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Corporate Strategy and Policy - Project report:Tata motors.

Extracts from this document...

Introduction

INDIAN INSTITUTE OF MANAGEMENT BANGALORE Corporate Strategy and Policy PROJECT REPORT: TATA MOTORS Submitted to: Prof Deepak K Sinha March 23, 2004 By Raghav Bihani (0311150) Sainag C V (0311151) Harshdeep Jolly (0311165) (0311166) TATA MOTORS - THE ROAD AHEAD SUBMITTED TO TATA MOTORS TATA HOUSE, MUMBAI On 24th March, 2004 Table of Contents TATA MOTORS - THE ROAD AHEAD 4 Challenges for Tata Motors 5 Automobile Industry Overview 5 Competitive Analysis 5 Key Recommendations 6 Elaboration 7 Criteria for evaluation 8 Rationale behind the recommendations 8 Launch of Rs 1 Lakh Car 10 Product Mix 10 MAVs 10 LCVs 10 Export of Commercial Vehicles 10 Other Alternatives Considered 11 Launch of passenger car in higher segments 12 Launch of Vehicles in the MUV Segment 13 Plan for Implementation 14 Business Level strategy 14 Functional Level Strategies 14 Product and Marketing Strategy 14 Production and Operations Strategy 14 Engineering and R&D strategy 15 Organization and Control Strategy 15 Budget and Financial Projections 16 Net present Value of Project ZING 16 Costs 16 Revenue 16 Net Present Value 16 Funds requirements to meet recommendations 17 Timetable 18 Possible Objections to recommendations 19 Contingency Plan 20 Appendix 21 Appendix 1: Porter for CV Segment 21 Appendix 2: Porter for Passenger Car Market 25 Appendix 3: TOWS Analysis for TATA Motors 29 Appendix 4: Calculations for the project MAGNA 29 Appendix 5: NPV Calculations for launch of car in C & D segment 29 Appendix 6: Cash Flows from ZING for 10 years after launch 30 Appendix 7: Requirements of funds for the various projects for the next 4 years 30 Appendix 8: Procurement of funds over the next 4 years to meet requirements 31 Appendix 9: SWOT Analysis of Competitors 31 Mahindra & Mahindra 31 Ashok Leyland 32 Swaraj Mazda 32 Volvo India 32 TATA MOTORS - THE ROAD AHEAD Tata Motors is a major player in the commercial vehicles segment (nearly 60% market share) ...read more.

Middle

Funds are also needed to maintain competitive position and for dividends. Funds requirements are immediate for MAVs while LCVs will be funded after 2 years. Exports of CVs will need approx. 100 crores annually. Detailed requirement of funds are given in Appendix 7. Funds shall be generated through internal accruals and borrowings. TATA Motors has additional funds after investing to maintain its competitive position. This is supplemented by external borrowings, especially a $500 million loan negotiated recently for next 4 years. Debt-equity ratio, which had fallen sharply as profits drove up equity, will be restored to its long-term average with this loan. The detailed funding is attached in Appendix. 8. Timetable The Time-Table for the recommendations, we have made, should be as follow: > ZING * The materials cost for ZING have been brought down to $1200 already * For the small car, ZING, the launch should be in the year 2007. This seems to be the earliest possible launch date considering the complexities involved in such a project. > Product Mix * The focus of the Company should be on MAVs in the next 2 years. This should include launching of higher tonnage vehicles. * The LCVs should be focused at a couple of years. This will give some time to the new transport policy to mature. Meanwhile the existing products in this segment can be continued to be pushed. > Exports of CVs * The exports should be in a phased manner - one geographical region at a time out of those identified. This will give the company flexibility to change the region in case of any unforeseen circumstances. * Once a foothold has been gained in one market, the company should move to another region. Possible Objections to recommendations 1. ZING - No guarantee of success: ZING might not be the huge success it aims for. There might be a design-actuality gap, which can cause the plan to off-track and result in a failure. ...read more.

Conclusion

For the first full year the sales are 10000 units, which result in a profit of Rs100 crores in the year 2008. This grows at the segment rate of 10% annually. Cost of capital is calculated at 10% for the project. Sales are projected based on total market and market share for TATA Motors. Appendix 6: Cash Flows from ZING for 10 years after launch Appendix 7: Requirements of funds for the various projects for the next 4 years Appendix 8: Procurement of funds over the next 4 years to meet requirements Appendix 9: SWOT Analysis of Competitors Mahindra & Mahindra STRENGTHS WEAKNESS * Tie ups with Nissan, Renault * Capacity 113000 CVs and 895000 tractors * Leader in tractors market-33.6% market share * Strong rural presence-75-80% Market share * Restricted to southern region in LCV segment * In most regions , market share below 5% in LCV OPPORTUNITIES THREATS * Export market * MUVs * Poor Monsoon * Competition from foreign players * Economic downturn Ashok Leyland STRENGTHS WEAKNESS * Second largest player * Strong presence in south:66% market share * Network of 141 dealers and 76 service centers * Only manufacturer of double decked buses * No presence in LCV-0.7%MS * Drop in capacity utilization OPPORTUNITIES THREATS * Export market * LCVs market entry * Gain foothold in North Indian market * Competition from foreign players like Volvo * Economic downturn Swaraj Mazda STRENGTHS WEAKNESS * Largest supplier to government and army * Over 100 models * Second largest player in the North * Low production capacity:5000 vehicles per annum * Dependence mainly on one sector OPPORTUNITIES THREATS * Shift to retail segment * Tap the private sector demand * Economic downturn * Cut in Government expenses especially defense. Volvo India STRENGTHS WEAKNESS * World's largest producer of CVs * Best technology * Expensive products * Weak dealer network * Only 22 service centers OPPORTUNITIES THREATS * Use India as global manufacturing base to export to South Africa, Middle East * Rs.700 million project with KSRTC * Change in government regulations related to foreign players 2 ...read more.

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