Nano ideas to sell "Nano" !!! with Big impacts....

Tata Motors, who early captured the nerves of the price conscious Indian customers failed to capitalise on it. A market where 80% market share is of two wheelers and meagre 15% of Passenger Cars, there is huge opportunity at the bottom of the pyramid to upgrade these Two wheeler owners to Cars.

Nano is apt product to meet this requirement. But November'10 saw sales of 503 Cars against the expected sales of 10,000. Poor sales performance shows that  something is wrong at the strategy level. How Tata Motors should address this issue is not only  difficult task but also  " Strategic One" for the survival of the Organisation which has gone full throttle with this India's dream Car.

What Went Wrong ...and How to Fix it !!!


Demand vs Supply: Tata Nano as concept came into market in 2004 and it took 4 years to bring this product in "Product" and another one year to reach the customer (Tata Nano, when started selling, the waiting time was huge). Six years is huge time for an product and in these six years Indian automotive Industry has evolved a lot. Small car Market has seen some tremendous momentum. There are 32 Models available as compare to 14 that were there 5 years back. So huge competition not only bring the intensity in the market forces but also the quality level of the services provided and of the quality level of the product gone up as a whole in creating the competitive advantage among the customers.

How to Fix: 
1. Making the availability of the product at the dealer, and there should be enough scope in terms of the color, Features and variants of the car.
2. Demand can be pulled up with target Advertisement and Promotions.
3. Finance Options. ( Low Interest Rate and fast approval of the loans)

"Fire" in the Trust : In all there are 6 cases of accidents in Nano, which has made the perception of this car as real pain in the eyes of customers. There is fear attached with this car and product like Car sells more on the word of mouth and not actual product performance. A negative word of mouth about the safety of the products brought down the hoopla created around this product.

How to Fix: 
1. Introduce "Nano-Reliabilty" test and proposing the long term Warranty of the car. Experts can be pooled in which gives it Thumbs Up.
2. Address Customer feedback in prompt and positive manner
3. Improve Customer Engagement in the market and educating the first time customer and Dealers.


Its "no more 1 Lakh Car" : Tata Nano as car is no more 1 lakh car, It's basic model is 1.3 Lakhs and with model with minimum features is around 1.5 Lacs. So expectation of the customer naturally not met, as they approach TATA dealer keeping the 1 Lakh figure in mind. So every customer who went back is actually potential customer who is not well convinced.

How to Fix: 
1. Awareness about the "Cost and Price" structure of the product, A New marketing strategy.
2. Compare the NANO with the next car ( ALTO, SANTRO,SPARK) and sell the " GAP" and opportunity cost concept. Example: Customer can buy Maruti ALTO ( 3 lacs) or Tata Nano (1.5 lacs) , A Splendor (50 K), TV (20 K) , A Fridge (15 K), AC (30 K) and six month fees of the children (15K).


Rural Penetration & Education: One of the target market for this car is Rural areas, and un-availability of the cars at this end of value chain really marred the image in the minds of customer.Also the expectation of the customer to be set with this product. So customer education is equally important aspect.

How to Fix: 

1. Target " Gram Prachayt" as centre for promotions for the product. 

2. Make Ads covering the rural and semi rural landscape.

3. Tata Nano as " DOWRY" product, use this concept in the Rural back ground. (Advertisement )

Off late Tata has launched new Ad along with 4Years warranty scheme for Tata Nano, but al lot to be done to make the initial penetration of the product, because once it is accepeted Tata Nao would change the face of automotive industry in the years to come.

Conflict Management !!!

STORY :

Here is a story which bring out the attitude which is required for effective conflict resolution:

There was a father who left 17 camels as an asset for his three sons. When the father passed away, his sons opened up the will.

Will of the father stated that the eldest son should get half of 17 camels while the middle son should be given 1/3rd (one-third). The youngest son should be given 1/9th (one-ninth) of the 17 camels.

As it is not possible to divide 17 into half or 17 by 3 or 17 by 9, three sons started to fight with each other. How can they divide their father’s inheritance?

Do you have any thoughts about how to divide 17 camels among three sons as prescribed in their father’s will?

You may take your time to think before reading further…..

So, three sons decided to go to a wise man.

The wise man listened patiently about the whole matter i.e. dividing 17 camels as follows:

½ to the eldest son, 1/3rd to the middle son and 1//9th to the youngest – How is it possible?

So, the wise man, after giving this thought, brought one camel of his own and added the same to 17. That increased the total to 18 camels.

Now, he started reading the deceased father’s will.

Half of 18 = 9. So he gave the eldest son 9 camels

1/3rd of 18 = 6. So he gave the middle son 6 camels

1/9th of 18 = 2. So he gave the youngest son 2 camels.

