The Tata group is one of the largest automobile companies in India and ranks sixth in commercial vehicle manufacturing in the world. It is a leader in the commercial as well as the passenger vehicle segment. This "Positioning the Tata Nano" case study focuses on the decision on how to position the brand and for which group of customers target the new car is going to reach.
Alice M. Tybout; Natalie Fahey
Harvard Business Review (KEL602-PDF-ENG)
October 24, 2011
Case questions answered:
- Immediate Problems on Positioning the Tata Nano
- Associated Issues
- Facts and Assumptions
- Alternative Solutions or Options
- Recommendations and Conclusions
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Case answers for Positioning the Tata Nano (A)
Positioning the Tata Nano (A) Case Analysis
This “Positioning the Tata Nano (A)” case study focuses on the Tata group which is one of the largest automobile companies in India. It ranks sixth in commercial vehicle manufacturing in the world. It is a leader in the commercial as well as the passenger vehicle segment.
1. Immediate Problems on Positioning the Tata Nano
The main point we must consider is that a decision must be made for positioning the Tata Nano brand and for which group of customers target the new car that is going to reach the market. There are two options: families or college students.
2. Associated Issues
First, 76 % of all vehicle sales in India are two-wheelers and only 16% are for passenger vehicles. This can be explained because of the urge to buy a small vehicle with good fuel efficiency. This is targeted as a low-cost people’s car. This car has a price estimate in the middle of a motorbike and a cheap car (Rs. 1 lakh), the press called it the world cheapest car.
The goal was to create a quality car with a low cost of production. The problem is that to achieve this price they had to cut out the air conditioning, power steering, power windows, abs brakes, airbags, and the dual windshield wipers. However other models like the CX and LX offered more luxurious features.
The maneuverability and fuel efficiency of the two-wheelers made them favorite among college students. This is an important point to consider if the strategy is choosing to aim the students. Also, the fact that college students tend to transport in smaller groups and do not care too much about their safety.
The combination of the economic growth per capita and the average household size of above 5 people tend to an interesting adjustment of the market positioning strategy. Since the average income of the family is increasing the portion of income devoted to transportation also increases. At the same time, the Indian customer is described as a tough customer that constantly seeks for a bargain.
They must consider that the company is known for its code of conduct and its commitment to improving the lives of people in the communities they operate. They have also created initiatives to develop hybrid and electric cars to conserve natural resources. At the same time, they have been supporting employment and education to improve the lives of children and women to support their code. A critic that the car has received is that it would attract passengers that use public transportation into the damaged roads leading to an increase in air pollution.
The farmers whose land the government had seized in Singur started a protest in the main plan of the Nano. The company had to abandon that production plant. They had to choose between other plants at Sanand but to delay the production to almost 2 years or rush into Nanos but to have a lower capacity to produce. They choose the second option.
To reach more area of distribution the company entertained the possibility of creating a cost conservative strategy to the ensemble and sell the cars in rural areas. TML was unable to assume warranty and liabilities for the cars ensembled with this method.
3. Facts and Assumptions
The economic growth of India has been sustained since 1991 which has allowed a reduction in poverty, expanding the middle class so that by 2025, 41% of the population in India is classified within this segment.
Additionally, the purchase of vehicles is projected to increase compared to purchases of housing, health, and education. As the motorcycle market is so big, it must offer a good cost car to capture a large part of the market and displace motorcycles from it.
As Tata Nano is not a…