External Environment Analysis Any company, in whatever industry it is operating, must inevitably be aware of the external environment.

They will affect the main internal functions of the business and possibly the objectives of the business and its strategies. Six Segment Analyses Political Since Tata Motors operates in multiple countries across Europe, Africa, Asia, the Middle East, and Australia, it needs to pay close attention to the political climate but also laws and regulations in all the countries it operates in while also paying attention to regional governing bodies. Laws governing commerce, trade, growth, and investment are dependent on the local government as well as how successful local markets and economies will be due to regional, national and local influence. On March 26, 2008, Tata Motors reached an agreement with Ford to purchase Jaguar and Land Rover. In order to be capable of this acquisition, Tata Motors must have a full comprehension of the governing bodies and laws regulating commerce in the home country, the United Kingdom, but also in countries Jaguar and Land Rover operate in (Carty, 2010). In accordance, Tatas headquarters in Mumbai, India, strictly controls and regulates operations in all dealerships and subsidiaries, in addition to knowing and abiding by all labor laws in the multiple countries where they have manufacturing plants it has to watch political change. This will be especially vital in the future as Tata Motors continues to expand and grow into new markets. While currently about 18% of its revenues are from international business, the company's objective is to expand its international business, both through organic and inorganic growth routes (Tata.com). The foundation of the companys growth internationally is a deep understand of economic stimulation, customer needs, and individual government regulations and laws. Although it is the headquarters ultimate responsibility to make sure each individual office and branch is operating and abiding by the local laws, it will become increasingly more important for that duty to be taken care of at the regional or even local level.

Economic Operating in numerous countries across the world, Tata Motors functions with a global economic perspective while focusing on each individual market. Because Tata is in a rapid growth period, expanding or forming a joint venture in over five countries world-wide since 2004, a global approach enables Tata Motors to adapt and learn from the many different regions within the whole automotive industry. They have experience and resources from five continents across the globe, thus when any variable changes in the market they can gather information and resources from all over the world to address any issues. For instance, if the price of the aluminum required to make engine blocks goes up in Kenya, Tata has the option to get the aluminum from other suppliers in Europe or Asia who they would normally get from for production in Ukraine or Russia (Goldman, 2008). Tata Motors also has to pay close attention to shifts in currency rates throughout the world. Currency fluctuations can equate to higher or lower demands for Tata vehicles which in turn affect profitability. It can also mean a rise in costs or a drop in returns. But they also have to pay attention to not just the domestic currency, the rupee, but also to the dollar, euro, bhat, won, and pound, to just name a few. Just because the rupee is strong against the dollar does not mean it is strong against all the other currencies. Attention to currency is important because it influences where capital investment will develop and prosper. Social Undoubtedly, the beliefs, opinions, and general attitude of all the stakeholders in a company will affect how well a company performs. This includes every stakeholder from the CEO and President, down to the line workers who screw the door panel into place, from the investor to the customer, the culture and attitude of all these people will ultimately determine the future of a company and whether they will be profitable or not. For this reason, Tata Motors tends to use an integration and rarely separation technique with foreign companies they acquire. On the other hand, some economic issues that Tata Motors face must also be looked at from a more localized perspective. For instance, the market in India for cars is much different than the market for cars in Italy. For one, India has over one billion more people than Italy does, thus the market is much larger or not as limited. Second, you must also take into affect the demographics

