TATA MOTORS : THE TATA ACE

Group B-3 Snigdha Chitranshi(11051) Nachiket Vanikar(11058) Sowmya Borra(11054) Abhishek Pal(11061) Anoop biswas (11064)

AGENDA
Overview of the Indian commercial vehicle sector Road transportation infrastructure Overview of Tata motors Idea for Tata Ace Gap analysis STP Design challenges for product development 4Ps Marketing and distribution Launch and response Future Marketing strategies and current scenario Learnings Answer to the case Questions

Indian Commercial Vehicle Sector

Indian commercial vehicle sector mainly dominated by three and four wheeled vehicles Three wheeler market: India was the worlds largest three-wheeler market in 2005 with a sales of 307,887 units . Cargo movement: 44% of sales Passenger movement : 56% of sales Four wheeler market( LCVs): Sales of 119,877 in 2005 Cargo movement: 83% of sales Passenger movement: 17% of sales

Three Wheelers

Four Wheelers

6% 5% 5% Tata Motors M&M 51% 33% Swaraj Mazda Eicher Motors Others 33% 5% 5%

6%

Tata Motors 51% M&M Swaraj Mazda Eicher Motors Others

ROAD INFRASTRUCTURE (2006)

3.32 million kms road, 2% national highways, 12% of this 2% was four lane Narrow and congested roads near commercial and retail markets Entry barriers for heavy vehicles during day time Poor rural road connectivity Ban of 3-wheelers due to safety considerations Golden Quadrilateral Project

Overview of Tata Motors

TELCO established in 1945 In 1969 TELCO began designing and developing its own commercial vehicle in house TELCO changed its name to Tata Motors in 2006 and produced its 5 millionth vehicle

Tata Motors was the largest of Tata companies measured by revenues

Idea for Tata Ace

Due to forecasted growth in Indian GDP and infrastructure, truck penetration would increase Need for hub to hub and lower per unit cost transport due to growth of better highway systems Need of last mile in transportation supply chain

GAP Analysis Market situation

Growth plans of better highway network between major cities and secondary road network within various states by government Improvement in the demand for large vehicles( LCVs) Higher GDP growth which may lead to higher truck penetration in the market

Company situation
Absence of larger( > 45 ton) and smaller( sub two-ton) vehicles in the product portfolio. There was a need of a cheap and rugged vehicle to be developed

Demand Side Gap : Large Trucks During day time, entry into cities was restricted

Demand Side Gap : Three Wheelers Banned in certain metros and bigger cities to avoid congestion

Supply Side Gap

Needed immunity against the cyclical trends in commercial vehicles segment Portfolio lacking product offerings

Less fuel efficient and not environment friendly

Not allowed on highways and expressways due to speed and safety concerns

Higher per unit transportation cost and poor conditions of roads makes them unsuitable for rural customers

Inability to enhance the social image of the user

SEGMENTATION

Functional Market Segmentation

Vehicles carrying high loads (2.5 ton & above) Vehicles carrying low loads (less than 175 kg)

There was a vacant segment (750 kgs to 1 ton) whose needs were not met

Customer Market Segmentation

Performance Sensitive (7%)

Balanced Perspective (25%)

Return on Investment (55%)

Acquisition Price Constrained (13%)

Bottom of Pyramid

 Performance sensitive
Interested in status, brand image & speed Willing to pay a higher price for additional features Currently using cars & large SUVs to haul goods

Balanced Perspective
Typically owner entrepreneurs Wanted ROI, comfort & convenience features Forced to purchase three wheelers since market didnt offer products which met their demand

ROI Sensitive
Purchase based on lowest cost per mile of transport Not interested in non-monetary purchase considerations Consisted of fleet owners/operators & some individual owners

 Acquisition price constrained

Lacked credit & financial means to purchase Would go for the regular product if the new product was even slightly expensive Preferred purchasing three wheelers

Bottom of Pyramid
Could not afford motorized vehicles Size of the segment is unknown Use bullock-carts, bicycle rickshaws etc. for transportation Overtime as prosperity increases would move upwards from lower categories

TARGETING

 Target Market
People planning for 3 wheelers First time commercial vehicle purchasers(40%) LCV purchasers & potential pick up (15%) People looking for last mile transportation solution

Target Individuals
ROI Price, fuel efficiency & easy maneuverability of 3 wheeler Safety, durability , additional payload capability & comfort of 4 wheeler trucks

POSITIONING

Indias first MINI TRUCK Small is Big Last mile transportation solution Feel good of the Job Comfort & stability of the big trucks Economic Liberation

Design Challenges
Enhancing overloading capacity- a product that could withstand the strain of overload Preference for diesel engine by customer One engine option ruled out due to NVH targets Foreign made 4 cylinder engine was ruled out due to cost In spite of strict cost target, M1/N1 targets to be maintained Customers did not want Semi Forward Engine

