INFLEXION POINT

HORIZONEXT

STRATEGY

Presented byDeekshita K Kotian

Deepak lal C K

Pilvina Pais

Swathi Shetty

3rd Semester

Department of MBA-2014 Mangalore institute of Technology

And Engineering Moodabidre, MangaloreKarnatakaIndia

• Tata motors unveiled its new customer focused strategy to put its passenger vehicle business back on track.

• The new strategy is horizonext.

• To infuse growth and excitement in its passenger vehicle business where sales fell 35% in 2012-2013.

• Horizon next will be their next step, in which they will be re-launching their entire passenger vehicle business.

• Plan of 8 new launches across 5 brands.

• Along with passenger vehicles they are also launching 11 service programmes.

• Product portfolio planned till 2020.

Facts of the case:

Inflexion point.

The time of transition of company's competitive position that requires the company change the current path and adapt to the new situation or risk declining profits.

Review of the company, products, markets and customers

• Tata Motors is the India’s largest automobile company.

• The company is the fourth largest truck manufacturer and the second largest bus manufacturer.

• Tata motors is one of the largest automobile company established in 1945 .

• It delivered its first model on roads of India in 1954.

• Now it is present all over the country.

• The company’s manufacturing base in India is spread across Jamshedpur (Jharkhand), Pune (Maharashtra), Lucknow (Uttar Pradesh), Pantnagar (Uttarakhand), Sanand (Gujarat) and Dharwad (Karnataka).

• The company is establishing new plant in Sanand in Gujarat. Over 5.9 million vehicles are running on Indian roads.

• Tata Motors the first company from India’s engineering sector to be listed in New York stock exchange in 2004.

• In 2008 it acquired Jaguar Landrover, in the same year it from Ford motors and in the same year it launched Nano, people’s car.

• In 2004 it acquired Daewoo Commercial Vehicles South Korea’s second largest truck maker

.

• Tata Motors developed the first indigenously light commercial vehicle, Sports Utility Vehicle and in 1998, the Tata Indica, India’s first fully indigenous passenger car.

• Within two years of launch, Tata became India’s largest car in its segment.

• The company’s dealership, sales, services and spare spats network comprises over 3500 communication points.

• Tata Motors is equally focussed on environment-friendly technologies in emissions and alternative fuels.

• It has developed electric and hybrid vehicles both for personal and public transportation.

• It has also been implementing several environment-friendly technologies in manufacturing processes.

• The company’s support on education and employability is focused on youth and women.

• . The company has won several awards recognising its training programmes.

PRODUCTS AND SERVICES

Passenger cars:

• The range comprises Tata Indica(compact car), Tata Indigo(Sedan), Tata Indigo Marina(Station-Wagon), and Tata Nano(small car).

Utility Vehicles:

• A range comprising of Tata Aria(Crossover), Tata Safari(SUV), Tata Xenon(Lifestyle- Pickup) and Tata Sumo Grande MK II, Tata Sumo Range and Tata Venture(People carriers).

Commercial Vehicles for Goods Transportation:

Commercial Vehicles: Tata Ace India’s first indigenous Mini-truck.

Light Commercial Vehicles: Pick-Ups and trucks ranging from 2T Small to 7.5T .

Commercial Vehicles for Transportation

Tata and Tata Marcopolo range of light, medium and heavy buses from 2T onwards.

Multi-purpose vehicles:

Tata Magic, Tata Magic Iris, Tata Winger and Tata Venture for urban and rural transportation

Subsidiary Companies• Jaguar Land Rover

• Tata Macropolo Motors

• Tata Daewoo

• Hispano Carrocera

• Tata Motors( Thailand)

• Telcon

• Tata Motors European Technical Care

• Tata Technologies

• TAL Manufacturing Solutions

• HV Transmission and HV Axles

• Tata Auto comp

• TML Distribution.Co

• Tata Motor Finance

Competitors

• Ford

• Toyota

• Hyundai

• Maruti Suzuki

• Honda

• Chevrolet

• Fiat

Market and Positioning

STP

SegmentHatchback, sedan & SUV segment

Target

GroupTargeted towards upper middle class

Customers

Positioning Positioned as a leader in automobile market inculcating innovative technologies to deliver value to Customers

Structure and Leadership

• Tata Motors is having relatively Flat structure, it helps them in easy interaction between various level in structure which improves knowledge and ideas sharing with an Organisation.

• All the departments of Tata Motors are interconnected with intra networking system, as well as the divisions are connected with inter networking system.

• In 2012, Mr. Cyrus Mistry was appointed as the chairman of Tata Sons.

• In addition, he is also chairman of all major Tata companies including Tata Industries, Tata Steel, Tata Motors, Tata Consultancy Services, Tata Power, Tata Teleservices, Indian Hotels, Tata Global Beverages and Tata Chemicals.

• Under his leadership Tata motors is taking up the turnaround strategy by adapting the horizon next Strategy, in which they will be re-launching their entire passenger vehicle business.

Does the company have its formal structure for Strategy ? What is its

strategy making hierarchy?

