Marketing plan of Tata Nano for UK market
|✅ Paper Type: Free Essay||✅ Subject: Marketing|
|✅ Wordcount: 5338 words||✅ Published: 3rd May 2017|
Tata is one of the biggest automobile manufacturer in India. Last year they have launch Nano which is the cheapest private car in the world. It is around Rs 1,000,000 which is £1452.53 approx. Mr Ratan the chairman of Tata Ltd announced Nano model which a common middle class Indian can afford it easily and they called it as the “People’s Car”. Nano was launched India 1st April, 2009. It was expected to be on road in July of the same year. It created a buzz in 2008 when it was first shown in an auto exhibition. People were so excited on the launching that on the first day of booking it received 5500 booking.
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The question arises, what makes Nano so affordable and cheap? Answer to this question Tata made it parts lighter, smaller, took all the shallow parts and changed without compromising the safety and fulfilment of environmental factors. According to Windecker (2005) these situation gives an emphasis the power of society of different cultures. In which low price cars have given high first choice over luxury, SUVs and sports cars. The latest trend has shown that low price cars are more in demand than the others even in the markets like US and UK. The Tata should be focus on the UK market. The reason behind selecting UK market as the primary target market is the status of India as a reasonable means in the market; UK Automobile market has the potential dynamics, potentials and communication similarities which are due to help an Indian company in the UK. The other potential markets that are to be considered are USA and Russia. USA is one of the largest markets in the world countries but the reason for not considering US market as preferential is because quality requirements are very high and some non tariff obstacles which make it slightly harder for a new competitor to go into this market. The other reason is because the market’s level of maturity, experience and competive pressure is quite high. On the other hand in Russian market, there were several factors high taxes on the new competitor etc which do not support an international company like Tata. This reason makes it less eye-catching than the UK market. The main being the development of the country is quiet tentative and dealers market is underdeveloped.
The three models Tata Nano available in the market. Tata Nano, Tata Nano CX and Tata Nano LX. All the parts of the models of Nano will be imported to United Kingdom by Tata Industries. The car can be assembled by the factories in Halewood and in Northwest England. Tata Motors already have dealers in East Kent Audi in Kent and White May fair Audi in Greater London. Tata can distribute Tata Nano cars through these distribution centres only.
2.0 SITUATION ANALYSIS:
Tata Motors Limited is arguably India’s largest automobile Company; it has revenues of over Rs. 1600 crores last year. Its Commercial vehicles are largest selling vehicles, and also it is ranked in top three in the passenger vehicles segment. Few of Tata vehicles also won the prizes in last three years. Another large announcement was made by Tata regarding their progress in the passenger vehicle segment. In January 2008 Tata announced that, “The company would release a $2,500 car that could replace the motor scooters commonly used in developing countries to car around whole families” (Carty, USA Today). The company is fourth largest truck and the second largest bus manufacturer in the world. Tata Motors also acquired Ford’s UK based car brands Jaguar and Land Rover in March 2008(BBC News, 2008).
Ratan Naval Tata (Chairman of Tata Group), insist the need for an innovation like Nano is because of the nature of the market and transport of the country. In India availability and quality of mass transport are major problems. The two seated motorcycle is normally considered to be a family vehicle in India, Even though motorcycles are quite dangerous mode of transporting for a family. So with this in mind Tata Nano was created as a safer form of transport. (Pradeep Thakur, 2009)
3.0 Market Summary :
The estimated number of cars on the road of United Kingdom more than 28 million, as per the survey more than 35% of the car on the road are low price vehicles. The price of such low price cars are estimated about say £4500 to £ 4812, which is almost 3 times higher than the price of TATA Nano.( Svend Hollensen, 2010)
3.1 Target Markets
Identifying the target market for launching any product is necessary. So Tata have recognise the lower income group with family, students, first time buyers mainly young population, and used cars buyers as their potential target market.
