The 5 Competative Forces That Are Taken Into Consideration Are

7/31/2019 The 5 Competative Forces That Are Taken Into Consideration Are

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The 5 competative forces that are taken into consideration are:

Competition in the Industry Potential of new entrant into Industry Power of Suppliers Power of Customers Threat to substitute products

Lets discuss each of these points in detail:

Competition in the Industry:

This describes the competition between the existing firms in an industry. Greater the competitive riverly(companies providing equally good products or services) lesser are the profit margin. The price of theproduct/services is the single most defining factor that influences the customer's buy decision. Hence to

maintain low cost, companies consistently has to make manufacturing improvements to keep the businesscompetitive. This requires additional capital expenditure which tends to eat up company's earning. On theother hand if no one else can provide products/ services the way you do you have a monopoly.

Lets try to explore these points in more detail. Look at the current senario, the small car market in India isvery competitive with players like Maruti Suzuki, Tata Motors, Huyndai etc. which was preety muchdominated by Maruti. But with launch of Nano the 1 lakh car the whole momentum of the market hasshifted. Now to be competitive in market other companies have to either slash rates of their existing model orhave to go back to the drawing board and build again. Now look it from Tata Motor's perspective what pricethey had to pay to gain such advantage. Building new production plant, raw material & equiptments, labor etc.

which accounts to huge capital expenditure. And as mentioned earlier price is the most important thing, youhave to offer lower price to the customers. Huge inital expenditure and lower price leave very less profit

margin. The bottom line is a competitor's single innovation can change the whole senario of the industry.Lets take an example of a monopoly industry. Chocklate industry in India has just one big player Cadbury.Go to any Big Bazaar or a D-Mart outlet you will find 90% of chocklate by Cadbury. When you go topurchase chocklate what you look for ...Dairy Milk, Perk, Eclairs, Temptation, Celebration,Halls all areproduced by Cadbury. As far as I remember I have seen Dairy Milk's ad on TV when I was 5 years old and itsstill there in market and in all probability it will be there for next 20 years.The current market share ofCadbury stands at impressive 71% even the 2003 worm were not able to eat its market share. What we canconclude a monopoly and a great business!!

Potential of new entrant into Industry:

Its not only the existing players in an industry pose threat to each other, a new entrant can also affect thecompetition. The easier it is for a new firm to enter in a business, the more cut-throat competition there willbe.The factors that can limit threat of new entrant are called as Barriers to Entry. Following are some somebarriers to entry:

Government Restrictions and legislations: Although government's job is to preserve free competitivemarket, it restricts competition through regualtions and restrictions. Oil sector in India is an example. Preliberization era it was a dominated by Public sector. However after liberization the sector has opened up for


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private players and FDI but it still remains highly regulated sector. Also the telecom sector, first to make anentry you need TRAI's approval and licensing also you have to compete for the finite radio spectrumavailable.

Patents: Ideas and Knowledge that provides competitive advantage over others when patented, preventing

others from using it and thus creates barrier to entry. Pharma and Software sectors sees maximum number ofpatents being filed making it difficult for new firms to replicate their products.

High Entry Cost: If the initial cost to set up a new firm is difficult, then the chances of new entrants arevery less. Once again coming back to oil sector, Exploration and Production of oil and gas involves a highlycapital and technology intensive process of finding oil reserves, assessing its feasibility, drilling andextracting.Hence creating a very high entry cost

Existing loyalty to major brands: If the existing brands are very well-established, then chances of a newfirm giving them competition is minimal. Pepsi and Coca Cola dominate the soft drinks industry worldwide

making it difficult for any new entrant to survive in front of them.

On the other hand, if the industry uses common technology, there is little or no brand franchise and if theentry cost is low then it is very easy for a new entrant to enter into the industry.

Power of Suppliers:

A company to manufacture its products requires raw material, labor etc.This creats a buyer-supplierrelationship in an industry.If there are few suppliers providing material essential to make a productthen they can set the price high to capture more profit. Take a look at the PC industry, it faces amonoplistic power of an operating system supplier. Yes you guessed it right Microsoft. Go to

purchase a Dell, Toshiba or HP's laptop it will come with Windows Vista. PCs have to becompatible with Windows platform.On the other hand if there are lot of suppliers competing for fewbuyers, then the buyers take control of the price. Walmart has a monoploy over its suppliers. If your

product is not in Walmart, then you are out of business. To give its customers a better buy, Walmartcan control the prices of the suppliers.

