The Business Environment Of Tata Motors In India

The blood line Environment Of Tata Motors In IndiaAs emphatic by (Palmer and Hartley, 2006) the Macrosurround of a comp each is composed of the External De borderinants. This includes factors much(prenominal) as political, scotchal, social, technological, environmental and legal. These factors make believe an indirect impact on a firm or any air activity. The Microenvironment of a family is composed of the Internal Determinants. This includes factors much(prenominal) as suppliers, consumers, competitors.Bringing this into perspective it is very signifi hobot for any gild to poll and study the Business environment in order to make plans, plan strategies and take decisions. For example, a company from the United Kingdom square offting up its activities in India has to focus on the Macro and Micro Environment in India to run successfully. If they work according to the compendium of the business environment in the United Kingdom they argon bound to fail in their trading tr ading operations in India.Thus to understand the Macroenvironments, companies and management students fucking make delectation of PEST analysis which helps in critic each(prenominal)y evaluating the political, economical, social, technological, environmental and legal determinants which devour an indirect impact on any business entity. This critical military rating helps a business firm to strategise effectively and take comelyified decisions. after analysing the business environment victimisation the PEST tool, any company can make make use of of SWOT analysis to gain an insight on the strengths, weaknesses, opportunities and threats to survive in todays world comprised of severe tilt.According to (Day and Shoemaker, 2005) scanning the Business Environment is alike(p) adapting a peripheral romance. Companies with a peripheral plenty can recognize the changes pickings place in the business environment and accordingly take steps to confront potential threats and grab the op portunities that can prove to be of significance moving ahead. Companies with a good peripheral vision gain a competitive edge everyplace their competitors if they respond positively to the changes happening nearly.The company selected for this work is Tata Motors. Being a braggart(a) shaper of gondolas, its periphery consists of all the accordant forces. Thus an analysis leave alone be done considering the changes that gather in occurred everyplace the stick up fiver long time, how Tata Motors lose reacted to these changes in order to survive in todays world of red competition. In this work Tata Motors will be analysed using tools like PEST Analysis, Michael Porters five forces and SWOT Analysis, and in the process these tools should be of help in lineage some conclusions and making some recommendations.Organisation Description and BackgroundTata Motors is Indias largest manufacturing business of gondolamobiles. It was initially known as Tata Engineering and Locomoti ve Company. In 1954, the company signed a collaboration agreement with Daimler Benz of Germany and started the manufacturing of commercial vehicles. It has been a pioneer in this sector, especially in India. They in any case have their musical theme of operations in the UK, South Korea, Thailand and Spain. Manufacturing of passenger political machines, utility vehicles, passenger buses and light, medium and cloggy commercial vehicles atomic number 18 the main areas of business of Tata Motors. www.tatamotors.comThe commercial line of Tata Motors has had its root strengthening since several(prenominal) days in assorted foodstuff segments such as Europe, Africa, Australia, Southeast Asia, South Asia and the Middle East. Tata Motors have al instructions believed in achievements to expand their business and build a securities industry share round the world.Daewoo, a commercial vehicle company was the second largest truck manufacturer in South Korea. It was acquired by Tata Mo tors in the year 2004 and this take everyplace gave Tata a real place in the Korean Market. Following this acquisition Tata Motors got into a joint venture with Thonburi Automotive in the year 2006 allowing them to make in Thailand. Tata Motors believes in expanding finished Mergers and Acquisitions quite than spending several old age in building a business. www.tatamotors.comThe largest acquisition made by Tata Motors was that of jaguar and land Rover from Ford in March 2008. These two brands toll Ford 5.3 billion dollars where as Tata paid Ford 2.3 billion dollars (Carty, the States Today). This was a significant step for the company as it paved way for them into the business of luxury railway cars.Tata Motors, in the higher up mentioned journey has been exposed to the determinants in its environment. Going ahead an analysis would be done on it using tools such as PEST Analysis, Michael Porters five forces and Swot Analysis.PEST synopsisPOLITICAL FACTORSAs mentioned in a higher place Tata Motors has its operations in several countries around the world. In setting up these operations it was vital for Tata Motors to analyse the policy-making Environment so as to run the business smoothly. Over the last five years Tata Motors has had a chance to venture in different Markets. When it entered in the UK, the options of ledger entry USA and Russia were also available. But Tata Motors preferred UK over USA and Russia due to favourable political factors such as India organism a preferred economic agent, UK car market and potential and spoken language similarity. USA market requires high quality and there are several non-tariff barriers which make it difficult for a new company to enter the market. The suit Russia was declined is because they lack a thoroughly-developed dealership network, there were high