Tata Nano

EXECUTIVE SUMMARY

Tata Nano is the first car to be said to be the common man’s car. It is sold in home country India around Rs 1-lakh i.e approximately USD 2000. It is manufactured by Tata Motor Limited, the largest automobile company in India. It’s Chairman, Mr Ratan Tata envisions that Tata Nano to become a “People car” which is affordable by almost everybody. Tata Nano was first launched in India on 1st April 2009 and expected to be in Indian market by July 2009. Since launching, it has created a huge buzz all over India. Within the first two days of lunching, it has received 5500 booking. The s keep increasing every day since the launching.

What makes Tata Nano so cheap? Basically, by making things smaller, lighter, do away with superficial parts and change the materials wherever possible without compromising the safety and environmental compliance. It is said that Tata Nano has better millage than Toyota Prius and same gas emission as a scooter.

Tata Nano will be imported to Malaysia by Tata Industries in parts. It will be assembled in its two factories i.e in Shah Alam, Selangor and Pasir Gudang, Johor Bahru. There are four distribution centres in Peninsular Malaysia i.e. in Kuala Lumpur, Penang, Johor Bahru and Kuantan. All Tata Nano cars will be distributed through these distribution centres only. Order can be made vide these distribution centres or its web site.

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There are three types of Tata Nano car available i.e. Tata Nano, Tata Nano CX and Tata Nano LX. However, due to hot weather in Malaysia, only Nano CX will be brought to Malaysia and will be sold here. The selling price of Nano CX in Malaysia is RM 13,704 per unit. It is estimated that gross profit for the first year would yield xxx, second year xxx and third year xxx. Estimated monthly instalment payment is xxx for seven years period. With this price, the target market is very wide which includes those with income RM 2000 per month, students, female workers and scooters’ riders.

2.0 SITUATION ANALYSIS

Tata Motors Limited is India’s largest automobile company, with revenues of Rs. 35651.48 crores (USD 8.8 billion) in 2007-08. It is the leader in commercial vehicles in each segment, and among the top three in passenger vehicles with winning products in the compact, midsize car and utility vehicle segments. The company is the world’s fourth largest truck manufacturer, and the world’s second largest bus manufacturer. In March 2008, Tata Motors acquired Ford’s UK based car brands Jaguar and Land Rover (BBC News, 2008).

According to Ratan Naval Tata (Chairman of Tata Group), the need for an innovation like Nano has got to do something for the people of India and transport. Unavailability and poor quality of mass transport is a common problem in India. In a two wheeler, father driving with elder child standing in front and wife behind holding a baby is norm in this country. Thus, this is a relatively an unsafe mode of transporting a family. Thus, with this in mind Tata Nano was created as a safer form of transport.

As one of its objectives is to become an Indian business conglomerate operating in many countries, Tata Nano will be introduced in Malaysia.

2.1 Market Summary

It is estimated that Malaysia has more than 5 million motorcycles on the road, compared to over 4 million motorcars(ICE, 2001).The majority of motorcycle buyers or users does not own a car and belong to the lower and middle-income group. A significantly larger percentage of motorcycle users in Malaysia are male.

2.1.1 Target Markets

The company is targeting lower income group with family, first-time buyers of car (fresh graduates) and motorcycle owners.

2.1.2 Positioning

Tata Nano will position itself as the world cheapest car and yet does not compromise the quality, safety and environment. This positioning will be achieved by leveraging Tata Nano’s competitive edge: industries experience from the parent company Tata Motor who has been in vehicles industries (commercial, passengers & utilities) since 1945. Tata motor has good supplier-manufacturer relationship with more than 100 components.

2.1.2 Demographics

Population , demographics, rural urban, vital statistics from Malaysian auto report.

2.1.4 Geographics

Tata Motors has targeted the urban area in Malaysia. This is going to be Kuala Lumpur and Johor Bahru. There are 5 million motorcycle riders in Malaysia.

2.1.5 Distribution review

Just like in India, Tata Nano will appropriate place as an low-cost car even in foreign markets. ‘Easy-to-assemble kits’ will be imported from Tata in India. The car then will be assembled at pre-defined locations. The proposed locations are Shah Alam, Selangor and Pasir Gudang, Johor Bahru. It will be then redistributed to showrooms that will be set up based on region. 30 sales offices will be opened throughout Malaysia.

