Marketing Audit Report of:

The Tata Motors entry in the

United Kingdom market

Author: Suellen de Sa - ID: 20092256

Date: 30th of august 2010

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Executive Summary

This report is a Market Audit about the Tata’s marketing plan which has as

objective analyse the possibility to the entry in the UK automotive market. The

study was conducted through the tree mainly environmental and internal

analysis of the company: PEST Analysis, 5 Forces Analysis and SWOT.

In spite of the Tata Marketing Plan be considered a clear and objective

study because it was able to choose a good entry strategy due a good

environmental and internal analysis, it have not present a good plan about the

marketing mix, that could be essential to the survival of the product and

consequently the company in the UK market.

Therefore the marketing audit suggests a depth and structured study

trough the competitors and consumers behaviour to be able to answer the

questions about the size of the market, market share, market forecast in a short

and long terms, target price and consumer expectations.

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1. Introduction

1.1 The Company: Tata Motors

Tata Motors is India's largest company in the automobile and commercial

vehicle sector with upwards of 70% cumulative market share in the domestic

commercial vehicle segment, and had a 0.81% share of the world market in 2007

according to OICA (International Organization of Motor Vehicle manufacturers) data.

The OICA ranked it as the 19th largest automaker, based on figures for 2007, and the

second largest manufacturer of commercial vehicles in the world. The company is the

world’s fourth largest truck manufacturer, and the world’s second largest bus

manufacturer. In India Tata ranks as the leader in every commercial vehicle segment,

and is in the top 3 makers of passenger cars. Tata Motors is also the designer and

manufacturer of the iconic Tata Nano, which at approximately USD 2.300, is the

cheapest production car in the world.

In 2004 Tata Motors bought Daewoo's truck manufacturing unit, now known as

Tata Daewoo Commercial Vehicle, in South Korea. It also acquired Hispano Carrocera

SA, now a fully-owned subsidiary. In March 2008, it acquired the Jaguar Land Rover

(JLR) business from the Ford Motor Company, which also includes the Daimler and

Lanchester brands and the purchase was completed on 2 June 2008.

Tata Motors has auto manufacturing and assembly plants in Jamshedpur,

Pantnagar, Lucknow, Ahmedabad, Sanand and Pune in India, as well as in Argentina,

South Africa and Thailand.

1.2 Outline of Marketing Plan

The focus of the Marketing Plan is analysing the possibility of Tata Motors’s

entry in UK car market. It is important to note that this study was conducted in mid

2006, before the purchase of the two British automakers (Jaguar and Land Rover).

The UK market was chosen between 2 other potential markets – USA and

Russia because it presents favourable factors according of the company objectives

such as high growth in specific segments, low barrier of entry and besides it they would

be the gateway to the strategy of expansion at EU.

The analysis of environmental external and internal factors have identified that

to achieve the overall success performance the marketing strategy plan is necessary:

fast entry on UK market – mainly due the high competitive pressure – Strategies to

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protect company’s share on Indian market – over 80% of the company’s revenue stems

from sales on Indian market.

Whereas the necessity of a fast entry on the market and for minimize the risk of

failure, the joint venture mode of entry was chosen. Through the analysis of the

Marketing Mix, the marketing plan has presented the USV car segment as the target

market and the model X1 will be the first product to entry into it.

According to the marketing plan, to protect the India market against the

competitors who are expanding their business aggressively, the Tata Motors should

implement an aggressive defensive strategy that would be increase the customer

loyalty by offering value-added benefits.

2. Analysis and Discussion

2.1 PEST Analysis

Considering all the spheres of the PEST analysis we might say that it includes

the most important aspects in a clear and objective way. In the lines below we have

some features about all the 4 factors that could be added to improve the analysis giving

more information to the making decision process, therefore it also include some

important points about Legislation and Environment sphere that was not showed in the

marketing plan at all.

