Discussion of Tata Motors
Tata Motors limited is an Indian company that operates in the field of the manufacture of automobiles and the company is also known as TELCO which is the short form for Tata Engineering and Locomotive Company. The company has its headquarters in Mumbai, India and it is multinational company which is a member of the Tata Group. The products manufactured by this company include, trucks, coaches, vans, buses, construction related equipment and sports cars. The company has its plants for manufacturing purposes in Pantnagar, Lucknow, Pune, Dharwad and Sanand. Tata Motors has its plants in Great Britain, Argentina and South Africa as well (Tatamotors.com 2017). This report is based on the analysis of one of the dream projects of the company which is the Nano car. The car was tagged as “the world’s cheapest car” and was launched in the year 2009. The was priced at one lakh rupees which amounts to approximately two thousand US dollars. The analysis in this report is based on the examination of the performance of Tata Nano in the market in the last eight years. This will be based on the analysis of the economic characteristics of the automobile industry and forces that drive this industry as well (Tatamotors.com 2017).
The global industry of motor vehicles has gone through a tumultuous phase in the last five years. The main factors that have affected the industry of motor vehicles are the price of fuel and the changes of the preferences of consumers of cars. The preference of the car consumers has shifted from the petrol and diesel driven ones to the electric cars. The focus of the consumers has shifted from big cars to the small ones in the recent times due to the prices of fuel (Amador, Cappariello and Stehrer 2015). The main factors that affect this industry include, the pressure related to pricing, the spending trends of the consumers, the increase in the price of the commodities related to this industry, the volatility of the exchange rates. The pressure related to pricing is one of the most important factors that affects the business of the car industry. The consumers of the cars are another major part of the industry and the motor companies need to constantly keep track about the preferences of the consumers and try get competitive advantages over the other companies (Broy et al. 2013). The prices of the commodities also affect the motor industry globally and these prices can control the sales of the motor vehicles as well. The other factors that affect the motor industry include the exchange rate of the currency between the countries. The exchange between the companies of different countries plays an important role in the pricing of the cars.
Economic Characteristics of The Global Motor Industry
The automobile industry is said to be one of the largest sectors of business in the world. The sector employs thousands of people and thereby the products are created by the companies for which the customers need to spend in a major way (Horn, Scheffler and Schiele 2014). The major factors that are related to the success of this industry are as follows,
The main factor for consideration regarding this industry is the image that the particular company maintain in the business environment. The trust that vested upon the company or the brand by the consumers affects the business processes of the company (Liu, Chaminade and Asheim 2013). The decision of the consumers regarding the purchase of the products of the particular brand is the result of the image of the company in the market. The ways by which the image of the company is affected in this process are, the advertising of the company, the reviews of the experts and the positive rumour of the company (Ponte and Sturgeon 2014).
The other factor that influences the success of the company is the network of distribution of the company. The network of the manufacturers and suppliers of the company has a major effect on the sales and profitability. The dealers of the cars are also a major part of the distribution networks. The distribution network of the companies plays an important role in the sales and profit of the company (Schulze, Brojerdi and Krogh 2014).
Another major factor related to the success of the company is the cash flow. If the cash flow of the company is healthy. The discounts and lower prices of the companies do not help its cash flow. The profit margins of the company can be increased by keeping a check on the expenses and the costs related to the operations of the company (Shende 2014). The costs related to the employees, manufacture of the products and the prices of the raw materials is a major factor that affects the profitability of the organizations.
The next factor that is related to the success of the companies in this industry is the compliance with the rules and regulations of the government and the other organizations as well. The companies need to comply with the legal aspects of the industry so that it can perform healthy business operations and thereby gain profits as well (Wells 2013).
The Key Success Factors of the Industry
The last factor related to the success of the companies is the flexibility of the companies in that sector. The companies in this sector need to be flexible with their operations and should update their operations based on the trends in the market. The needs and wants of the customers related to this industry can change on a continuous basis (Amador, Cappariello and Stehrer 2015). The companies thereby need to bring changes in their products so that they keep pace with the competition in the market.
