Tata Ace Solution

Solution TATA Ace case study Ganesh Iyer MMS-B, R.No.-85 1. Explain the following aspects of the case study in brief? (refer exhibit 1 and 2) o

Overview of the Indian Commercial Vehicle Sector

Commercial vehicle: A commercial vehicle is a type of motor vehicle that is used for transportation of goods or passenger

Overview of Indian Commercial Vehicle Sector as per case study,

Major Manufacturers (Market share)

Indian Commercial Vehicle sector

4-Wheelers Sales for 2005-119877 units Trucks, Pick-ups, Small buses 83% cargo 17% passenger Payload-1.2-7.5tons

TATA motors (51%) Mahindra & Mahindra (33%) Swaraj Mazda (5%) Eicher Motors(5%)

3-Wheelers Worlds Largest Market Sales 2005-307887 units 44% cargo 56% passenger Payload -0.5-1.0 tons

Bajaj (51%) Piaggio (26%) Force Motors (8%) Mahindra & Mahindra (7%)

2-Wheelers motorcycles , mopeds, sccoters cars & sports utility vehicles (SUV)

Non Motorised Vehicles Bullock cart BIcycle Rickshaws horse-drawn carriages manully pulled carts

Segmentation of Commercial Vehicle Industry

Indian Commercial Vehicle Industry

Gross Vehicle Weight (GVW)

LCV-Light Commercial Vehicle GVW < 7.5 tons E.g TATA Ace . Mahindra Maximo

Application

GOODS

M&CVMedium and Heavy Commercial Vehicle GVW > 7.5 tons

UTILITY VEHICLES (UV)

E.g.Mahindra Traco

Seating Capacity< 13

PASSENGER

LCV passengers Seating Capacity > 13

Road Transportation Infrastructure in India 

Inadequate and underdeveloped and needs rapid development



3.32 million Kilometre of road network out of which national highways network is only 66400 km. Out of 66400 only 7968km is four lane or above.



The maximum percentage share of total roads in India is by District and rural roads



Roads near retail outlets in urban areas in congested and narrow



Roads in rural India are poorly paved and lack markings.



Ban of three wheelers on highways due to slower speed and safety concerns

Roads transportation infrastructure in India as of 2015 

India has the second largest road network in the world, spanning a total of 4.87 million kilometres



India transport over 60 per cent of all goods and 85 per cent of total passenger traffic.

Overview of the TATA Group and TATA Motors

6 Continents

96 Operating Companies $21.9 bn Revenue (2006)

2,02,000 Employees

TATA Group (Business sectors)

TATA Group

54 Operations Countries

120 Exports Nations

1-IT & Comm 2-Engineering 3-Chemicals 4-Energy 5-Consumer products 6-Materials 7-Services

TATA Motors 

TATA motors was initially TATA Engineering and Locomotive Company (TELCO) established in 1945



Tata motors together with Daimler Benz started manufacturing medium size commercial vehicles in 1954 and set up an Indian research and development centre in 1959



Launched a four ton Tata 407 truck which became the top selling in the category



Launched Tata Indica in the year 1998 which received an overwhelming response in the market



Began exporting Indica to U.K through M.G Rover



2003 TELCO was changed to TATA motors



TATA motors is the major manufacturer of passenger cars and commercial vehicles in India

2. Explain the Idea for the Ace and role of Market Research in finding the attractive segment of LCV of less than 1 ton? (refer exhibit 34)

Idea for ACE 

Tata Motors posted a loss of Rs.5 billion in 2001 added with a downturn of commercial vehicle sector and absence of smaller than 2 ton vehicle threatened the company to develop a new product.



As we can see from the exhibit 3 the Road density (paved highway (km)/ Area (km2)) is very low for India so it was must for the automobile manufacturers to deliver a better vehicle then three wheeler that could reach the remote areas having unpaved roads



From the second graph it is clear that the GDP per capita of India was very low which recommended for a low cost vehicle to be launched



Three wheelers were banned from entering highways and heavy commercial vehicle in city areas



The exhibit 4 shows that the requirement in the 750-1000kgs and 1000-1250kgs was diversified and a new substitute was required which could do the work of both three wheeler truck and pickup. This opportunity was by grasped by TATA motors through TATA ACE

Role of Market Research Customer analysis to know the exact requirement Market research revealed the different perspective of buying a LCV Price at which the vehicle will be accepted by customer willing to buy below 1 ton LCV Different criteria (safety, facilities etc.) for selection of vehicle was studied through research Demand of the new product was studied