A – Political

In the political factor they have already pointed the 5 mainly political conditions

that have a strong influence to the UK automotive industry witch are oil prices,

administrative barriers, car park legislation, political relationships and the foreign

ownership regulations. The first and the most important one is the question of the oil

prices. When the price of the oil rises, it clearly concerns the auto industry because the

companies are competing with each other to meet the new demands for more fuel

efficient consumer conscious at reduced price. There is no doubt that it is affecting the

profit margin of the company. Moreover, increase oil price is also affecting the type of

vehicles demanded by the customer and the way those vehicles are designed (strain

on the sales of luxury and premium because of the large-size engines (more than two

litres).

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To make the political analysis perfect they could add the factor that European

Union will continue to have an impact upon the automotive retail industry through

modifying existing and introducing new legislation.

B - Legislation and Environment

There are four important points about the UK market legislation that were not

tipped in the marketing plan which definitely influence in the strategy to achieve the

goal of the entry in this market. They are:

• Block Exemption legislation relates to the way in which new vehicles are supplied,

distributed and dealt with after they are sold. Recent amendments to Block Exemption

legislation at the European level has changed the traditional distribution methods and

opened up the market to increased competition. Some industry players have suggested

that little impact has been felt as a result of the amendments to Block Exemption

Legislation. In the future it is not known if this will have an impact upon the industry

further. Possible outcomes are widely debated within the industry.

• The growing awareness of climate change issues and waste pollution has led to a

number of legislative directives and government policies aimed at reducing the

negative environmental impact of the UK automotive industry.

• The End of Life Vehicles Directive (ELV) is a complex piece of legislation that aims to

increase the levels of re-use and recycling of End of Life Vehicles (vehicles that are to

be scrapped), improve environmental standards at sites processing End of Life

Vehicles and limit the use of material harmful to the environment in new vehicles. The

European aftermarket is now preparing for ‘End of Part’ legislation. This means all

aftermarket suppliers, new and remanufactured, will be responsible for the disposal of

their parts, not just new car manufacturers.

• Addressing the automotive industry’s contribution to climate change by moving to low

carbon fuel will require a technology shift for both fuel and vehicle technology.

C – Economic

Although the market plan gives a deep analysis trough the market aspects

which are size, maturity and the growth potential of the target market, they have not

given much importance to some specific economic factors such as:

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• Fluctuating interest rates will continue to have an impact upon consumer confidence

to borrow and spend, affecting disposable income, and potentially affect new car

demand.

• Diversity of taxes is negatively influencing opportunities for global market

convergence.

• Garages need to expand and exploit new revenue opportunities such as the higher

margins offered through the sale of car financing.

D - Socio-Demographic/Economic/Cultural Factors

Across the PEST analysis, the social factor is the most superficial since only

some aspect about lifestyle was briefed. Still considering the consumer behaviour

aspects some important points might be included in the analysis such as:

• Customer negotiation skills are improving as they become more aware of the power

they hold over retailers and aftermarket players. They also demand optional extras

such as service and finance packages or material ‘add-ons’ if they can obtain them,

which potentially decrease margins for retailers.

• Increased customer sophistication has challenged the way in which new cars are

sold. Organising supply chains to enable ‘build to order’ sales strategies, such as

preferred interior/exterior fittings, will increasingly become a growing trend. In the future

this will also apply to distribution. Alternative distribution channels such as using the

telephone to buy cars are becoming popular and therefore sales strategies must

account for this.

E - Technology and Innovation

Technological improvements are making it easier to disseminate information,

both technical and customer oriented which will make the industry more competitive as

players learn to capitalise on the opportunities that information sharing and knowledge

management offer.

The primary innovations within the industry at present surround optimum

dealership network structures and how to organise in order to compete effectively and

achieve maximum economies of scale. Much of this is likely to be achieved through

further consolidation, though some companies have already experimented with

alternative network structures.

Other innovations involve the development of value adding packages and

extended warranties to increase the attractiveness of packages and tie customers into

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networks for longer. Diagnostic equipment will become increasingly technologically

orientated.

2.2 Five forces Analysis

A - Threat of new entrants

The analysis of new entrants should be one of the most important macro

investigations done. The analyses findings could give strategic information in terms of

entrance process and protection market. However, the marketing plan has considered

in a very superficial way only the high level of entry barriers and the potential of

Chinese manufactures.