entry barriers, lyric problem and finally there was always the uncertainty of future economic state. As emphasized by (Hill, 2002) the cooperation b etween India and the UK falls in the government activity of favourability which implies benefits macrocosm derived due to less tariff and non-tariff barriers. Thus Tata Motors decision of entering the UK market is justified.ECONOMIC FACTORSThis is one of the most significant determinants that need to be analysed as it encompasses factors such as market growth potential, pricing strategies, fall out on enthronement and various such monetary aspects. Since 2004 Tata Motors is on an refinement role around the world. It has made its presence felt in over five countries world-wide through acquisitions and joint ventures. Over the past five years there have been changes in different economies. Tata Motors has been adapting to these changes successfully and running their business smoothly. To give an example if there is a hike in scathe of aluminium in Kenya, Tata Motors has the option of falling back on suppliers in Europe or Asia. They also have to keep a beside eye on the fluctua tion in the currency rates. The rupee being pie-eyed against the American Dollar doesnt mean it will be strong against the Sterling Pound. This factor is directly related to Capital Investment thus posing a challenge, Tata Motors operating in different economies which have been in a turmoil due to recession.SOCIAL FACTORSDemography is one of the significant social factors. It comprises of lifestyle, consumer trends, income, spending causation and so forth The trait of demographic trends allows a company to make plans and strategise on the kind of products to be marketed. As emphasized by (Mintel, 2006) the influence of fashion and luxury is so strong that consumers look out on the hike in price of fuel. Catering to this Tata Motors launched Tata Sa outlying(prenominal)i and Tata Sumo Grande, Indias premier SUVs. Having tell that, not all the people are in a posture to afford these cars. Bringing this into perspective Tata Motors has continued to manufacture and market Tata In dica, a low budget passenger car. A lot of motorcycle accidents taking place in India, Ratan Tata, the Chairman of Tata Group had a vision of launching the worlds cheapest car and his vision did come true in the operate of Tata Nano. Thus it is clearly evident that Tata Motors does respond to changes in the social factors. technological FACTORSTechnology is a factor that enables a company to gain a competitive edge and survive the fierce competition in the market. Tata Motors has presently employed 1400 Scientists and Engineers in their Research and Development Team. This has ensured that they are ahead or at par with their competitors in the domestic market as good as internationally. www.tatamotors.com. In the last 5-10 years technology has been advancing at a very rapid space. There have been foreign automobile giants like Hyundai, Toyota etc setting up operations in India. Their cars were technologically far too advanced than Indian cars. They had cater steering and windows, central locking, machine rifle transmission on gears etc. Considering these changes in the environment Tata Motors did not resort behind. They also adapted and brought out cars with this technology and survived the robust change and kept up(p) their position as a top outer in the automobile sector.MICHAEL PORTERS flipper FORCES ANALYSIShttp//www.valuebasedmanagement.net/images/porterfiveforces.gifSource www.valuebasedmanagement.net.The above mentioned diagram shows the factors considered as significant by Michael Porter in his analysis. Moving further we will see how this analysis can be used to evaluate Tata Motors project Tata Nano.Threat of impertinently EntrantsTata Motors launched Tata Nano as the worlds cheapest car. It basically targeted the people who used motorcycles as their mode of transport. Indian automobile sector is vibrant and emerging, attrperforming international brands like Volkswagen, Toyota, etc all of whom are expected to launch new innovative products. Tata Nano is priced approximately at just Rs 1,00,000. Launching a product at such low court implies that the manufacturer needs to make a huge initial investment and bear a low profit margin as well. The competitors are studying the strategies of Tata Motors closely. But because of the above mentioned reasons Tata Motors doesnt have the threat of New Entrants at a time however yes it will have to definitely face some fierce competition in the future. www.scribd.comThreat of SubstitutesTata Nano faces a threat from electric cars as a substitute. Reva car is already present in the Indian market and Morbi based Ajanta Group is think on manufacturing an electric car. Ajanta Group is planning on pricing its electric car at Rs 85000 which is even cheaper than the Tata Nano. Reacting to this threat Tata Motors has aleady considered making an electric car and named it the E-Nano. www.scribd.com The second hand market for cars is also booming in India. These second hand cars can act as substitutes to Tata Nano as they are in the same price range, moreover they have powerful engines. www.jimthetrucker.comBargaining Power of buyersTata Nano is a car that has been manufactured retention in mind the people with low income. At present Tata Nano is the totally car in the Indian Market available at such a low price(approximately Rs 1,00,000). Bringing this into perspective the Indian consumers do not have many options. This implies that there is not much bargaining power vested in the hands of the buyer. But as and when the competitors come with similar cars the buyer will have the power to switch cars, the power of choice etc. www.tatamotors.comBargaining Power of SuppliersThere are