Power of Customers:

This is the pressure a customer can place on a business. If there are few buyers then they are able to

dictate the terms. For example, defence contractors have to approach Governments to sell theiraircrafts, submarines, missiles and amunutions. Also if switching to another product is simple andcheap. An example can be telecommunication industry. The bargaining power of buyer is high asthere are lot of choice available to the buyer and the service do not vary from one service provider tothe other. Switching to another service provider is also simple and cheap. Some industries such asretail industry has very weak or almost no power. It is very difficult to bargain for the rate of potatoesat say Reliance fresh store.


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Threat to substitute products :

Substitute products refer to to products in other industry. The threat that consumer will switch to a

substitute product if there has been an increase in price of the product or there has been a decreasein price of the substitute product. Suppose if the price of coffee increases substantially thenconsumers may switch to other beverages like tea. In early times print media was the only way ofadvertisement. But the advent of electronic media and internet provides alternative medium toadvertise and market products. The strong 2 wheeler market in India can face a stiff competitionfrom a substitute Tata Nano which is providing a car which is just shade costlier than the bikes.

Travelling by airlines or by railway AC -II tier can be a substitute for each other depending on thefactors like time, money, personal prefrence etc.

Porters Five Forces Analysis of Indian Automobile Sector1.

Industry Rivalry

Industry Concentration:The Concentration Ratio (CR) indicates the percent of market share held by a company.A high concentrationratio indicates that a high concentration of market share is held bythe largest firms - the industry isconcentrated. With only a few firms holding a largemarket share, the market is less competitive (closer to amonopoly). A low concentrationratio indicates that the industry is characterized by many rivals, none of

which has asignificant market share. These fragmented markets are said to be competitive. If rivalryamongfirms in an industry is low, the industry is considered to be disciplined

High Fixed costsWhen total costs are mostly fixed costs, the firm must produce capacity to attain thelowest unit costs. Since

the firm must sell this large quantity of product, high levels of production lead to a fight for market shareand results in increased rivalry. The industry istypically capital intensive and thus involves high fixed costs

Slow market growthIn growing market, firms can improve their economies. Though the market growth has been impressive inthe last few years (about 8 to 15%), it takes a beat in even slighteconomic disturbances as it involves a luxurygood. Aggressive pricing is needed tosustain growth in such situations

Diversity of rivals:Industry becomes unstable as the diversification increases. In this case the diversity of rivals is moderate as

most offer products which are close to standard versions and thecompetitors are also mostly similarin strengthIndustryRivalryBargaining Powerof CustomersBargaining Powerof SuppliersThreat of NewEntrantsThreatof Substitutes

Highly competitive industry:The presence of many players of about the same size little differentiation between competitors, and a verymature industry with very little growth were the features of ahighly competitive industry. Higher the


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competition in the industry lower would be the profit margin. To remain ahead in competition, auto-makerswere tempted to offer value added services to the customers incurring more costs2.

Threat of New EntrantsThese are the characteristics that inhibit the entrance of new rivals into the market and inturn protect the

profits of the existing firms. Based on the present profit levels in the market, one can expect the entrance ofnew firms into the market or not. The entrance is however also affected by the start-up costs

Economies of scale:The Minimum Efficient Scale (MES) is the point at which unit costs are minimized. Thegreater the differencebetween the MES and the entry unit cost, greater is the barrier.Economies of scale are becoming increasinglyimportant as competition is driving the profit margins to lower levels. Also being a capital intensive industryeconomies of scalehave important consequence

Government policies:

Automobile Industry was de-licensed in July 1991 with the announcement of the New Industrial Policy

The passenger car industry was de-licensed in 1993. No industrial license is required for setting up of any unitfor manufacture of automobiles except in some special cases

The norms for Foreign Investment and import of technology have been progressively liberalized over theyears for manufacture of vehicles including passenger cars in order to make this sector globally competitive

At present 100% Foreign Direct Investment (FDI) is permissible under automatic route in this sectorincluding passenger car segment. The import of technology/technological up gradation on the royaltypayment of 5% without any duration limit and lump sum payment of USD 2 million is allowedunder automatic route in this sector