The greatest USP of Tata Nano is that it is the world’s cheapest car while being eco friendly as well. The company have not compromise the quality and safety of the car while making it cheapest car. By leveraging Tata Nano’s competitive edge the positioning of the product can be achieved: industries Tata Motor who has been in vehicles industries (commercial, passengers & utilities) since 1945 is already an experience player in the automobile market. Tata motor has good relationship with more than 100 components suppliers( Jagmohan Raju, 2010).
Tata Motors has targeted the urban area market such as London. Because according to the survey more than 60% of cars running in London are in lower price range. Secondary, the presence of Asian Community in London, Tata is a renowned name in automobile sector in India. That can play the fact that the market Tata is entering is not entirely new and it already have brand recognition.
3.4 Distribution review
Tata Nano will be positioned as an affordable car in overseas markets same as it was done in Indian market.. The car will be assembled at pre-defined locations as the Easy to assemble kit will be imported from India. The proposed locations are Northwest England and Halewood. Its redistribution to showrooms can be done on regional basis. More than 40 sales offices will be opened throughout United Kingdom.
3.5 Competitor review
The main competitors are Volkwagen, Renault, Peugeot, Toyota, BMW, Citroen, Ford, GM (Vauxhall), and Honda. As per the SMMT statistics, top Companies in selling cars in United kingdom are as follows:
4.0 SWOT Analysis:
The first and foremost strength is that the car has low price, stylish, high fuel efficiency and environment friendly (Green House). Tata as company is already a known brand in the world which can create enough brand awareness in people to consider the product. The response of the car was very heart warming in the country of launch which increase the company turn over as well as the trading profit.
The main weakness of the product is lack of luxury quality. And mere perception of the people because of the price of the product. The sophisticated buyer will feel that the product is not worth buying because of its price. The product is not technologically advance and the performance is average in compare to its competitors.
The product is relatively new. So in this case it can create an opportunity to Tata. As Nano is a nice specimen of Innovation. This is also an opportunity to the company to enhance its global presence. The market demand of lower price cars can also be an opportunity for the company launching the cheapest car in the world.
The major threat will be the competitors like Ford and GM. Their product Ka and Astra respectively are already major players in the market. The volatility of fuel price can also be seen as a major threat. The change of legislations and foreign policies can also affect the plan of Tata. The other threat face by the company can be the oil crisis, recession etc.
5.0 Pestle Analysis:
According to Hormazd sorabjee, a top indian car journalist, Tata Nano is the most eco friendly and politically acceptable car ever launched in the market. It is expected that Nano will pressurize the automobile industry globally for have direct model in its price range. Other automobile manufacturers like Volkswagen have already shown interest by announcing their plans for a model of lower price range. But the cost will be slightly more when the factors like tax and manufacturing costs will be taken into account. The market will be surely affected by the increase in the oil price due the global economic unsteadiness which can also be a major factor. Any increase in the oil prices will affect the sales of luxury car, as it will surely go down. Mintel in 2006 stated because of this issue, an increase in the level demand has been developed towards the car with smaller engine with fuel effieciency. According to KPMG, 2004 Administrative barriers which quality controls and operations requirements are not to be overlooked and a higher emphasis will be given to all safety measures and emission level which will result in increase in production costs. Because of which profit margin on the product will decrease. Mintel, 2006 stated that the increase of traffic on the road of UK can increase the threat of high capacity overload. Hill in 2002 stated in his article that the political relations between countries of operations can also be the factor which can affect the company. For example if India will cooperate with the UK within the government policy of favourability the UK government can leverage in tariff and non-tariff barriers which can make the entry for the company in UK market easier.
The foreign ownership regulations (The market expansion mode (Hill, 2002) – the government has remove some regulatory control from large numbers of industries which includes automobile as well. This means that it is up to the foreign companies to choose their mode of expansion the UK according to their preferences.
Strategies of pricing and potential profit on investment are the major issues that affect the current as well as the future market growth. These factor are to be considered while selecting a market. The UK market is viewed as a very mature market (Mintel, 2006). According to the present scenario the market is estimated to reach the value of £31billions. But the overall UK market is experiencing negative growth due to the maturity level of the consumers. Nevertheless due to the impact of certain factors like society and technology the car segments with lower price range have considerable growth prospects.