and the average income of each market. Italians have a higher average income per capita than Indians and Italian citizens tend to drive larger and fancier cars. For this reason, the Tata Nano might not do so well in the Italian market. In summation, Tata Motors views the economy from a global perspective with operations across the entire globe; however, they must also maintain a local market understanding and knowledge when it comes to product positioning and placement throughout the different markets Tata conducts business in. In 2004, Tata Motors acquired Daewoo Commercial Vehicles Company, which was at the time Koreas second largest truck maker. Rather than using de-culturation or assimilating Daewoo, Tata took an integrated approach, and continued building and marketing Daewoos current models as well as introducing a few new models globally just as it had been done under Korean management. With the new acquisition of Jaguar and Land Rover, Tata will have to be careful with how they handle the acquisition. While Land Rover is thriving while under the helm of Ford, Jaguar was more of the trouble child. Jaguar cost Ford some $10 billion during its 18-year stewardship and its sales were in headlong decline, especially in America, its most important market. Industry analysts also struggled to see what value Tata could add that had eluded Ford, and what synergies there could be between a maker of trucks and basic cars and two luxury marques. (Siciliano et al., 2009). Separation could be a good approach for the immediate future to keep the name of Jaguar and Land Rover distinguishable and associated with the luxury automobile market. Overall, Tata does a good job of integrating some aspects of their large multi-national conglomerate into new acquisitions; however, the company must also understand that separation from the name Tata can be valuable in some social areas. Technology Tata Motors and its parent company, the Tata Group, are ahead of the game in the technology field. The Tata Group as a whole has over 20 publicly listed enterprises and operates in more than 80 countries world-wide. This equates to Tata Motors having lots of experience and resources to draw from for research and development purposes. The foundation of the companys growth is a deep understanding of economic stimuli and customer needs, and the ability to translate them into customer-desired offerings through leading edge R&D. Employing

1,400 scientists and engineers, Tata Motors Research and Development team is ahead of the pack in Indias market and right with the rest of the field internationally. Among Tatas firsts are the first indigenously developed Light Commercial Vehicle, India's first Sports Utility Vehicle and, in 1998, the Tata Indica, India's first fully indigenous passenger car, as well as the increasingly famous Tata Nano, which is projected to be the worlds cheapest production car (Anonymous, 2010). In the automotive industry, it is becoming increasingly crucial for manufacturers to stay on top of the technology curve with new problems always rising such as escalating gas prices and pollution problems. Tata recognizes this and dedicates lots of resources and time into research and development to be even with or preferably ahead of other competitors, global trends, and changing economies. In all, an automobile manufacturer must change, adapt, and evolve to stay competitive in the automotive game, and this is exactly what Tata is doing with their rapid growth, and extensive research and development. Five Forces Analysis The Threat of Entry Product differentiation and cost advantage- The new product has to be different attractive to be acceptable by the customer. Attractiveness to be measured in terms of features price etc. At this level the price of the Nano car was one thing that is attracting customers and above all this the image, trust the name TATA carries with it. Time of entry- Time is very essential thing when launching a product in the market. The launch of NANO is quite viable as the demand on the small car is on rise in the market. Cost of entry- The cost of entry is referred to as the initial capital required to set up a new firm is very high; it makes the chance of new entrance very less. Even other car producers can enter into the market later but NANO has the first mover advantage. Knowledge and Technology- Ideas and Knowledge that provides competitive advantage over others when patented, preventing others from using it and thus creates barrier to entry. The TATA motors have great knowledge/experience in the automobile industry and have renowned technological advantage because of the recent acquisition and mergers.

Product Differentiation and Cost Advantage The new product has to be different and attractive to be accepted by the customers. Attractiveness can be measured in the terms of the features, price etc. At this level the price of the NANO car was one thing that is attracting customers. And above all this the image, trust the name TATA carries with it. Access to Distribution Channels When a new product a launched a well developed distribution is must for its success. The TATA motors had a advantage of well established distribution channel across the world. The way in which NANO is produced such a method will lead to even more innovative manufacturing to offer affordable cars to customers. New entrants at this market have to address various challenges like inflation, low price barriers, substantial increase in raw material prices and government regulations. But going forward more automakers will make low cost cars. It might take few years and huge investment for a car maker to design and build a low cost car, which itself has a low cost margins. Therefore, the threat of new entrant to NANO in the long run is exist. This force is still favorable to NANO in short run. Buyers Power Switching Costs- If switching to another product is simple and cheap the customers do not think much before doing it. In case of NANO car the switching cost from bike to car is low. Thus increasing the demand of the car many fold. As the NANO car is made for lower income group people, thus there is less power in the hands of buyer at present as only NANO (the cheapest) is available in market but soon there will be cheaper car in the market and buyers will have power to switch to other cars. However, if switching to another product is simple and cheap the customers do not think much before doing it. In case of NANO car the switching cost from motorcycle to car (NANO) is low. Thus increasing the demand of the NANO may increase. This force is favorable to NANO.

