KARAN MEHRISHI and SACHIN BHAREL draw lessons from Indica’s diesel curve
In January 2007, BBC’s website wrote that “there is no other Indian business conglomerate, which quite dominates the lives of middle-class Indians the way Tata Group does….” The article added that lakhs of urbanites wake up with Tata tea, make early calls on Tata mobile, drive to office in a Tata sedan, and wear Tata watches and Tata shoes. Their younger kids go to school on a Tata bus, elder ones work with the Tata group, which employs 250,000 people, and wives surf channels on Tata Sky.
One may be prompted to say here that this is because the Tata group has been in existence for decades and, for most periods, operated in a protected business environment. But so did many other business groups, and they don’t seem to have this kind of a presence. What works for the Tatas is a single-minded focus on business, spotting opportunities, and offering products and services that click with consumers. They identify the needs, and roll the products out at the cheapest-possible price.
This is definitely true of Tata’s foray in the passenger car segment. B&E finds out how Ratan Tata, Chairman, Tata Group changed the face of Indian roads.
Tactic No 1: Pinpoint new opportunities
Prior to the launch of the Indica, Ratan Tata realised that internal factors were compelling him to change Tata Motors’ strategy. Since the market for commercial vehicles wasn’t growing fast, he had to seek volumes elsewhere. The only way he could do it was to venture into the passenger car segment. But then, he could only compete with established players like Maruti Suzuki by offering new propositions to the customer. Tata thought it should be low price and cheap operational costs.
Agrees Ramnath S, Partner, Idfcsski Securities, “Indica became a success because of its pricing and positioning as a diesel car. Since Maruti was only making petrol cars then, Indica was the first of its kind.” For the upwardly-mobile consumer, a ‘sensible’ car is one, which has the lowest operational costs. She understood the dynamics of the volatility in global crude prices. The disparity between petrol and diesel prices in India created an insecurity against petrol cars. For her, Indica was a small car with a difference. It was as cheap as other compact models, and it had a diesel engine, which was cheaper to run.
Says a Tata Motors’ spokesperson, “When Indica was launched, it combined the best of what was offered by competitors. Most importantly, it offered running economy and ‘more car per car’ value. This enabled the Indica to become a breakthrough product in the Indian small car market and, in fact, establish the B segment in India. The positioning strategy was more space, better styling and more economy.” Tata now wants to create the cheapest segment – a $2,500 model. The Rs.1 lakh car may hit the market in 2008. Adds NDTV’s Siddarth Patankar, “There are different audience segments. On Tata’s part, there is a need to build on what the Indica has achieved. Retail outlets will play a key role in the success of the Rs.1 lakh car,” The car’s low buying and maintenance costs created another market – private taxis. “Tourists preferred the Indica as it was cheaper,” adds Ramnath.
In January 2007, BBC’s website wrote that “there is no other Indian business conglomerate, which quite dominates the lives of middle-class Indians the way Tata Group does….” The article added that lakhs of urbanites wake up with Tata tea, make early calls on Tata mobile, drive to office in a Tata sedan, and wear Tata watches and Tata shoes. Their younger kids go to school on a Tata bus, elder ones work with the Tata group, which employs 250,000 people, and wives surf channels on Tata Sky.
One may be prompted to say here that this is because the Tata group has been in existence for decades and, for most periods, operated in a protected business environment. But so did many other business groups, and they don’t seem to have this kind of a presence. What works for the Tatas is a single-minded focus on business, spotting opportunities, and offering products and services that click with consumers. They identify the needs, and roll the products out at the cheapest-possible price.
This is definitely true of Tata’s foray in the passenger car segment. B&E finds out how Ratan Tata, Chairman, Tata Group changed the face of Indian roads.
Tactic No 1: Pinpoint new opportunities
Prior to the launch of the Indica, Ratan Tata realised that internal factors were compelling him to change Tata Motors’ strategy. Since the market for commercial vehicles wasn’t growing fast, he had to seek volumes elsewhere. The only way he could do it was to venture into the passenger car segment. But then, he could only compete with established players like Maruti Suzuki by offering new propositions to the customer. Tata thought it should be low price and cheap operational costs.
Agrees Ramnath S, Partner, Idfcsski Securities, “Indica became a success because of its pricing and positioning as a diesel car. Since Maruti was only making petrol cars then, Indica was the first of its kind.” For the upwardly-mobile consumer, a ‘sensible’ car is one, which has the lowest operational costs. She understood the dynamics of the volatility in global crude prices. The disparity between petrol and diesel prices in India created an insecurity against petrol cars. For her, Indica was a small car with a difference. It was as cheap as other compact models, and it had a diesel engine, which was cheaper to run.
Says a Tata Motors’ spokesperson, “When Indica was launched, it combined the best of what was offered by competitors. Most importantly, it offered running economy and ‘more car per car’ value. This enabled the Indica to become a breakthrough product in the Indian small car market and, in fact, establish the B segment in India. The positioning strategy was more space, better styling and more economy.” Tata now wants to create the cheapest segment – a $2,500 model. The Rs.1 lakh car may hit the market in 2008. Adds NDTV’s Siddarth Patankar, “There are different audience segments. On Tata’s part, there is a need to build on what the Indica has achieved. Retail outlets will play a key role in the success of the Rs.1 lakh car,” The car’s low buying and maintenance costs created another market – private taxis. “Tourists preferred the Indica as it was cheaper,” adds Ramnath.
Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
and Arindam Chaudhuri (Renowned Management Guru and Economist).
For More IIPM Info, Visit below mentioned IIPM articles.
Zee Business Best B-School Survey 2012
Prof. Arindam Chaudhuri’s Session at IMA Indore
IIPM IN FINANCIAL TIMES, UK. FEATURE OF THE WEEK
IIPM strong hold on Placement : 10000 Students Placed in last 5 year
IIPM’s Management Consulting Arm-Planman Consulting
Professor Arindam Chaudhuri - A Man For The Society….
IIPM: Indian Institute of Planning and Management
IIPM makes business education truly global
Management Guru Arindam Chaudhuri
Rajita Chaudhuri-The New Age Woman
IIPM B-School Facebook Page
IIPM Global Exposure
IIPM Best B School India
IIPM B-School Detail
IIPM Links
IIPM : The B-School with a Human FaceProf. Arindam Chaudhuri’s Session at IMA Indore
IIPM IN FINANCIAL TIMES, UK. FEATURE OF THE WEEK
IIPM strong hold on Placement : 10000 Students Placed in last 5 year
IIPM’s Management Consulting Arm-Planman Consulting
Professor Arindam Chaudhuri - A Man For The Society….
IIPM: Indian Institute of Planning and Management
IIPM makes business education truly global
Management Guru Arindam Chaudhuri
Rajita Chaudhuri-The New Age Woman
IIPM B-School Facebook Page
IIPM Global Exposure
IIPM Best B School India
IIPM B-School Detail
IIPM Links