Now add this up: 9 plus 6 plus 2 is 17 and this leaves one camel, which the wise man took away.

KEY LEARNING

So, the attitude of conflict resolution is to find the 18th camel i.e. the common ground. Once a person is able to find the 18th ground by using his or her intellect, the issue is resolved. It is difficult and at times, it is not easy at all. However, to reach a solution, first step is to believe that there is a solution. If we think that there is no solution, we won’t be able to reach any!

Your thoughts?

Wikileaks would cause next Economic Breakdown

Information can be lethal. This can be better understood by US, which has find itself in awkward position after wikileaks cable releases.

Trust is the foremost thing that has taken a hit after these leaks, it has revealed the true motive of the diplomatic words is so destructive. US has lost his face of " Free Democracy" as it has trapped several economies in its diplomatic ties/ dialogues.

How intentions behind the actions are when exposed can create chaos is best exemplified by Wikileak Case.

The chain of reaction started with " No of cables leaked" will have next biggest devastation in the history of political scenes on this globe, but the worst sufferer of the same would be Business, the genesis of everything.

Diplomacy for centuries has been used as weapon of destruction between the nations. US has been the front runner in the diplomacy. From Russia to Germany during first and second world war, followed by Japan and Vietnam, and the gulf countries from Iraq to Afghanistan and now North Korea and china. US has tweaked the rules in the name of diplomacy to gain strategic advantage. Classical example is KYOTO Protocol, which US has discarded though the whole world is witnessing the aftermaths of ozone layer depletion.

Diplomacy however is polished word that encapsulate the bad intentions and tactical mind. But when like other side of the coin is exposed, it brings havoc in any relationship.

US in the backbone of world business, from biggest financial houses to the Dollar, the world currency, it has the largest say in today's business landscape. The roots of American business systems are so deep that any impact on US would have ripple effect on world's other economies, as the world is so inter dependent in business way that it will hit the globe badly, as business runs on trust and that has taken the hit after the wikileak case.

So It should not come as surprise if business across the world gets into recession.

Tata Nano - A Strategic Dream !!!

“If ever there were a symbol of India’s ambitions to become a modern nation, it would surely be the Nano, the tiny car with the even tinier price-tag. A triumph of homegrown engineering, the $2,200 (€1,490, £1,186) Nano encapsulates the dream of millions of Indians groping for a shot at urban prosperity”

-Financial Times

Abstract:
This papers illustrates the opportunities, challenges and trade-offs involved in the design, prototyping, and marketing of the Nano - the People's Car – A dream drafted by Ratan Tata, Head, Tata Group Company. This paper plots the magic that comes out when a dream is pursued passionately by the person at the TOP. Everything falls in place from hazy dream to defined vision and mission followed by formation of goals and objectives, and how Team work can produce impossible results given the directions by an enthusiastic leader?

This paper gives some inferences how the strategic dream sat inside the subconscious mind of Ratan Tata, using impact of CK Prahlad’s BOP Model of business, which he injected into the veins of Tata Group companies during his tenure at the board of directors at Taj Hotesl, another Tata group arm. How Ratan Tata gives business definition to his dream, this has been explained using Abell’s frame work? After defining the new business foray how he formed a team of high energy executives who relentlessly worked over the project? How SWOT analysis carried out in two steps? Firstly by External environment analysis of Tata Motors using ETOP (Environment Threat Opportunity Profile ) and then Internal Analysis using Organizational Capability Profile. Finally Strategic Advantage Profile is developed.

Further this paper touches upon the aspects of capability building to bring out successful business strategy, this has been expounded over one of the Porter’s generic strategies of. cost leadership strategy. How that is pursued through a chain of breakthrough innovations, out of the box thinking and stream of value engineering proposals? This has been covered in detail in this paper.

Finally this paper summarizes a few key learning out of this strategic dream The Nano which met its promise of reliable, safe transportation to India's emergent middle class as a fraction of the cost.

Management Perspectives: Abell’s Frame work, BOP, Porter Generic Strategies, Grand Strategies, SWOT Analysis (ETOP and SAP).

This is Abstract of term paper project, submitted by the author for the course of Competitive Strategy in Department of Management Studies in IIT Delhi. ( Course Instructor- Dr Mahim Sagar)

Suzuki pinch to Maruti-Suzuki !!!

