Macro Economics and Business Environment Assignment

Submitted to: Dr. C.S. Adhikari

Submitted By-
Gaurav Gupta
Roll No- 152
PGDM C
ITM Kharghar.
 Introduction
Tata Motors Ltd is a multinational corporation headquartered in Mumbai, India. Part of the
Tata Group, it was formerly known as TELCO (TATA Engineering and Locomotive Company).

Tata Motors is India’s largest automobile company, with consolidated revenues of USD 20
billion in 2009-10. It is the leader in commercial vehicles and among the top three in passenger
vehicles. Tata Motors has winning products in the compact, midsize car and utility vehicle
segments. The company is the world's fourth largest truck manufacturer, the world's second
largest bus manufacturer, and employs 24,000 workers. Since first rolled out in 1954, Tata
Motors has produced and sold over 4 million vehicles in India.

Established in 1945, when the company began manufacturing locomotives, the company
manufactured its first commercial vehicle in 1954 in collaboration with Daimler-Benz AG,
which ended in 1969. Tata Motors is a dual-listed company traded on both the Bombay Stock
Exchange, as well as on the New York Stock Exchange. Tata Motors in 2005 was ranked among
the top 10 corporations in India with an annual revenue exceeding INR 320 billion. In 2010, Tata
Motors surpassed Reliance to win the coveted title of 'India's most valuable brand' in a annual
survey conducted by Brand Finance and The Economic Times.

Tata Motors has auto manufacturing and assembly plants in Jamshedpur, Pantnagar, Lucknow,
Ahmedabad, Sanand and Pune in India, as well as in Argentina, South Africa and Thailand.
 SWOT ANALYSIS
Strengths
 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 company has a strategy in place for the next stage of its expansion. Not only is it
focusing upon new products and acquisitions, but it also has a program of intensive
management development in place in order to establish its leaders for tomorrow.
 The company has had a successful alliance with Italian mass producer Fiat since 2006.
This has enhanced the product portfolio for Tata and Fiat in terms of production and
knowledge exchange. For example, the Fiat Palio Style was launched by Tata in 2007,
and the companies have an agreement to build a pick-up targeted at Central and South
America.

Weaknesses
 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.
 Despite buying the Jaguar and Land Rover brands (see opportunities below); Tat has not
got a foothold in the luxury car segment in its domestic, Indian market. Is the brand
associated with commercial vehicles and low-cost passenger cars to the extent that it has
isolated itself from lucrative segments in a more aspiring India?
 One weakness which is often not recognised is that in English the word 'tat' means
rubbish. Would the brand sensitive British consumer ever buy into such a brand? Maybe
not, but they would buy into Fiat, Jaguar and Land Rover (see opportunities and
strengths).

Opportunities
  In the summer of 2008 Tata Motor's announced that it had successfully purchased the
Land Rover and Jaguar brands from Ford Motors for UK £2.3 million. Two of the
World's luxury car brand have been added to its portfolio of brands, and will undoubtedly
off the company the chance to market vehicles in the luxury segments.
 Tata Motors Limited acquired Daewoo Motor's Commercial vehicle business in 2004 for
around USD $16 million.
 Nano is the cheapest car in the World - retailing at little more than a motorbike. Whilst
the World is getting ready for greener alternatives to gas-guzzlers, is the Nano the answer
in terms of concept or brand? Incidentally, the new Land Rover and Jaguar models will
cost up to 85 times more than a standard Nano!
 The new global track platform is about to be launched from its Korean (previously
Daewoo) plant. Again, at a time when the World is looking for environmentally friendly
transport alternatives, is now the right time to move into this segment? The answer to this
question (and the one above) is that new and emerging industrial nations such as India,
South Korea and China will have a thirst for low-cost passenger and commercial
vehicles. These are the opportunities. However the company has put in place a very
proactive Corporate Social Responsibility (CSR) committee to address potential
strategies that will make is operations more sustainable.
 The range of Super Milo fuel efficient buses are powered by super-efficient, eco-friendly
engines. The bus has optional organic clutch with booster assist and better air intakes that
will reduce fuel consumption by up to 10%.