They should go deeply trough the sources of entry barriers which are capital

requirements, economies of scale, cost advantages, product differentiation, access to

channels of distribution, governmental and legal barriers, and retaliation.

Capital requirements – The capital costs of getting established in the UK car industry

can be large enough to discourage the new entrants. This market is protected by the

capital costs of establishing R&D, production and service facilities for supplying the

cars.

• Economies of Scale – Due the intensive and massive use of the capital the car

industry require a large-scale operation to be efficient. Nevertheless, the problem for

new entrants is the choice between entering on a small scale and accepting high costs,

or entering on a large scale running the financial risks while they build up sales

volumes.

• Cost Advantages – Established UK companies may have a cost advantage over new

entrants simply because they entered earlier. The cost advantages result from the

acquisition of low-cost sources of raw materials and also from economies of learning.

This impact could be absorbed with a joint-venture strategy is used.

• Product Differentiation – In terms of product differentiation, the new entrants have to

face the advantage of brand recognition and mainly customer loyalty. In other words,

the brand’s power acts can be a significant entry barrier.

• Channels of Distribution – Limited capacity within distribution channels, risk aversion

by retailers, and the fixed costs associated with carrying an additional product result in

retailers being reluctant to carry a new manufacturer’s product.

• Retaliation – One of the biggest barriers to entry also can be the possibility of

retaliation by established car companies. Retaliation against Tata may take the form of

aggressive price-cutting, increased advertising, sales promotion, or litigation

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considering the size of the competitors such as Land Rover, Toyota and Suzuki in the

SUV’s segment.

B - Rivalry between Established Competitors

The competitor’s analysis should be more detailed and specific. They determine

the strategies to be used in a highly consolidated market, which the threat of intense

prices wars is real, however is not possible to understand the particular competitors’

strategies or how each competitor acts in the market. Moreover, they present the

strategies in a general context considering the market as a tough competitive

environment. Thus, the strategies cited are supply chain improvement, new product

development and serving the needs of emerging market segments.

Considering the high risk of entry and the size of the capital investment the

rivalry analysis should be shared in micro analyses about the three points below:

• Concentration – referring to the number and size distribution of firms competing within

a market.

• Diversity of Competitors – determining how similar the competitors are in terms of

origins, objectives, costs and strategies.

• Product Differentiation – the more similar the offerings among the rivals, the more

willing customers are to substitute and the greater the incentive for companies to cut

prices to increase sales.

C - Buyer’s bargaining power

Despite the market plan consider a very strong bargaining power due to high

intensity of competition and increasing overcapacity UK issue, is important to note that,

historically, the bargaining power of automakers went unchallenged, even consumers

are very price sensitive, they don't have much buying power as they never purchase

huge volumes of cars.

D - Supplier’s bargaining power

In the relationship between the automotive industry and its suppliers, the power

axis is substantially tipped in the industry’s favor. The automotive industry is comprised

of powerful buyers who are generally able to dictate their terms to their suppliers. There

are specific characteristics that make members of the automotive industry powerful

buyers: (1) there is not a grand proliferation of companies manufacturing automotive,

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(2) automotive parts (e.g., oil filters, mufflers, belts, etc.) are standardized commodities

and these parts are only used on automobiles; and (3) backward integration can and

does occur.

In the relationship between the automotive industry and its ultimate consumers,

purchasers of finished vehicles, the power axis is tipped in the consumers’ favor.

Consumers wield the greatest power in this relationship due to the fairly standardized

nature of the automotive commodity (a vehicle) and the low switching costs associated

with selecting from among competing brands. However, the automotive industry

remains marginally powerful due to the large customer to producer ratio. The

automotive industry is a dynamic place. With the forces above at play, and with history

as a guide, it is safe to say that the automotive industry will continue to change, evolve,

and adapt.

