PRODUCT DEVELOPMENT PROCESS OF TATA MOTORS (Tata Nano)

Submitted To: Mr. Ozer Khalid Submitted By: Aneela Saleem Annam Manzoor Rozina Younus

Subject: New Product Development

Contents
Contents................................................................................................4

COMPANY PROFILE.................................................................................8 TATA GROUP AND ITS SUBSIDIARIES....................................................................14 PRODUCT DESCRIPTION (NANO)............................................................15 MARKET SEGMENTATION ......................................................................18 SEGMENTING CONSUMER MARKET........................................................................18 STUDY RESULTS.....................................................................................................33

INTRODUCTION TO THE NEW PRODUCT DEVELOPMENT...........................35 IDEA GENERATION.................................................................................................37 IDEA SCREENING .................................................................................................. 39 CONCEPT TESTING AND DEVELOPMENT................................................................40 BUSINESS ANALYSIS.............................................................................................. 43 DISRUPTIVE TECHNOLOGY ....................................................................................44

FINAL PROTOTYPE..................................................................................................47 COST REDUCTION PARADIGM................................................................................50 TOTAL SALES ESTIMATION.....................................................................................52 MARKET STRATEGIES.............................................................................................54 PROCESS:............................................................................................57

COMPANY PROFILE
Tata Motors Limited is India's largest automobile company, with consolidated revenues of USD 14 billion in 2008-09. It is the leader in commercial vehicles in each segment, and among the top three in passenger vehicles with winning products in the compact, midsize car and utility vehicle segments. The

company is the world's fourth largest truck manufacturer, and the world's second largest bus manufacturer. The company's 24,000 employees are guided by the vision to be "best in the manner in which we operate best in the products we deliver and best in our value system and ethics." Established in 1945, Tata Motors' presence indeed cuts across the length and breadth of India. Following a strategic alliance with Fiat in 2005, it has set up an industrial joint venture with Fiat Group Automobiles at Ranjangaon (Maharashtra) to produce both Fiat and Tata cars and Fiat power trains. The company's dealership, sales, services and spare parts network comprises over 3500 touch points. Tata Motors also distributes and markets Fiat branded cars in India. Tata Motors, the first company from India's engineering sector to be listed in the New York Stock Exchange (September 2004), has also emerged

as an international automobile company. Through subsidiaries and associate companies, Tata Motors has operations in the UK, South Korea, Thailand and Spain. Among them is Jaguar Land Rover, a business comprising the two iconic British brands that was acquired in 2008. In 2004, it acquired the Daewoo Commercial Vehicles Company, South Korea's second largest truck maker. In 2005, Tata Motors acquired a 21% stake in Hispano Carrocera, a reputed Spanish bus and coach manufacturer, and subsequently the remaining stake in 2009. In 2006, Tata Motors formed a joint venture with the Brazil-based Marco polo, a global leader in body-building for buses and coaches to manufacture fullybuilt buses and coaches for India and select international markets. In 2006, Tata Motors entered into joint venture with Thonburi Automotive Assembly Plant Company of Thailand to manufacture and

market the company's pickup vehicles in Thailand. The foundation of the company's growth over the last 50 years 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. With over 3,000 engineers and scientists, the company's Engineering Research Centre, established in 1966, has enabled pioneering technologies and products. It was Tata Motors, which developed 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. Within two years of launch, Tata Indica became India's largest selling car in its segment. In 2005, Tata Motors created a new segment by launching the Tata Ace, India's first indigenously developed mini-truck. In January 2008, Tata Motors unveiled its People's Car, the Tata

Nano, which India and the world have been looking forward to. The standard version has been priced at USD 2500 (excluding VAT and transportation cost). Tata Motors is equally focused on environment-friendly technologies in emissions and alternative fuels. . It has developed electric and hybrid vehicles both for personal and public transportation. It has also been implementing several environment-friendly technologies in manufacturing processes, significantly enhancing resource conservation Through its subsidiaries, the company is engaged in engineering and automotive solutions, construction equipment manufacturing, automotive vehicle components manufacturing and supply chain activities, machine tools and factory automation solutions, high-precision tooling and plastic and electronic components for automotive and computer applications, and automotive retailing

and service operations. Tata Motors is committed to improving the quality of life of communities by working on four thrust areas employability, education, health and environment. The activities touch the lives of more than a million citizens. The company's support on education and employability is focused on youth and women. They range from schools to technical education institutes to actual facilitation of income generation. In health, our intervention is in both preventive and curative health care. The goal of environment protection is achieved through tree plantation, conserving water and creating new water bodies and, last but not the least, by introducing appropriate technologies in our vehicles and operations for constantly enhancing environment care.