Threats
 Other competing car manufacturers have been in the passenger car business for 40, 50 or
more years. Therefore Tata Motors Limited has to catch up in terms of quality and lean
production.
 Sustainability and environmentalism could mean extra costs for this low-cost producer.
This could impact its underpinning competitive advantage. Obviously, as Tata globalises
and buys into other brands this problem could be alleviated.
 Since the company has focused upon the commercial and small vehicle segments, it has
left itself open to competition from overseas companies for the emerging Indian luxury
segments. For example ICICI bank and DaimlerChrysler have invested in a new Pune-
based plant which will build 5000 new Mercedes-Benz per annum. Other players
developing luxury cars targeted at the Indian market include Ford, Honda and Toyota. In
fact the entire Indian market has become a target for other global competitors including
Maruti Udyog, General Motors, Ford and others.
 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.
Macro Economic Factors Affecting Tata Motors
The Managing Director of Tata Motors should make a strategy for the company keeping in mind the
Macro-Economic factors. Basically the formula Y= C+ I+ G+ (X-M) should be kept in mind.

National Income = Consumption + Investment + Government Expenditure + (Export - Import)

Consumption
The cumulative growth of the Passenger Vehicles segment during April 2007 – March 2008 was 12.17
percent. Passenger Cars grew by 11.79 percent, Utility Vehicles by 10.57 percent and Multi Purpose
Vehicles by 21.39 percent in this period. The Commercial Vehicles segment grew marginally at 4.07
percent. While Medium & Heavy Commercial Vehicles declined by 1.66 percent, Light Commercial
Vehicles recorded a growth of 12.29 percent. Three Wheelers sales fell by 9.71 percent with sales of
Goods Carriers declining drastically by 20.49 percent and Passenger Carriers declined by 2.13 percent
during April- March 2008 compared to the last year.

Automobile Exports registered a growth of 22.30 percent during the current financial year.

Tata Motors’ total sales (including exports) of Tata commercial and passenger vehicles in July 2010 were
67,799 vehicles, a growth of 41% over 48,054 vehicles sold in July 2009. The company’s domestic sales
of Tata commercial and passenger vehicles for July 2010 were 63,558 nos., a 39% growth over 45,599
nos. sold in July last year.

Cumulative sales (including exports) for the company for the fiscal are 249,507 nos., a growth of 46%
over 171,168 nos. sold last year.

GROSS TUNROVER OF THE AUTOMOBILE INDUSTRY

IN INDIA
Year (IN USD
MILLION)
2004-05 20,896
2005-06 27,011
2006-07 34,285
2007-08 36,612
2008-09 38,238
Investment
Nearly every automobile company is investing at a higher rate than ever before to achieve a high
growth trajectory. The overall investment in the sector has been increasing quite rapidly. It is expected
that by the end of 2010 Indian automobile sector will be investing a huge amount as Rs. 30,000 crores.
For example, Maruti Udyog has plans of investing Rs. 6,500 crores; the Tata Motors is coming up with
more investment of Rs. 2,000 crores in its compact car project. Not only the Indian companies but also
foreign players like Hyundai are coming up with the investment of more than Rs. 3,800 crores in India.
At present the industry is enjoying a growth rate of 14-17% per annum, with domestic sales growth at
12.8%. The growth rate is predicted to double by 2015. As it is seen, the total sales of passenger vehicles
- cars, utility vehicles and multi-utility vehicles - in the year 2005 reached the mark of 1.06 million. The
current growth rate indicates that by 2012 India will overtake Germany and Japan in sales volumes.

Financing schemes have become an important factor in the growth of automobile sales. More and more
financial schemes are coming up with easy installment plans to lure the customers. Apart from domestic
production, the industry is consistently focusing on the automobile exports. The auto component
segment is contributing a lot in the export arena. The liberalized policies of the government are now
making the companies go for more and more exports.

The total investment done by Tata Motors is $15.430 billion.