E – Threat of substitutes

To complement the marketing plan analysis is important to say that the threat of

substitutes to the automotive industry is fairly mild. Numerous other forms of

transportation are available, but none offer the utility, convenience, independence, and

value afforded by automobiles. The switching costs associated with using a different

mode of transportation, such as train, may be high in terms of personal time (i.e.,

independence), convenience, and utility (e.g., luggage capacity), but not necessarily

monetarily (e.g., round trip train fare on MARTA would most likely be less expensive

than the cost of fuel consumed on a similar round trip, daily parking, car insurance, and

maintenance). The exception to this statement occurs in the global urban areas with

high population densities. In these areas, the substitutes available (e.g., walking, mass

transit, bicycles, etc.) can be less costly than automobiles and thus alternative modes

of transportation are often preferred.

2.3 SWOT Analysis

According the research was possible to find out some aspects about internal

(strengths and weakness) and external (opportunities and threats) factors that were not

showed in the marketing plan.

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A – Strengths

• Tata’s internationalisation strategy so far has been to keep local managers in new

acquisitions, and to only transplant a couple of senior managers from India into the new

market. The benefit is that Tata has been able to exchange expertise.

• Tata’s management is strengthened by the collective experience of its partners and

acquired companies – this includes general management, marketing, sales and

operations.

• Tata’s buying power is enhanced and leveraged through its size.

B – Weaknesses

• One weakness which is often not recognised is that in English the word 'tat' means

rubbish. Would the brand sensitive British consumer ever buy into such a brand?

C – Opportunities

• Joint ventures in other countries allow TATA motors to easily enter into new market.

D – Threats

• Sustainability and environmentalism could mean extra costs for this low-cost

producer. This could impact its underpinning competitive advantage. Obviously, as

Tata globalises and buys into other brands this problem could be alleviated.

• Rising prices in the global economy could pose a threat to Tata Motors Limited on a

couple of fronts. The price of steel and aluminium is increasing putting pressure on the

costs of production. Many of Tata's products run on Diesel fuel which is becoming

expensive globally and within its traditional home market.

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3. Conclusions and Recommendations

Although the marketing plan present some gaps and some superficial analyses

it still could be a good foundation to answer the marketing issue: entry in the UK

market.

In general the PEST and Five Forces analyses have provided a good overview

of the environmental factors to make possible to choose the best strategy with less risk

of failure to entry the market. In spite of the strategy of entry had been chosen through

a good environmental analysis, the marketing mix can be considered very superficial.

The marketing mix has defined the target market (SUV segment) however it have not

given any tangible information such as the market size, rate of growth and forecast.

Moreover to define the strategy of price, promotion and place it should give

information and analyses about consumer behaviour and especially about competitors

in the target market. In this case the company should conduct one structured and

formal market research specifically in the SUV segment to identify: who are the

competitors? What is the market share segmentation? What is the forecast for the

short and long terms? Who are the customers of this market? What are the

expectations of the costumers? How much are they willing to pay for the new car?

Moreover, whereas one of the biggest barriers to entrance in the UK market would be

the brand’s power of the competitors, the marketing mix must consider the necessity of

incur in additional advertising and promotional costs.

Whereas the joint venture entry strategy is strength for Tata, since it has chosen

it as the main strategy for the business expansion in the world, and it has been

success, the risk of failure is decreased but not absent, thus the details and

suggestions of this audit report should be considered before any action.

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4. Appendices

4.1 The Marketing Plan

Despite the global tendency for the significant fall of car sales there are certain

car segments which experience dynamic growth. According to Datamonitor (2006b) the

sales of commercial vehicles and sport utility vehicles were very healthy. Windecker

(2005) stresses the influence of socio-cultural forces which formed the increased

preferences towards more fashionable, sport-type, SUV equipped cars. The extremely

high growth of SUVs was identified in US and UK.

The focus of Tata’s market entry will be UK. There were several reasons for

selecting UK as the target market. These favourable factors were the status of India as

the favourable economic agent, UK Car market dynamics and potential, language

similarity. The other countries which were considered as potentially attractive were: the

USA – the largest market size in the world, Russia – emerging market with significant

sales potential. The option of the USA as target market was declined due to extremely

high quality requirements and other non-tariff barriers which make it hard for a new

entrant to enter this market. Besides, this market is highly mature and experiences

extreme level of competitive pressure. With regards to Russia, there were several

unfavourable factors which made it less attractive then the UK – the uncertainty of the

further economic state, high entry barriers and no well—developed dealership network.