The over-dependence on its Japanese parent for launching new models in quick succession is proving costly for Maruti Suzuki. In the June 2010 quarter, the country’s largest passenger carmaker reported a 20% fall in net profit to `465 crore despite a 27% YoY jump in net sales. This is largely due to a sharp rise in the payment of royalty and technical fees (RTF) to its parent, Suzuki Motor, for use of its technology and brand. Though the company doesn’t divulge RTF figures on a quarterly basis, it is captured under ‘other expenses’, which was up 42% on an aggregate basis during the quarter and 14% on a per unit basis. Royalty and technical fees are now the second-largest cost head for Maruti after raw material costs. The company had earlier told ET that RTF is fixed at 5% of the revenues for domestic sales and 8% in case of exports. On top of that, in the June 2010 quarter, the company made a one-off payment of `65 crore to Suzuki Motor as an adjustment for the past RTF dues. This resulted in a sharp contraction in operating margin to 7.6% of net sales, one of the lowest in the last five quarters. Operating margin fell despite favourable raw material environment. The company’s raw material cost rose by 25.9% YoY during the quarter, less than 27% jump in net sales during the period. This resulted in over 60 bps improvement in raw material intensity to 75.5% of net sales in the June quarter compared with 76.1% a year ago. The net profit was also hit by a sharp 53% fall in other income to `100 crore as the company withdrew cash from its treasury operations to fund its capex programme. The company is investing nearly `1,700 crore to raise its manufacturing capacity by 25% to 1.25 million units per annum. Maruti Suzuki also bore the brunt of the 2% hike in excise duty in the last budget and its indirect outgo was up 51% during the period, much faster than the 25% YoY increase in sales volumes. The duty burden was up 21% to `32,818 per unit and was only partially compensated by a 1.6% increase in net sales realisation during the period. The future looks equally challenging for company, given its RTF commitments, the possibility of a further rise in metal prices and its capex. The operating margin in the passenger car industry has in general softened in recent years due to rising competitive intensity and now hovers around 12-13% of net sales. This puts Maruti at a disadvantageous position vis-à-vis its domestic competitors such as Tata Motors and Mahindra & Mahindra who don’t have to incur royalty payments. This would not have been a big issue if Maruti had charged premium pricing for its latest models. But the company seems to have decided against it for fear of losing market share.

Source: Economic Times

Global ambitions through reverse innovation

As Global companies want to capture the market in every corner of the world, while keeping the core-function of the business such as R&D, technology or Decision making in their home country.

Business models which gave the way to outsourcing of the routine functions or activities such as customer care were actually fading away as more and more organizations have got the taste of reverse innovation.

Reverse innovation is basically about innovating products and solutions primarily in emerging markets with an aim to serve both developing and developed nations. (//Source: Business Today, May 30 2010, Page 77). It is of significant importance because of following four reasons.

Business lies here: Now Big players are getting greater pie of their profit cake from countries such as China, India, Brazil, and South Africa. So focus on the need of the consumer is suppose to be addressed by these organizations and that is possible by being closer to the customer for critical functions such as design.

Cost of innovation: availability of skilled manpower which is equipped with latest technological assets has made the designing of the new products much cost-effective in emerging markets. Renault is designing its global compact car at its design centre in Mumbai, India.

Frugal mindset in developed nations: It is another reason that has given reverse innovation so much importance, as the consumers in developed nations are also becoming cost-conscious, so they are hitting the “VALUE QUOTIENT” of any product. It has made easier for the product designers in the developing countries to address the needs of this segment of customer in developed nations along with local markets. Blurring the line of quality expectations among the consumers has given they way to reverse innovation.

More and more organizations are on set to adopt a business model which has reverse innovation at its core to fulfill their global ambitions.

First Year of MBA - Key learnings

Three things that I have learned at the end of second semester (First Year) of my MBA in technology management at DMS, IIT Delhi.

1. Statistics is one of the foundation of the Management over which this tall building of management is towering. Its principles are used so extensively that future of leading multinational organizations might turn dark without this subject.

Business Intelligence .... has statistics at its core...

2. Its not subject that is interesting or boring in itself, but its teacher who makes it what it should be. Management accounting, I thought of it as night mare being an engineer,before joining the course but thanks to Prof P K Jain, Professor at DMS, IIT Delhi, who not only made our fundamental strong, but also gave the practical aspects of accounting to the engineers giving them better decision making power.

Now I can understand that why Volume Profit Graphs are @ desks of board room.

3. Creative problem solving, a unique course at B School -IIT Delhi, is basically about how problem actually hit our face and how we (manager) should solve them. How a problem from mess state can be turned into statement through process of diverging and converging patterns of thinking, and how we ended up to the solution.

I got to know about P N Khandwalla, Ex Dean IIM Ahmadabad , a true genius and writer of Master piece "Life Long Creativity-An unending Quest"... A bible on Creativity, its process and how it can be part of our life ....


Other Important Books I read during this year...

1. Fifth discipline by Peter M Senge
2. My years with General Motors by Alfred P Sloan
3.Exploring Corporate Strategy by Gerry Johnson,Kevan Scholes & Richard Whittington
4. Managing radical Change -Sumantra Ghoshal & Gita piramal

Thanks 2009-10....

CGPA: 9.5