With the foundation of its rich heritage, Tata Motors today is etching a refulgent future.

TATA GROUP AND ITS SUBSIDIARIES

TATA groups portfolio includes wide range of businesses which are leading in their fields. Its total revenue in 2006-07 is $ 28.8 billion which is 3.2 % of Indias GDP. TATAs business empire extends to over 80 countries across 6 continents. TATA group has ninety eight companies that are basically operating in seven sectors.

PRODUCT DESCRIPTION (NANO)

Nano is a car which has breathed into life due to one man. Give credit to Mr. Ratan Tata for his determination to build a low cost family car that has come true, finally. Designed with a family in mind, it has a roomy passenger compartment with generous leg space and head room. It can comfortably seat four persons. Its mono-volume design will set a new benchmark among small cars. Its safety performance exceeds regulatory requirements in India. Its tailpipe emission performance too exceeds regulatory requirements. In terms of overall pollutants, it has a lower pollution level than twowheelers being manufactured in India today. The lean design strategy has helped minimize weight,

which helps maximize performance per unit of energy consumed and delivers high fuel efficiency. The high fuel efficiency also ensures that the car has low carbon dioxide emissions, thereby providing the twin benefits of an affordable transportation solution with a low carbon footprint. In pursuit of excellence and to keep up to the initial promise made to people that Tata will come out with a compact, quality car within a price tag of Rs. 1 lakhs(3000 SGD), Tata Motors came up with a design, marketing and operational strategy keeping in mind the constraints of:

Price Market Scalability Customer Aspiration Resource Efficiency

MARKET SEGMENTATION
SEGMENTING CONSUMER MARKET

Tata-Motors undertake research to get the answer of following questions before they take decision to launch a new small car or not. 1. Who are my customer and potential customer? 2. What kind of people they are? 3. Where do they live? 4. Can and will they buy?

Research helps us to get the answer of above mentioned questions. Thus, research helps producer to collect the information which reduces business risk. It helps producer to identify sales opportunities and to develop action plans. Following are the objectives of this Study: Research is undertaken for following reasons. 1. To know awareness of potential customers about NANO

2. To Know the Perception of people toward pre-launched Tata Nano Car.

They asked questions from the people and the results of these questions are as under:

STUDY RESULTS
From this study, it is found that from the total of 150 Respondents interviewed 111respondentswould like to purchase car and out of that 111 respondents 96 respondents want to purchase Tata Nano Car means 86.48% are interested in purchase Nano Car from the criteria of those Responded who want to purchase car. From this result, we can conclude that generally people whose income is more than Rs. 45,000 they do not prefer to purchase Nano Car and the people whose income is below Rs.10, 000 generally they already possess vehicle and they dont want to replace it because as a financial condition Car is not preferred and neither they want to purchase Nano Car. Generally, Law of Demand says that

as price of product or goods increases demand of that particular goods decrease and vice versa. But there are some exceptions which do not obey this law of demand which are as under: (I) Luxurious Goods (II) Giffen Goods

The people whose income is higher they dont want to purchase it because they think that Nano produced only for Middle class People and if they will purchase, it will decrease their prestige in society but in some cases High profile people also purchase Tata Nano the perception is different for

that.50 responded are strongly agree to purchase Tata Nano instead of Bike & 45 Responded are strongly agree to purchase Tata Nano instead of secondhand car

INTRODUCTION TO THE NEW PRODUCT DEVELOPMENT

Before the introduction of a product into the market, it goes through several stages of development. The stages of the product development include the following:

 Idea Generation Idea Screening Concept Testing and Development Market Strategy Business Analysis Total Sales Estimation

As far as Nano is concerned, it falls new to the world products in the context that it has made a history for the cheapest car ever made without compromising on quality. i.e. best way value analysis.