SWOT ANALYSIS
STRENGTHS WEAKNESS 1. After sales service 2. Higher cost

1. First Mover Advantage

2. Brand Name of TATA 3. Possession utility to buyers 4. Research & Development

OPPORTUNITIES 1. Increasing Growth rate of LCV segment 2. Rural Market (especially North and East) THREATS 1. Increase in competition

4 Ps

PRODUCT- TATA ACE (Differentiation Factors)

Ideal for both city and rural areas. Compact size and shorter turning radius helps in Indian narrow streets Comfortable conditions for the driver allows the ACE to travel over 500 kms a day M1/N1 safety norms for frontal crash, roof crush etc. 700cc engine delivers a power of 16hp@3200rpm Meets BS II and BS III standards. Low operating cost and highly reliable Usage ranges from vegetable vendors to cargo pickup to passenger transport

PRICING
PRICING OBJECTIVE
Product quality leadership Priced just beyond the max-price of 3 wheeler of Rs.2 lakhs A premium on the price of three wheelers

Analyzing competitors costs, prices and offers

Final price Priced at Rs. 225000
They priced at a premium or around 12% over the maximum price of three wheeler in the market.

PLACE
Location close to target market Plant located in Pune at the time of launch Target markets: Southern and Western regions A sales outlet every 40 to 50 kilometer Only sales stores as compared to early sales, service & spare Existing dealership acted as a hubs and set up 1S dealership

PROMOTION
TARGET AUDIENCE Three wheeler audience Owners of truck Trucking fleet owners First time LCV purchasers To communicate the benefits of the product-ACE To develop a positive brand attitude among the target customer group The Chota Haathi Advertisement Generated a lot of positive press in the launch period 1st LCV brand used extensive ad on TV

DISTRIBUTION NETWORK: HUB AND SPOKE MODEL

3S to 1S Approach A sales outlet every 40 to 50 kilometer. Only sales stores as compared to traditional Sales, Service & Spares Existing dealership acted as hubs and set up 1s dealership Each dealer can set new 1S stores This will help to set new distribution point for TATA ACE

Launch & Response

Launched in May 2005 with the price of Rs. 225000 Exceeded Tata Motors expectations Sold its annual production target of 30000 units in less than a year 54% by first time buyers 30% by LCV owned customers 33% by previously owned three wheelers Customers overloaded the vehicle approximately by 30% above rated capacity

Current scenario & Recommendations

Competition Mahindras Maxximo and ALLs Dost are eating away into Tata Motors ACE market share
TML: ACE M&M: Maxximo ALL: Dost

Pricing Engine

2.84-3.99 Lacs 700 cc 1400 cc

2.79-3.99 Lacs 909 cc

3.79-4.37 Lacs 1478 cc

Mileage
Market share

20 kmpl (700cc)
68% (2011) 60 (2012)

17 kmpl
22% (2011) 29% (2012)

17 kmpl
NA

Tata ACE Distribution

Many of the Aces cost-conscious potential customers in rural areas might not be willing to travel long distances to see the vehicle, so Tata Motors deployed a new bare-bones dealership format Bring Ace closer to these customers without incurring the expense of a new network of full-service dealerships Instead of building an expensive new network of service centers, the company trained local mechanics and gave them tools to take care of common problems. Vehicles would be sent to larger service centers only for major repairs or accidents.

Tata Motors: Sales transformation for ACE

Change in process - $45 million in additional revenue and significantly boosted market share in all states 3 areas of focus were identified 1. Aligning their sales programs to the needs of customer segments. Making sure the dealer network was running as smoothly and effectively as possible 2. Set new processes in place to optimize sales pipeline activitiesfrom lead generation to prospect acquisition to sale conversion 3. Sales process enablement

IDENTIFYING THE NEEDS OF DEVELOPING ONES DEALERS

Understanding of and focus on the customer's buying process Understanding of and appreciation of the world in which the buyer lives Being an information provider for the members of the buying committee

METHODS AVAILABLE FOR DEVELOPING THE DEALER EFFECTIVENESS

Training Providing the adequate support required Showing belief in their capabilities

FACTORS LEADING TO THE SUCCESS OR FAILURE IN DEALER DEVELOPMENT

SUCCESS Adequate ownership to the dealer Maintain transparency Incentives Cash and credit support

FAILURE
Inadequate training

Technical inefficiency
Demotivated dealers

How to replicate the Distribution Strategy of TATA ACE?

A sustainable competitive advantage is a combination of multiple resources & not any individual resource Tata ACE became successful because of following: Product Reliability Service Network Channel Reach

 Product Reliability Tata ACE was a product which met high quality standards Provided Last mile transportation

Service Network Extensive & dependable service network across India Channel Reach Sales & service outlay which the customers can reach easily

LEARNINGS
Work in your core competent area Balance between quality, cost and time Focus on outsourcing Coming up with innovative methods to serve customer needs

THANK YOU