The automotive industry comprising of the automobile and the auto component sectors has made rapidstrides since de-licensing and opening up of the sector to FDI in 1991

The industry had an investment of about Rs. 50,000 crore in 2002-03 which has gone up to Rs. 80,000 croreby the year 2007. The automotive industry has already attained a turnover of Rs. 1, 65,000 crore (34 billionUSD)

The industry provides direct and indirect employment to 1.31 crore people. The contribution of theautomotive industry to GDP has risen from 2.77% in 1992-93to 5% in 2006-07. The industry is making acontribution of 17% to the kitty of indirect taxes of the Government With all the policies regarding the FDIand Tariff barriers as mentioned above, it has become easier for the foreign players to enter the Indianautomobile industry.

3.

Threat of Substitutes


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The replacement market is characterized by the presence of several small-scale suppliers who score over theorganized players in terms of excise duty exemptions and lower overheads.

A products price elasticity is affected by the presence of substitutes as its demand is affected by the changein the substitutes prices

The cost of the automobiles along with their operating costs was drivingcustomers to look for alternativetransportation options

The new technologies available also affect the demand of the producte.g.: In case of Marutis products, the threat of substitutes is high. The competition is intense as several playershave products in the categories given by Maruti. However, in the 800ccrange it is the market leader and the

threat of substitute products is low. Price performance comparison favors heavily towards Maruti in mostproduct categories. Also the high availability and quality of services offered by Maruti gives the customera better trade-off4.

Bargaining Power of Suppliers

Suppliers can influence the industry by deciding on the price at which the raw materials can be sold. This isdone in order to capture profits from the market.

Steel is a major input in this industry and so steel prices have a sharp and immediate impact on the productprice

The industry being capital intensive switching costs of suppliers is high, other thansteel as raw material whichis highly price sensitive and the firm may easily move towards a supplier with lower cost5.

Bargaining Power of Buyers

It specifies the impact of customers on the product

When buyer power is strong, the buyer is the one who sets the price in the market. Here there is purchases oflarge volumes

There is prevalence of alternative options


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Price sensitive customers were some of the factors that determined the extent of influence of the buyers inthis industrye.g.: In the case of Maruti, the sales volumes have shown increasing trend over past so many years. Thecustomers are more or less concentrated in metros or other tier two cities. The industry is also concentratedin these regions mostly. Most of them are havegood amount of knowledge about the product. Except the

800cc range in other categories brand loyalty is only moderate. Also it is difficult to measure sincerepurchases are rare. Product differentiation is high as there are many categories in the passenger vehiclesegment. Buyers get incentives in the form of cost discounts and better after sales services

At home in the worldAnchored in India and committed to its traditional values of leadership with trust, the Tata group is spreadingits footprint globally through excellence and innovation TheTata groups revenues for 2007-08 from itsinternational operations were $38.3 billion, which constitutes 61 per cent of its total revenues. Each operatingcompany in the group develops its international business as an integral element in an overall strategy,depending on the competitive dynamics of the industry in which it operates. Exports from India remain thecornerstone of the Tata groups international business, but different Tata companies are increasingly investingin assets overseas through Greenfield projects(such as in South Africa, Bangladesh and Iran), joint ventures(in South Africa, Morocco and China) and acquisitions. Acquisitions are a crucial component of the global

expansion of Tata enterprises. Over the past eight years the group has made overseas acquisitions of $18billion. Among the bigger deals on this front have been Tetley, Brunner Mond, Corus, Jaguar and Land Roverin the UK, Daewoo Commercial Vehicles in South Korea, NatSteel in Singapore, and Tyco Global Networkand General Chemical in the US.Priority marketsWhile individual Tata companies have differing geographical imperatives, the Tata group is focusing on aclutch of priority countries, which are expected to be of strategic importance in the years ahead. The regionsare North America, UK, China, the Netherlands, Germany, South Africa, members of the Gulf CooperationCouncil, Brazil, Vietnam, Thailand and Sri Lanka. Ratan Tata, Chairman, Tata Sons, sums up the Tata groupsefforts to internationalize its operations thus: I hope that a hundred years from now we will spread our

wings far beyond India, that we become a global group, operating in many countries, an Indian businessconglomerate that is at home in the world, carrying the same sense of trust that we do today.