Government Expenditure.
Investment exceeding Rs. 50,000 crore, the turnover of the automobile industry exceeded Rs. 59,518
crore in 2002-03. Including turnover of the auto-component sector, the automotive industry's turnover,
which was above Rs. 84,000 crore in 2002-03, is estimated to have exceeded Rs.1,00,000 crore ( USD 22.
74 billion) in 2003-04.

ROAD NETWORK OF INDIA

Category of road Length in Km

Total road network 3.34 million

National Highways 65,569

State Highways 1,30,000

Major Distt. Road, Rural 3.14 million

road & Urban road

 India having 3.34 million kilometers of road network is the second largest in the world.
  As per present estimate, road network carry nearly 65% of freight and 85% of passenger traffic.

 Traffic on roads is growing at a rate of 7 to 10% per annum while the vehicle population growth
is of the order of 12% per annum. ‘

 81 numbers of proposals amounting to Rs. 402.62 crore under Economic Importance.

 116 numbers of proposals amounting to Rs. 521.24 crore under Inter-State Connectivity scheme.

 An amount of Rs. 170.59 crore (Rs. 162.09 crore for the States and Rs. 8.5 crore for UTs) is
earmarked for this purpose during the year 2005-06

The Indian Automobile Industry plays a major role in the economic scenario of the country. The
automobile sector in India, record sales of more than one million passenger cars per year. The
percentage of automobile exports has risen significantly during the last few years. The government
policies on Indian automobile industry have been framed in order to aid in the expansion of the
automobiles sector in India.

A reduction in the tariff imposed on car exports has been effected by the Indian government. There has
also been a removal of the minimum capital investment required from new investors. The new policy is
also in favor of reduction in excise duty for small automobiles and low emission and multi utility cars.
The tariff policy is also to be reviewed on a regular basis in order to affect a balance between domestic
industry and international trade. There has also been a proposal for tax relaxation on investment of
more than Rs. 500 Crore.

The government has recently proposed for an infrastructure that will provide one stop clearance for any
kind of proposal for foreign direct investment in the automotive sector. This will include the local
clearance system also for the same purpose. There are also plans for imposing a 100 % tax deduction on
export profits. The government has also proposed for a concession in import duty for the establishment
of new manufacturing units and industrial holdings.

The Indian government is also urging the state governments to ensure continuous power supply to the
automotive manufacturing units as well as granting them with the preferred plots of land. Captive
Generation for the automobile sector has also been proposed. The auto policy of the Indian government
also includes the promotion of vehicles which are run on alternative energy resources. Talks are also on
for extensive research, development and designing facilities that would affect modernization in the
automotive sector.

Export – Import
Auto Mobile Export Trends
Category 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10
Passenger 129,291 166,402 175,572 198,452 218,401 335,729 446,146
Vehicles
 Commercial 17,432 29,940 40,600 49,537 58,994 42,625 45,007
Vehicles
Three Wheelers 68,144 66,795 76,881 143,896 141,225 148,066 173,282
Two Wheelers 265,052 366,407 513,169 619,644 819,713 1,004,174 1,140,184
Grand Total 479,919 629,544 806,222 1,011,529 1,238,333 1,530,594 1,804,619

Tata motors Total export around 30,000 were the commercial vehicles showing a growth of 50 per
cent over the previous year’s figure of around 20,000. Tata Motors exports rises by 65%

The company has already doubled its production capacity of Ace at its Pune plant and is now looking
for an alternative site to set up a new manufacturing unit in view of its growing demand.

But the growth in export of passenger vehicles has been almost 80 per cent as it grew from around
11,000 in the previous year to 20,000 during the year, the north face Australia, he said. Tata Motors
has been focusing on the export market in recent years and apart from South Africa it has been
exporting to some other African countries, Europe, Middle East and in the Asian markets.

Backed by strong demand for Indian vehicles from markets such as South Africa, Tata Motors has
exported more than 50,000 vehicles during 2005-06 showing a growth of over 65 per cent over the
previous year.