the tata nano

7/29/2019 The Tata Nano

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The tata nano1. INTRODUCTION:Seldom do we see cars that rewrite the history books even before they areseen running around on the roads. And hardly ever do we see cars that vowto put the nation on four wheels. The Tata Nano is one such car that has been

in the news for quite a few years, for reasons good and evil. Nano is a carwhich has breathed into life due to one man. Give credit to Mr. Ratan Tata forhis determination to build a low cost family car that has come true, finally.Took long it did, but the Nano came in a beautiful form. Touted as world'scheapest car by a far cry, Nano has been the talk of the town around theglobe. Head honchos of big organizations have been pouring in by numbers tohave a look at this engineering master piece. Nano as a part of a "new breedof 21st-century cars" that embody "a contrarianphilosophy of smaller, lighter, cheaper" and portend a new era in inexpensivepersonal transportation and potentially, "global gridlock". The Wall StreetJournal confirms a global trend toward small cars, led by the Nano. The prefix"Nano" derives from the Greek root 'Nano's', meaning dwarf as withnanometer. "Nano" also means "small" in Gujarati, the native language of theTata family, founders of the Tata Group.The project to create a 1 lakh rupees (3000SGD) car began in 2003, underthe Chairman of Tata Motors, Ratan Tata. The strategy behind the project wasthe awareness of the number of Indian families who had two wheeledtransport, but couldn't afford a four wheel car, and was based on thecompany's success in producing the low cost 4 wheeled Ace truck in May

2005.To discuss the innovation strategy for Tata Nano, we first discuss theconstraints as per which the company had to operate.In pursuit of excellence and to keep up to the initial promise made to peoplethatTata will come out with a compact, quality car within a price tag of Rs. 1lakhs(3000 SGD), Tata Motors came up with a design, marketing andoperational strategy keeping in my mind the constraints of:

Price

Market Scalability

Customer aspiration

Resource efficiency

2. COMPANY PROFILE:Tata Motors Limited is India's largest automobile company, with consolidatedrevenues of USD 14 billion in 2008-09. It is the leader in commercial vehiclesin each segment, and among the top three in passenger vehicles with winning


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products in the compact, midsize car and utility vehicle segments. Thecompany is the world's fourth largest truck manufacturer, and the world'ssecond largest bus manufacturer.The company's 24,000 employees are guided by the vision to be "best in themanner in which we operate best in the products we deliver and best in our

value system and ethics."Established in 1945, Tata Motors' presence indeed cuts across the length andbreadth of India. Over 4 million Tata vehicles ply on Indian roads, since thefirst rolled out in 1954. The company's manufacturing base in India is spreadacross Jamshedpur (Jharkhand), Pune (Maharashtra), Lucknow (UttarPradesh), Pantnagar (Uttarakhand) and Dharwad (Karnataka). Following astrategic alliance with Fiat in 2005, it has set up an industrial joint venture withFiat Group Automobiles at Ranjangaon (Maharashtra) to produce both Fiatand Tata cars and Fiat powertrains. The company is establishing a new plantat Sanand (Gujarat). The company's dealership, sales, services and spareparts network comprises over 3500 touch points. Tata Motors also distributesand markets Fiat branded cars in India.Tata Motors, the first company from India's engineering sector to be listed inthe New York Stock Exchange (September 2004), has also emerged as aninternational automobile company. Through subsidiaries and associatecompanies, Tata Motors has operations in the UK, South Korea, Thailand andSpain. Among them is Jaguar Land Rover, a business comprising the twoiconic British brands that was acquired in 2008. In 2004, it acquired theDaewoo Commercial Vehicles Company, South Korea's second largest truck

maker. The rechristened Tata Daewoo Commercial Vehicles Company haslaunched several new products in the Korean market, while also exportingthese products to several international markets. Today two-thirds of heavycommercial vehicle exports out of South Korea are from Tata Daewoo. In2005, Tata Motors acquired a 21% stake in Hispano Carrocera, a reputedSpanish bus and coach manufacturer, and subsequently the remaining stakein 2009. Hispano's presence is being expanded in other markets. In 2006,Tata Motors formed a joint venture with the Brazil-based Marcopolo, a globalleader in body-building for buses and coaches to manufacture fully-built busesand coaches for India and select international markets. In 2006, Tata Motors

entered into joint venture with Thonburi Automotive Assembly Plant Companyof Thailand to manufacture and market the company's pickup vehicles inThailand. The new plant of Tata Motors (Thailand) has begun production ofthe Xenon pickup truck, with the Xenon having been launched in Thailand in2008.Tata Motors is also expanding its international footprint, established throughexports since 1961. The company's commercial and passenger vehicles are