Corporate level strategy (directional strategy)

•Growth

• Stability

•Diversification

Corporate strategy ?

Business level strategy (competitive

strategy)?

Business level strategy (competitive strategy)Cost leadershipDifferentiation (product)

• Marketing strategy (4 p’s)

• Financial strategy (sources of finance)

• R&D strategy (technological leader, innovation)

• Operation strategy (production strategy)

Functional level strategy

Effectiveness in Strategy implementation

• new internationalization strategy, the company has decided to focus on a narrow base of 14-15 countries where market conditions are similar to that of India

• In these countries, Tata Motors now has dedicated manufacturing facilities, marketing teams and sales teams

• The company evaluates locations on the basis of market opportunities and labour skills.

• In the framework pertaining to international expansion strategies, Tata Motors can be identified as an Extender, and is focusing on expanding into markets similar to those of the home base, using competencies developed at home

• Sustainable competitive advantage lies not in one, but a combination of multiple resources, each of which individually need not necessarily be the best

• Tata Motors, the combination of resources providing it competitive superiority on a weighted average basis includes:

•Product Reliability

•Service Network

•Channel Reach

Contingency Plans• Mass customization has its own shortcomings. Hence

They propose that the sales of the customized vehicles be closely tracked and in case sales achieved within a reasonable timeframe do not merit the additional resource outlay, then the company should revert to the original multipurpose positioning.

• In the background of rupee appreciation, exports will become costly. Hence it is prudent to open integrated production plants in other countries rather than just concentrating on exports.

The strategically relevant components of the company’s external environment

 

PEST Analysis of TATA motors

• Pest is abbreviation for Political, Economic, Social, Technological factors

• Its scan of an organisation’s external environment

• The purpose of Pest is to identify factors that may impact on the services, customers (or Patients), products, markets, staff, profitability, etc. of the organisation.

POLITICAL ANALYSIS.• The foundation of the company’s growth

internationally is a deep understand of economic stimulation, customer needs, and individual government regulations and laws

• 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

• 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. On March 26, 2008, Tata Motors reached an agreement with Ford to purchase Jaguar and Land Rover

• 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

• By all labour laws in the multiple countries where they have manufacturing plants it has to watch political change

ECONOMIC FACTORS

• Tata is in a rapid growth period, expanding or forming a joint venture in over five countries world-wide since 2004

• a global approach enables Tata Motors to adapt and learn from the many different regions within the whole automotive industry.

• The company's dealership, sales, services and spare parts network comprises over 3,500 touch points; Tata Motors also distributes and markets Fiat branded cars in India.

SOCIAL FACTORS.

• Social factors include the cultural aspects and include health consciousness, population growth rate, age distribution, career attitudes and emphasis on safety.

• Undoubtedly, the beliefs, opinions, and general attitude of all the stakeholders in a company will affect how well a company performs.

• 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 effect 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.

TECHNICAL ANALYSIS:

• 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 world-wide. This equates to Tata Motors having lots of experience and resources to draw from for research and development purposes

• 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

• Tata Motors European Technical Centre (TMETC) was set up in 2005, which is primarily involved in design engineering and development of products, supporting Tata Motors skill sets. Approximately 2% of the annual profits of the company invested in research and development. On May 11th of every year, “Technology Day” organized across all Tata plant locations

• Tata motors should give more importance to R&D in order to develop highly efficient automotive technology at an optimal cost

What are the driving forces which impact the company ? what are the KSF’s?

Driving Forces which impact the company are

• Emerging new internet capabilities and applications

• Increasing globalisation

• Changes in who buys the product and how they use it

• Product innovation

• Technological change and manufacturing process innovation

• Marketing innovation

• Entry or exit of new firms

• Changes in cost and efficiency

• Changing societal concerns, attitudes and lifestyles

• Regulatory influences and govt. policy changes.

Key success factors of Tata motors are

There could be number of factors that contribute to the success of the company. But the key factors for the success of Tata include:

• Quality

• Innovation

• Distribution channel

• Brand image

• Variety of products

• Promotion

• Product attributes

Application of Porters 5 force Model 

Threats from new entrantsIts not only the existing players in an industry pose threat to each other, a new

entrant can also affect the competition. The factors that

can limit threat of new entrant are called as Barriers to Entry.

Following are some barriers to entry:

• Economies of scale:

• Demand side benefit of scale

• Customer switching cost

• Capital requirements

Threat of Substitutes

Substitute products are different goods are services from outside a given

industry that perform similar or the same function as a product that the

industry produces.

 If we talk about the substitute for automobile then there are mainly two

substitutes are:

• Railways

• Airlines

Bargaining Power of Suppliers

A company to manufacture its products require raw material labour etc. This creates buyer-supplier relationship in an industry. To manufacture a vehicle number of inputs is used like steel, seat covers, technology, and tyre etc.

Bargaining Power of Buyers

The bargaining power of buyer is very high as there are lot of choice available to the buyer and service do not vary from one service provider to the other. 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.

. 

Industry Rivalry

This describes the competition between the existing firms in an industry.

Greater the competitive rivalry, lesser are the profit margin. 