2.1.6 Competitor review

The main competitors are Proton, Perodua, Toyota and Honda. The table below indicates the market share of the main competitors in the auto industry for the year 2008.

2.2 SWOT Analysis

The following SWOT analysis investigates the Malaysian political, economic and business environment. The following finding are adapted from Malaysian Auto Report 2009.

a. Malaysia Political SWOT

Strengths

Malaysia is a successful example of a democratic Islamic state. Despite murmurs of discontent among hard-line Muslims in some states, multiracial Malaysia is unlikely to abandon moderate Islam

Weaknesses

The Malay half of the population holds a constitutionally enshrined special position in society, amounting to positive discrimination in not only jobs, but also wealth.

Opportunities

The weak performance by the ruling Barisan Nasional in the general elections held on March 8 2008, has paved the way for the stalled reformist agenda -promised by Prime Minister Abdullah Ahmad Badawi back in 2004 – to gather pace. This would help to open up the country’s closed political system and improve transparency and accountability within key institutions.

Threats

Ethnic tension will remain a non-violent, but simmering, problem, so long as there remains a threat that the influence of hardline Islam could revive. For now, however, the hardliners have lost much of their political clout. The poor showing of Barisan Nasional at the 2008 general elections has put Prime Minister Abdullah under intense pressure from both opposition parties and members of his United Malays National Organization (UNMO) party, who blame him for the coalition’s worst ever result.

b. Malaysia Economic SWOTaysia Economic SWOT

Strengths

During the past four decades, Malaysia has transformed itself from a commodities-dependent backwater into a major world source for electronics and computer parts. Malaysia is the world’s largest producer of rubber, palm oil, pepper and tropical hardwoods, and is also a net exporter of crude oil. All this provides a solid platform for economic growth

Weaknesses

Malaysia’s relative insulation from global energy price shocks is being eroded. Within the next 5 years Malaysia could become a net importer of oil Malaysia’s economic openness can be as much of a burden as a benefit, since it confers a high degree of vulnerability to global growth and capital flows.

Opportunities

The opportunity for private-sector-led growth will improve as the government continues divestment of state shareholdings in order to raise funds to narrow the budget deficit.

Threats

Wages are higher in Malaysia than in a number of its competitors, such as China and Vietnam, which could be a long-term hindrance to economic expansion. To maintain its competitive edge, Malaysia needs a steady stream of inward investment Export competitiveness could be eroded if the exchange rate continues to appreciate markedly.

c. Malaysia Business Environment SWOT

3 Strengths

4 Standards of corporate governance in Malaysia have greatly improved since the Asian financial crisis at the end of the 1990s – more so, in fact, than in many neighboring countries. Foreign companies, or at least foreign manufacturing companies, looking to do business in Malaysia will continue to be welcomed with open arms, with the government offering lavish tax breaks and concessions.

Weaknesses

State subsidization of prices will remain a peripheral but persistent part of daily economic life in Malaysia. Doing business in Malaysia will always, to some extent, mean dealing with the politically well-connected. Big construction projects – and big contracts for foreign construction firms – are unlikely to be as much of a priority for Malaysia’s government as they were under the previous administration of former prime minister Mahathir Muhammad.

Opportunities

The opportunity to invest in Malaysian state assets could improve. The government, if it sticks to its word, will conduct its biggest ever divestment of state shareholdings. Malaysia is eager to compete globally in banking, and although it currently lacks a domestic champion, with ten main institutions in the market, bank consolidation is a strong possibility.

Threats

The waterways and shipping lanes that surround Malaysia will continue to pose the threat of piracy and terrorism Malaysia is at risk, conceivably, of losing out to China in the race for foreign investment. Penang, once the pillar of Malaysia’s electronics industry, has seen an exodus of foreign firms, with Seagate, Motorola and Solectron all shifting production elsewhere in Asia.

d. The following will be key strengths and weakness within the company and describes the opportunities and threats facing Tata Nano.

Strength

The internationalisation tactics so far has been takeover to local managers in new style, and only to transplanting a couple of higher managers from India into the new trade. The key point is that Tata has been able to share ideas. The company had a successful agreement with Italian mass product Fiat in 2006. This has enhanced the product collection of investments for Tata and Fiat as per agreements of production and ideas sharing. An example, Fiat Palio design was introduced in 2007 by Tata, and both the companies have an contract to create and achieved their Goal at Central and South America.