The global industry of automobiles has shown huge growth in the year 2014 and 2015. The profitability of the industry has increased a lot in the current year. The most prominent challenge in the industry in the uneven global market. The uncertainty in the macroeconomic environment will lead to many changes in the industry in the coming 10 years as well. The factors that drive the changes in the automobile industry are as discussed further. The shifts in the demands of the consumers is the factor that drives the change in the automobile industry (Cabigiosu, Zirpoli and Camuffo 2013). The major impact of this factor is on the volume of sales of the company. The loyalty of the customers with the brands is a driving force in this industry. The difference between the products of the different companies or brands of the cars drives the changes in the demand of the consumers. The prices and the regulations of the fuel economy of a country has become a driving force in the industry in the year 2014. The availability of the information regarding the features of the cars and usage has also acted as a driving force in the industry (Gao, Hensley and Zielke 2014). The data related to the customers of this industry affects the value chain of this industry. The bargaining power of the consumers have increased as accessibility of the information related to the discounts, quality, process and the performance has also increased.
Tata Nano was a dream project for the company which had been brought in the market so that the consumers who can only afford two wheelers can upgrade to cars for a minimum price. The car was prices at 1 lakh to 1.5 lakh in the Indian currency. However, this project has only led to loss for the company. As of now, or the year 2017 the company has shifted its concentration towards other next generation products rather than concentrating towards Nano (Hausman and Johnston 2014). The future and the production of Nano is also uncertain for the financial year 2017-18. The sales of Nano have fallen in the month of May 2017. The annual sales of the company have also decreased by 63% due to the decline of the sales of Nano.
The Driving Forces of the Industry in the Year 2014
Tata Motors has built its reputation in the industry of commercial vehicles for the year 2017. The company has been in the headlines recently due to its acquisition of Land Rover and Jaguar from the company like Ford. The company has been ranked at the fifth position by the business ranking institutes (Tatamotors.com 2017). Tata Motors hols the 226th position in the Fortune 500 list in the year 2017.
Conclusion
The analysis in this report based on the market position of Tata Motors can be concluded by stating that the company holds a strong position in the global automobile market even after the failure of the dream project of the company. Tata Nano was launched in the market for a specific group of consumers who can afford two wheelers and they can upgrade to a car. The car was said to be the cheapest in the market. However, the project had proven to be failure both in the local as well as the global market of the company. The company has however, has held its position in the automobile market after this failure. This has been achieved by the company by the acquisition of different global car companies.
References
Amador, J., Cappariello, R. and Stehrer, R., 2015. Global value chains: A view from the euro area. Asian Economic Journal, 29(2), pp.99-120.
Broy, M., Kirstan, S., Krcmar, H., Schätz, B. and Zimmermann, J., 2013. What is the benefit of a model-based design of embedded software systems in the car industry?. Software Design and Development: Concepts, Methodologies, Tools, and Applications: Concepts, Methodologies, Tools, and Applications, p.310.
Cabigiosu, A., Zirpoli, F. and Camuffo, A., 2013. Modularity, interfaces definition and the integration of external sources of innovation in the automotive industry. Research Policy, 42(3), pp.662-675.
Gao, P., Hensley, R. and Zielke, A., 2014. A road map to the future for the auto industry. McKinsey Quarterly, Oct.
Hausman, A. and Johnston, W.J., 2014. The role of innovation in driving the economy: Lessons from the global financial crisis. Journal of Business Research, 67(1), pp.2720-2726.
Horn, P., Scheffler, P. and Schiele, H., 2014. Internal integration as a pre-condition for external integration in global sourcing: a social capital perspective. International Journal of Production Economics, 153, pp.54-65.
Liu, J., Chaminade, C. and Asheim, B., 2013. The geography and structure of global innovation networks: A knowledge base perspective. European Planning Studies, 21(9), pp.1456-1473.
Ponte, S. and Sturgeon, T., 2014. Explaining governance in global value chains: A modular theory-building effort. Review of International Political Economy, 21(1), pp.195-223.
Schulze, A., Brojerdi, G. and Krogh, G., 2014. Those who know, do. Those who understand, teach. Disseminative capability and knowledge transfer in the automotive industry. Journal of Product Innovation Management, 31(1), pp.79-97.
Shende, V., 2014. Analysis of research in consumer behavior of automobile passenger car customer. International Journal of Scientific and Research Publications, 4(2), p.1.
Tatamotors.com (2017). Overview | Tata Motors Limited. [online] Tatamotors.com. Available at: https://www.tatamotors.com/about-us/ [Accessed 2 Dec. 2017].
Wells, P., 2013. Sustainable business models and the automotive industry: A commentary. IIMB Management Review, 25(4), pp.228-239.
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