about 60 companies acting as suppliers for Tata Nano. These suppliers together assimilated an amount of about $112.7 dollars to set up base on the Singur Complex. Suppliers mentioned that the existing plants were equipped enough to support the launch of Tata Nano provided the Tata compris e shifts to Pantnagar or Pune. Other suppliers showed cooperation by showing the will to use their sheds as warehouses for storing purposes. (www.scribd.com)Tata Motors has formulated a bill marketing placement vesting the interest of the suppliers. finished this Tatas bank makes the payment to the suppliers and then Tata pays the bank. Tata has also set up a suppliers council to recognize and rectify issues such as delayed payments which were acting as hindrance between the company and its suppliers. www.tatamotors.comThis shows that the suppliers conveyed utmost support to Tata Motors, thus rather than acting as a threat they acted in favour of the auto manufacturer. Tata Nano being the only make of its type the suppliers seem to be innocent but as and when competitors come up with similar cars the suppliers bargaining power will pose as a threat.Rivalry among existing firmsThe competition is very fierce among car manufacturers in India, especially the small car manufacturers l ike Maruti Suzuki, Hyundai, Chevrolet etc. Tata Motors had come up with the Tata Indica to compete with the Maruti Suzuki 800, Maruti Suzuki Zen etc. Maruti at that time was the leader in the small car market in India. As a counter attack to the Tata Indica, Maruti came up with cars like Alto and some brand extensions like the Zen Estilo. The scene in all changed with the launch of Tata Nano. The price of Tata Nano was half the price of Maruti 800, which then was one of the cheapest car in the Indian Market.In response Maruti Suzuki talked about slashing mastered the prices of Maruti 800 and Maruti Alto. There were also speculations about Maruti Suzuki redesigning the 800 to pose a challenge to Nano but this got scrapped as the costs involved were very high. The launch of Nano also stand the dealers of second hand vehicles. These dealers in response got in tie-ups with banks and financial institutions to perpetrate consumers towards buying second hand cars. Thus the launch of Na no intensified the tilt amongst existing firms. www.driveinside.comVALUE CHAIN ANALYSIShttp//gscmotion.files.wordpress.com/2009/08/a-value- string-analysis1.jpgSource http//gscmotion.wordpress.com/2009/08/07/using-value-chain-analysis-for-customer-satisfaction/The diagram shown above describes the main components and sub-components of a value chain. Going forward in this subsidization an analysis will be done on the value chain of Tata Motors.inward LogisticsTata Motors has a very strong set up of Inbound Logistics. This gives the company attain a competitive edge over the new(prenominal) players in the market. Following are the factors which enable the company to maintain a strong set up on Inbound Logistics. Tata Motors gets into Long term contracts with its service providers in transport and various other activities. It does the same with the agents relations with it. It employs special personnel at regional offices to supervise the entire process. The company has made use o f SAP business softwares to strengthen its IT department through which it is able to monitor the activities. The storage facilities are very efficient which lead to easy stuffing and retrieval of materials. www.tatamotors.comOperationsOver the past a couple of(prenominal) years Tata Motors has established a Capital Equipment Manufacturing Division which assists the company in development capabilities of international standard. It also has designed Apprentice trainee courses which ensure perceptual constancy in the supply of skilled manpower. Tata Motors also has a team smell into Kaizen and TPM which profoundly works towards improving efficiency. The company has an automated manufacturing process. Moreover the manufacturing is well distributed not just within India but globally. The company practices optimum utilization of capacity. An example to support this could be that of Mercedes Benz which uses Tata Motors paint shop facilities.Outbound LogisticsStockyards all across the c ountry and also in the countries abroad where Tata Motors has its operations set up implies that they have a strong Outbound Logistics. As mentioned above the company gets into long term contracts with transporters, gives high and constant business to them which ensures it gets the outflank deals. SAP programmes ensure that all the offices and various sections are well committed which ensure timely execution of tasks. Pilferage is prevented, thanks to an excellent security system being enforced.Marketing and SalesTata Motors is in a pact with large number of dealers and agents to support the function of marketing and sales of its products. Tata Motors follows a taxonomic approach towards understanding the needs and preferences of customers. Over the past five years Tata Motors has been analysing the market dynamics and accordingly manufacturing innovative products or extending existing brands. any(prenominal) examples of this would be Tata 207, Tata 407 and Tata Ace. Tata Motors c aters to different segment of customers like the common man, farmers, Defence, State imparting etc. It has specific teams developed to address the needs of these customers respectively. Their strategy in Marketing and sales has enabled them to impose a Pan India and Global presence. A fact to support this statement is that Fiat which is an international brand got into a pact with Tata Motors on 13th January 2006 to use the dealership of Tata Motors to sell its vehicles and Tata Motors would use Fiats technology and unutilized capacity.www.tatamotors.com