Weaknesses

The Tata Nano passenger travel car products are depends upon 3rd and 4th generation platforms, which is a disadvantage of Tata Motors Limited with competition others car manufacturers. One which is not recognised in English the word ‘tat’ means ‘rubbish’.

Opportunities

In 2008 Tata Motor’s announced that they had successfully purchased the foreign car assembled Land Rover and Jaguar from Ford Motors for United kingdom £2.3 million. World’s Two luxury car brand have been added to Tata Motors portfolio of brands, They have a chance to demonstrate Company vehicles in the luxury segments. Tata Motors Ltd have taken Daewoo Motor’s Commercial vehicle business in 2004 for USD $16 million. Tata Nano is the most cheapest car in the World – selling at little more than a motorbike. The new emerging industrial of the countries such as India, S.Korea and Republic of China will have a thirst for produce and distribute vehicles in low-cost passenger. These are the advantages. However the company has put in place a proactive Corporate Social Responsibility considering to address potential tactics that will make its operations more sustainable. The range of Super Mileage fuel efficient buses are powered by efficient, atmosphere friendly car engines. The bus has automatic organic clutch with booster help and better air intakes that will low fuel consumption by up to 10 percent.

Threats

Other car manufacturers companies are in passenger car business for 40 or more then 40 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.

2.3 Objectives and issue

We have set aggressive yet achievable objectives for the first, second and third year of market entry.

First year objective ( July 2009 to December 2009)

We want to achieve 25,000 units of sales gaining ….market share % get from market size

Second year objective (JAN 2010 TO DEC 2010)

We want to achieve 10% increase in quarterly basis (RM 48,600)

Third year objective (JAN 2011 TO DEC 2011)

We want to achieve 10% increase in quarterly basis (RM 53, 460)

1.0 MARKETING MIX STRATEGIES

3.1 Product Strategies

The product strategy which will be adapted would be the straight product extension, which is marketing the car in another foreign market without any change. This is because there would be no additional product development cost, manufacturing changes, or new promotion.

3.2 Product Review

* There are three variants in the Nano range: Nano, Nano CX and Nano LX

* Only the Nano CX variant would be introduced in the Malaysia Market for the first stage

* Tata Nano LX will introduced in the Malaysia Market during the following year

The car has achieved its low price by minimizing costs on unnecessary “luxuries”, the basic Nano comes without front and rear fog lights, without a heater or air conditioning, without anti-lock brakes, only one single windscreen wiper, manually operated windows, manual steering with no air bags, tiny 12” wheels, plastic body parts joined with adhesive instead of more conventional metal and welding and a two cylinder 623 cc engine that provides a massive maximum speed of 65 mph (around 105 km/h).

Among the features of the car are:

a) Stylish and comfortable

The Passenger Car, designed with a family comfortable in mind, has a luxury passenger space with superb leg space and head room. It can luxury sit 4 persons. 4 doors with excellent seating perfection make ingress and egress easy.

with a measuring length of 3.1 metres, width of 1.5 metres and a height of 1.6 metres, with adequate ground clearance, it can effortlessly manoeuvre on busy roads in cities as well as in rural areas. Its semi volume structure, with tires at the sides and the power train at the rear, enables it to uniquely combine both space and manoeuvrability, which will set a benchmark among small cars.

b) Fuel-efficient engine

The People’s Car has a back wheel drive, with aluminium, 2 cylinder, 523 cc, 33 PS, multi point fuel injection petrol engine. This is the first time that a 2 cylinder gasoline engine fitted in a car with a one balancer shaft. The lean design strategy has helped minimise weight, which helps maximise performance per unit of energy consumed and delivers high fuel efficiency. Performance is controlled by a specially designed electronic engine management system.

c) Meets all safety requirements

The People’s Car’s safety performance exceeds current regulatory requirements. With an all metal body sheet, it has a solid passenger department, with safety features for e.g crumple zones, intrusion resistant doors, seats belts, strong seats and anchorages, and the rear tailgate glass bonded to the body. Tubeless tyres further enhance safety.

d) Environment-friendly

The People’s Car’s tailpipe emission performance exceeds regulatory requirements. In terms of overall pollutants, it has a lower pollution level than two-wheelers being manufactured in Malaysia today. The high efficiency also ensures that the car has low carbon dioxide emissions, thereby providing the twin benefits of an affordable transportation solution with a low carbon footprint.

