Corporate Strategy and Policy - Project report:Tata motors.

Authors Avatar

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

Key Recommendations        

TATA MOTORS - THE ROAD AHEAD

Tata Motors is a major player in the commercial vehicles segment (nearly 60% market share) and is trying to become a force in the passenger car segment. TATA Motors faces unique challenges and opportunities in different sectors of the automobile industry. This report analyses the industry, challenges and opportunities before Tata Motors and how the company can utilize its strengths to develop a winning strategy for the future.

Challenges for Tata Motors

Tata Motors has to maintain growth and profitability in the dynamic automobile industry:

It has to meet the twin objectives of:

  • Sustaining leadership position in the commercial vehicles segment
  • Improving competitive position in the passenger car market

Automobile Industry Overview

We begin by analyzing the automobile industry .Some basic facts about the industry are:

  • The Industry can be characterized into Passenger cars (12%), two wheelers (82%), commercial vehicles (3%) and tractors (3%)
  • The size of commercial vehicle (CV) industry is estimated to be 90 billion and has a CAGR (2004-09) of 5.2%
  • The CV industry faces cyclical demand, the demand being influenced by industrial and agricultural production, state of roads and government policies
  • The passenger car market is a highly competitive market (size at 6 lakh units p.a.) and has a CAGR of 8%
  • Tata Motors has a 13% market share in the passenger car segment with Indica and Indigo being the prime offerings

Competitive Analysis

A Porters analysis was done for both the commercial vehicles segment and passenger car segment (Appendix 1 and 2). The CV segment is moderately attractive. The passenger car segment is less attractive than the CV segment

TOWS analysis of Tata Motors was done (Appendix 3). It helps bring out the challenges facing the company and gives a direction for future strategy. Some key inferences are:

  • Tata motors should utilize its research and development capabilities and strong dealership network to bring out and market a “common man’s” car
  • It should defend its position in the HCV market, where foreign competition is not strong as yet.
  • New MAVs could be launched to counter threat of LCV players entering into the heavy commercial vehicle segment
  • Leverage Brand image and strong sales and distribution network to stave of foreign competition.

SWOT analysis for the competitors of Tata Motors (Mahindra, Ashok Leyland, and Volvo) is given in Appendix 9.

Key Recommendations

We recommend the following actions for TATA Motors in certain key areas

  • Launch of Rs 1 Lakh Car – Although overall the passenger car market is not so attractive there are certain niches in the market which are quite profitable and which can be exploited by the company. One such area is the lower ‘A’ segment. The company should go ahead with the launch of the Rs 1 Lakh car in this segment.
  • Product Mix
  • MAVs – The Company should focus on Multi-Axle Vehicles as we see a huge growth potential in this segment.
  • LCVs – In the coming years, the development of the new transport policy will push the demand for the Light Commercial Vehicles. The Company should look at LCVs also in its portfolio to take advantage of this opportunity.
  • Export of Commercial Vehicles – In order to hedge the risk against the cyclical nature of this industry, the Company should focus on Exports of the commercial vehicles.

Elaboration 

Criteria for evaluation


The evaluation of the suggested strategy has been done on the basis of the following criteria.

  • To be in sync with the overall vision of the top management.
  • To maximize the total possible returns to the company.
  • To ensure optimization of the total resources of the company.
  • Market size and demand for different types of products.

Rationale behind the recommendations

The relative positioning of the automobile segments shows that CV segment has a lower share and a lower trend growth as compared to the Cars segment.

Join now!

Figure 1: Relative positioning of automobile segments

In the CV segment TATA Motors has a share of 59% and in the Passenger Car segment a share of 15.5%. This makes the commercial vehicle segment a cash cow and the passenger car segment a question mark for TATA Motors. Therefore money from the CV segment should be used for the development of the passenger car business.

Figure 2: BCG Matrix

Figure 3: Strategy framework

The Company has distinctive competencies in the CV segment and will have to defend its position in this segment ...

This is a preview of the whole essay