The aim of this case study is to develop an international marketing plan for ‘Tata Nano’ the world’s lowest price car with lowest fuel consumption produced by the Tata Motors of India. To carry out the marketing plan, this report will provide historical background and cultural background of host country and give a brief overview of the company and economic analysis of home country India including an export diagnosis of the company.
A) Background of the Company
TSL (2011) reported that the Tata group stated it journey in 1868 and now operating in eighty countries with ninety different subsidiaries with a market capitalization of US$ 100.39 billion while its 57% of the revenue comes from export. Donlan (2005) mentioned that in 2003, the hundred and forty years old group of companies announced in the Geneva Motor Show that Tata Motors would produce world’s cheapest car ’Tata- Nano’.
In 2006, Tata Motors started to establish its Nano plant at Singur of West Bengal in India by accruing 1,000 acres of land, which was disturbed by the political violence of farmers who were not willing to give agricultural land for Nano plant. After trilateral negotiation with the government political parties and entrepreneurs Tata Nano successfully came in the market in March 2009 and the market response were more than expectation due to the world’s cheapest car with highest energy efficiency both in home and abroad.
However, this brand is popularly known as a raise- engine, cheap, four- passenger city automobile and it is generally a silver bodied car. Some common features of this product include single windscreen wiper, three pull nets on wheels, single mirror without CD player or radio along with airbags and power steering and 623cc engine, etc.
The Nano has three basic models offering distinct patterns of additional values regarding without additional benefits, with air condition and with power windows along with air condition. According to the annual report 2010 of this company, its outer layout has designed by Italian Institute of Development in Automotive Engineering, and its engine configurations involve 2 cylinder petrol, value of Motronic engine, 35 PS power, 48 N.m Torque and the compression ratio of 9:5:1.
Regarding suspension, brakes and tires, the car has 180 mm of front and 180 mm of rear brake, 1315 mm of rear and 1325 mm of from track and finally, McPherson strut of front and free coil spring of rear suspension while its wheels are sized as 12 inches.
It has the average speed of 60 km/h with the maximum limit of 105 km/h a full efficiency is 23.6 km per liter; however, it is a rear wheel drive car that has 4 speeds manual spreads with automatic rack and pinion steering with 4 meters of revolving radius. Various entities supply its multiple parts among them some are Bosch, Caparo, Delphi, Ficosa, GKN, Mahle, TRW, Visteon and AG etc. (Tata Nano, 2011)
The PEST analysis of Tata Nano for US market is shown below-
Political factors: USA is the country that has relatively stable government with specific and advantageous business policies for foreign companies, like- Tata. Also the country’s local government already has several trading relations with various Indian vendors which would leverage the introduction of Nano into that country (USA Forum, 2011).
Economic factors: The overall economic condition of USA is very well and for this, it is considered the strongest economy in the world. Thus, Tata needs to consider a number of integral factors, like- interest rates, inflation and unemployment level and GDP etc. because those factors can positively or negatively affect the sales and profitability from the product (USA Forum, 2011).
Socio- cultural factors: It incorporates prime religion, local attitude towards imported products, projected influence of language, recreation and leisure pattern of people, environmental concern and the practice of green marketing, family pattern and life cycle etc. (USA Forum, 2011).
Technological factors: One of the prime characteristics of US consumers is that they are highly technologically advanced than many other consumers of other parts of the world. So, this factor includes customer affordability to enjoy new technology, habituation of using online distribution channel and the potential to use technology more than product differentiation as providing customer service or promotion (USA Forum, 2011).
1. Relevant History
Library of Congress (2004) pointed out that India is one of the Asian emerging economies that became independent in 1947 coming out from British colonial rule more than a two centuries, the country upholds multi party federal democratic system based on secularism and social justice. In context of population, India is the world’s prevalent democratic country that has successfully evidenced balance of power between the central and state government with rich diversity of nations while the country huge political unrest with a number of isolation movements.
Kujur (2008) mentioned that the remarkable political and social unrest of India has aligned with underground political organizations like Marxist-Leninist Communist Party of India, People’s War Group, Maoist Communist Centre and Naxal Movement all these go with arms straggle that seriously hampered the smooth investment environment of country.
The government and law enforcement agencies have to engage special effort for the unification of the country and to protect terrorist trends of communist groups and liberation activists. The major political parties who are in democratic practice are Congress- that carried out independence, BJP and Left Alliances though there are dozens of regional parties in every state with strong institutional infrastructure to protect isolation or so called liberation movement.
