Information about the product: The Tata Nano is a rear-engine, four-passenger city car built by Tata Motors, aimed primarily at the Indian market. The car is very fuel Efficient, achieving around 78mpg on the highway and around 92 in the City. It was first presented at the 9th annual Auto Expo on 10 January 2008, at Pragati Maidan in New Delhi, India. Nano had a commercial Launch on March 23, 2009 and, a booking period from April 9 to April 25, generating more than 200,000 bookings for the car.
The sales of The car will begin in July 2009, with a starting price of Rs 115,000 (Rupees), which is approximately equal to UK? 1,467 or US$2,421 as of June 2009. This is cheaper than the Maruti 800, its main competitor And next cheapest Indian car priced at 184,641 Rupees. Tata had Sought to produce the least expensive production car in the world — Aiming for a starting price of Rs. 100,000 (approximately US$2,000 in Juneprice competition often leaves the entire industry worse off. NANO is the only player so it has the price freedom but as the Maruti and Honda are also planning to launch the car in the
Same segment the price competition will start.
Porter’s 5 Forces Model of the NANO car There is continuing interest in the study of the forces that impact on an Organization, particularly those that can be harnessed to provide Competitive advantage. The ideas and models which emerged during The period from 1979 to the mid-1980s were based on the idea that Competitive advantage came from the ability to earn a return on Investment that was better than the average for the industry sector.
As Porter’s 5 Forces analysis deals with factors outside an industry that Influence the nature of competition within it, the forces inside the Industry (microenvironment) that influence the way in which firms Compete, and so the industry’s likely profitability is conducted in Porter’s five forces mode. BARRIERS TO ENTRY •? Time and cost of entry – Time is most essential thing while Launching a product in any market. The launch of the NANO is Quite viable as the demand of the small Car is on the rise in the market. By the cost of the entry we mean The nitial capital required to set up a new firm is very high, it Makes the chances of the chances of new entrants are very less. •? Knowledge and Technology – Ideas and Knowledge that Provides competitive advantage over others when patented, Preventing others from using it and thus creates barrier to entry. The TATA motors have great knowledge/ experience in the Automobile industry and has renowned technological advantage Because of the recent acquisition and mergers. •? Product Differentiation and Cost Advantage – The new Product has to be different and attractive to be accepted by the Customers.
Attractiveness can be measured in the terms of the Features , price etc. At this level the price of the NANO car was One thing that is attracting customers. And above all this the Image , trust the name TATA carries with it. •? Government Policy and Expected Retaliation – Although Government’s job is to preserve free competitive market, it Restricts competition through regulations and restrictions. The Government tried to promote the TATA Motors to start a plant by Providing land and tax rebates. But the unexpected retaliation by The local people surface in the setting up of the plant which Costed the company a lot. ? Access to Distribution Channels – When a new product a Launched a well developed distribution is must for its success. The TATA motors had an advantage of well established distribution Channel across the world. BUYERS •? Switching Costs – If switching to another product is simple and Cheap the customers do not think much before doing it. In case Of NANO car the switching cost from bike to car is too high. Thus Increasing the demand of the car many fold. •? Number of customers/ Volume of sales – If there are few Buyers then they are able to dictate the terms. They pull down The cost by Bargaining. The bargaining
Power of buyer is high as there are lot of choice available to the Buyer and the service do not vary from one manufacturer to the Other. They force the manufactures to improve the quality. All this Can be clearly seen in the case of NANO car the price tag at Which it has been offered or the quality of the NANO car no Compromises have been done at any front. •? Brand Image – The brand image of the TATA and the segment In which the NANO has been the most attractive thing in the Entire package. SUPPLIERS •? Number and Size of Suppliers – A company to manufacture its Products require raw material, labor etc.
If there are few Suppliers providing material essential to make a product then They can set the price high to capture more profit. Powerful Suppliers can squeeze industry profitability to great extend. In Case of NANO the supplier are limited and the size of the Suppliers are big enough to bring about the controlling power in The price of the car. The NANO car has more than 128 suppliers in All and the major portion of the building cost of the car is the Parts supplied by the suppliers. •? Unique Service / Product – Suppliers’ products have few Substitutes.
Supplier industry is dominated by a few firms. The Some parts of the NANO car are obtain from the supplier who They are big enough and limited substitutes are available against Them. So the entire production line depends upon them only. •? Ability to substitute – Suppliers’ products have high switching Costs. In many case even when substitute are available its not That easy to opt for substitute as the next product in the Assembly line depends upon it. If the change in the any part is Brought about the long list of depended parts also have to be Changed , which in most cases is not feasible to do.
SUBSTITUTES •? Price band – 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 decrease in price Of the substitute product. If the price of the NANO car will Increase the main expected customers i. e. The one switching from Bike to car will not move to car and will remain in the bike only. Thus the price is kept checked in this manner. •? Substitutes performance – The performance of the substitute Sector will also play an important role in the success of the NANO Car.
If the price of the Bike segment increases or the price band of The small segment fall , it will have effect on the quantity Required in the market. It’s just on the price but also the features And the other services associated or it may be the status symbol Story. The success of the electric car segment with player like REVA can also affect the demand of the NANO. •? Buyers willingness – Products with improving Price/performance tradeoffs relative to present industry products. It will determine the willingness of the buyer to but the NANO Car. The willingness of the customers to go forward try the new Product in the market i. e. NANO’. They might be willing to go for The test products like Maruti 800 , Santro etc. COMPETITIVE RIVALRY •? Number and Diversity of Competitor – This describes the Competition between the existing firms in an industry. The current Scenario, the small car market in India is very competitive with Players like Maruti Suzuki, Tata Motors, Hyundai etc. Which was Pretty much dominated by Maruti. But with launch of Nano the 1 Lakh car the whole momentum of the market has shifted. Now to Be competitive in market other companies have to either slash Rates of their existing model or have to go back to the drawing Board and build again. ? Price Competition – Advertising battles may increase total Industry demand, but may be costly to smaller competitors. Products with similar function limit the prices firms can charge. •? Exit Barriers – Even if the product fails in the market it’s not that Easy for the company to exit the market just like that because of The heavy investment it has made in the initial stage. If the NANO Fails or falls flat the TATA motors will not be in a state to slow Done the product even when NANO production line can be used
By the other products after few modification as for NANO only the New product line was setup and huge cost was incurred. •? Product Quality – Increasing consumer warranties or service is Very common these days. To maintain low cost, companies Consistently has to make manufacturing improvements to keep The business competitive. This requires additional capital Expenditure which tends to eat up companies earning. On the Other hand if no one else can provide products/ services the way You do you have a monopoly. NANO enjoys the monopoly are There are no competitors in this segment. Page | 7
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