Tata Motors is India’s largest automaker. Mr. Ratan Tata outlined Tata’s’ vision as Making the Peoples car safe, affordable, and within everyone’s reach; an innovative product for the masses and lower costs at the market place.
Tata Nano, an ultra-cheap vehicle (UCV) is a product of Tata Group. Its idea was conceived by Mr. Ratan Tata, the Group’s chairman.
The idea was to cater to the largely poor populace of India & developing countries. The target market was the users of 2-wheeler (scooters & motorcycles). India has a huge population in India alone, and the ration of people to the vehicle was 1000:8. With the price of 1 Lakh, one would own a peoples car, Nano. To Tata group, this was an opportunity to create a new market segment at a time when the world’s cheapest car produced by Chinas’ Cherry Automobiles was priced of about US$ 5,000 (Krishna P; Bharat A; Rachna.
T- March 28, 2011)
The announcement of Tata to create this segment elicited the reaction from its competitors around the world. Maruti Suzuki announced their plan to introduce to Maruti Cervo; Chrysler announced newborn called Dodge Hornet; Hyundai announced $3,700 valued car and Renault introduced $3000 valued car. The competitor employed the use of several strategies which included but not limited to: multiple vendors, large capital investment, and a single supplier for critical components; indigenous content and partnering with local manufacturers of 2-wheeled, for instance, Bajaj Auto to advance their success (Krishna P, Bharat A, Rachna T.
March 28, 2011)
Vendor partnership and negotiation was key to Tata Nano project success. The group cleverly situated its factory near to tier-1 ancillary manufacturers. This would help the group reduce logistical & and inventory costs. Evidently, Tata employed passenger car channels partners and leveraged on a non-traditional channel such as other Tata group companies. (Krishna P, Bharat A, Rachna T. March 28, 2011)
Tata pursued the option of setting up its factory at the Eastern state of Bengal was well informed by politically orchestrated economic incentives by the government. This was a deal too good to refuse by the group’s management. However, the win was short-lived. The locals resisted the establishment of Tata’s partners in the area. Despite efforts by the management to calm them that things will settle, the suppliers’ couldn’t hear of that. Three major setbacks happened: Tata met 75% of suppliers cost of relocation; Tata’ production was halted and hence relocation cost to West of State, about 1550 miles away; and the loss of business in terms of unsatisfied orders. (Krishna P, Bharat A, Rachna T. March 28, 2011)
Internally, Tata staff collaborated very well with the project team. A case is told of the marketing team helping the project team in advising on the design of what customers prefer. Innovation on the green statement was a feature to be lauded. The design unique features such as tubeless tires; rear engine placement hence increased internal space; own-designed 2-cylinder engines-cheaper than any next cheapest engine in India; fuel efficient and less carbon emission. The teams were able to control noise vibration harshness (NVH); low footprint and weight. The meeting of regulatory requirement and that can satisfy a customer about: has good resale value and that there no hidden costs.
NANO PROJECTS PROBLEMS & SMART OBJECTIVES
The Nano project faced many problems right from inception to the very end. At first, there was nothing to benchmark Nano with. The suppliers didn’t know how the parts should look like and what it would cost them to deliver one. Tata had come up with the ridiculous cost of 1 lakh, estimating between the price of 2-wheeler and that of Suzuki Maruti 800, India’s then cheapest car. At one point, suppliers/ partners mentioned to the researchers that Tata didn’t come to them with any condition. This shows that they had a dream but were clueless about how to realize it. Tata didn’t take sufficiently elaborate research on Nano. Instead of collaborating with the industry leader in the 2-wheeler, Bajaj Auto, they decided to go by themselves, a big blunder. They weren’t specific about what they really wanted.
Measurability of progress was mainly by way of meeting the budget. The problem is that Nano project team was closely monitored by Mr. Ratan Tata himself who would occasionally meet the team, test the prototype and critic it. The team would do as directed. He owned the idea through and what this meant was that he was too inelastic about everything including the budget and that there was no room for the team to be innovative. The researcher recalls that the team at one point would suggest abandoning the project rather than changing its cost. The approval even for the immaterial amount like $0.02 clearly presented perfect inelasticity in this project, something rare in such like projects of high magnitude. Despite iteration, the project was also completed within the set time frame of 4-years. This type of mindset that everything must be as set is unrealistic and we see this in Tata Nano’s launch when Mr. Ratan admitted that the cost of 1 Lakh was unrealistic with the current economic state. Despite this knowledge, he proceeds with a sale of Nano at the initially pronounced price of 1 lakh, just to please it’s would be customers. What we see at the end is mass ordering which the company was unable to satisfy (more than 50%). At the time of launch, the company and the customer should have high psyche to supply and order satisfaction respectively. If this isn’t met, customers wouldn’t bet on the company on being relied upon to satisfy the market. Mr. Ratan Tata ought to have shared the idea, letting the team pull from there with an acceptable level of flexibility. This would have changed the result for better.
Tata Nano was to be made for local Indian customer and later to developing countries whose requirement is at par with India’s’. There seems to be diverted attention to think about Europe and the Americas. This is greed in the making. Diverted attention means inattention to the immediate needs of the local. Quality issues could start setting up at this stage. At this time, Tata is constrained financially hence will not have the muscle to do so anytime soon. Europe countries like Germany have standards set high & Nano for sure isn’t for such an advanced market.