Suppliers Number and Size of Suppliers A company to manufacture its products requires raw material, labor etc. If there are few suppliers providing material essential to make a product then they can set the price high to capture more profit. Powerful suppliers can squeeze industry profitability to great extend. In case of NANO the supplier are several. The NANO car has more than 128 suppliers in all and the major portion of the building cost of the car is the parts supplied by the suppliers. Rather than a threat to NANO, suppliers were supporting Tata Motors for launch of NANO and there are overall thousands of suppliers to TATA Motors. Driving down the price of the Tata NANO couldn't have been done without the collective effort of the component suppliers. Some of the biggest and the best in the business were roped in, with scissors and ingenuity to bring out solutions within a specified cost structure Sister company TATA TACO worked on parts like interior injection moldings, dash board aggregates and door handles. It also entered with JV with Ficosial International of Spain to supply cables and mirrors of the car that are being produced in the company Hinjiwadi Pune facility. TATA TACO will supply over 20 percent of all the parts being built for the NANO. Some of the other suppliers include Sona Koyo for the steering assembly, Lumax for the lights and Coparo for the body panels. A rack and pinal steering development by Sona uses a two spoke for the base version and three spoke variants for the CX and LX versions. A whole host of other suppliers was also involved in the project that despite supplying the smaller number of components played their part. At the end despite steel price fluctuations a tanking economy and component supplier from immense revenue pressure the combined operation helps TATA Motors to achieve the magical 100000 Rs. This favors TATA NANO. Substitutes Substitutes performance- The performance of the substitute sector will also play an important role in the success of the NANO car. If the prices of the motorcycle segment decrease, it will have affected the demand of NANO on the quantity required in the market. The success of the electric car segment with player like REVA can also affect the demand of the NANO. At present, in the electric car segment only REVA car is available in India.

The threat of substitute for NANO car is that of electric car, the new entrant in the small car sector is the Morbi-based world famous clockmaker Ajanta group. The company is already manufacturing electric scooters and motorcycle under Oreva' brand. Production of electric car is not difficult for them as the technology is almost similar and 70 per cent of its parts can be produced in-house, giving them an edge over the vehicle's pricing. The threat of substitute for NANO car is only electric car. This will be a favorable situation for NANO. Competitive Rivalry Number and diversity of competitor- This describes the competition between the existing firms in an industry. The current scenario, the small car market in India is very competitive with players like Maruti Suzuki and Hyundai which was pretty much dominated by Maruti. Exit barriers- Even if the product fails in the market it is not that easy for the NANO to exit the market just like that because of the heavy investment it has made in the initial stage. If the NANO fails or falls flat the TATA motors will not be in a state to slow done the product even when NANO production line can be used by the other products after few modification as for NANO only the new product line were setup and huge cost were incurred. It shows there is medium threat of rivalry for NANO. Tatas Competitive Advantage and Value Chain Hard work, preparation, research, thinking, getting the value proposition right and serving the customer better, can take care of the economic challenges. When things change, reacting appropriately to the change helps. Moraes (2006) said that, The house of Tatas is, I think, amazingly placed. Owing to our Indian base, we have a core competitive advantage-our people. We have more high quality people available at a lower cost than most of our competitors in the international market place. There are two type of competitive advantage; one is to compete on the basis of lower cost than their rivals or on the basis of differentiation where they provide some unique and superior value, stated Stacy (1993). Furthermore Stacy (1993); Robson (1997); Thompson, (2001) indicated that the firms can use these competitive advantages either in a broad or narrow way, with their competitive scope. In Tatas case, such as motor industry where the

industry structure is that low cost is the source of competitive advantage, then the group may success only if they takes a broad approach and goes for cost leadership. In case of Tata automobile parts industry, the standardization of product will help the group to achieve the lowest cost of products and while adopting the cost focus strategy. Cost focus strategy will also help the group to sweep out the highest cost producer competitors from the market. In differentiation strategy the group will succeed only if they take a broad approach and differentiate its whole range of products; for example Tatas Automobile; the launch of lowest cost car in Indian market. Core Competencies Tata Motors is able to maintain, as well as increase, their market share by capitalizing on their core competencies. Tata Motors is active, competitive, and dynamic in all aspects of the automotive industry, which means that there must be many different activities going on in all areas of the company. As a result of the ever evolving automotive industry Tata Motors must always be changing and one way to stay at the forefront of the industry is to make continuous improvements in technology through research and development. One way that Tata Motors has done this is by producing one of the most efficient and low cost vehicles on the market. Acquisitions, mergers, and expansion is another core competency that Tata Motors has is embedded in their company structure and philosophy. Another core competency that Tata Motors holds is being located in the India. This location has allowed them to understand not only the Indian market but also the dynamics of emerging and developing markets. This market understanding and knowledge allows Tata Motors to manufacture their products at lower costs, sell them to emerging markets while making profits as well as take advantage of the strong labor base in India. Inbound Logistics Long term contract with service provider's- transporters and agents Personnel at regional offices for overseeing the smooth transit of goods Transparency and monitoring through deployment of IT- all transactions through SAP DTL supplies for critical high value items Efficient storage facilities- easy storage and retrieval