3.3 Branding

Brands identify the source or maker of a product and allow consumers – either individuals or organisations to assign responsibility for its performance to a particular manufacturer or distributor. Branding is endowing products and services with the power of a brand. It’s all about creating differences between products. For branding strategies to be successful and brand value to be created, consumers must be convinced there are meaningful differences among brands in the product or service category. In Tata Nano’s case, the branding strategy used is corporate name combined with individual product names. This company’s name legitimises and the individual name individualises the new product

3.4 Product Strategy

The Tata Nano CX, including all the features described in the earlier Product Review section, will be sold with a three-year warranty or 100,000km warranty, whichever comes first. We will introduce the Tata Nano LX during the following year, after we have established our Tata brand. The brand and logo will be displayed on the car as well as in all marketing campaigns.

3.5 Pricing Strategies

The Cost price is an estimated USD2, 420 or equivalent to RM8,954, which includes import tax, duties excise , sales tax, shipment costs and assembly cost . The selling price for the Malaysian market is RM13,704.00, which is inclusive of standard accessories, but exclude road tax (RM70.00), registration fees (RM150.00), number plate (RM50.00) and ownership endorsement fee (RM50.00), sales tax (RM1370.40) which amounted to RM320.00. The On-The-Road price will be RM15797.40.These prices reflect a strategy of taking a share from established competitors, such as Perodua’ s model of Kancil and Viva.

3.5.1 Setting the price – selecting price objectives

Tata Nano Malaysia (TNM) has set major three objectives in its effort to position itself in the Malaysia Automotive market. The objectives are: Survival, maximum current profit and maximum market share.

a. Survival

Intense competition from Malaysia’s second car manufacturer, Perodua for a share of the automotive market segment for the below 1,000 cc category will spur TNM to ensure that the car price covers variable costs and some fixed costs. In this case, survival is a short term objective as in the long run, TNM will add value such as added safety features to the Nano range.

b. Maximum current profit

TNM has set a price that will maximize current profits, cash flow and return on investment, after taking into consideration the demand and costs involved. As this category of small foreign cars segment has not been really tested by other manufacturers, therefore the demand is rather difficult to estimate but TNM is confident of a good response towards its entry into the Malaysian market.

c. Maximum Market Share

For the Malaysian market, TNM will implement the market-penetration pricing, which is to set a low price for a new car in order to attract a large number of buyers and a large market share. This will be done by achieving high sales volume, which will results in falling costs, allowing the company to cut its price even further. We are positive enough that the Malaysia car market is highly price sensitive, as a low price produces more market growth. TNM is also confident that production and distribution costs will fall as sales volume increases and the low price of Nano cars will help to keep out competition and maintain its low-price position. The low-price entry will provide Malaysians consumers with a viable alternative to Perodua -Malaysia second National car. Further liberalization is expected as Malaysia implements the ASEAN Free Trade Area agreement, which commits the Malaysia Government to scrap foreign car taxes.

4.0 PROMOTION STRATEGIES

4.1 Objectives of Promotion Strategies

Before determine the promotion strategies, we need to very clear about what are the objectives we need to achieve. We know as above, our missions are to promote Tata nano in Malaysia and increase the sales quarterly. Tata Nano is very new for Malaysian, they feel fresh with this new brand and concept of this car. Tata Nano will get into Malaysia market in July 2009.

So first of the objective for promotion strategies are aims to create brand awareness and concept/knowledge of this new car – Tata Nano. This is the cheapest car in the world and burst into the worldwide market in the short time. But still is the new brand for the Malaysians, so we do the advertisement and organize the event or campaign in sufficient detail to establish the good brand attitudes. Brand awareness is important to provide a foundation for brand equity.

