Tata Motors Porters Five Model and Pest

12/21/2014 Tata Motors Porters Five Model And Pest Analysis Marketing Essay

Tata Motors Porters Five Model And Pest
Analysis Marketing Essay
Delicensing in 1991 put the Indian automobile industry on a new growth trajectory, which attracted foreign
auto giants to set up their production facilities in the country to take advantage of the various benefits it
offers. Large middle class population, growing earning power and strong technological capability have been
boosting automobile demand for the past few years. Despite economic slowdown, the Indian automobile
sector is expected to see high growth in coming years, especially in passenger cars segment, said our new
research report, ''Indian Automobile Sector Analysis”.
The passenger vehicle market, which constitutes around 80% of automobile sales, has immense growth
potential as passenger car stock stood at around 11 per 1,000 people in 2008. Anticipating the future
market potential, the production of passenger vehicle is forecasted to grow at a CAGR of around 10% from
200910 to 201213.
The recent launch of Tata Nano has brought about a new revolution in the country’s small car segment.
Seeing the good initial response from consumers, many other players in the industry are chalking out their
plans to launch cars in this segment in the next few years. Our research foresees a CAGR growth of around
14.5% in domestic volume sales of passenger vehicles during the forecast period. Other segments, such as
twowheelers, multipurpose vehicle and light commercial vehicle, are also expected to witness fast growth
in coming years.
This essay is an example of a student's work
Disclaimer
This essay has been submitted to us by a student in order to help you with your studies. This is not an
example of the work written by our professional essay writers.
Who wrote this essay
Become a Freelance Writer
Place an Order
Withstanding a growth rate of 18% per annum, Indian automobile industry; manufacturing cars, buses, three
data:text/html;charset=utf8,%3Cdiv%20class%3D%22textcenter%20socialbuttons%20hiddenprint%22%20style%3D%22boxsizing%3A%20borderbox%3… 1/9
wheelers, two wheelers, commercial vehicles, heavy vehicles, provides employment to a large number of
workforce. A number of leading global automotive companies entered into joint ventures with domestic
manufacturers of India and thus started the largescale production of automobiles in India.
PLAYERS IN INDIA
Maruti Udyog, Fiat India Private Ltd, Ford India Ltd., General Motors India Pvt Ltd, and Toyota Kirloskar
Motor Ltd among others. The production of automobiles in India is mainly for the domestic customers.
Some facts on Automobile industry in India:
India has the fourth largest car market in the world
India has the largest three wheeler market in India
India is the second largest producer of two wheelers in the world
India ranks fifth in the production of commercial vehicles.
Hyundai Motors ranks second in car production in the world.
The two wheelers manufacturers in India are, at present, doing good business.The popular two wheelers
manufacturers in India are
Bajaj Auto
Hero Honda Motors
Honda Motors
LML
Scooters India Ltd
Suzuki Motorcycles
TVS Motor Company
Car manufacturing in India first began in late 1940s. Earlier a couple of cars made by foreign technology
were manufactured in India. But now, cars made by Indian car manufacturers dominate the business. The
future of car manufacturing in India is bright. The popular car company in India are:
Maruti Udyog
Ford India Private Ltd:
General Motors India
Hindustan Motors
Hyundai Motors
Fiat India Private Ltd.
Tata Motors Limited
Toyota Kirloskar Motor Ltd
Domestic Market Share for 200809

