Assignment Quiz-2

Topic- Tata Nano: An Inspiration from an Indian Conglomerate

MGT748: Management of Change

Submitted To:
M. Nazmul Amin, PhD

Submitted By:
Md. Abu Yousuf
ID: 20374014

Submission Date: April 20, 2021

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Introduction:
Till today private transport is the dream of maximum people. In India privet car is considered as
fashion, symbol of success. Not only that, it is shows the status of an individual, a family. But due
to its high cost, it’s less affordable for some people. More than motorbikes, cars are safer and
convenient for communication. So researchers are finding every possible aspect to make it more
reasonable for everyone to own a car. That’s exactly what TATA has made it happen with the
invention of their Tata Nano.
Summary of the Case:
Tata is a reputed multinational Indian company established by Jamsetji Tata in 1868. It is running
its operation worldwide with 350, 000 employees to achieve the company’s goal for over 140 years.
They earned $62.5 billion in 2007-2008 with great praise.
Their focus on communications and IT, engineering, materials, services, energy, consumer products
and chemicals, Tata motor, Tata steel, Tata power, Tata chemicals etc. Tata group come up with top
five commercial vehicle manufacturer in the world when it acquired Jaguar and Land rover. Tata
group as the world’s sixth most reputed firm focusing on new technologies and innovation to build
a series of world class business in select sectors.
Tata Nano is the dream car for nearly 300 million upper middle class with the half price then other
companies. Tata Company is widely popular in India and one of the largest passenger automobile
and commercial vehicle manufacturing company, because they created the cheapest car in the world
such as Tata Nano. Tata Nano was available in the market in 2009. However, about 97% of the parts
of this car were locally sourced. The chairman Ratan Tata was the first to get the idea to build world’s
cheapest car. The idea came to his mind because of enormous of families in India drive two-wheel
instead of using four-wheel vehicles. However, he gave is full efforts with his team to fulfill the
dream. The Times of India reported that the vehicle was not a four-wheel auto rickshaw but a pure
car with perfect design.
To sum up, Tata motors has faced some issues regarding environment pollutions because of Tata
Nano car. Tata Nano has lack of latest technology for this reason it cannot maintain the emissions
perfectly. It pollutes air four or five times higher than other vehicles. However, the company is
continuously working for fixing it.

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To design the Tata Nano initially, there are many forces of change, which stemmed from external, as
well as from internal.

External forces are mentioned & explained below:

Economic Forces: Indian economy has grown steadily over the last two decades, its growth has
been uneven when comparing different social groups, economic groups, geographic regions, and
rural and urban areas. Since India’s 1991 economic reforms, the nation’s annual GDP growth rate
has stabilized at a more robust growth of 6 to 7 percent per year. This economic advancement is one
of the reason to aim and introduce Tata Nano in the market. Tata Nano is the dream car in the eye of
middle class family in the India. Tata Nano was designed to grab this market of middle class people,
as this class always prefers to buy budget vehicle.

Technological Forces: Advances in technology and knowledge structure and innovation of new
devices have helped and influenced the Tata Nano to advance in India's competitive automobile
industry. It has been observed that the body parts of Nano were made and assembled in India.
Starting from engine, steering, wheels and tires to the windshield washing system, gear shifter and
central console, every component was given special emphasis in an effort to cut down cost. In
2005, they started working on new engine for Tata Nano after they have considered the suitable
engine and decided to create an engine on their own. While to reduce cost they have used steel
tube in place of steel rod which actually helps to reduce the weight of the cars. The wheels for
Tata Nano were supplied by the Wheels of India and they used lighter wheels as compared to other
vehicles. And in order to reduce the weight of the car and save cost, the engine induction system
was made of plastic instead of aluminum. Tata Motors has manufactured Tata Nano cars by
reducing all the cost incurred to lowest to make the 1 lakh car.

Competitive force: Suzuki maruti 800 the first people’s car of India was the lowest cost car in
India and T ford in America before Tata Nano. Tata introduced this Nano with the half cost of
Suzuki maruti 800. Since the Nano is a small, low cost and high fuel efficient car, it is in demand
not only in India but also globally. The competitors of Tata Nano for example, Bajaj Auto and
Mahindra-Renault launched Bajaj-Renault small car, Hero Honda with the affiliation with a
Canadian company was working on a small car project, Maruti-Suzuki was developing a 600cc
car, Xenetis was also planning to build a budget car, Nissan-Toyota-Ford also felt interest to

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establish their business in this segment. In addition, as Nano can be modified according to given
requirements/ specifications, it was able to grab the markets in Africa, South Asia and Latin
American countries. As Tata Group previously acquired many International Brands, they were
capable to manage their business in global market. As Asian, African & Latin American economies
has a huge demand for fuel-efficient cheap vehicles, India has their card of Tata Nano to compete
against Korea, Japan, China and threaten the dominance of U.S.A.