After that, our second objective is knowledge and persuasive. We aim to create liking, preference, conviction, and purchase of a Tata Nano car. We can do the comparison with other cars which are higher purchase price and this price is not every people will be affordable especially lower income families and students. Beside that we will convince current purchasers that we will give the potential customer to enjoying the good experience with Tata Nano by give try to drive the Tata Nano before buying the car. And also will provide them warranty to the Tata Nano.

We will organize all the promotion strategies with lower cost to maintain the lower purchase price for the Tata nano in Malaysia.

4.2 Promotion Tag line

‘Have Fun, Pay Less, get more with Tata Nano’

Why we establish this tag line? Because this is make all the Malaysian to easy to remembered Tata Nano and feel happy all the ways with Tata Nano. Tata Nano is safety and you can travel everywhere by Tata Nano with your family or friends with fun, but you just need to pay all of this at lower price -Pay Less & Get More.

Beside that we can enjoying special fun with Tata nano, our earth also will feel happy with Tata nano because Tata nano also is the environment friendly car.

4.3 Advertising Program

We aims to inform Malaysians this is the cheapest car in the world and persuade Malaysians to buy Tata Nano due to this car is safety, useful, all in good quality and also environment friendly by developing an advertising program.

4.3.1 Online Advertisement

First step we start before lunching Tata Nano, we do the online advertisement. Tata Nano created a Web site – www.tatanano.com – on March 2009 to better communicate with the customers. In the Web site, we posted the photo categories and videos to provide customers the information and special features of Tata Nano and bring them inside the company. In addition to photos and videos, the web site links to recent news about Tata Nano and space for public feedback.

Besides that, Blogs have become an important outlet for word of mouth which are regularly updated online diaries. Blogs is bringing together people with common interests. They vary wide and can influence a vast audience due to many internet users have read Blogs. We can establish the blog network and carefully monitoring to find out what’s on people’s minds especially the potential customers. This is a cheapest and good way to build up brand awareness.

4.3.2 Television Advertisement

Television advertisement is very expensive but this is the most powerful to perform the Tata Nano to the public by demonstrating Tata Nano attributes and persuasively explaining their corresponding consumer benefits. By lower advertising budget, we cannot do the TV advertisement in whole day, so we just choose the prime time (7pm – 11pm) to place the advertisement. By properly designed and executed TV advertisement can improve brand equity and affect sales and profits.

4.3.3 Radio Advertisement

Most of the Malaysians listen to the radio daily. Now a day have many facilities such as MP3, hand phone and so on, is convenience for the people to listen the radio anytime at anywhere, This is a cheap and pervasive medium for us to create the brand awareness by repeatedly listen the advertisement and the brand name. Advantages of the radio advertisement are flexibility, quick response and also more effective media for reaching teens.

4.3.4 Newspaper Advertisement

Beside that the radio, most of the Malaysians also will saw a newspaper everyday. So this is good market coverage. From here, Tata Nano can get the broad acceptance and good reputation from Malaysians. Newspaper advertising is inexpensive.

4.4 Marketing Campaign

This Marketing campaign is base on every four month :

4.4.1 Marketing Campaign for July 2009 to October 2009

Tata Nano will lunch at Malaysia on July 2009. Launching program is very important for positioning which is the act of designing Tata Nano and image to occupy Malaysia in the minds of the target market. Launching program also is one of the promotion strategies to build awareness, through launching at public center Tata Motor will introduce the Tata Nano to market.

In July and August, we focus on marketing campaign which will take place at all the IPTA and IPTS which have organize the convocation, by providing product display and banner; and the peoples can have the experience with Tata Nano by provide the opportunities to drive Tata Nano around the campus. Theme for this campaign is ‘Good future with Tata Nano’. Reason for this marketing campaign is one of our targets are students such as fresh graduate who just get the new job and also the international students. Fresh graduate need the transportation in their working life but they can’t afford to buy the too expensive car; international student just need the car which is economy and using it in short period around 2-3years for their student life in Malaysia. This is cheapest cost by event or campaign in the campus.

In September and October, Malaysians will celebrate two big festivals together, there are Hari Raya Puasa Aidifitri and Deepavali. So we can focus on lower income group with family especially those are come from Malay family or Indian family. Use the mail, telephone, fax, e-mail to communicate directly with them. Base on historical, more of the Malay or Indian will buy the car before festival. ‘Raya with Tata Nano’ can be the theme for our campaign at this period, and promote them Tata Nano is cheapest and safety.