Mintel (2006) claims that there is a significant decrease in the confidence of new cars consumers. The decrease in the rate of GBP has created various confusion for manufactures consumers operating in pounds. The cost of labour in the automobile industry highlighted, the cost factor and capability of direct and indirect costs becomes one of the key issues in maintain advantage. According to the opinion of the industry specialists (KPMG, 2004), the issue that will influence the decision selecting the location the most is the cost of labour. According to the survey (KPMG, 2007), a major importance is given by the company on the cost of labour which can is describe cost of their retirement fund, healthcare and their legal services. The growth of present political and economic boundaries for example European Union, all European Union markets are now considered as a single EU market. This political policy can help Tata motors for entering in various European markets like Italy and France
According to estimations of Nieuwenhuis & Wells (2003) the European Union attracts the companies as the target market for a car manufacturer will remain high. They claim that the EU as a target market will be maintained to attract the manufacturers because of the increase of its market value and size.
5.3 Social Factors:
Demographic factor is one of most important social factors. It affects the risk taking nature, spending power, consumer trends, lifestyle, and value per customer. The change of demographic trends allows the company to construct a plan which suites the particular product. The current demographics have gradually weakened the sales of family cars in the UK. Lifestyles – The change of lifestyles and habits of the consumer can have a direct impact on their expenditures; Mintel (2006) also pointed out that in UK recent increase in the culture of having two or more cars in the family. Mintel (2006) adds that the negative effect of market development and increase in the prices of oil is challenge by the impact of change in the lifestyle of the masses. Thus, on the contrary, Tata Nano will experience healthy growth despite a fall in the sales of automobile in the UK. Because our target market will be the high population of students and female drivers in the country,
5.4 Technological Factors:
The doors for new transactional options are open by the rapid growth of Internet in the market. Currimbhoy (2004) suggests that because of the constant growth in the areas of technology, like in the fields of communication and digital technologies have formed new opportunities such as e-shopping, new channels for marketing and new tools of marketing research. According to Mintel (2006) the problem in increase in capacity can be tackled by the using e-shopping by the leading car distributors. The growth in the channels of e-exchange between agents will be able to benefit the supply chain strategy of the company.
5.5 Environmental Factors:
As per the UK market, Tata Nano is made environmental friendly, Tata also has exceeds measures for regulating standards on safety and pollution. The aim is to make Nano an eco-friendly car for the masses. As per the UK standards the car has been modified by replacing the seatbelts, glass, light, tyres and engine. Speed in miles, Indian road are on klilometre. Accordint to Data monitor, 2006b the car subjected to undertake government official crash tests and is also has to undergo an overall inspection. Then only the car is given approval for sale. After these all inspections the price of the car is expected to increase (Datamonitor, 2006b)
6.0Porters Five Forces:
6.1 Competitor’s bargaining power:
The UK is highly consolidated automobile market. The competition is between Ford, GM (Vauxhall), BMW, Volkwagen, Peugeot, Toyota, Renault, Citroen and Honda. Because of presence of powerful and establish competitors a requirement of product differentiation has been created. According to Mintel (2006) the tough competition in the market introduces a significant price pressure and requires increasing overall promotional costs. The manufacturers had to close certain plants to cut the costs and survive on the market because of the present market conditon. At the moment, the major competitive strategies are new product development, an improvement in supply chain and above all serving the needs of emerging market segments (Mintel, 2006). The emerging requirements demands extremely high level of responsiveness towards operational.
6.2 Buyer’s bargaining power:
In the UK market the buyers experience very strong bargaining power because the intensity competition on the global scale is high and overcapacity issue UK is always on the rise. According to Mintel (2006) A high level of bargain seeking behaviour is shown by the buyers.