Analysis of External Environment of the UK market

There are numerous numbers of factors that might be included into P.E.S.T.

analysis. But due to various limitations (time, word limit), the factors will be outlined,

whereas the major focus will be made on several sub-factors only (according to the

Pareto Principle, it is likely that about 20% of the factors will represent 80% of the

potential effect on the business (Wit & Meyer, 1998).

Political

Political and legal factors play the role on the development of the industry.

These factors shape the rules of competition, operational costs and supply chain

requirements.

Oil prices resulting from international instability – The special attention shall be

given to oil prices and its affect on the market requirement. According to Mintel (2006)

the increase of oil prices has created a strong tendency towards small engines, hybrid

engines and diesel engines. Current high level of oil price increase the strain on the

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sales of luxury and premium cars, the majority of which are equipped with large-size

engines (more then two litres).

Administrative barriers (quality controls and operations requirements) (KPMG,

2004) – Administrative barriers need to be seriously concerned as various

requirements for safety standards and emission level might increase the costs of

production and reduce the operating profit margin.

Car park legislation – According to Mintel (2006) the UK experience the threat

of high overcapacity with the excessive traffic load of road networks.

The political relationships between countries of operations (regimes of

favourability/protectionism) (Hill, 2002) – India cooperates with the UK within the

regime of favourability which implies the certain benefits as reduced tariff and non-tariff

barriers.

The foreign ownership regulations (The market expansion mode (Hill, 2002) –

At the present time the UK is considered as one of the most pro-FDI country in EU. The

large number of industries, including automotive one, are deregulated. It means that

foreign regulation provides foreign companies with flexibility of choosing between all

possible entry and expansion modes.

Economic

One of the major location choice determinants is the current and future demand

conditions as they will affect the market growth potential, pricing strategy and

operations margin and the potential of the return on investment.

The target market size – According to Mintel (2006) since 2001 there has been

a steady market growth by size and value. The current UK car parc is estimated to

accommodate 31 million units. The market value was contributed by the steady growth

of average price level. The present market value is estimated to reach the level of £31

billion

The maturity of the target market – The UK market is viewed (Mintel, 2006) as

highly mature. The current maturity causes overcapacity issue and significant sales fall

of particular car segments.

The growth potential of the target market – The overall UK market experiences

negative growth due to the maturity issue. Nevertheless, certain the sales of certain car

segments have significant growth potential due to the impact of socio-cultural and

technological factors.

PDI – According to Mintel (2006) the strong growth of GDP (10% between

1998-2005), personal disposable income (PDI) (19%) and consumer expenditures

(18%) reflect the high level of consumer confidence. Mintel (2006) claims that in terms

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of the purchase of new cars consumer confidence has significantly fallen. By the

present moment UK consumers have been reluctant to take out new debt and instead

are choosing to service their existing debt. Additionally the levels of mortgage equity

withdrawal have declined, what indicates that UK consumers do not seek alternative

funds to buy expensive items like cars.

Currency stability – The current strong state of British pound against other

currencies have created various benefits for manufacturers consumers operating in

pound zone such as predictability of operations and minimised currency fluctuation

risk .

Labour costs – As the outlook of the automotive industry highlighted, the cost

factor and the capability of direct and indirect costs becomes one of the key issues in

maintaining competitive advantage. According to the opinion of the industry specialists

(KPMG, 2004), one of the key issues that will influence the operations location decision

will be labour-specific costs. According to survey (KPMG, 2004) industry specialists put

a major emphasis on the labour-specific cost saving. Moreover, 85 % of the

respondents agreed that during coming five years there will be a major increase of

labour specific costs (cost of pensions, health care, and legal services) in US and EU .

The expansion of existing political and economic blocs (EU) – The importance

of the recent further expansion of EU is in the enlargement of the EU as single market.

