This project is a part of the internalasse ssment for the subject Business Policy &

Competiti veStrategy . I have developed a Porters Five Forces analysis for theorganizati

on. I identified strategic strengths and weaknesses andidentified core

competencies of the organization . The company that Ihave taken into account to analysis the

Porters Five Forces is the TataMotors . The Specific product that I will be taking

into analysis is the NANO CAR . This segment has a great growth potential in

developingco untries , especially in a country like India.1.Potent ial Entrants Threat of new entrants2.Bu

yers Bargaining power of buyers3.Sub stitutes a.Threat of substitute products or

servicesb.Riv alry among existing firms4.Suppli ers Bargaining Power of Suppliers5.Ot

her Stakeholders Relative Power of Union, Governments etc.

A brief Informatio n about the product : The Tata Nano is arear-engine,

fourpassengercit y carbuilt by Tata Motors, aimed primarily at theIndian market. The

car is very fuelefficient, achieving around 78mpgon the highway and around 92 in thecity. It was

first presented at the 9th annualAuto Expoon 10 January2008, atPragati MaidaninNew

Delhi,India. Nano had a commercialla unch on March 23, 2009 and, a booking period from

April 9 to April25, generating more than 200,000 bookings for the car. The sales of the

car will begin in July 2009, with a starting price of Rs 115,000(rupe es), which is approximatel

y equal toUK1,467 orUS$2,421 as of June 2009. This is cheaper than theMaruti 800, its main

competitoran d next cheapest Indian car priced at 184,641 Rupees. Tata

hadsought to produce the least expensivepro duction carin the world aiming for a starting price

of Rs.100,000 (approximatel yUS$2,000 in June 2009).

Page | 2

TATA

Business Policy & Competitive Strategy

Porter's 5 Forces Model of

the NANO car There is continuing interest in the study of the forces that impact on

anorganisati on, particularly those that can be harnessed to providecomp etitive

advantage. The ideas and models which emerged duringthe period from 1979 to the

mid-1980s were based on the idea thatcompetiti ve advantage came from the ability to

earn a return oninvestment that was better than the average for the industry sector.

AsPorter's 5 Forces analysis deals with factors outside an industry thatinfluence

the nature of competition within it, the forces inside theindustry (microenviro nment) that influence the

way in which firmscompet e, and so the industrys likely profitability is conducted

inPorters five forces model.

Page | 3

Business Policy & Competitive Strategy

BARRIERS TO ENTRY

Time and cost of entry T ime is most essential

thing whilelaunchin g a product inany market. The launch of the NANO isquite viable as the

demand of the smallcar is on the rise in the market. By the cost of the entry we meanthe initial capital

required to set up a new firm is very high, itmakes the chances of the chances of

new entrants are very less.

Knowledge and Technolog yIdeas and Knowledge

thatprovides competitive advantage over others when patented,pre venting others from using it

and thus creates barrier to entry. The TATA motors have great knowledge/ experience

in theautomobil e industry and has renowned technological advantagebe cause of the

recent acquisition and mergers.

Product Differentia tion and Cost

Advantage The newproduct has to be different and attractive to be accepted

by thecustomers . Attractivenes s can be measured in the terms of thefeatures ,

price etc. At this level the price of the NANO car wasone thing that is attracting customers.

And above all this theimage , trust the name TATA carries with it.

Governme nt Policy

and Expected Retaliation Althoughgove rnment's job is to preserve free

competitive market, itrestricts competition through regulations and restrictions.

Thegovernme nt tried to promote the TATA Motors to start a plant byproviding land and tax

rebates. But the unexpected retaliation bythe local people surface in the setting

up of the plant whichcosted the company a lot.

Access to Distributio

n Channels When a new product alaunched a well developed distribution is

must for its success. The TATA motors had a advantage of well established distributionch

annel across the world.

BUYERS
Page | 4

Business Policy &

Competitive Strategy

Switching Costs If switching to another product is

simple andcheap the customers does not think much before doing it. In caseof NANO car the

switching cost from bike to car is too high. Thusincreasin g the demand of the car many fold.

Number of customers / Volume of sales If there are fewbuyers then they are able to

dictate the terms. They pull downthe cost by Bargaining. The bargainingpo wer of buyer

is high as there are lot of choice available to thebuyer and the service do not vary from one

manufacturer to theother. They force the manufactures to improve the quality. All thiscan be

clearly seen in the case of NANO car the price tag atwhich it has been offered or the quality of

the NANO car nocompromis es has been done at any front.

Brand Image -

The brand image of the TATA and the segmentin which the NANO has been the most

attractive thing in theentire package.

SUPPLIER S

Number and Size of Suppliers A company to manufacture itsproducts requires raw

material, labor etc. If there are fewsuppliers providing material essential to make a

product thenthey can set the price high to capture more profit. Powerfulsup pliers can

squeeze industry profitability to great extend. Incase of NANO the supplier are limited and

the size of thesuppliers are big enough to bring about the controlling power inthe

price of the car. The NANO car has more than 128 suppliers inall and the major portion

of the building cost of the car is theparts supplied by the suppliers.

Unique Service / Product - Suppliers products have fewsubstitute s. Supplier

industry is dominated by a few firms. Thesome parts of the NANO car are obtain from the

supplier whothem are big enough and limited substitutes are available againstthem. So the entire

production line depends upon them only.