6.3 Supplier’s bargaining power:
Even though Automobile manufacturers have consolidated forming large entities they do not make a significant shift of bargaining power in OEM-suppliers relations. According to Veloso & Kumar (2002) a consolidation of different supplier groups is gaining because of the OEM sector. The sections like demand chain partners and large car dealers are experiencing bargaining power because of the overcapacity.
6.4 Threat of substitutes:
Apart from direct competition from public transport, the major competition for automobiles are other transport services like taxis. One of the major substitute threats are the second hand cars market.According to Mintel (2006) the steady accumulation of second-hand cars has become one of the major reasons of the dramatic fall of the sales of new cars.
6.5 Threat of New Entrant:
The threat of new entrant is minimises because the level of entry barriers like conlosidated industry, R&D capability and well developed value added chain are quite high. Nevertheless, because the industry is much globalised, the concept of new entrant is not that clear-cut, new geographical markets are entered by existing manufacturers. Datamonitor (2006) also states that there is not enough measures introduce by EU countries to protect the market if the Chinese manufacturers tried to flood EU markets in the future.
7.0 Marketing Mix Strategy:
7.1 Product Review:
There are three variants in the Nano range: Nano, Nano CX and Nano LX
Only the Nano CX variant would be introduced in the UK Market for the first stage
Tata Nano LX will introduced in the UK Market during the following year
The car has achieved its low price by minimizing costs on unnecessary “luxuries”, the basic Nano comes without front and rear fog lights, with a heater or air conditioning, with anti-lock brakes, only one single windscreen wiper, manually operated windows, manual steering with no air bags, tiny 12″ wheels, plastic body parts joined with adhesive instead of more conventional metal and welding and a two cylinder 623 cc engine that provides a massive maximum speed of 65 mph (around 105 km/h).
Among the features of the car are:
7.1.1 Stylish and comfortable
The design for Nano is made designed by taking a family in mind, has a roomy passenger compartment with generous leg space and head room. It can comfortably adjust four persons. Four doors with high seating position make the people to have more leg and head room.
Yet with a length of 3.1 metres, width of 1.5 metres and a height of 1.6 metres, with adequate ground clearance, it can effortlessly manoeuvre on busy roads in cities as well as in rural areas. Its mono-volume design, with wheels at the corners and the power train at the rear, enables it to uniquely combine both space and manoeuvrability, which will set a benchmark among small cars (Pradeep Thakur,2009).
7.1.2 Fuel-efficient engine
Nano has a rear-wheel drive, all aluminium, two-cylinder, 523 cc, 33 PS, multi point fuel injection petrol engine. Two-cylinder gasoline engine with a single balancer shaft is used for the first time in any car. The design helps the car to minimise weight, which results in maximising performance for consumed energy and delivers high fuel efficiency. The electronic engine management system controls the performance of the car.
7.1.3 Meets all safety requirements
The current regulatory requirements are all taken in consideration in the case of Nano. Nano actually exceeds all safety measures. It has a strong passenger compartment because of an all sheet-metal body, seats belts, intrusion-resistant doors, crumple zones and strong seats.
Tata motors are known for manufacturing eco friendly in Indian Market. Nano is not different it has tailpipe emission performance exceeds regulatory requirements. Nano has a lower pollution level in comparison to all two-wheelers being manufactured in UK today. The car has low carbon dioxide emissions because of the high emission, thereby benefiting in two an affordable transportation solution with a low carbon footprint.
By help of branding the consumer can identify manufacturer of a product and them to send the feed of the products performance to the concern manufacturer or distributor. Branding creates a different identity in the products and services from the other. The main task of branding strategies is to convince the consumers that there is a meaningful difference among brands in the product category. In the case Tata Nano, corporate name is combined with product’s name for the sake of branding. Tata is fourth largest heavy vehicle manufacturer in the world, and it is a good strategies to cash in the brand value of the manufacturer.
7.3 Product Strategy
The Tata Nano CX model will be first introduced with a 3 years warranty. The next Tata Nano LX model will be introduced in the following year, because Tata as a brand will be established by then. For all marketing campaigns the brand and logo will be displayed everywhere and on the car as well.