Operations Capital Equipment Manufacturing division tooling development capabilities of global standard Apprentice Trainee Course- ensuring stable source of skilled manpower Kaizen & TPM team- continuous drive to improve efficiencies Automated manufacturing processes Distributed manufacturing-Assembly units at South Africa, Thailand, Bangladesh, Brazil etc Maintenance- technical competence Capacity utilization Outbound Logistics Stockyards, all across the country Long term contracts with transporters- higher volume of business to transporters ensures competitive price Regional Sales Office and Vehicle Dispatch Section linked through SAP Efficient security system for prevention of any kind of pilferage Marketing & Sales Structured approach to understanding the requirements of individual customers- QFD's conducted at regular intervals Pan India presence and global footprint Independent teams for addressing the requirements of institutional customers - Defense, State Transport Units Helping to augment the scarce resources- Fiat selling vehicles through Tata dealerships, in return Tata has access to Fiat's technology and unutilized capacity. Service Easy availability of spare parts Efficient collection of data from field and communication to the respective plants Pan India presence, as well as global presence Large network of workshops- Dealer workshops and TASS Training facilities- for dealer end and TASS personnel

Procurement e-procurement initiative Global sourcing team- China, a key destination for sourcing essential items like tires, power steering units etc., Steel procured from Belarus Long term relationships with a stable and loyal pool of suppliers Technology driven procurement- SAP and VCM Strategic subsidiaries & JV's- TACO group of companies, Tata Cummins Centralized Strategic Sourcing for key components- FIP's, Steel etc Group resources- Tata Steel and Tata International Technology Development Approximately 2% of the annual profits of the company invested in research and development Knowledge portal- helps employees keep abreast with the latest technologies Extensive prototype building and testing facilities Strategic partnerships- MDI (France), Fiat etc Formal benchmarking process Human Resource Vast pool of technically competent engineers and managers Focus on development of technical capabilities Technical Training Center's, Alliance with technical institutes Focus on development of managerial capabilities- MTC's, TMTC, executive training programs at premier business schools Career advancement schemes- ESS, FTSS Firm Infrastructure Multi- Location facilities Strong leadership- under the aegis of Tata Sons Best in class prototype building facilities Technology- SAP Large product portfolio

SWOT Analysis Strengths Strong domestic player: Tata Motors is Indias largest automobile manufacturer by revenue. The companys market share in the Indian four-wheeler automotive vehicle market (i.e. automobile vehicles other than two and three wheeler categories) stood at 26.1% in FY2008. The company is also the leader in the Indian commercial vehicles with a market share of 62.7% and is the second largest player in the Indian passenger vehicles market with a share of 14.2% in FY2008. Research and development activities: Tata Motor has strong research and development (R&D) capability. The company incurred large expenditure for its R&D activities. The companys R&D activities focus on product development, environmental technologies and vehicle safety through its Engineering Research Centre (ERC). The ERC is one of the few government recognized in-house automotive R&D centers in India. In the recent period, the ERC developed the Tata Nano, an affordable family car. The strong R&D capability enables the company to build a broad range of vehicle portfolio and improves its competitive strength in the automotive industry. Internationalization: The internationalization strategy so far has been to keep local managers in new acquisitions, and to only transplant a couple of senior managers from India into the new market. The benefit is that Tata has been able to exchange expertise. For example after the Daewoo acquisition the Indian company leaned work discipline and how to get the final product 'right first time. The Group had operations in more than 54 countries across six continents, and its companies exported products and services to 120 nations. This diversification has helped to minimize the risk of operating in just one country or region, and helped the group to establish and maintain strong relationships with governments, businesses, and consumers around the world. Having such a diverse group of companies operating under the Tata umbrella has also created the potential for synergies, vertical integration, and information sharing within the organization. Cost leadership: Price itself was a major strength factor for the mini magical vehicle which created a sensation all over the world. Even US president Obama was all praises for the Nano during his Indian