With far above the ground religion diversity such as Hindu, Muslim, Buddha, and Christen, Indian political system has ensured human right, freedom of speech, liberty of media, and nourishing scholars to face the challenger of globalization though there are enough evidence of emergency and presidential rule in some provinces.
In the province West Bengal where the Tata Nano plant situated, has ruled by left alliance under the leadership of communist party for more than four decades, and the Tata Motors has to face serious political disturbance with its Nano project though the government has strong support for Tata.
IndexMundi (2011) forecasted that the total population of India is approximately 1,189,172,906 in 2011 while it was 1,173,108,018 in 2010. Initially, the population growth rate was high, but not this rate is reducing dramatically, for instance, in 2004 and 2007, it was 2.91 % and 3.15% approximately and now the growth rate is 1.39%.
Figure 1: – Total population of India from 2003 to 2011
Source: – IndexMundi (2011)
3. Legal System
India is a promising market to the present corporate houses and the legal system of India is very flexible to the multinationals and new entrants as the government tries to ensure the highest possible business-friendly environment to the firms, as a result, the policy makers support to increase Foreign Direct Investments.
However, it is notable that commercial legislation regarding labor and environmental concerns are theoretically very strong, but practically practice of labor law and ethical codes is not too standard in terms of remuneration, workplace safety and compensation issues.
4. Distribution System
For distributing Nano in the USA, the marketer can import the ‘easy- to- assemble’ kits from their home country and then the products should assemble at certain locations. After that, the company should redistribute the finished cars to the various showrooms throughout the country and fifty sales centers can be opened for this purpose (TNN, 2011).
5. Gross National Product (GNP) of India:
ICAI (2008) pointed out that Indian GNP calculated by adding net factor incomes from foreign counties with GDP and subtracting the foreigners income from India while it is equated as GNP = GDP + NFIA ; NFIA indicates the balance of export earning and import spending.
In this process, service rendered for free of cost are not taken into account of GNP, at the same time capital gains and losses are also dropped from this calculation as they are not the consequence of concurrent economic activities of that year. During the 10th five years plan India targeted 8% GNP growth but in practically the country has gained 7.6 % while the country pointed to gain 8.5 %.
Zaman et al (2008) added that there is no particular standard to identify the gross national income in India, it has incorporated a number of factors, while the economic growth of the country are benchmarking with GNP growth, per capita income, renovation with multidimensional course of action connecting the restructuring and progress of entire economy with social systems.
At the same time in Indian, the improvements of incomes and outputs are characteristically engross with fundamental changes in institutional infrastructure, education, social and political alignments, different ethic groups along with administrative structure.
The export data of Indian statistically demonstrates noteworthy positive signs and its export are in intensifying with upper trend that point toward potency of the economy while the FDI inflow in the country is a vital concern of the economy that has presented statistically momentous progress. The Indian GNP from 1990 to 2006 has demonstrated in the following table as follow-
Figure 2: Indian GNP Table 1970 – 2006
Source: Zaman et al (2008)
WUSTL (2011) pointed out that the Indian economy is the world’s eleventh largest economy with GNP of US$ 2400 billion in context of purchasing power parity while the agriculture sector contributes 25.3 %, industrial production donates 26.2 %, manufacturing segment produces 15.1 %, and rest 33.4 % contributed by the service sector.
For the country has been progressing in its GNP growth at a targeted growth of 8 % and the driving force laid behind for such achievement are the democratic society with low cost labor, vibrant capital market, and liberalized capital market and open window for foreign direct investment.
6. Principal Industrial Sector of India
The raising sectors of India those are aimed to compete in the global market are as biotechnology, pharmaceutical, petrochemical, iron, steel, chemicals, vehicles, entertainment, alternative energy resources, software, and information technology and the country already proved its successful footstep for IT industry while major multinational companies are deeply concerned with the Indian market.
WUSTL (2011) also added that the major growth driver of Indian economy and the biggest asset for future growth is its competent people while the population of the country has been growing at 1.8% per year with increasing education rate and the domestic customer market is growing 5 to 10 percent per annum.
7. Principal Exports
Johansson (2008) stated that exporting means the promotion and direct sells of locally manufactured products in the foreign market and it is a well-developed and conventional form of strategy to capture international markets.
As a result, export is the core basis of revenue for the India’s financial system because it generates huge amount of money from this segment and earning from exports is increasing per year, for instance, India’s net exports earning was approximately $168.2 billion in 2010 whereas economists estimate $201 billion in current year (IndexMundi, 2010). However, the following figure demonstrates the actual figure of exports from 2003 to 2011 –
Fiscal YearTotal Imports ($billion)Rank