tata motors ace

1

Tata Ace

“Small is Big”

overview

2

Introduction

Need and Development of ACE

Key issues

Functional Strategy

Financial Strategy

Operational Strategy

Marketing Strategy

Competitors

Recommendations

History

Business Strategy - Group 1 3

1945 - Tata Engineering & Locomotive Company

Ltd. (TELCO) was established

1954- Start manufacturing commercial vehicles

1961- Exporting Trucks

1966- Machine tools division in Pune.

1983- Start Producing Heavy Commercial Vehicle.

1986- Light Commercial Vehicle, TATA 407 and

TATA 608

1990- Launch Of Passengers Car

Contd..

Business Strategy - Group 1 4

1994- Launch Multi-Utility Vehicle, TATA

Sumo

1998- India’s First Utility Vehicle, TATA Safari

1998- Launch Of Indica

2001- Stock Prices Fell Rs.564 in 2006 to

Rs.59 in 2001

Mergers And Acquisitions

Business Strategy - Group 1 5

1993- TATA Cummins Ltd.

1994- TATA Holset Ltd.

1994- Mercedes-Benz India Ltd

1997- Concorde Motors Ltd.

2004- Daewoo commercial vehicles comp.

2008- Jaguar Land Rover

Case KEY ISSUES

Was there really a need to introduce Tata Ace?

Was Tata Motors justified in indigenously developing a new vehicle instead of buying/licensing technology from already established vehicle manufacturer.

Was Tata Ace justified to be launched as a last mile distribution vehicle?

Is there a loophole observed in the financial strategy of Tata motors?

Business Strategy - Group 1 6

Findings of Research

Prime Minister’s Rural Roads Program

Improvement Of Infrastructure – Hub and Spoke

Cue from foreign Countries

Business Strategy - Group 1 7

NEED FOR TATA ACE

Business Strategy - Group 1 8

Need for company

Need for

customers

Need for

developing Ace

NEED FOR TATA ACE

Business Strategy - Group 1 9

Customer needs-• An alternative with fuel efficiency, comfort, safety,

low maintenance costs.• Social status• Last mile distribution vehicle

Company needs-• Cyclic decline of sales• Capture growing market opportunity

LICENSING TECHNOLOGY

Business Strategy - Group 1 10

Costly Expenditure

Create Competitors

Legal Constraints

Lose Position In The Market

Strategies

---Financial---operational---Marketing

Business Strategy - Group 1 11

Financial strategyLost Cost strategy initiatives

Business Strategy - Group 1 12

Outsourcing

Manufacturing

Tooling

Marketing

Cost Reduction – Direct material cost, Variable conversion cost, Fixed Cost, interest cost reduction

Break even point low

Financial Strategy - Outcome

Business Strategy - Group 1 13

Rs. Billion FY05 FY06 FY07 CAGR

Net Revenue 174.2 206.5 274.7 25.6%

EBITDA 21.7 25.8 33.1 23.5%

EBITDA Margin 12.5% 12.5% 12.1%

PBT 16.5 20.5 25.7 24.8%

TAX 4.1 5.2 6.6 26.1%

Profit after tax 12.4 15.3 19.1 24.4%

Basic EPS ( EPS) 34.38 40.57 49.76 20.3%

Business Strategy - Group 1 15

TATA60%

Ashok Ley-land16%

M & M12%

Others12%

Commercial Vehicles 2005-06

TATA

65%

Ashok Ley-land16%

M & M9%

Others10%

Commercial Vehicles 2006-07

Operation strategies

Business Strategy - Group 1 16

Project CUB!!

Heavy truck & last mile distribution vehicle

Features important for customers

E- sourcing

New manufacturing plant at Pantnagar

Various strategies-

Value engineering

Use of carry over items

Single sourcing of parts

Operation strategies

Business Strategy - Group 1 17

Engine modification

Dealership & service strategies

Business Strategy - Group 1 18

small is BIG Brand : Ace

Marketing ACE !!

Business Strategy - Group 1 19

Value proposition

Pricing strategy

Positioning: sub -one ton pay load segment

Distribution:

South India Export

Promotional strategies :

Chota Haathi,

Life Ban Jayegi Pyaare

“ c h o t a H A A T H I ”

Business Strategy - Group 1 20

“LIFE BAN JAYEGI TERI PYARE”

Business Strategy - Group 1 21

Off to work in TATA Ace

Rushing to school

Wife seeing husband off for the day

To school in TATA Ace

“Safalta ki nayi sawari – Jo do lakh zindagi badal chuka hai – Aapka pyara chota

haathi”.

COMPETITORS

Three-Wheeler Cargo Vehicles:PiaggioBALM&M

Business Strategy - Group 1 22

2005 2006120000

125000

130000

135000

140000

Sales

Sales

Value enhancers……

looked and performed better than the existing alternatives.

Addressed the key concern of commercial vehicle buyers : Lead & Load.

Business Strategy - Group 1 23

New Entrants

Business Strategy - Group 1 24

Piaggio - quadricycle

Create a new segment Capacity between 1 to 1.5 tonne Cargo and passenger variant Similar to Light commercial vehicle Priced within Rs.200000

Business Strategy - Group 1 25

Force motors

Large Cargo Holding with three side opening

Also available with power steering Low maintenance cost Heavy duty chassis and axles Wider wheel track and optimum ground

clearance Drivers cabin

Business Strategy - Group 1 26

Competition in near future… Eicher & Swaraj Mazda

BAL

Hyundai

Business Strategy - Group 1 27

Strategies to Counter Competition

Business Strategy - Group 1 28

More Concentration on Fuel Efficiency and Fuel

alternatives

Improve Product features on KPPs

Develop variants on the same platform

Increased use of CAD/CAE/CAM

TMF – Provide cheaper loans on Tata Products

Impact of ACE on Tata Motors

Business Strategy - Group 1 29

Leveraged the First Mover’s Advantage

2005 2006 20070.00

5,000.00

10,000.00

15,000.00

20,000.00

25,000.00

30,000.00

35,000.00

20152.0323673.43

31486.97

Sales Turnover

May 5,2005Launch of Tata Ace

Impact…Contd…

Business Strategy - Group 1 30

Sales growth achieved the all time high rate i.e. 33.36 %

Created and maintained a new segment in the commercial

vehicles

Attracted Market Competition and Innovation

ISSUE – Point for Discussion

Business Strategy - Group 1 31

Sustainability of growth in the era of rising crude oil prices and the increase in the raw material costs.

2007 2008

Growth 33% 6.9%

Market share 64% 62.7%

Recommendations

Cost down efforts Focus on quality in process/design Focus on distribution

network(channel partners)

Business Strategy - Group 1 32

Learnings

Balance between quality, cost and time.

Stretch targets and motivate the team to achieve the desired objectives

Set a common goal and a objective

Business Strategy - Group 1 33

QUESTIONS

Business Strategy - Group 1 34

THANK YOU

Business Strategy - Group 1 35