IDEA GENERATION
The main idea behind TATA NANO was perceived by the chairman of TATA group himself who saw a family of four going on a scooter in rain he wanted to develop a transport which was affordable, safe and could face all types of weathers. This turned out to be the most ambitious project of Tata motors till date when Mr. Ratan Tata told this to one of his managing directors Mr. Ravi Kant he was also

interested about the idea. Mr. Ravi Kant had learned from his experience that People want to move from two-wheelers to four-wheelers but they cannot afford it. More and more can, but Indian car buyers today represent a tiny slice of a potentially giant market India has just seven cars per 1,000 people. India's auto industry has grown an average of 12% for the past decade, but just 1.3 million passenger vehicles were sold in India in the fiscal year ending March 2006. That means a billion Indians buy about the same number of cars in a year as 300 million Americans buy in a month. If four wheels cost as little as two wheels, that could change fast. About 7 million scooters and motorcycles were sold in India last year, typically for prices between 30,000 rupees and 70,000 rupees, about $675 to $1,600.

IDEA SCREENING
The next step was screening of ideas. There were many ideas like to make a scooter with two extra wheels at the back for better stability, a three wheeled car like a closed auto rickshaw but the market requirement was a car, the car should be such that it doesnt convey a message that its just an extension of a scooter it should be a proper car and likewise should also give the feel of a actual car. Trying to build a car cheap enough for motorcycle buyers seems to make sense now but seemed unachievable several years ago when Mr. Ratan Tata, chairman of Tata Motors had first mentioned his dream of building a one-lakh car in 2003 at that time the whole world thought that this gamble will

never work out but ironically the whole world is now talking of small cars as $5,000 or $7,000 after TATA NANO was launched in 2009.

CONCEPT TESTING AND DEVELOPMENT

After surveying customers the end result was that people wanted a four wheeler which was cheap, dependable and strong enough to carry a load of 1 ton additionally four wheelers also increased the social status of the person who owns it .Four wheels not only practical appeal but also had a emotional

appeal. Thus the new product was now to be developed but the following considerations would have to keep in mind when developing it: The car should be built on a different platform than conventional ones. It must be meeting all the safety and regulatory requirements.

It has to be built on a scale which shall be more than double the earlier launches of similar products and the ramp up must be smooth.

 The car has to be designed so that it can be exported to other countries as the domestic demand may not materialize as per projections. There were three main requirement of the new vehicle: it should be low cost, adhere to the regulatory requirements, and achieve performance targets such as fuel efficiency and acceleration capacity. Nearly 500 engineers were involved in the development of the vehicle and everyday they had meeting so that the decision taking and the problem solving process could be accelerated. Each engineer represented a different part of the car: engine and transmission, body, vehicle integration, safety and regulation, and industrial design. The body of the vehicle had to go under a number of iterations because the Mr.Ratan

Tata wanted that a person whose height is over six feet can also fit into the car without any discomfort and finally the length of the car had to be increased by 100mm but eventually. The hard work of designing the car paid off and the designers were successful in their attempt to design an actual car which did not look shabby and inexpensive but looked sleek and sophisticated.

BUSINESS ANALYSIS
COST:

Since the car had to be built within a cost of Rs. 1 Lac, no conventional design would work as the costs shall be higher and so the entire car has to be redesigned. The design has to question the need of each and every component from the point of view of its necessity of existence and also the minimum requirements of its functionality. Value Engineering concepts have to be deployed to finalize the minimum requirements.

DISRUPTIVE TECHNOLOGY
Its a technology which brings radical change by introducing new ways of doing things.

Technology that is Significantly cheaper than existing Technology. Much higher performing? Has greater functionality and Is more convenient to Use.

 Brings to market a totally different Value proposition than the one available and can change the Paradigm about a product. The Guiding factor was that the cost has to be minimized for each component yet maintaining its basic functionality. The Alternatives are: Reduce Consumption of Material being used. Alternate Suppliers to get same material at fewer prices.

 Use alternate materials. Eliminate use of Material. Eliminate a process Or a Combination of the above.

FINAL PROTOTYPE
This implementation was made possible through series of innovative ideas which led to acquisition of 37 patents by Tata Motors.

I.