4.4.2 Marketing Campaign for November 2009 to February 2009

In November and December, Malaysia have the Mega Sales due to Merry Christmas and New Year in the end of the year at whole Malaysia so that have many people will go to shopping. We can organize the event at shopping centers in Malaysia such as KLCC, Midvalley, Berjaya Times Square, and Sungai Wang by providing product display and banner.

On January and February, most of the employees in Malaysia will get the bonus in this period so the purchasing power will increase. Beside that Chinese New Year is at February. Send the brochures to the small and medium company or office and do the introduction or briefing to them. Follow by mail, telephone, fax or e-mail to developing effective communication.

4.4.3 Marketing Campaign for March 2009 to June 2009

We will do the road show at every state (whole Malaysia). We can have the road show at the center market such as all market at all the state. Have many people will go to market early morning to buy the vegetable, take the breakfast or buy the necessary things. Most of them are women or housewife who may be come from the lower or medium income family. Some of them go to Pasar by motorcycle or by bus. There are our target markets. We can promote Tata Nano to them such as, Tata Nano is the cheapest car in the world, Get the Tata Nano to be second car for their family member especially for their children or elder parent, ‘Easy life with Tata Nano’. Housewife or mother can go to Pasar or anywhere by Tata Nano better than motorcycle or by bus for complete their daily matter more effectively. When the women get the news, they will pass this news to their friend immediately. This will help us to promote Tata Nano effectively in the local society. At the road show, people also can get the experience with Tata Nano by have the opportunities to drive the Tata Nano car before purchase it.

5.0 Channel of Distribution Strategies

5.1 Direct marketing channel (zero-level channel)

We perform the Tata Nano in Malaysia by selling it directly to customers. Customers can deal directly with our dealers and make the booking for Tata Nano by visit our sales office or at any special event/campaign. Besides that, customers also can get the information or make the booking via the telephone (1-800-88-nano) and through the Internet ( www.tatanano.com ). By this way we can save more cost and maintain the cheapest purchasing price rather than through retailers or resellers.

5.2 Physical Flow

From the diagram, can know that Tatanano will send the paths to the Malaysia after received the order from the sales office. After that, we will assemble a car at the workshop. Finally, send to the customers directly. From here, we can often provide faster delivery to customers because we are closer to the customers.

5.3 Payment Flow

Customers can paying bills by cash or do the financing from bank. Customers pay less by this diagram due to not need to pay extra commission to third party such as wholesalers or retailers. Tata Motor also can collect the payment more efficient.

5.4 Information Flow

Customers can get the information directly from Tata Motor such as new product, price development and so on. Tata Motor can more understanding customer’s needs when receiving customers, response calls and mailings or through internet blog. If customers have any need or complaint, we can satisfy them immediately by deal with customers directly.

5.5 Promotion Flow

Marketing Campaign/Event

Have two ways of promotion flow, directly and indirectly. Directly is we’ll organize the marketing campaign, event and road show. By this way, we’ll promote Tatanano to target market by face by face and provide the opportunities to them try to drive the Tatanano. Indirect ways are we will do the advertisement through media such as internet, TV, radio and also newspaper. By this promotion flow, Tata Motor aims to create brand awareness and increase the sales in the Malaysia.

6.0 Financial Plan

This section will offer the overview of Tata Nano related marketing activities. It is include, sale forecast, expense forecast, break even analysis and how those relate to the market strategy.

6.1 Break even analysis

Break even analysis indicates that 3369 unit or $ 46,168,776 will be required in monthly sales revenue to reach the break even point.

Table: Break Even Analysis

Break even analysis :

Monthly unit break even 3369

Monthly sales break even

$46,168,776

Monthly unit production

6083

Average per unit revenue

$13704

Average per unit variable cost

$8,954

Average per unit fixed cost

$2630.28

Estimated monthly fixed cost

$16,000,000

6.2 Sales forecast

Sale was forecasted quarterly basis, with adjustment of seasonal factor. At Malaysia there is 3 main celebrations each year, which Aidil Fitri, Chinese new year, and Deepavali, those factors was used as seasonal factor. Since one of our target markets is fresh graduate student, graduation month also was used as seasonal factor to adjust our forecasted sales. The sales was fore