Page | 5

Business Policy &

Competitive Strategy

Ability to substitute - Suppliers products have high

switchingcost s. In many case even when substitute are available its notthat easy to opt for

substitute as the next product in theassembly line depends upon it. If the change in the any part

isbrought about the long list of depended parts also have to bechanged , which in most

cases is not feasible to do.

SUBSTITU TES

Price band -

The threat that consumer will switch to a substitutepro duct if there has been an increase in

price of the product orthere has been a decrease in priceof the substitute product. If

the price of the NANO car willincrease the main expected customers ie the one

switching frombike to car will not move to car and will remain in the bike only. Thus the

price is kept checked in this manner.

Substitutes performan ce The performance

of the substitutesect or will also play a important role in the success of the NANOcar.

If the price of the Bike segment increases or the price band of the small segment fall

, it will have effect on the quantityrequi red in the market. Its just on the price but also the

featuresand the other services associated or it may be the status symbolstory. The success

of the electric car segment with player likeREVA can also effect the demand of the NANO.

Buyers willingn ess Products with improving pri ce/performan ce tradeoffs

relative to present industry products.It will determine the willingness of

the buyer to but the NANOcar.Th e willingness of the customers to go forward try the

newproduct in the market ie NANO. They might be willing to go forthe test products like

Maruti 800 , Santro etc.

COMPETIT IVE RIVALRY

Number and

Diversity of Competito r This describes thecompetitio n between the

existing firms in an industry. the current

Page | 6

Business Policy & Competitive Strategy

scenario, the small car market in India is very competitive withplayers like Maruti Suzuki, Tata

Motors, Hyundai etc. which waspretty much dominated by Maruti. But with launch of

Nano the 1lakh car the whole momentum of the market has shifted. Now tobe competitive

in market other companies have to either slashrates of their existing model or

have to go back to the drawingboard and build again.

Price Competitio n-

Advertising battles may increase totalindustry demand, but may be costly to

smaller competitors . Products with similar function limit the prices firms can

charge.Price competition often leaves the entire industry worse off.NANO is the only

player so it has the price freedom but as theMaruti and Honda are also planning to launch the

car in thesame segment the price competition will start.

Exit Barriers

Even if the product fails in the market its not thateasy for the company to exit the market just

like that because of the heavy investment it has made in the initial stage. If the NANOfails or

falls flat the TATA motors will not be in a state to slowdone the product even when NANO production

line can be usedby the other products after few modification as for NANO only thenew

product line were setup and huge cost were incurred.

Product Quality -

Increasing consumer warranties or service isvery common these days. To maintain

low cost, companiesco nsistently has to make manufacturin g improvement s to keepthe

business competitive. This requires additional capitalexpen diture which tends to eat

up company's earning. On theother hand if no one else can provide products/

services the wayyou do you have a monopoly. NANO enjoys the monopoly arethere are no

competitors in this segment.

Page | 7

Business Policy & Competitive Strategy

TATA MOTORS STRENGTH S

The

internation alisation strategy so far has been to keep localmanager s in new acquisitions,

and to only transplant a couple of senior managers from India into the new market. The

benefit isthat Tata has been able to exchange expertise. For example afterthe Daewoo

acquisition the Indian company leaned workdisciplin e and how to get the final

product 'right first time.'

Tata Motors Limited acquired Daewoo Motor's

Commercialv ehicle business in 2004 for around USD $16 million.

The company has

had a successful alliance with Italian massproduce r Fiat

since 2006. This has enhanced the productportf olio for Tata and Fiat in terms of

production, knowledgeex change , logistics and its infrastructure.

In the summer of

2008 Tata Motor's successfully purchased the Land Rover and Jaguar

brands from Ford Motors for UK 2.3million. Two of the World's luxury car brand have

been added toits portfolio of brands, and has undoubtedly off the company thechance to

market vehicles in the luxury segments.

NANO is the cheapest car in the World.

Page | 8

Business Policy & Competitive Strategy

The range of Super

Milo fuel efficient buses are powered bysuperefficient, ecofriendly engines.

TATA MOTORS WEAKNESS

The company's passenger car products

are based upon 3rd and4th generation platforms , which put Tata Motors Limited at

adisadvantag e with competing car manufacturer s.

Despite buying the Jaguar and

Land Rover brands Tata has not got afoothold in the luxury car segment

in its domestic, Indian market. The brand associated with commercial

vehicles and lowcostpasseng er cars to the extent that it has isolated itself from lucrativesegm

ents in a more aspiring India .

Other competing car manufacturer

s have been in the passenger carbusiness for 40, 50 or more years. Therefore

Tata Motors Limitedhas to catch up in terms of quality and lean production.

Sustainabil ity and environme ntalism could mean extra costsfor this low-cost

producer. This could impact its underpinning competitive advantage. Obviously, as Tata

globalises and buys intoother brands this problem could be alleviated.

Page | 9
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Michael Porter's Five Forces Analysis TATA Motors

Michael Porter's Five Forces Analysis of TATA Motors The rivalry between existing sellers in the market. The power exerted by the customers in the market. The impact of... (More) Download or Print 40,211 Reads Info and Rating Category: Business/Law > Marketing Rating: (2 Ratings) Upload Date: 08/07/2009 Copyright: Attribution Non-commercial Tata michael porters five forces analysis tata motors Tags: 5 force model (more tags) Flag document for inapproriate content Uploaded by vivekhanna4u Follow Download

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