Business Policy & Competitive Strategy

The compan y that I have taken into account to analysis the Porters Five Forces is the Tata motors

The Spec if ic prod uct taken in to anal ys is is theNANO CAR. This segm ent has a great growth pot ent ial in develop ing countries , especially in a country likeIndia.

A brief Information about the product :T he T a t a N a no i s a rear-engine, four-passengerc i t y c a r b u i l t b y TataMotors, a i m e d p r i m a r i l y a t t h e I ndian market. T h ec a r i s v e r y f u e l efficient, achieving around 78mpgon the highway and around 92 in thecity. It

was fir st pr es ented at th e 9th annua lAuto Ex poon 10January2 0 0 8 , a t Pragati MaidaninN e w D e l h i ,India. N a n o h a d a c o m m e r c i a l l a u n c h o nMarc h 23 , 200 9 an d , a book ing p er io d f rom Apr i l 9 to A pr i l 25, generat ing more than2 00, 00 0 booking s for the c ar . T he s al es of t h e c a r w i l l b e g i n i n J u l y 2 0 0 9 , w i t h as t a r t i n g p r i c e o f R s 1 1 5 , 0 0 0 (rupees), which is approximately equal toUK1,467orUS$2,421 as of June 20 09 . Th i s i s ch eape r than th e Maruti 800, i t s m a inc om pe ti to ra n d n e x t c h e a p e s t I n d i a n c a r p r i c e d a t 1 8 4 , 6 4 1 R u p e e s . T a t a ha d s o u g h t t o p r o d u c e t h e l e a s t e x p e n s i v e production i n the wor l d a i m i n g f o r as t a r t i n g p r i c e o f Rs.100,000 (approximatelyUS$2 ,0 00 i n June 2009).
http://en.wikipedia.org/wiki/Rear-engine_designhttp://en.wikipedia.org/wiki/Rear-engine_designhttp://en.wikipedia.org/wiki/City_carhttp://en.wikipedia.org/wiki/City_carhttp://en.wikipedia.org/wiki/Tata_Motorshttp://en.wikipedia.org/wiki/Tata_Motorshttp://en.wikipedia.org/wiki/Tata_Motorshttp://en.wikipedia.org/wiki/Miles_per_gallonhttp://en.wikipedia.org/wiki/Auto_Expohttp://en.wikipedia.org/wiki/Auto_Expohttp://en.wikipedia.org/wiki/Pragati_Maidanhttp://en.wikipedia.org/wiki/Pragati_Maidanhttp://en.wikipedia.org/wiki/New_Delhihttp://en.wikipedia.org/wiki/New_Delhihttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Indian_rupeehttp://en.wikipedia.org/wiki/Indian_rupeehttp://en.wikipedia.org/wiki/Indian_rupeehttp://en.wikipedia.org/wiki/UK?http://en.wikipedia.org/wiki/UK?http://en.wikipedia.org/wiki/US$http://en.wikipedia.org/wiki/US$http://en.wikipedia.org/wiki/US$http://en.wikipedia.org/wiki/Maruti_800http://en.wikipedia.org/wiki/Maruti_800http://en.wikipedia.org/wiki/Indian_Rupeehttp://en.wikipedia.org/wiki/Indian_Rupeehttp://en.wikipedia.org/wiki/United_States_Dollarhttp://en.wikipedia.org/wiki/United_States_Dollarhttp://en.wikipedia.org/wiki/United_States_Dollarhttp://en.wikipedia.org/wiki/United_States_Dollarhttp://en.wikipedia.org/wiki/Indian_Rupeehttp://en.wikipedia.org/wiki/Maruti_800http://en.wikipedia.org/wiki/US$http://en.wikipedia.org/wiki/UK?http://en.wikipedia.org/wiki/Indian_rupeehttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/New_Delhihttp://en.wikipedia.org/wiki/Pragati_Maidanhttp://en.wikipedia.org/wiki/Auto_Expohttp://en.wikipedia.org/wiki/Miles_per_gallonhttp://en.wikipedia.org/wiki/Tata_Motorshttp://en.wikipedia.org/wiki/Tata_Motorshttp://en.wikipedia.org/wiki/City_carhttp://en.wikipedia.org/wiki/Rear-engine_design


