However, the Tata Motor’s automotive market is growing strongly in India. Thus, the company should aim at increasing its regional stake to regain its lost identity. This plan will lay a robust framework for attracting more customers in the international arena.

Another key area that requires strategic improvement is compliance to automobile safety standards. Customers already know that the company has been adamant to manufacturing vehicles that increase the safety of the passengers. The introduction of new brands should be accompanied by adherence to safety standards to increase customer’s trust in Tata brands.

In conclusion, the Tata Motors should work on a number of initiatives such as improving the sales network and diversifying its product portfolio. Besides, the firm should upgrade its manufacturing processes with a view of refining its brand image as one way of achieving its goal to be among the topmost players in the automobile industry.

References

Bhatia, Jeannie. “Porter’s Five Forces Industry Analysis of Indian Passenger Car Industry.” Pacific Business Review International, vol. 8, no. 7, 2016, pp. 113-123.

Gupta, Suraksha, and Naresh Malhotra. “Marketing Innovation: A Resource-based View of International and Local Firms.” Marketing Intelligence & Planning, vol. 31, no. 2, 2013, pp. 111-126.

Kumar, Srirama. “Business Sustenance through Open Innovation at Tata Motors Limited.” Projects (VEAS), vol. 37, no. 1, 2014, pp. 21.

Pathak, Atul Arun and Atul Arun Pathak. “Tata Motors’ Successful Cross-Border Acquisition of Jaguar Land Rover: Key Take-Aways.” Strategic Direction, vol. 32, no. 9, 2016, pp. 15-18.

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