Passenger Vehicles
15.96%
Commercial Vehicles
3.95%
Three Wheelers
3.60%
Two Wheelers
76.49%
MARKET SHARE
At present major Indian, European, Korean, Japanese automobile companies are holding significant market
shares. In commercial vehicle, Tata Motors dominates over 60% of the Indian commercial vehicle market.
Tata Motors is the largest medium and heavy commercial vehicle manufacturer.
Among the twowheeler segment, including scooters and mopeds motorcycles have major share in the
market. Hero Honda contributes 50% motorcycles to the market in which Honda holds 46% share in scooter
and TVS makes 82% of the mopeds in the country. In the three wheeler industry in India, Piaggio holds 40%
of the market share. Bajaj is the leader by making 68% of the threewheelers.
Car manufacturers in India dominate the passenger vehicle market by 79%. Maruti Suzuki is the largest car
producer in India and has 52% share in passenger cars and is a complete monopoly in multi purpose
vehicles. In utility vehicles Mahindra holds 42% share. Hyundai and Tata Motors is the second and third car
producer in India.
DOMESTIC SALES
Established under the parent company, Tata Group, in 1945, Tata Motors Limited has become India’s
largest automobile company. It was the first Indian automobile company to list on the New York Stock
Exchange. Tata Motors began manufacturing commercial vehicles in 1954 with a 15year collaboration
agreement with Daimler Benz of Germany. This partnership has led Tata Motors to not only become India’s
largest automobile company but also India’s largest commercial vehicle manufacturer; the world’s top five
manufactures of medium and heavy trucks and the world’s second largest medium and heavy bus
manufacturer. Having just entered the passenger vehicles market segment in 1991, Tata Motors now ranks
second in India’s passenger vehicle market.
Tata has enjoyed the prestige of having developed Tata Ace, India’s first indigenous light commercial
vehicle; Tata Safari, India’s first sports utility vehicle; Tata Indica, India’s first indigenously manufactured
passenger car; and the Nano, the world’s least expensive car.
PEST ANALYSIS
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.
In Tata Motors agreement with Ford to purchase Jaguar and Land Rovero, Tata Motors must have a full
comprehension of the governing bodies and laws regulating commerce in United Kingdom.
Tata’s headquarters in Mumbai, India, strictly controls and regulates operations in all dealerships and
subsidiaries, in addition to knowing and abiding by all labour laws in the multiple countries where they have
manufacturing plants it has to watch political change.
Disclaimer
Place an Order
The foundation of the company’s 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.
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 worldwide 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.
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.
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.
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
worldwide. This equates to Tata Motors having lots of experience and resources to draw from for research
and development purposes. The foundation of the company’s growth is a deep understanding of economic
stimuli and customer needs, and the ability to translate them into customerdesired offerings through
leading edge R&D . Employing 1,400 scientists and engineers, Tata Motors’ Research and Development
team is ahead of the pack in India’s market and right with the rest of the field internationally. Among Tata’s
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 world’s cheapest production car. 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.
Disclaimer
Place an Order
PORTER’S FIVE FORCES ANALYSIS OF INDIAN
AUTOMOBILE SECTOR
It's true that the average person can't come along and start manufacturing automobiles. The emergence of
foreign competitors with the capital, required technologies and management skills began to undermine the
market share of various companies.
The domestic auto industry posted a robust over 24 per cent jump in August sales, fuelling hopes of an
even better performance in the coming festival season. According to the Society of Indian Automobile
Manufacturers (SIAM), the industry sold 10,08,702 units in August against 8,11,341 units in the same month
last year. Passenger car sales continued to grow for the seventh straight month for August, up 25.59 per
cent while sales for motorcycles soared 25.94 per cent for the same month.
At present 100% Foreign Direct Investment (FDI) is permissible under automatic route in this sector
including passenger car segment. The import of technology/technological upgradation on the royalty
payment of 5% without any duration limit and lump sum payment of USD 2 million is allowed under
automatic route in this sector.
Barriers to entry:
Economies of scale: Companies like Maruti, Hero Honda etc are present in market from many year and
achive the optimum level of production through which these companies are enjoying the economies of
scale. But for a new player it will not be easy to get benefit of these economies of scale due to high price
competition from exiting players
Demand side benefit of scale: It is never easy to get the trust of the customer. Company like Hero Honda,
Bajaj and TATA etc having the large number of customer base and build the trust in the product. So new
players will have make place among the customer to beat the competition which will not be easy for them.
Customer switching cost: Customer in automobile industry has high switching cost. Because after buying
vehicle once they did not replace it before two or three years so the switching cost in this industry is high. It
will be a barrier for new player.
Capital requirements: Capitals require tostart an automobile company is very high. Land and machinery
requirement and human resources requirement and after then there is high competition so it will be very
risky for new company.
distribution channels: In automobile industry or in any industry to capture the huge market you should have
a big distribution network not only for sales of vehicles but also for the services, which is important feature
