Marketing Strategies for Tata motors Essay Example

considered affordable compared to some foreign alternatives. The repositioning of Tata Motors in changing times is also evident in the company's brand repositioning and image makeover. For over 40 years, the company was known as Tata Engineering but underwent a name change to reflect its global aspirations. Tata Motors' growth in the domestic market is driven by its diverse product portfolio, which includes over 130 models of Commercial Vehicles, Passenger Cars, and Multi-Utility Vehicles.

In CVs, Tata Motors has vehicles in various tonnage categories, including pick-ups. The upcoming launch of new-generation heavier-tonnage vehicles will help the company maintain its leadership position in the HCV segment. The positive outlook for industrial growth also bodes well for Tata Motors in the near future, as it will support domestic demand. In the cars and UVs segment, Tata Motors already has a successful portfolio and plans to introduce new models. Additionally, Tata Motors is planning to appoint 25 more dealers across the country by the end of 2005, increasing its dealership network to approximately 156 from the current 131 dealers. With approximately 500 service outlets in 175 cities, Tata Motors has the second largest service network in the country. (Exhibit 1 - Tata's CV volume mix6).

Despite already having a sufficient service network, the company may still open new outlets in order to address regional needs. TML has improved its distribution and service network through supply chain management and the addition of 576 Tata certified garages. This is complemented by a nationwide sales, service, and spare parts network. Tata is no longer an outdated Indian company, as it now focuses on modernization and technological advancements in its products. Tata plans to

introduce a 'Truck of the future' with innovative technology, which is unprecedented for an Indian manufacturer. Their current products, such as Indica and Indigo, are known for having cutting-edge technology.

It had set the main USPs of these 2 products as space and fuel economy.

International Market strategies

The senior management at Tata Motors faced a dilemma: should they remain exporters of vehicles or venture into the international automobile market as a company that can compete with the best? The answers were clear. The first step was to align the international business with the Passenger Car Business Unit (PCBU) and Commercial Vehicle Business Unit (CVBU) to create more focus and synergy between domestic and international operations. The Business Units have categorized different markets based on their size, growth opportunities, product segments, and target volumes.

Currently, the company's focus has shifted from exporting to 70 countries to concentrating on 15 to 20 key countries where it aims to have a strong presence in terms of volume and market share. As part of this strategy, the company signed an agreement with M G Rover to export 100,000 Indica vehicles to the UK market over a period of 5 years. Additionally, the company has successfully exported more than 6,500 City Rovers since Q3 FY04. The distribution of Indica vehicles in the UK is handled through Rover's dealerships.

This benefit will provide impetus to the other markets where the company plans to export Indica on its own.
3. Tata Motor's acquisition of DVCL for $ 102 mn is the first step taken by the company in using inorganic expansion route to improve its

presence in the international market. This acquisition is just the beginning of the company's global expansion plans which would further help the company in making an easy entry into other significant export markets. The synergies between both offer a lot of benefits to Tata Motors like The company through this subsidiary now has access to South Korean CV market which is one of the fastest growing truck markets. The Korean company has a capacity of 20,000 M/HCV units and makes commercial vehicles in the 200-400 HP range while Tata Motor's CV's stop short at 200 HP ( leading to a complimentary product range).

Tata Motors plans to use DVCL's manufacturing unit as a central hub for exporting to India, Russia, China, South Africa, and Latin America. DVCL will also assist Tata Motors in developing its worldwide truck platform and launching the "Truck of the future" in FY07.4. Additionally, Tata Motors aims to expand its presence in traditional markets such as Sri Lanka, Bangladesh, Africa, and the Middle East while exploring new markets like Russia and South East Asia. In addition to the agreement with Rover in the UK, Tata Motors intends to strengthen its position across Europe.

The company aims to reduce risk by expanding its business model geographically. This expansion is expected to significantly contribute to the already thriving domestic revenue of the company. In fiscal year 2005's first quarter, Tata Motors witnessed a 25% growth in export revenues, amounting to Rs 2.12 bn compared to the previous Rs 1.69 mn. This positive trend follows an outstanding export performance in fiscal year 2004, where exports escalated from Rs 4.8bn in FY03 to Rs 10bn in FY04.

Currently, exports account for 7.6% of the company's total revenues.

The acquisition of Daewoo Commercial Vehicle Co. (DWCV) by Tata Motors is anticipated to boost the overall export ratio to total revenues. Additionally, Tata Motors' market position in emerging economies like SAARC countries and Africa will further contribute to this increase. Revenues generated from DWCV are projected to lead to a 10-20% growth in Tata Motors' exports during FY2005, with expectations of surpassing 20% by FY2006.

Tata Motors is taking measures to safeguard itself against changes in commercial vehicle sales, such as increasing exports and expanding its non-auto ventures. By FY07, the company aims for exports to contribute 22-25% of its total revenues. Tata Motors has set up manufacturing facilities in multiple locations within India, namely Jamshedpur, Pune, and Lucknow. The original plant was established in Jamshedpur in 1945, followed by the Pune plant for LCVs and cars in 1966. Lastly, the most recent facility was founded in Lucknow in 1992.