In case of successful expansion on the UK market, Tata might consider the further

expansion in certain EU countries. According to estimations of Nieuwenhuis & Wells

(2003) the attractiveness of EU as the target market for a car manufacturer will remain

high. They claim that the attractiveness of EU as a target market will be maintained by

the increase of its market size and value as the outcome of the extension of EU zone.

However the current maturity of the market, excessive completion and demand trend

suggests that the share of Europe will drop.

Social

Demographic factors – Demographic factor is one of the key social factors. It

affects lifestyle, consumer trends, the type of risk aversive behaviour, spending power

and value per customer. The state of demographic trends allows building projections

for the use of particular type of products. The current UK demographics have

undermined the sales of family cars

Lifestyles – The change of lifestyles and habits have a direct impact on the

consumer expenditures. For instance, Mintel (2006) points out the recent increase of

preferences for second car ownership. Mintel (2006) adds that the impact of lifestyle

factors such as fashion ability and luxury preferences are so strong that it removes the

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negative effect of market maturity and oil prices in certain car segments. Thus, against

all odds, SUVs and luxury cars experience healthy growth, whereas the sales in other

car segments have fallen dramatically.

Technological

The development of information technologies – The current development of

Internet opens new transactional capabilities. Currimbhoy (2004) suggests that

continuous development of technological solutions, especially in the area of digital and

communication technologies create new operating opportunities such as new

marketing mix channels, new purchase environment (e-commerce) and new market

research tools. According to Mintel (2006) the number of leading car distributors

develop e-commerce to counter the problem of overcapacity.

The impact of new technologies on supply chain architecture – The

development of e-exchange channels between supply chain agents becomes the

source of strategic advantage (Currimbhoy, 2004) as it creates the ability of fast market

response and better value chain quality control.

The review of micro factors affecting UK car business

Competitors’ bargaining power

The UK automotive market is highly consolidated. The major rivalry involves

Ford, GM (Vauxhall), VW, Renault, Peugeot, Toyota, BMW, Citroen and Honda. The

presence of powerful competitors with established brands create a threat of intense

price wars and poses s strong requirement for product differentiation. According to

Mintel (2006) the tough competitive pressure require increasing promotional costs,

overcapacity introduces a significant price pressure. The present market conditions are

so tough, that certain manufacturers had to close certain plants to cut the costs and

survive on the market.

At the moment, the major competitive strategies are supply chain improvement,

new product development and serving the needs of emerging market segments (Mintel,

2006). The emerging opportunities requires the extremely high level of operational

responsiveness and leaves little space till market opportunity will be leveraged by

competitors.

Buyers’ bargaining power

Due to high intensity of competition on the global scale and increasing

overcapacity issue UK buyers experience very strong bargaining power. According to

Mintel (2006) buyers have indicated a high level of bargain-seeking behaviour.

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Suppliers’ bargaining power

Though vehicle manufactures have consolidated forming large entities it did not

make a significant shift of bargaining power in OEM-suppliers relations. According to

Veloso & Kumar (2002) the consolidation in the OEM sector has triggered the

corresponding consolidation of different supplier groups. Demand chain partners, car

dealers, especially the large ones do experience large bargaining power in the light of

the overcapacity issue.

The threat of Substitutes

Apart from direct competitors (public transport) cars compete with other

transport services: air, rail and sea. The increasing importance of door-to-door

transportation and environmental concerns decrease the current threat of other

transportation means as substitutes. One of the major sources of substitute threat

comes from the sales of second-hand cars. According to Mintel (2006) the steady

accumulation of second-hand cars has become on of the major reasons of the dramatic

fall of the sales of new cars.

Threat of New entrants

The high level of entry barriers (extremely consolidated industry, well-developed

value-added chain, R&D capability, investment capability in promotions and new

product development) minimises the threat of new entrants. Nevertheless, due to

globalised nature of the industry the notion of new entrant is not that clear-cut, since

existing players might enter new geographical markets. Datamonitor (2006) stresses

the future potential of Chinese manufacturers to flood EU markets in case protectionist

measures are not introduced by EU countries.