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TATA

Business Policy & Competitive StrategyBARRIERS TO ENTRY

T i me an d c o s t o f en t r y T T i m e i s m os t e s s en t i a l t h i ng wh i l e l a unc h i n g a p r o du c t i n any m ar k e t . T h e l au nc hof th e N AN O i s quite viable as the demand of the small car is on the rise in the market. By the cost ofthe entry we meant t he in i t ia l c ap i ta l r eq uir ed to se t u p a new f i rm is ver y h igh , i tmakes the chances of the chances of new entrants are very less.

Knowledge and Technology - Ideas and Knowledge that provides competitive advantage over o t h e r s w h e n p a t e n t e dpreventing others from using it and thus creates barrier toentry. T h e T A T A m o t o r s h a v e g r e a t k n o w l e d g e / e x p e r i e n c e i n t h e

automobile industry and have renowned technological advantage because of the recent acquisitionand mergers.P roduc t Di f f e re nt ia t ion and Cos t Advant ag e T h e n e w pr oduc t ha s to be di ffer en t and at trac tive to be accepted by the custom er s.

At tract iv enes s can be measu red in the ter ms of the f e a t u r e s , p r i c e e t c . At t h i s l ev e l t h ep ri ce o f t he N AN O c ar wa s o n e t h i n g t h a t i s a t t r a c t i n g c u s t o m e r s . A n da b o v e a l l t h i s t h e image, trust the name TATA carries with it.G o v e r n m en t P o l i c y a n d E x p e c t e d R e t a l i a t i o n -

Althoughg o v e r n m e n t ' s j o b i s t o p r e s e r v e f r e e c o m p e t i t i v e m a r k e t , i t res tr ic tscompet ition through reg ulat ions and res tri ctions. Thegovernment tried to promote the TATAMotors to start a plant by providing land and tax rebates. But the unexpected retaliation by t h e l o c a l

p e o p l e s u r f a c e i n t h e s e t t i n g u p o f t h e p l a n t w h i c h costed the company a lot.

Access to Di st ri buti on Channels W h e n a n e w p r o d u c t a l a un ch ed a we l l de v e lo pe d d i s t r i bu t i on i s m us t f o r i t ss u c ce s s . The TATA motors had an advantage of well established distribution channel across the world.BUYERS\Business Policy & Competitive StrategySwitching Costs -If swi tching to ano ther product is simple and cheap the customers does not think much before doingit. In case of NANO car the switching cost from bike to car is too high. Thus increasing thedemand of the car many fold

Num be r o f c us t om e rs/ Vo lum e o f sa le s - I f t h e r e a r e f e w b u y e r s t he n t h ey a r e a bl e t o di c t a te t h e t e r m s. T h ey p u ll d o w nthe cost by Bargaining. The bargaining power of buyer is high as the re are lot of choi ce ava ilable tothe buyer and the s ervic e do not v ary from one manufacture r t o the other. They force themanufactures to improve the quality. All this c a n b e c l e a r l y s e e n i n t h e c a s e o f N A N Oc a r t h e p r i c e t a g a t w h i c h i t h a s b e e n o f f e r e d o r t h e q u a l i t y o f t h eN A N O c a r n o compromise has been done at any front.Brand Image -


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The brand image of the TATA and the segment i n w h i c h t h e N A N O h a s b e e n t h e m o s ta t t r a c t i v e t h i n g i n t h e entire package.SUPPLIERS

Number and Size of Suppliers

A company to manufactureitsp r o d u c t s r e q u i r e s r a w m a t e r i a l , l a b o r e t c . I f t h e r e a r e f e w s upp l ie r s p r o vi d i ng m at e r i al s e ss e n ti a l t o ma k e a pr o d u ct t he n t h e y c a n s e t t h e p r i c eh i g h t o c a p t u r e m o r e p r o f i t . P o w e r f u l s u p pl ie rs ca n s qu ee ze in du st ry p r o f i t a b i l i t y t o g r e a t e x t end . I n c a s e o f N A N O t h e s u p p l i e r a r e l i m i t e d a n d t he s i z e o f t h e suppliers are big enough to br ing about the controll ing power in the priceof the car. The NANO car has more than 128 suppliers in a l l a n d t h e m a j o r p o r t i o n o f t h eb u i l d i n g c o s t o f t h e c a r i s t h e parts supplied by the suppliers.U n i q u e S e r v i c e / P r o d u c t - S u p p l i e r s p r o d u c t s h a v e f e w subst it ut es . Suppl ie r i ndus tr y i s domina ted by a

