INTRODUCTION

Global marketing offers a way for companies of all sizes to grow by expanding their customer base beyond the domestic market. However the complexities of global marketing, demand careful planning and proper implementation.

Tata Motors will plan to launch its Rs.0.1 million (USD $2,300) small car, dubbed the people’s car (X1) would be introduced in the Indian Market by 2008. Tata’s new small car would be exported to other developing countries after observing the car’s success in India.

This study has been conducted to gain knowledge about the potential strength of Tata’s X1 car to foreign countries. The demand scenario, domestic car industry and the present and possible role of India was analyzed in case of South Africa.

Expansion strategy in market like South Africa, Tata' invests in nations where there is a need for company’s existing products or the market is too small to interest other multinationals. The company's tremendous record of south-south investments is impressive. In African countries in particular, the striking characteristic of this successful company's presence is not only that it is long-standing but that it emphasizes social responsibility just as much as growth.

 

COMPANY BACKGROUND

Tata Motors Ltd is the largest commercial vehicle manufacturer in India and one of the top three players in the passenger vehicles segment. It was established in 1945 to manufacture steam locomotives. Tata Motors, a flagship company of the Tata Group, has more than 3 million Tata vehicles plying on Indian roads making Tata a dominant force in the Indian automobile industry.

The name of the company was changed to Tata Motors from Telco in July ’03, to better reflect its business focus. The year ’04 was another watershed year for Tata Motors as it acquired South Korea’s ailing Daewoo Commercial Vehicle Company for Rs4.6 billion. (Tata Motors, 2006)

Present Strategies of Tata Motors

The Business Units of Tata Motors have been classified into different markets in terms of size, growth opportunities, product segments and target volumes. From being present as an exporter in 70 countries, the company today focuses on 15 to 20 key countries, where it will have a significant presence in terms of volumes and market shares. With this integration and focus, Tata Motors have stepped out in specific areas with specific products. In stead of its being in all places and all product segments they have chosen regions very carefully and base their strategy on well-connected product strategies.

(TATA International & its Primary Activities in Appendices)

SOUTH AFRICAN AUTOMOBILE INDUSTRY

Africa's automobile industry is one of the continent's fastest growing sectors. It lacks the necessary local technology to fully harness its potential to contribute to growth and development. South Africa is the 18th largest manufacturer of vehicles in the world and represents 80% of Africa's vehicle output, but only 0,9% of the world market. ()

The automotive industry contributes 5.7% of GDP and is the third largest sector in the South African economy, accounting for 29% of the country's manufacturing output. It employs 261,000 people directly and many more indirectly. (Focus Reports, August 2006)

Despite policy initiatives by most other countries in Africa to open up its automobile sector, the sector's performance has not been that encouraging. Most countries such as Ghana, Nigeria and Cameroon concentrate today on importing completed units for sale in the local market with more emphasis placed on after sales service. This really casts doubt over the ability of African countries to sustain any improvement on the performance of their manufacturing sectors.

Major elements of the Motor Industry Development Programme in South Africa

Source: Barnes, J., “Changing lanes: the political economy of the South African automotive value chain”, October 2003).

MICRO ENVIROMENTAL ANALYSIS

PORTER’S FIVE FORCES MODEL

In 1980 Porter developed a framework which helps to identify the sources of competition in an industry or sector.  He said that there are five competitive forces which determine the nature of competition within an industry. These 5 forces further help the mangers to develop competitive strategies. (Campbell David, Stonehouse George and Houston Bill 2003).

1. Threat to new entrants: -

Tata Motors need to be careful as many companies are trying to establish its base in South Africa like Hyundai, Fiat etc. Another Indian passenger car company Maruti Suzuki will enter South Africa in by august 2007 (). The entry for new comers is not going to be easy because there are already big established companies. And moreover South Africa is a very price sensitive market.

2. Substitute goods: -

Since Tata’s X1 is a very unique car, with a low price and a good quality therefore the threat from substitutes is going to be very low. But the possible substitutes of X1 can be motorcycles, bicycles and any other means of public transport.

3. Competition between rival companies: -

Competition is always there in the automobile industry anywhere in the world. Similarly in South Africa, there are already big global companies like GM motors, Ford, Fiat etc who assemble cars and can surely compete with Tata motors. Therefore we can say that competitive rivalry is high.

4. Suppliers: -

In this case there are two possibilities:

  • Firstly when Tata motor act as suppliers because they supply the spare parts and the cars to the dealers.
  • And secondly when dealers act as suppliers to their customers.

5. Buyers: -

Now day’s buyers are aware of the quality of the product and services. This makes suppliers more conscious to provide them with best quality, service and competitive price. But Tata motors are providing a car which is very cheap and is of a good quality so therefore buyers cannot demand anything more.

MACRO ENVIRONMENTAL ANALYSIS

PEST ANALYSIS

PEST analysis is nothing but the host of different Environmental forces/factors which have impact on global marketing strategy (Douglas P. Susan, Craig C. Samuel, 1996). All the factors are not important to a particular industry, it differentiates with every industry. And these forces are not independent, but they are rather interlinked. That means change in one factor can lead to change in the other

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Political Factors

The future of car industry will also be dependent on the political environment of South Africa. The growth of car industry will be positively linked with following issues:

  • Continuance of liberalized policies.
  • Reduction in both Excise and import duties.
  • Investment in improvement of road network.

Automotive Policy

Memorandum of Understanding Policy: Car (Completely Built-Up Units) imports are a restricted item. For the import of completely Knocked Down/Semi-Knocked Down kits the new manufacturers had to enter into individual agreements with the government of India. The government has recently announced a policy for granting import

The ...

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