SWOT analysis

Assessing the external and internal environmental factors, the following picture

can be drawn:

Strengths

• Strong revenue growth – According to company’s annual report (Tata Motors,

2006) the company registered strong operational growth of 32,5%, whereas the

revenues from the international operations grew by 149%.

• Diversified product portfolio – Company operates in different market segments

including passenger cars, trucks, medium and heavy commercial vehicles, light

commercial vehicles, utility vehicles and buses.

Weaknesses

• High dependence on Indian market – over 80% of the company’s revenue

stems from sales on Indian market.

Opportunities

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• The further expansion on the EU market;

• The increase of global presence in SUV segment;

Threats

• Further increase of competitive pressure on Indian market – At the moment

the Indian market is already shared between such strong competitors as GM, Ford,

Toyota, VW and Honda. These companies are expected (Datamonitor, 2006a) to

increase their presence through licensing agreements, wholly owned subsidiaries and

joint ventures. Datamonitor (2006a) envisage additional threat stemming from local

automotive firms provided that they gain access to debt and equity financing.

• Overall problem of liquidity – As the case study highlighted, Tata Group

allocates significant investment flows in IT sector. The failure of this capital to be

returned might put financial pressure on all business areas, including Tata Motors.

• Slow pace of market entry – Due to the high competitive pressure of UK

market, the market window for Tata Motors entry is narrow. The slow pace of entry and

wrong timing decision might undermine the company’s success on this market.

Key success factors

In terms of the overall successful performance of the Tata Motors , the analysis

of environmental and internal factors study identified the following integral elements:

• Fast entry on UK market;

• Implementation of strategies designed to protect company’s share on Indian

market;

Defensive measures on Indian market

To protect its market share against the aggressive expansion of competitors the

company needs to implement defensive strategy. According to Veloso & Kumar (2002)

one of the strongest available tools is the increase of the customer loyalty by offering

value-added benefits such as affordable price, attractive credit conditions, post-

purchase service. Veloso & Kumar (2002) note that car maintenance might account for

up 70% of the overall car’s lifetime value. The company should develop its service

centres network to maximise its geographical coverage and pre-empt the entry of

competitors.

Marketing strategy

Market entry choice

To maximize the speed of entry and minimize the risk of failure, Tata Motors

should choose the entry mode which provides the fast access to customers. At the

same time, the entry mode shall secure certain long-term benefits like access to market

knowledge and the development of firm’s presence on the new market. Given these

requirements contractual joint venture was chosen as the optimal entry mode. Unlike,

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wholly owned subsidiary it requires much less investment in operational launch (Hill,

2002). Additionally, this mode of operations provides a fast access to the facilities and

customer of contractual partner. The other advantage of this mode of market entry is

that it limits the possibility of technology or knowledge transfer.

Marketing mix

Product

Product advantage is the “outcome of the new product development process

comprising the degree of unique benefits not previously available, the extent to which

customer needs are better satisfied, the product’s relative quality and innovativeness,

and the extent to which the new product solves customer problems better” (Craig &

Hart, 1992). The product advantage is a key differentiator between success and failure

in the development of new products and services alike. In order to hit the market the

company have manufactured the model X1 which is environmentally friendly mini- sport

utility vehicle with 5 speed automatic transmission and 140 HP 1,8L hybrid engine with

relatively low fuel consumption[1]. The company needs to emphasize the order-winning

qualities of the product to potential customers. The decision of entering SUV segment

was determined by the growth dynamics of this segment during 2003-2005 – 10%. The

product will be designed to meet the quality preferences of the following customer

segments: fashion oriented individuals, 25-45 years old, who look for affordable sport

type utility vehicle.

One of the essential aspects of Product mix will be the development of post-

purchase service. The company will seek to develop contractual relationships with

different car service networks like independent garages, specialist fast-fit chains,

mobile servicing and tuning services and autocentres. The development of strong

relationship with Kwik-Fit, Finelist and Halfords will increase product attractiveness in

terms of availability and accessibility of service facilities.