Engine was packaged on the rear side. 2 cylinder engine (conventionally there are 3-4 cylinder engines) Identical handles and mechanisms for left and right side doors Instrument cluster in the middle of the dashboard Interior space was maximized by pushing wheels to the corners and power train below the rear seat. Product created was very contemporary and

II.
III. IV.

V.

VI.

It has sufficient Space inside to accommodate 4 persons comfortably. Highly fuel efficient Exceeds the current Safety requirements Complies with the current emission requirements.

VII.
VIII.

IX.

COST REDUCTION PARADIGM

Value Engineering Alternatives The target was very clearly defined that, within the given cost structure all the components have to be allocated and the same had to be achieved using the available alternatives. The Guiding factor was that the tax structure on materials and manufacturing must support the final cost. Decisions were Establish factory in a tax free zone.

 Get the tax advantages on infrastructure development. Get the suppliers to establish base near the factory. Get special concessions from State Govt. In short select a manufacturing location where all the advantages could be achieved.

TOTAL SALES ESTIMATION

The total sales had been estimated based on the following decisions It was estimated that the demand for the peoples car shall be at least twice the demand for Maruti 800, the lowest end car. Initial projections were at about 500,000 cars per year.

 The basic reason was the conviction that the target price shall redefine the 4 - wheeler segment. The price decision of Rs 1 lakh is definitely going to make a lot many people transit to 4wheeler fold and that shall explode the demand. Only 10% customers of 9 Million two wheeler market transit to 4-wheelers it shall amount to 50% of the passenger car market share.

 It was decided to set up plants with 5 lakhs cars per annum capacity and ramp the same up in stages, in line with increase in market demand.

MARKET STRATEGIES
Price:

Tata Motors set their retail price target before they designed the car. Doing so let them establish their demographic. Setting the price and working backwards also required a fundamental shift in the way the car was designed, since many costs are fixed once the design is set. The prices of Tata motors are generally affordable acceptable by the general public at large. Tata always have something for the lower class people with Nano being their trump card. Giving discount every month and special promotion for certain type of vehicle also one of the strong strategy use by Tata Motors. Discount can be made from Companys profit or from dealers profit at certain range.

Pricing strategies: Penetration pricing Low pricing policy with minimum profit margin. Though the one lakh price tag is not fixed by TATA group, it was the word of mouth of people which fixed that range. This expectation of people creates a big challenge for the company.

PROCESS:
Sustainability of innovation in products needed to be complemented with innovative changes in the organizational processes too. Some examples are: 1) Adoption of the Tata Business Excellence Model (TBEM)

It is based on Malcolm Baldridge Award for business excellence and Balance Score Card. This has created a culture of exploring various innovative ways to achieve excellence in all the organizational processes. 2) Use of IT systems: It has been a benchmark and highly leveraged in the organization throughout VALUE CHAIN. 3) Supply Side

Free-Markets for e-Sourcing, Supplier Relationship Management (SRM).

4) Product Development Process

Institutionalized Stage Gate process in the organization is a benchmark in itself and ensures development of right product for the market and also an effective and efficient program management. Transition from in-house product development to a collaborative product development, utilizing the capabilities of suppliers, design houses, subsidiaries and associate companies specializing in different verticals. Internalization philosophy of Tata Motors made some major global acquisitions like TDCV,

JLR, Hispano, etc. Unlike many other Japanese / US players, they followed an innovative approach to be seen as a local company in the country of operation, i.e., as a South Korean player in South Korea and as a Spanish Player in Spain. This has helped them to appreciate the need and importance of all the stakeholders and they achieved this in four stages. This involves Initiating, by understanding the language and basic facts of the country, Familiarization with their culture, Harmonization and finally synergizing by sharing the best practices and work ethics.

CONCLUSION
Tata Nano car development process is fully integrated with the process described. It is the perfect example of how the company recognized the need of this product and the final output is according to the requirements of the target segment. The quality was not compromised and the best solution is provided at the economical rate.

REFERENCES: http://www.slideshare.net/hemanthcrpatna/a-project-report-on-tata-nano-pre-launch-survey
www.tatamotors.com/ www.tatanano.com/

http://en.wikipedia.org/wiki/Tata_Motors http://en.wikipedia.org/wiki/Tata_Nano