Reference no: EM132226517
Tata Motors makes and sells the world’s least expensive automobile, the Nano, which it designed and manufactured itself in India. Subsequently, Tata acquired two renowned automobile brands, the Jaguar and Land Rover. This is an unusual lineup of automobiles owned by a firm which has diversified its holdings in the parent firm into quite a number of unrelated businesses. Samsung and Amazon have nothing over Tata when it comes to diversified portfolios. The advice widely given to American corporate leaders a few years ago, “Stick to your knitting” seems like it might be very appropriate in these times. Question: How might you explain Tata’s strategy in the automobile market? Would you consider it’s acquisitions of Jaguar and Rover synergistic? Why or why not? additiaonal Soureces pealse copy and paste the links if you get the information from somwehre else.
The Tata Group: Integration at the Corporate Level Founded in 1868 as a trading company by then 29-year-old entrepreneur Jamsetji Nusserwanji Tata, the Tata group today has roughly 660,000 employees and $105 billion in annual revenues. A widely diversified multinational conglomerate, headquartered in Mumbai, India, its activities include tea, hospitality, steel, IT, communications, power, and automobiles. Some of its strategic business units are giants in their own right. Tata includes Asia’s largest software and steel companies (TCS and Tata Steel) and the renowned Taj Hotels Resorts and Palaces. This diversified approach can be seen in microcosm within two divisions of one of its holdings in the automotive industry. Tata Motors started producing cars in the 1950s. In 2008 it bought luxury brands Jaguar and Land Rover from Ford for $2.3 billion. In a seemingly disjointed effort, in 2009 the company unveiled the Tata Nano, the world’s lowest-priced car. Each division follows a separate business strategy (low-cost versus differentiation).
Tata Motors designed the Nano to wean India’s emerging middle class from mopeds and bikes, expanding the market. Ratan Tata, then chairman of the Tata group, famously conceived of the Nano while seeing a family of four cramped on a moped in heavy rains.
LOW-COST LEADER Tata Motors hoped the Nano, engineered for a price point about 50 percent cheaper than the previously available cheapest car, would reach tens of millions of customers in the Indian and Chinese markets. But initial sales were flat. Families able to trade up from two wheels apparently found more value in a used full-featured car than a stripped-down version of a new car. The tiny Nano used much less steel than traditional cars; lacked such basics as a radio, glove compartment, and operable rear hatch; would not accommodate passengers much over 6 feet tall; and could barely reach speeds topping 60 mph. As a plus, however, the Nano gets 67 mpg, beating the Toyota Prius for fuel consumption.
Tata Motors tried again with the Nano GenX in 2015, which brought more customizability and such features as USB ports, an audio system, Bluetooth compatibility, and an automatic transmission with a special “creeping” mode—designed to allow the car to creep forward with the engine at idle if the brake is released—a valuable feature in China and India with their massive traffic jams.
HIGH-END ICONS Contrast the Nano car division strategy of focused cost-leadership with the luxury division’s strategy of focused differentiation. Launched in 2017, the Range Rover Autobiography starts at $200,000. Tata is attempting to carve out different strategic positions in its different segments of the automotive industry. To accomplish this, the company integrates distinctly different business strategies at the corporate level.
FUTURE AT THE LOW END Sales of the Nano models had their ups and downs but generally declined in 2016 and 2017. Consumers were more tempted by competing low-cost options priced roughly at the Nano GenX price point. One competitor was the Renault Kwid. But the other Nano competitor came from Tata Motors itself. Its new Tiago model, launched in 2016 and priced similarly to the Nano GenX, is faring much better. With the Tiago, Tata may yet realize some of its ambition around the Nano.
Taken together, we can see that Tata’s corporate strategy pursues distinctly different strategic positions by different strategic business units, each with its own profit and loss responsibility, and with integration at the corporate and not the operational level.