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Tata Motors in 2014

Tata Motors faced declining sales in India and globally in 2012-2014 as its major brands lost market position. Macroeconomic factors like increased competition and potential diesel subsidy cuts significantly impacted automobile manufacturers, especially Tata. To compete, Tata pursued a multibrand strategy including luxury brands Jaguar and Land Rover for international growth. Domestically, the ultra-low-cost Nano aimed to convert bike and scooter riders to car ownership. While revenues grew in 2014, leadership changes disrupted stability and strategic decision-making processes would impact Tata's ability to effectively compete in the global auto industry.

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Tahera Abbas
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235 views

Tata Motors in 2014

Tata Motors faced declining sales in India and globally in 2012-2014 as its major brands lost market position. Macroeconomic factors like increased competition and potential diesel subsidy cuts significantly impacted automobile manufacturers, especially Tata. To compete, Tata pursued a multibrand strategy including luxury brands Jaguar and Land Rover for international growth. Domestically, the ultra-low-cost Nano aimed to convert bike and scooter riders to car ownership. While revenues grew in 2014, leadership changes disrupted stability and strategic decision-making processes would impact Tata's ability to effectively compete in the global auto industry.

Uploaded by

Tahera Abbas
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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TATA MOTORS IN 2014: ITS MULTIBRAND APPROACH TO

COMPETING IN THE GLOBAL AUTOMOBILE INDUSTRY

Tata motors were established in 1945 when Tata engineering and locomotive company started
manufacturing locomotives and engineering products. Tata was India’s leading automobile
manufacturer by revenue and was placed at the third position in the passenger vehicle category
brand in India in 2012.

Unfortunately, the company’s major brand started to decline both domestically and globally and
the third position was also lost to Honda in India in terms of sales. Similarly the company’s sales
were decreasing in the commercial vehicle segment in 2013 and 2014. As a result the company’s
position dropped from the fourth largest seller of commercial vehicles to fifth.

There were some macro-economic factors associated in the industry in India as well such as
increasing competition in the automobile industry and various other factors such as the possible
elimination of diesel subsidies by the Indian government. Usually these factors had substantial
effect on all the businesses involved in automobile manufacturing, but Tata motors was being
affected the most because there was lack of strategic planning and the strategy which it was
using was ineffective as compared to the rest of the players prevailing in the market.

India’s economy recovered from the global recession quickly because of high domestic demand
of goods and services with economic growth over 8%. In 2011 this growth decreased due to lack
of progress on economic reforms, high interest rates and a consistent increase in inflation and the
figure of economic growth decreased to 5% in 2012 and 2013. The manufacturing and mining
sector known as the key sectors in Indian economy also showed a decline, growth in several
developed markets also declined, which made the Indian market less attractive for foreign
investors.

Auto sales in India broke the record in 2012 and due to that consumers increased their purchases
specifically of diesel vehicles as they that they knew the government would raise taxes on diesel
vehicles in the next fiscal year, similarly increase in loan rates and fuel prices decreased the
demand for cars in 2011. Fuel prices severely affect the Indian economy because when prices are

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high consumers demand less and when prices are low consumers’ purchases increase, hence
causing a boom in sales for the automobile manufacturers.

Tata motors’ strategy for its passenger car division was keyed to leveraging its broad product
line and focusing severely on value including fuel efficiency because the Indian market is very
sensitive when it comes to fuel efficiency and people demand for those cars which are fuel
efficient, or in other words it can be said that it is a price sensitive market and demand fluctuates
with the price. The passenger vehicle strategy focused on aggressive growth of new vehicles’
sales and an extensive service network that would improve customer care services and increase
sales and brand image. Tata owns several giant brands which cater to the international markets
for international growth in developed markets such as the BRIC countries, brands such as Jaguar
and Land Rover have been acquired for catering the international markets.

Tata has a brand named as Tata Nano which is a great innovation in the Indian automobile
industry. This car was for the middle class people who used to travel on bikes, scooters along
with their families which were quite unsafe as stated by Mr. Ratan Tata, the chairman of Tata
motors.

The main strategy was to switch customers towards buying a car. As Tata motors’ unique selling
proposition is based on cost differentiation, therefore the company came up with a vehicle which
was affordable for the middle class people. Moreover, the vehicle’s base price was set for $2500
which could be easily purchased by middle class group. Tata motors set this price after extensive
market research on consumers’ needs, wants, purchasing power, likes and preferences.

Tata Motor’s management enjoyed a record setting year with revenues for the fiscal year-end
March 31, 2014, increasing by 21 percent compared to the prior year. This was due to the
increase success of its Jaguar and Land Rover acquisitions, with combined sales of the two
luxury brands increasing by nearly 23 % during the past 12 months.

The death of the Managing Director Karl Slym disrupted the company’s stability. However, they
would continue to follow Slym’s turnaround strategy by introducing two new cars: the Bolt
hatchback and the small Zest. There was hope that these cars along with another new compact
model with the code name Kite, would compete in the global automobile industry.

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The processes for making strategic decision can shape the strategy. In order to make an effective
strategy, organization need to know their process, otherwise even if they eventually reach their
destination, they will end up discovering that they reached to the wrong place. Company’s
process differs in two ways firstly in term of high or low level of process to make strategic
decision and second the amount of input from employee. So, there are four approaches to
strategic decision making which are unilateral, administrative, Ad hoc and collaborative. In
particular, we classified ZARA as Collaborative firm because they have both high level of
process and high input from employee.

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