7.4 Pricing Strategies
The Cost price is an estimated GBP 2, 420 or equivalent to INR 174,903, which includes import tax, sales tax, duties excise assembly cost and shipment costs. The prices show a strategy by which shares can be taken from more settled competitors.
7.4.1 Setting the price – selecting price objectives
Major three objectives of Tata should be for an effort to position itself in the UK Automotive market. The objectives are: Survival, maximum current profit and maximum market share.
Intense competition from UK second car manufacturer, Perodua for a share of the automotive market segment for the below 1,000 cc category will act as an incentive fot Tata Nano. It will ensure that the car covers variable costs as well as some fixed costs. Survival in the case of Nano is a short term objective as in the long run.
7.6 Maximum current profit
Tata in UK will set a price that will maximize current profits, cash flow and return on investment, after taking into consideration the demand and costs involved. Because the category of small foreign cars has not been really tested by other manufacturers, therefore the demand is rather difficult to estimate but Tata Nano for having a good response towards its entry into the UK market.
7.7 Maximum Market Share
Tata is set to launch low price for a new car in order to attract a maximum number of buyers and a large market share by will implementing the market-penetration pricing in the UK. The cost can be decrease by achieving high volume of sales. This will allow the company to further decrease the price of the product. In the UK car market the low price prodices more market growth, this show the high sensitivity of the market. Tata is also confident that as sales increases the production and distribution costs will also fall. By this Nano will help to keep out competition and maintain its low-price position. The low-price entry will provide all Perodua consumers to have a best alternative.
8.0 PROMOTION STRATEGIES
8.1 Objectives of Promotion Strategies
Before determine the promotion strategies, we need to very clear about what are the objectives we need to achieve. We know as above, our missions are to promote Tata nano in a UK and increase the sales quarterly. Tata Nano is very new for UK, they feel fresh with this new brand and concept of this car. Tata Nano will get into market in 2010.
Brand awareness and concept/knowledge of this new car should be the company’s first and foremost objective for promotion. Tata Nano burst into the worldwide market in the short time because of being so cheap. The advertisement and organize the event or campaign in sufficient detail to establish the good brand attitudes should be done properly because Tata is still new to UK market. For creating a strong brand equity awareness of brand is very important.
The second objective should be persuasion through the medium of knowledge. The comparison between Nano and other cars which are more expensive and are not afforded by everyone can approve to be a good marketing tool for Tata Nano. Besides that the scheme of 30 days money return guarantee will also be introduced for the promotional purpose We can also have a 3 years free maintenance scheme for Tata Nano like other major car manufacturers
8.2 Advertising Program
The main aim is to inform UK market that Nano is the cheapest car in the world. Create an understanding in the consumer to buy Tata Nano not just because its cheap but also its safe, useful, all in good quality and also environment friendly by developing an advertising program.
8.3 Online Advertisement
The online advertisement should the first step taken by the company. Tata Nano already created a Web site – www.tatanano.com – on March 2009 for a good communication with the concern consumer. In the Web site, all the details of the car and company with images and videos are provided to customers. This can be a good strategy to bring the consumers close to the histpry of the company so that they can be more satisfied. In addition to images and videos, the website also has a links which shows the public feedback of Nano.
Besides that, Blogs have become an important for searching any major information you require. Blogs is best place where people of same interest can discuss their issues and concern. By establishing a blog network a company can easily monitor the feedback and even can look for the potential new consumer. Blogs and Internet are at present the best and cheapest way pf creating brand awareness globaly.
8.5 Television Advertisement
Television is expensive mode of advertisement but its ia also very powerful as product is fully explained and secondly the product get an image by exposing it to television. Tata can show Nano’s attributes and persuasively explaining their corresponding consumer benefits. The company should lower advertising budget and should only air the advertisement on national channel between 7 to 11 pm. A good advertisement always creates a need in the consumer mind which increases brand equity as well as improve sales.