Consumer Requirements and Social Pressure: Since about 300 million Indians live in the middle
class, they have dream for low cost, small and fuel efficient vehicles for their daily use and status.
As four-wheelers feel their pride, dignity and wealth, the invention of the Nano awakens a new
hope for them to hold their prestige in society. Tata Nano is the great contribution for middle class
people globally.

Government Forces: Indian government always encourage to manufacture for their internal
requirement as well as for global market. Government policies such as import barriers and local
content requirements contributed to the automobile manufacturing industry. In addition, the
Government of India's highways and rural expansion programs open up new opportunities for small
cargo vehicles, mini-trucks and trucks to maintain connectivity between India's rural and urban
economy. This has created opportunities to create new claims in the expanded region.

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Internal forces are mentioned & explained below:

Individual Expectation: Mr. Ratan Tata, Chairman of Tata Group, is the brain to build the world's
cheapest car. By then, he had noticed that most Indian families rode two wheels instead of four
wheelers because most of India was middle class. Mr. Ratan Tata’s vision, teamwork and
commitment to the creative collaboration of individual key units have made the Nano a successful
brand of the Tata Group.

Person Focused Change: Nano was the dream of Mr. Ratan Tata, He has made his dream come
true with his team. The project was led by Mr. Tata. He formed a huge cross-functional team where
there was a mix of experienced and young people who possessed skills and courage. There were
more than 500 engineers who worked on the car for four years. Tata motors also used the cheap
Indian Labor Market and growing skilled labor to set up the Nano project.

Structure Focused Change: Since the Nano had a compact design and was built on a very
competitive budget, Tata Motors took steps to change its manufacturing process and always invited
new innovations from suppliers. Nano had different variants so that different group of people can
afford it. They also follow a modular design policy. The parts of the car were easy for shipping,
distributing & assembling in any location by local entrepreneurs. Tata had a plan to build a network of
satellite assembly operations by training the various entrepreneurs for operations, maintenance & quality
assurance. As over 90% of the parts are locally sourced, low cost labor, larger distribution in global market,
availability of easy modification of the car for new markets.
Technological Change: As it is a budget car, the features which are installed are only the necessary
ones. However, as it is cheap, it doesn’t have radio, power steering, power windows, air conditioner
or proper speedometer. But Nano is open for modification and has different variants which are more
upgraded with features. It has a 34 horsepower and 623cc aluminum engine meets Euro III emission
standards with high fuel efficiency. It also successfully met the India’s front on crash tests,
international offset and side impact crash tests, it proves its reliability though it doesn’t have airbags.

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The reason behind the failure of Tata Nano:

Environmental challenges: As Nano lacks the complex technology to maintain its initial level of
emissions, it pollutes the environment more than other cars. To eradicate this problem, Nano is
working on eco-friendly projects. Tata Nano lost its value for the statement of environmental
personnel as they said “the race to produce a super – cheap car will impose massive costs on society
and on the environment”. However, they are working with a French firm named Moteur
Development International to develop technology that compresses air into a fuel. Tata Motors are
also working to build electric version of Nano, named E-Nano.

Social statues challenge: In India people are socially attached like neighbors are called second
family especially in middle class and lower middle class society. It was branded as the world’s
cheapest car and the word ‘cheap’ is associated with many other negative terms like ‘unreliability’
and ‘fragile’. The car was positioned as a poor man's car and India is very status conscious. Young
Indians do not necessarily think cheap is best; they like things that have embellishments and dazzle.
The price was its biggest strength but the positioning in people’s mind as the ‘world’s cheapest car’
became its biggest weakness.

Consumers’ perception challenges: Ratan Tata wanted to make a car for every home in India. He
wanted it to be an affordable family car and not the cheapest car and thus realized that branding it as
the 'cheapest' rather than most affordable car was the greatest flaw that distanced people from it.
Every product takes its own time to make a place in the market and consumer’s mind but before
Nano could do so it was covered by controversy.

Safety challenge: During the first year of its launch 2-3 cars caught fire and led to fatal accidents.
And the marketing team failed in clearing up the mess. Thus the competitors took advantage of it
and fueled up the negative publicity for Nano. And negative news travels faster than positive one.
India is a huge country where word of mouth has a strong influence on every product. People’s
opinion is based on perception of others so this fire controversy resulted in huge loss for Nano as a
segment of people were afraid to buy it anymore and the Tata group could do nothing to bring back
that faith among people for Nano.

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Value addition challenge: Nano was placed as an alternative of motor bikes in people’s mind. The
whole thing about it being an alternative to a motorcycle was great as a concept but not as a marketing
slogan. Car has an ‘aspirational value’ even today in India. A man’s status is measured by the society
through the type of car he drives. In America a person can buy any type of car and no one will say
anything but the brand of car matters in India. A young Indian man irrespective of his looks will get
better marriage proposals if he owns a stylish car rather than a motorcycle.