Price

The Mintel (2006) research indicates the relative importance of price issue,

especially for customers who seek to own a second car. The chosen pricing strategy

will seek to attract potential customers buy affordable price – £10 000. This price is

2,995 lower then the price of one of the best-selling cars – Daihatsu’s Terios. The

aspect of pricing is related to the cost of service and car accessories. The major focus

will be to minimize the servicing costs by concluding conditional agreements with

service partners and providing them with low-cost quality accessories and spare parts.

Place

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Distribution is crucial in the eventual acceptance and sales of a new product in

the market as it governs the availability of the new product to customers (Calantone &

Montoya-Weiss, 1993). It goes without saying that the distribution channels chosen

must reflect the target market’s buying behavior and allow for maximum availability to

the target market. The distribution channels chosen may reinforce or dilute the

intended message of the product’s positioning in the marketplace. To maximize the

product availability Tata Motors will select the contractual partner with strong

dealership network. Additionally, e-distribution strategy will be implemented to utilize

the capacity of this distribution channel.

Promotion

Promotion decisions encompass the range of communication and motivation

instruments needed to raise awareness and precipitate purchase of the new product

(Lilly & Walters (1997).

The Mintel (2006) study gives following options of possible advertising

channels:

- TV;

- Print advertising;

- Internet Advertising

Mintel (2006) asserts that the ATL (above the line) spending account for the

major share of all expenditures on promotional activities, whereas the share of TV

advertising might exceed 50% of total cost. KPMG (2004) notes that promotional

budget usually comprises 1%-2% of the expected sales. Provided that the initial target

for Tata Motors is to sell 25 000 units in the first year of operations, the marketing

budget will be £3 750 000[2]. Additionally, the similar contribution will be expected from

the contractual partner of Tata Motors. 50% of marketing budget will be allocated to TV

advertisings, 25% – promotional activities in Car and Life style Magazines. 25% – will

allocated for point of sales promotions, events and co-marketing activities. To increase

the level of coverage the company will look for partnerships that can strengthen its

promotional appeal.

Conclusion

The paper suggested that Tata Motors should enter the UK market. This

country was chosen due to the presence of the number of favorable business and

environmental factors such as economic stability, relatively medium entry barriers,

positive growth of certain car market segments and the future growth potential within

EU whereas the UK might be used as expansion base. The analysis of business

factors indicated the importance of choosing fast mode of entry and the development of

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contractual relationships with UK operating market agents. To address this issue the

paper suggested that the company should use contractual joint venture as the mode of

UK market entry. This strategic option will provide Tata Motors with fast market

penetration, access to market knowledge and reduced financial strain. At the same

time, possible negative aspects of this choice should be counterbalanced. The analysis

of internal factors revealed that the company’s performance is strongly dependent on

the success of operations in Indian market, which might be undermined with the further

increase of competitive pressure. To strengthen its position against aggressive tactics

of competitors Tata Motors is suggested to focus on building customer relationships

and employ marketing tools designed to increase the level of customer loyalty.

On the basis of the analysis of current market dynamics Tata Motors is advised

to enter the market with SUV model, designed for sport type oriented individuals, who

look for a relatively cheap, environmentally friendly, high quality car. The price will be

one of the attractive factors, especially for price-sensitive individuals. The company will

launch advertising campaign designed to create awareness about car, communicate its

advantages and persuade customers to buy it. As for the Place Mix, the company will

seek to cooperate with various car dealers and will develop e-commerce facilities to

maximize the product availability.

Reference: http://www.jimthetrucker.com/tata-motors-entry-into-uk-market/

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4.2 References

1. Success and Sustainability UK Automotive

http://pdfcast.org/pdf/automotive-industry-analysis

2. Global Automobile Industry: Changing with Times

http://www.outsource2india.com/kpo/site/includes/

Global_Automobile_Industry11.pdf

3. Customers Luxury Behaviour

http://www.economicswebinstitute.org/essays/carthai.pdf

4. http://www.autoindustry.co.uk/

5. http://www.rba.co.uk/sources/automotive.shtml

6. http://www.berr.gov.uk/policies/business-sectors/automotive

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