The plant produces three types of vehicles: Sumo, LCVs, and MCVs. Tata Motors plans to increase car production capacity to 225,000 in order to boost volumes, particularly from export markets that were affected by capacity limitations. The plant currently manufactures the Indica and its compact variant, Indigo. In the previous fiscal year, the plant operated at 80% capacity for the first eight months and at 90% capacity for the remainder of the year. The capital expenditure for expanding capacity will be funded through internal cash generation and funds raised via FCCB issue. Tata Motors has improved operational efficiencies in its CV division through cost reduction and global benchmarking, which has led to significant margin expansion. Additionally, effective

inventory and receivables management has enabled Tata Motors to maintain a negative working capital for the past two financial years.

Its inventory and debtors days were 27 and 12 respectively, compared to 39 and 18 days. Recently, Tata Motors-Passenger Car Unit in Pune received certifications from Bureau Veritas Quality International-BVQI for ISO 9001:2000 Quality Management System-QMS and ISO 14001:1996 Environmental Management System-EMS. The implementation of ISO-QMS has impacted all areas of the Quality Value Stream, aligning with the company's main goals of customer satisfaction and continuous improvement. Segment Wise analysis of the auto industry reveals that seventy-eight auto and auto ancillary companies began fiscal 2005 on a positive note. In the first quarter ending June 2004, these companies recorded a 44% increase in bottomline to Rs 1137 crore, with a topline growth of 27% to Rs 16700 crore. All segments including commercial vehicles, passenger cars, two-wheelers, tractors, and auto ancillaries showed double-digit growth in both topline and bottomline.

The tractor segment's profit increased by 102%, while the commercial vehicles segment experienced a significant growth of 90%. Auto ancillary and passenger cars had growth rates of 50% and 45%, respectively. However, the two-wheeler segment only saw a growth rate of 12% for the quarter. These figures demonstrate the strong performance of auto companies, excluding two-wheelers. Tata motors heavily relies on commercial vehicle sales, so the rapid growth in this segment is advantageous for them. In total, auto sales reached 1,886,852 units during the quarter, marking a rise of 15%. Total auto exports rose by 38% to reach 152,315 units while domestic sales grew by 13% to reach 1,734,537 units.

Sales of commercial vehicles saw a substantial 46% increase, while

three-wheeler sales followed with a 24% rise. Passenger vehicle sales also experienced growth, increasing by 22%, while two-wheelers had a more modest 12% increase in sales during the quarter. The tractor industry also witnessed significant recovery in sales thanks to favorable monsoon conditions last year, marking an important turnaround after years of declining sales. Four tractor companies achieved remarkable growth, with a 45% increase in sales reaching Rs 1788 crore and net profit doubling to Rs 95 crore.

Within the commercial vehicle segment, five companies enjoyed robust revenue growth of 40%, totaling Rs 4912 crore, while net profit impressively increased by 90% to Rs 275 crore.

During the quarter, there was a significant surge in sales volume within the commercial vehicle (CV) sector, including medium and heavy commercial vehicles (M;HCV) and light commercial vehicles (LCV). The total number of units sold reached 72018, marking a 46% increase. M;HCV sales grew by 51%, with 43421 units sold, while LCV sales increased by 40% to reach 28597 units. This positive trend has continued into the first quarter of the current financial year. Several factors have contributed to this expansion in the commercial vehicle industry including road infrastructure projects, restrictions on overloading and aged vehicles, lower interest rates, and easily accessible finance options.

There was also a notable rise of 26% in sales volume within the passenger vehicles (PVs) segment during the same period. Sales for passenger cars, utility vehicles (UVs), and multi-purpose vehicles (MPVs) all showed positive growth. Passenger car sales increased by 27%, totaling at 209064 units; UV sales saw an uptick of 25%, reaching a total of 38469 units; while MPV sales reached a total of 15236 units

with an increase of 8%.

The sales and profits of three passenger car companies rose by 22% and 45% to Rs 2711 crore and Rs 149 crore respectively, while nine two-wheeler companies witnessed an 11% growth in sales to reach Rs 3770 crore. Moreover, the net profit for the two-wheeler companies increased by 12% to Rs 347 crore. In terms of volume, the overall two-wheeler sales (including exports) also saw a rise of 12%, totaling at 1461926 units. It is worth mentioning that all segments were impacted.

Sales of scooters, motorcycles, and mopeds experienced a strong increase in the double digits. The overall sales of scooters saw a significant growth of 15% to reach 240,277 units during the quarter. Motorcycle sales also went up by 12% to reach a total of 1,136,268 units while moped sales grew by 14% to achieve 85,381 units. The industry is rapidly shifting from being characterized as a market with "high growth - low competition" to one where there is "low growth - high competition."

Efficient cost management, proper product positioning, a widespread distribution network, strong R patterns, and a focus on global markets will drive future growth for the players in this scenario. The aggregates of the 78 companies showed a slight improvement in operating profit margin from 11.8% to 12.1%, resulting in a 30% growth in operating profit to Rs 2021 crore. It is important to note that despite the increase in price of one of its main raw materials, steel or its intermediates, the industry's operating profit margin improved. Furthermore, other income during the quarter increased by 28% to Rs 346 crore.

Interest cost declined by 33% to Rs 122 crore,

whereas depreciation rose by 12% to Rs 550 crore. As a result, profit before tax experienced a growth of 48% to Rs 1694. Despite an increase of 55% in tax provision to Rs 557 crore, profits at the end reported a rise of 44% to Rs 1137 crore. Cash profit reached Rs 1687 crore, indicating a rise of 32%.