Design and shape challenge: The name of the car was Nano which in Guajarati meant ‘dwarf’ and
the look of the car was more like a covered auto rickshaw. To Indian people car are supposed to be
big and spacious unlike Nano which was small and congested.

Target consumer challenge: Along with positioning Tata group made mistake in targeting too.
Ratan Tata envisioned a car for a family of four who rather than using motor bikes would choose a
Nano but in India the middle and lower middle class people in small towns and villages lived in joint
families with more than 4 members with roads that are bumpy and not at all well-structured. So the
expectations of small town people driving their full family in a car could not be fulfilled by a Nano.
It suited well for the people in cities which had nuclear families and well-structured roads but not for
small towns.

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Lessons to be learnt from Tata Nano’s failure:
The positioning lesson:
Positioning refers to how a brand has taken place in the minds of consumers and how it differs from
competitors' products. The idea of being a 'cheap' car in the Tata Nano market has created a
misconception in people's minds. So companies should be extra careful to remind the customer to
associate it with their products because a wrong word happened in the case of Tata Nano which can
create negativity.

The targeting lesson:

The Tata group targets middle-class and lower-middle-class people who live in small towns, but the car
design doesn't match the part they choose to target. In small towns in India there are joint families of
12-15 people who live together so Nano is not an option for that kind of people. Ratan Tata wanted
to design a car that would be suitable for a family of four but this type of nuclear family is found in
cities like Pune, Goa, Ahmedabad rather than small towns. Companies should have a clear
segmentation of the market that they want to target as the wrong target market can result in the Nano
failing such a product.
The value lesson:
A product’s value depends on the consumer’s mindset perspective. A car is considered a luxury and
status symbol in the Indian subcontinent which has both sociological and psychological value. A car
which is only used for practical purpose will not be valuable from other perspective that’s where
TATA NANO failed to provide value beyond practicality. The lesson here for company is that a
product is looked after from both practical and psychological perspective. One cannot be singled out
to make a product. A product being only a product does not have the same value as a product seen
from psychological perspective. A product must have both monetary and psychological value.
The competition lesson:
Nano has failed to see competition from the consumer mindset. The Nano had no radio, no power steering,
no power winding, and no air conditioning. The Nano was undoubtedly the cheapest car on the market but
as a customer it was a very low quality car and not worth the money and they would rather spend a bit
more to get a better priced car like Maruti 800 or an Alto or Ritz. Tata Nano failed to realize that there are
other budget cars on the market and buyers will not be able to buy the car because it was the cheapest. Every
company needs to understand that the cheap market is not always the best way to capture it.

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Recommendation:

 Instead of branding the Nano as the cheapest car in the world, the Tata Group should have
branded it as a smart car or a great car because the word cheap was the reason for its downfall.

 The marketing team should have been more vigilant and focused on the campaign. They were
happy with the unplanned promotion of the car but did not realize that the location of the product
was wrong.

 The fire controversy should have been handled more cautiously by the Public Relation team.
Only 2-3 cars out of 4-5 lakhs caught fire but there were rumors that all cars were defective and
thus negative publicity happened which put a hold on the sales of the car.

 Tata group should not have placed Nano as an alternative for motorcycle as due to this
comparison it lost the aspirational value of a car. If they wanted a comparison then they could
use Nano as an easier option for people who wanted to have a car but did not have the money.

 Tata group should have tried to understand consumer’s psychology of car being a status symbol
rather than just a need of transport. They could work on the look of the car by bringing more
variations in design of the car.

 Tata group thought offering a car at the lowest cost will attract a lot of customers. It did attract a
lot of eyeballs but even though India is a price sensitive market they did not want to compromise
in buying a car because it was not only a means of transport for them but also a status symbol.
They should have given importance to adding more features and upgrading it.

 Tata group thought that middle class and lower middle class families from the small towns were
their target market but they should have targeted the middle class families of cities because they
contained the perfect family size and proper infrastructure for driving a Nano.

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Conclusion:

The TATA Group management style has been quite constant since its lifetime. The TATA Group
has contained more command changes which are essential in current environment to operate a vehicle
towards to become more competitive. In terms of management style, TATA Group has implemented
a team-led culture and collective way. With Ratan Tata as leader of the Group, the management
design of the complete TATA Group has transformed significantly; trust became an enormous facet
and theme of the group. It was a perfect blend of value, price and quality and had excellent word of
mouth publicity before its launch. Even president Obama during his visit to India at that time praised
the concept of Tata Nano. The demand was so high that the pre-booking order for Nano surpassed
the production capacity. It took more than 22 months to deliver the pre-booked 1 lakh order. It was
branded as the world’s cheapest car and the word ‘cheap’ is associated with many other negative
terms like ‘unreliability’ and ‘fragile’. The car was positioned as a poor man's car and India is very
status conscious. Young Indians do not necessarily think cheap is best.

Thank you for best efforts for us!

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