f ew f irms . T he som e pa r t s o f t he N AN O c a r a r e ob t a i ned f rom the s upp l i e r whothem are big enough and limited substitutes are available against them. So the entire production line dependsupon them only.


Ability to substitute- Suppliers products have high swi tch ing cos t s . In many case even when subs t i tu te a rea v a i l a b l e i t sn o t t h a t e a s y t o o p t f o r s u b s t i t u t e a s t h e n e x t p r o d u c t i n t he a s s e m b l y l i n e d e p en d s u p o n i t . I f t h e ch a n g e i n t h e a n y p ar t i s b r o u g h t a b o u tt he l o ng l is t o f d ep en de d p a r ts a ls o h av e t o b e changed, which in most cases is not feasibleto do.SUBSTITUTESPrice band -The threat that consumer will switch to a substitute pr oduc t if ther e has been an incr eas e in pr ic e ofthe product or there has been a decrease inpriceo f t h e s u b s t i t u t e p r o d u c t . I f t h e p r i c e o f t h e N A N O c a r w i l l i ncrease the main expected customers ie the one switching from bike to ca r will not move tocar and wi ll remain in the bike only . Thus the price is kept checked in this manner.Substitutes performance -The performance of the substitute sec tor wi ll al so pla y a im port an t ro le in th e succe ss of theNANO car. If the price of the Bike segments increases or the price band

of t h e s m a l l s e g m e n t f a l l , i t w i l l h a v e e f f e c t o n t h e q u a n t i t y requiredin the market. Its just on the price but also the features and the o ther serv ices associated or it may bethe statussymbols tor y . The succ ess of the e l ec t r i c car segm ent w i th p l ay er l i ke REVA can alsoaffect the demand of the NANO.B u y e r s w i l l i n g n e s s P r o d u c t s w i t h i m p r o v i n g price/performance tradeoffs relative to presentindustry products. I t wi l l de ter min e the wi l l in gne ss of the buy er to bu t the


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NANOcar.The willingness of the customers to go forward try the new product in the marketi.e. NANO. They might be willing to go for the test products like Maruti 800, Santro etc.COMPETITIVE RIVALRYN u m b e r a n d D i v e r s i t y o f C o m p e t i t o r - T h i s de s c r i b e s t h e competition between the existing firms in an industry. The current

Business Policy & Competitive Strategyscenario, the small car market in India is very competitive with players like MarutiSuzuki, Tata Motors, Hyundai etc. which waspretty much dominated by Maruti. But withlaunch of Nano the 1lakh car the whole momentum of the market has shifted. Now to b ec o m p e t i t i v e i n m a r k e t o t h e r c o m p a n i es h a v e t o e i t h e r s l a s h r a t e s o f t h e i r e x i s t i n g mo de l or ha ve to go ba ck to th e dr aw in g board and build again.Price Competition -

Ad v e r t i s i ng b a t t l e s m a y i nc r e a s e t o t a l i n d u s t r y d e m a n d , b u t m a y b e c o s t l y t os m a l l e r c o m p e t i t o r s.

Products with similar function limit the prices firms cancharge.P r i c e c o m p e t i t i o n o f t e n l e a v e s t h e e n t i r e i n d u s t r y w o r s e o f f . N A NOi s t h e o n l y p l a y e r s o i t h a s t h e p r i c e f r e e d o m b u t a st h eM a r u t i a n d H o n d a a r e a l s o p l a n n i n g t o l a u n c h t h e c a r i n t h e same segmentthe price competition will start.Exit BarriersEven if the product fails in the market its not that easy for the company to exit the market just like thatbecause of the heavy investment it has made in the initial stage. If the NANO f a i l s o r f a l l s f l a t t h e

T AT A m oto r s w i l l n o t b e i n a s t a t e t o s l ow down the product ev en when NANOproduction li ne can be us ed by the other products after few modification as for NANO only the newproduct line were setup and huge cost were incurred.