consider for company. Like Maruti due to the oldest company in India have the advantage over the
competitors. Ever existing players are not able to overcome this who are trying from so many years so a big
barrier for new entrance.
Threat of Substitutes
If we talk about the substitute for automobile then there are mainly two substitutes are:
Railways
Airlines
But both of these will not be substitutes for every customer and in every situation. Like for a short journey
airlines will not be substitutes. And journey to a place where railway can’t reach in this position railway will
not be substitute. but these can be threat in near future as airlines industry trying their hard best to cheap
their fair and start as much as local airlines.
But within the automobile industry lots of completion and substitutes are able like for two wheels any car can
be substitute after the launch of Nano the price factor also remove and owned car or car on rent are the
substitute for each other. This is great advantage to TATA as now two wheeler customer can also go for car
which mean new segment of customer.
Bargaining Power of Suppliers
To manufacture a vehicle number of inputs is used like steel, seat covers, technology, and tyre etc. Input
which add value to the vehicle supplier of those inputs are always have bargaining power like tyres of MRF
will add value to the final product so company using the MRF tyre can’t change the supplier easily due to
high switch cost.
When we talk about steel major input for the automobile industry and in India steel demand is more than its
supply and most of the steel is imported from the abroad so in this case also automobile company are
lacking.
But when we talk about the input like seat cover, plastic etc. which can easily switch and cost is nil of
switching. So in this case bargaining power of supplier will be low.
Disclaimer
Place an Order
Bargaining Power of Buyers
For the produced which are adding values to the product the switching cost of company will have low
bargaining power because it will directly affect the customers.
Company have to keep good relation with supplier to enjoy the benefit of discounted prices so they have to
go keep long relation with supplier. So they can’t change supplier time to time. In that case buyer will have
high bargaining power.
When automobile company can go for backward integration in that case buyer have the high bargaining
power. Like Tata which have its own steel plants so can face the problem of shortage of raw material.
When buyer power is strong, the buyer is the one who sets the price in the market. Here there are
purchases of large volumes. There is prevalence of alternative options It specifies the impact of customers
on the product
Price sensitive customers were some of the factors that determine the extent of influence of the buyers in
this industry. The major focus of Indian Component suppliers is Quality as suggested by one of the
Japanese Quality focus firm. The Industry association ACMA reports that over 170 of its members have
already received ISO9000 certification and 23 have received QS9000 certification.
Industry Rivalry
When total costs are mostly fixed costs, the firm must produce capacity to attain the lowest unit costs. Since
the firm must sell this large quantity of product, high levels of production lead to a fight for market share and
results in increased rivalry. This is happening in the automobile industry all player are big and put huge
investment.
Industry becomes unstable as the diversification increases. In this case the diversity of rivals is moderate as
most offer products which are close to standard versions and the competitors are also mostly similar in
strength
The presence of many players of about the same size little differentiation between competitors. Higher the
competition in the industry lower would be the profit margin. To remain ahead in competition, automakers
were tempted to offer value added services to the customers incurring more costs.
Conclusion:
Tata Motors is an overall strong company that has found strength and expansion through its parent
company, Tata Group, but also through its numerous acquisitions and mergers. Although Tata Motors stock
prices have fallen since the start of the 2008 year due to suggestions that Tata Motors is overreaching by
adding luxury brands to pair with the Nano, the world's cheapest car.
Chairman of Tata Group, Ratan Tata, rejects suggestions that, ``We're not trying to be a global player,'' he
told reporters in New Delhi Jan after unveiling the Nano, which will be built in a new plant costing 10 billion
rupees ($249 million). ``We will grow internationally in select markets'' (Krishnamoorthy).
we identify and describe attributes of successful companies including: production efficiency, wellplanned
cost structures, distributed management, attention to underserved markets, and wellrespected brands and
products. We then move from specific company attributes to identifying key trends in the automotive
industry as a whole including: international expansion, distributed competition in new markets, increased
environmental regulation, increased energy constraints and increased operational efficiency.
With the development of Indian economy and the liberalisation of policies new international players are
entering in the Indian market due to huge potential. It will be directly affect the national players. The future
looks much more promising for the four Asian companies with international market reach that were studied:
MUL, Honda, Hyundai and Toyota. Toyota stands out as being best positioned for success in the near
future, while Honda will most likely continue to be successful on a smaller scale. And although currently
successful, it is much more difficult to predict the future success of Maruti Udyog Automotive Industrial

Tata Motors Porters Five Model and Pest

Uploaded by

Document Informationclick to expand document information

Copyright:

Available Formats

Tata Motors Porters Five Model and Pest

Uploaded by

Document Information

Original Description:

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Tata Motors Porters Five Model and Pest

Uploaded by

Copyright:

Available Formats

12/21/2014 Tata Motors Porters Five Model And Pest Analysis Marketing Essay

You might also like