8.4 Newspaper Advertisement
Beside the television, most of the UK reads newspaper every day because of the fact there are around 10 newspaper companies circulating it for free. So this can be a good mode for market coverage in a big city like London. Newspaper advertising is also not so expensive.
9.0 Channel of Distribution Strategies
9.1 Direct marketing channel (zero-level channel)
Tata Nano in UK can sold directly to its concern customers. By visiting the sales office or any special event the customer deal directly with the companies dealers for booking. Besides that, there should be a 24X7 customer care centre from where customers can get all the information they want for booking a new Tata Nano and there should be a 24 hrs attendant on the website who can chat live with the customers and give information about the product. These all ideas can help us eliminating the middle men from the chain which will surely decrease the variable costs.
9.2 Physical Flow
Tata Motor at India
From the diagram, we can understand that as per the basis of demand the car will send in parts from India and will b assembled in the workshop in the UK can know. The final step is to send the product direct for the customer collection.
9.3 Payment Flow
Tata Motor at India
Customers can have two option of paying the bills either by cash or by bank. Because of this diagram the customer will be pay less because the cost of commission of the middle men like retailer and franchise are not included in the flow chart. It is also good for the Tata Motor because the payment will be collected more efficiently.
9.4 Information Flow
Tata Motor at India
Informations like product, price development and so on can be given direatly by Tata motors to their customers. And by the help of various services like response calls and mailings or through internet blog, Tata can identify the need of the customers. The complaints of the customers have to be dealt directly. So that customer will be fully satisfied at the end of the day.
9.5 Promotion Flow
Tata Motor at India
Have two ways of promotion flow, directly and indirectly. Directly is we’ll organize the marketing campaign, event and road show. By this way, we’ll promote Tatanano to target market by face by face and provide the opportunities to them try to drive the Tatanano. Indirect ways are we will do the advertisement through media such as internet, TV, radio and also newspaper. By this promotion flow, Tata Motor aims to create brand awareness and increase the sales in the UK.
10.0 Financial Plan
The overview of the Tata motors will be done in this section. The major financial aspect like expense forecast, sale forecast, break even analysis and their relation to the market strategy are included in the section.
10.1 Break even analysis
Break even analysis indicates that 3369 unit or £ 28,615,563 will be required in monthly sales revenue to reach the breakeven point.
Table: Break Even Analysis
Break even analysis :
Monthly unit break even 3369
Monthly sales break even
Monthly unit production
Average per unit revenue
Average per unit variable cost
Average per unit fixed cost
Estimated monthly fixed cost
10.2 Sales forecast
Sale was done with adjustment of seasonal factor and is on quarterly basis. Graduation month was used as seasonal factor to adjust our forecasted sales because our primary targets are the graduation students. There is an increase of 10% sales annually according to the forecast, graph given below represent the sale forecast.
Figure : Sales Forecast
10.3 Marketing Expense Forecast
Marketing expense forecast provides an indication about when our marketing plan has to be modified and it also keep marketing department focused toward their goal. Advertisement, marketing campaign, direct marketing and other are all the major categories in which the expensed are tracked down. The marketing budgeting is quite necessary for most of the companies from it affect the total sale of the quarter. In 2010 Tata motors believe that marketing expense will not be more than 4 percent of total sales.
11.0 IMPLEMENTATION AND CONTROL
The idea behind the marketing plan of Tata Nano is to show the current standing of the company. The performance of the company can be improved by observing following areas of the company:
Monthly and annual revenue of the company
Monthly and annual expenses of the company
Satisfaction of the customers
A 10 percent growth in the annual sales of the company
11.1 Marketing Organization
The main responsibility of a marketing manager should be taking control of all marketing activities. Marketing manager will designate all the promotional and advertising responsibilities to his juniors. Sales performance will be the responsibility of the sale manager. The entire department will be work under the guidance of marketing director
11.2 Contingency plan:
Difficulties and risks:
One of the difficulties that will be face by the company
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