Rivals

•Maruthi

•Hyundai

•GM and others

Swot AnalysisSTRENGTHS:

1.One of the most established company in automobile sector

2. Distribution Network

3. Good market penetration

4. Expert service professionals available

5. International presence

6. Dedicated engineering and R&D department

7. More than 60,000 employees

8. Highly diversified product portfolio

 

WEAKNESS

1.Limited international presence

2. Sometimes faces alleged quality and durability issues

3. Limited consumer base

OPPORTUNITY:

1. Expanding automobile market and Augmenting the distribution and service network in various countries

2. Increasing per capita income and purchasing capability of potential customer base

3. Leveraging customer engagement experience to acquire new customers

4. Leveraging mergers and acquisitions to acquire newer technology

 

 

 

 

THREATS:

1. Increasing fuel costs

2. Competition from other big automobile giants

3. Competitive products offering same level features at a lesser price

4. New entrants

 

MULTI COMPANY OPERATIONS

• Through subsidiaries and associate companies, Tata Motors has operations in the UK, South Korea, Thailand, Spain, South Africa and Indonesia. Among them is Jaguar Land Rover, the business comprising the two iconic British brands.

• Tata Motors, the first company from India's engineering sector to be listed in the New York Stock Exchange (September 2004), has also emerged as an international automobile company.

,

• In 2005, Tata Motors acquired a 21% stake in Hispanso Carrocera, a reputed Spanish bus and coach manufacturer, and subsequently the remaining stake in 2009.

• In 2006, Tata Motors formed a joint venture with the Brazil-based Marcopolo, a global leader in body-building for buses and coaches to manufacture fully built buses and coaches for India and select international markets.

• Tata Motors is also expanding its international footprint, established through exports since 1961. The company's commercial and passenger vehicles are already being marketed in several countries all over the world.

Financial Highlights

•  Market Capitalisation (as on March 31, 2014) 1,18,777 crores

• Total Revenue 2,33,662 crores

• Consolidated profit before tax 18,869 crores

• EBITDA margin 16.1%

Quarter ended 30 June 2014 (in lakhs)

• Total Income 7,61,289.00

• PBT 39,365.00

• Net Profit 39,365.00

• EPS Rs.1.21

Strategic group map.

•A strategic group is a concept used in strategic management that groups companies within an industry that have similar business models or similar combinations of strategies..

0 10 20 30 40 50 60 700

5

10

15

20

25

30

Price

sales volume for passenger car vehicles

Maruthi/Hyundai

BMW

Skoda/VW

Ford

Toyota/Honda

Tata/mahindra

*Approximate market share

Outlook for the industry offering the company prospects with profitability and growth

 

Tata Motors has never had it so good. Today the company is the undisputed market leader in the commercial vehicles industry in India and is gradually emerging as one of the key players internationally too.

It has been forging ahead on a number of fronts in an attempt to further entrench its position as a market leader. In the SUV segment, the company has witnessed unprecedented success with the launch of the pioneering Tata ACE.

In the M and HUV segment, the company has been taking determined steps to further consolidate its position. The company enjoys a number of key strengths that enable it to present a unique value proposition to its customers.

However this success is far from being a given. The company must focus on combining its unique strengths, as it endeavours to replicate its recent successes in new segments and across new geographies.

StarsSafari dicor,indica

vista, Tata ace,magic, tata prima, star bus,

winger other lcv’s

QUESTION MARKSVenture, Other new

inventions, nano, versa, essota

Cash cowSafari,

manza,sumo, indigo cs, indigo xl

Dog.Sedan, sierra,

estate

Growth

High

Low

Market ShareHighLow

The company strategy and business model-Is the strategy focused and is its business

model working? Does it display strategic intent.

• A business model describes the rationale of how an organization creates, delivers, and captures value, in economic, social, cultural or other contexts.

• In theory and practice, the term business model is used for a broad range of informal and formal descriptions to represent core aspects of a business, including purpose, business process, target customers, offerings, strategies, infrastructure, organizational structures, trading practices, and operational processes and policies

Horizonext strategy

• In their Horizon next journey towards great products that exceed customer needs, Connect Next is one of the key ‘Next’ pillars personifying the ‘connect’ of theircars with customers and their environment.

•  HORIZONEXT, a four-pronged customer-focused strategy, provides the best customer .

• Experience from best vehicle experience to superlative purchase experience and followed by

technology intense after-market service support.

The four pillars horizonext strategy

• Intense product focus

• Focus on world-class manufacturing practices

• Enriched customer purchase experience

• Consistent quality of service

A few pointers on what Tata Motors ought not to do are captured below• Compete on price because proportion of individual players is

low.

• Engage in rapid capital expansion given the high debt to equity ratio.

• Focus on rapid acquisitions and instead focus on consolidation in the foreign market.

• Lose focus on the 'Value for Money' positioning, especially in the soon to be launched offering in the Ultra Heavy Commercial Vehicle segment

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.

• The future presents challenges and opportunities for the company in equal measure both domestically and internationally. While pitfalls are many, Tata Motors looks well positioned indeed to capitalize on these opportunities and take on the world.

Thank you