Product Quality - Increasing consumer warranties or service

isvery common these days. To maintain low cost, companiesconsistently has to make manufacturing

improvements tokeept h e b u s i n e s s c o m p e t i t i v e . T h i s r e q u i r e s a d d i t i o n a l c a p i t a l e x p end i t ure which tend s t o ea t up compa ny ' s earn ing . On the o ther hand i f no one e lsecan provide products/ services the way yo u do you ha ve a mon opo ly . NAN O en joy st he m on opo l y a r e there are no competitors in this segment.

TATA MOTORS STRENGTHSThe

Internationalization strategyso far has been to keep local managers in new acquisitions, and to only transplant a coupleof senior manage rs from India into the new marke t. The b enefit is that Tata has been able toexchange expertise. For exampleaftert h e D a e w o o a c q u i s i t i o n t h e I n d i a n c o m p a n y l e a n e d w o r k discipline and how to get the final product 'right first time.'T a t a M oto r s L i m i t ed a cq u i r edD a e w o o M o t o r ' s


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Commercialvehicle business in 2004 for around USD $16 million.T h e c o m p a n y h a s h a d a s u c c e s s f u l a l l i a n c e w i t h I t a l i a n m a s s producerFiats i n c e 2 0 0 6 . T h i s h a s e n h a n c e d t h e p r o d u c t p or tf ol i o f or T a t a and F i a t in terms of production, knowledgeexchange , logistics and its infrastructure.

In the summer of 2008 Tata Motor's successfully purchased theLand Rover and Jaguar brands from Ford Motors for UK 2.3million. Two of the World's luxury car brand havebeen added toits portfolio of brands, and has undoubtedly off the company the chance tomarket vehicles in the luxury segments.NANO is the cheapest car in the World.Page | 8


T he r a ng e o f S up e rMilo fuel efficient buses are powered bysuper-efficient, eco-friendly engines.

TATA MOTORS WEAKNESSThe compan y' s pa ssenger ca r product s ar e ba se d upon3rd and4th generation platforms , which put Tata Motors Limited at adisadvantage with competing car manufacturers.Despite buying the Jaguar and Land Rover brands Tata has not got afoothold in theluxury car segmentin its domestic, Indianmarket. T h e b r a n d a s s o c i a t e d w i t h c o m m e r c i a l v e h i c l e s a n d l o w -c o s t passenger cars to the extent that it has isolated itself from lucrativesegments in a moreaspiring India.Other competing car manufacturers have been in the passenger carbusiness for 40, 50 or more years.

Theref ore Ta ta Moto rs Limi tedhas tocatch up in terms of quality and lean production.Sustainability and environmentalismC o ul d me a n e xt r a c o st s f o r t h i s l o w -c o s t p r o d u c e r . T h i s c o u l d i m p a c t i t s u n d e r p i n n i n g competitive advantage.Obviously, as Tata globalises and buys intoother brands this problem could be alleviated.

Business Policy & Competitive StrategyPorter's 5 Forces Model of the NANO carThere is continuing interest in the study of the forces that impact onano r g a n i s a t i o n , p a r t i c u l a r l y t h o s e t h a t c a n b e h a r n e s s e d t o p r o v i d e competit ive advantage. The ideas and models which emerged duringt he pe ri od fr om 197 9 to th em i d - 1 9 8 0s w e r e b a s e d o n t h e i d e a


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t ha tc o m p e t i t i v e a d v a n t a g e c a m e f r o m t h e a b i l i t y t o e a r n a r e t u r n o n investment that was better than the average for the industry sector. AsPor ter' s 5 Forces analys is deals withfactors outside an industrythati n f l u e n c e t h e n a t u r e o f c o m p e t i t i o n w i t h i n i t , t h e f o r c e s i n s i d e t h e i nd u s t r y (m i c r o en v ir o n m en t ) t h a t i nf l u e nc e t h e w a y i n wh i c h f i rm s c o m p e t e , a n d so t h e i n d u s t r y s l i k e l y p r o f i t a b i l i t y i s c o n d u c t e d i n Porters five forces model.

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The 5 Competative Forces That Are Taken Into Consideration Are