3. Explain the Functional and Customer Segmentation used for effective Segmentation and Targeting Strategy adopted for TATA Ace? (refer exhibit 4 and 5)

Functional segmentation

Percentage

Ace’s core market 750-1500kgs over 100-200 km distance

Pickup/LCV 15%

3Wheelers 45%

First Time Purchsers 40%

Customer Segmentation

Customer Type Performance sensitive Balanced perspective ROI sensitive Acquisition Price constrained 13%

7% 25%

55%

Performance sensitive customers were those interested in Status, brand image and speed and are willing to pay higher for features (AC, metallic paint, and radio) Balanced Perspective customers were typically entrepreneurs and want vehicle that justified itself on an ROI basis but also want comfort and convenience to improve quality of life. ROI-sensitive customers were those who buy on lowest cost per mile basis. Largely consist of fleet owners Acquisition Price Constrained customers are those who lacked credit and financial means to purchase slightly higher price car

4. Explain the 4P's of Marketing Mix strategy used for TATA Ace?

•Overload capabilities were designed as per payload •Two cylinder engine is designed based on the concept of Indica •Engine is matched to the fuel efiifciency and speed demanded by the customer •water cooled engine allowed more travel per day •Rotary fuel injection pump designed to meet emission norms •Highest safety norms achieved through Flat-face design •Using existing facility and aggregate outsourcing, high performance car like product was developed •Semi monocoque design resulting in low cost, high durability and a ride quality of a car. •4-wheelers is hiigher status symbol in few rural areas •Payload capacity 750kgs to 1000kgs

•More economical than three wheelers in the long run •Less operating cost than the next best competitor (RS.6.70 perkm per ton vs Rs.7.88perkm per ton) •27 % less operating cost than the segment average •Financing offered through Tata's own financing firm •Third party financers were ready to offer a 5-years loan (3years for three wheelers) resulting to low monthly installments compared to three wheelers loans •81.5% of material required was outsourced to keep the cost price low •Targeted at Rs.2,00,000 whereas price of three wheeler is Rs.1,00,000-Rs2,00,000 •Well suited price for ROI sensitive customers

•Production done at underutilised plant in pune to reduce freight cost •5 states in western and southern India, with strongest three wheeler demand targeted •Ace distribution netwrok was benchmarked with two and three wheeler dealer network having sales and service outlay to cover more and more rural market •New dealership format 1S (Sales) developed to increase the reach of TATA Ace •300 distribution points set-up within three months •"Suvidham" meaning convinience, a program launched to train existing rural mechanica free of cost to complete simple maintenance works of Ace

•Educate dealers in the operating-economics analysis •Tag lines to emotionally attack customers, "feeling good about your job" •"Free themselves" a marketing message for owners to highlight the new opportunities this vehicle could create for them compared to three wheelers •Advertised as "India's first mintruck" •Newspaper, advertising media involved for aggresive promotion •Local language used for advertisement •Ace "small is big " campaign to suggest the Tata customers the stability and trust of a big TATA truck in a small package •A television ad created "Chinna Annai" Tamil word meaning "little elephant"to promote Ace

5. Explain the market launch and response of TATA Ace

Tamil Nadu

Market launch Maharashtra

Karnataka

 

  Kerala & Pondicherry

Launched in May 2005 South and West India were the initial launch regions Priced competitively at Rs.2,25,000 25% of India covered for initial launch

Andra Pradesh

Response of TATA Ace 

TATA Ace exceeded the expectations of TATA Motors and its annual production target of 30,000 vehicles was sold in less than one year



54% of the customers were first time buyers, 33% previously owned 3-wheelers customers and 30% had LCV suggesting that the launch was successful



Customers in the age group 25-35 were the first time buyers suggesting that Ace was successful in attracting first time buyers



56% of customers were using Ace for intracity transport, 35% for intercity transport, 7% for village to city transport and 2% for intervillage transport



In Jan 2006 TATA Ace won BBC Top Gear’s annual “Best Commercial Vehicle Design” award.

6. Provide your key learning from the case study on how marketing strategy was used by TATA Motors for the successful launch of TATA Ace 

The marketing strategy should start with the requirement of a customer and then designing a new-product or upgrading a new product as per customer need.



4 P’s analysis should be used to successfully market and launch a product



Demand estimation should be done through proper market research

 

Consumer behaviour should be studied Sales strategy should be designed that is best suited for the product

http://www.ibef.org/industry/roads-presentation