visit, an appreciation which soon spread across the world. The strengths of the product included its small size, ease in handling and good mileage efficiency. It directly took on the motorcycle market and tried to attach a status symbol to itself such that customers prefer the Nano above buying a motorcycle. Brand name: The Tata Group has much strength that has helped it to become such a successful and well respected business group. Perhaps the most significant is the strength of the Tata name. Tata Sons owns the name and trademark, which are registered in India and around the world. The Tata name is symbolic of India's industrialization and innovation (Richter, 2007). The companys entrepreneurial spirit has driven much of its growth, and has facilitated successful ventures into growing industries such as high technology, biotechnology, and alternative energy. The groups companies all operated under a common corporate culture characterized by independence, entrepreneurship, and ethics. The strong brand name, entrepreneurial spirit, and corporate culture have helped to unify this large and disparate group of companies under the Tata umbrella. Weaknesses Decline in vehicle sales: Tata Motors recorded decline or marginal growth in its vehicle sales in the last financial year. The company recorded a sale of 585,649 vehicles, a growth of 0.9% over last year. During the same time, the automotive industry in India recorded a growth of 10.4% to reach the total vehicle sales to 2,309,324 units. The overall market share of the company stood at 25.4% in 2008 as compared to a market share of 27.8% in 2007. The decline in sales would further affect the companys market share, and erode investors confidence. Employee productivity: Tata Motors posted weak revenues in proportion to the total number of its employees. The revenue per employee of the group stood at INR10 million (approximately $0.24 million), significantly lower when compared to its global competitors such as Toyota Motor ($.73 million), and Nissan Motor ($.53 million). The weak revenue per employee of the company compared to the global auto majors indicates its weaker productivity and operational inefficiency.

 Lack of integration and coordination: Despite buying the Jaguar and Land Rover brands; Tata has not got a foothold in the luxury car segment in its domestic. The company's passenger car products are based upon 3rd and 4th generation platforms, which put Tata Motors Limited at a disadvantage with competing car manufacturers. Opportunities Product launches: Tata Motors has launched various new products during the last two year period (200708). For instance in December 2007, Tata Motors introduced its new range of Medium and Heavy Commercial Vehicles. In March 2008, Tata Motors (Thailand) launched the Tata Xenon 1ton pickup truck at the annual Bangkok International Motor Show. In FY2008, the company launched the Indigo sedan and Indica with the Direct Injection Common Rail (DICOR) and Sumo Grande. Furthermore, the launch of its small car, NANO in January 2008 would further fuel its presence in the passenger vehicle market. Acquisition of Jaguar and Land Rover brands: These brands had sales operations in more than 100 countries with over 2,200 dealers. Acquisition of JLR provides the company with a strategic opportunity to acquire iconic brands, and increase the companys business diversity across markets and product segments. Threats Increasing competition: Tata Motors face intense competition from its domestic as well as foreign competitors including General Motors, Honda Motor, Maruti Udyog, Mitsubishi Motors, Fiat, Ford and so on. Competition is expected to intensify further as Indian automotive manufacturers obtain greater access to debt and equity financing in the international capital markets or gain access to more advanced technology through alliances. Additionally, in recent years, the government of India has permitted automatic approvals for foreign equity ownership of up to 100% in entities manufacturing vehicles and components in India. Environmental regulations: The company is subjected to extensive governmental regulations regarding vehicle emission levels, noise, safety and levels of pollutants generated by its production facilities. These

regulations are likely to become more stringent in the near future. In addition, Jaguar Land Rover has significant operations in the US and Europe which have stringent regulations relating to vehicular emissions. The proposed tightening of vehicle emissions regulations will require significant costs for the company. Rising prices: Rising prices in the global economy could pose a threat to Tata Motors Limited on a couple of fronts. The price of steel and aluminium is increasing putting pressure on the costs of production. Many of Tata's products run on Diesel fuel which is becoming expensive globally and within its traditional home market.