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already being marketed in several countries in Europe, Africa, the MiddleEast, South East Asia, South Asia and South America. It has franchisee/jointventure assembly operations in Kenya, Bangladesh, Ukraine, Russia, Senegaland South Africa.The foundation of the company's growth over the last 50 years is a deep

understanding of economic stimuli and customer needs, and the ability totranslate them into customer-desired offerings through leading edge R&D.With over 3,000 engineers and scientists, the company's EngineeringResearch Centre, established in 1966, has enabled pioneering technologiesand products. The company today has R&D centers in Pune, Jamshedpur,Lucknow, Dharwad in India, and in South Korea, Spain, and the UK. It wasTata Motors, which developed the first indigenously developed LightCommercial Vehicle, India's first Sports Utility Vehicle and, in 1998, the TataIndica, India's first fully indigenous passenger car. Within two years of launch,Tata Indica became India's largest selling car in its segment. In 2005, TataMotors created a new segment by launching the Tata Ace, India's firstindigenously developed mini-truck.In January 2008, Tata Motors unveiled its People's Car, the Tata Nano, whichIndia and the world have been looking forward to. The Tata Nano has beensubsequently launched, as planned, in India in March 2009. A development,which signifies a first for the global automobile industry, the Nano brings thecomfort and safety of a car within the reach of thousands of families. Thestandard version has been priced at USD 2500 (excluding VAT andtransportation cost).

Designed with a family in mind, it has a roomy passenger compartment withgenerous leg space and head room. It can comfortably seat four persons. Itsmono-volume design will set a new benchmark among small cars. Its safetyperformance exceeds regulatory requirements in India. Its tailpipe emissionperformance too exceeds regulatory requirements. In terms of overallpollutants, it has a lower pollution level than two-wheelers being manufacturedin India today. The lean design strategy has helped minimize weight, whichhelps maximize performance per unit of energy consumed and delivers highfuel efficiency. The high fuel efficiency also ensures that the car has lowcarbon dioxide emissions, thereby providing the twin benefits of an affordable

transportation solution with a low carbon footprint.In May 2009, Tata Motors introduced ushered in a new era in the Indianautomobile industry, in keeping with its pioneering tradition, by unveiling itsnew range of world standard trucks called Prima. In their power, speed,carrying capacity, operating economy and trims, they will introduce newbenchmarks in India and match the best in the world in performance at alower life-cycle cost.


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Tata Motors is equally focused on environment-friendly technologies inemissions and alternative fuels. . It has developed electric and hybrid vehiclesboth for personal and public transportation. It has also been implementingseveral environment-friendly technologies in manufacturing processes,significantly enhancing resource conservation

Through its subsidiaries, the company is engaged in engineering andautomotive solutions, construction equipment manufacturing, automotivevehicle components manufacturing and supply chain activities, machine toolsand factory automation solutions, high-precision tooling and plastic andelectronic components for automotive and computer applications, andautomotive retailing and service operations.Tata Motors is committed to improving the quality of life of communities byworking on four thrust areas - employability, education, health andenvironment. The activities touch the lives of more than a million citizens. Thecompany's support on education and employability is focused on youth andwomen. They range from schools to technical education institutes to actualfacilitation of income generation. In health, our intervention is in bothpreventive and curative health care. The goal of environment protection isachieved through tree plantation, conserving water and creating new waterbodies and, last but not the least, by introducing appropriate technologies inour vehicles and operations for constantly enhancing environment care.With the foundation of its rich heritage, Tata Motors today is etching arefulgent future.2.1 TATA GROUP AND ITS SUBSIDIARIES

TATA group's portfolio includes wide range of businesses which are leading intheir fields. Its total revenue in 2006-07 is $ 28.8 billion which is 3.2 % ofIndia's GDP. TATA's business empire extends to over 80 countries across 6continents. Similar to Jack Welch's opinion that the business should either befirst or second else it is better to sell the business, TATA groups companiesexcel it the fields wherever they started the business. TATA group has ninetyeight companies that are basically operating in seven sectors.3. ORGANIZATIONAL INNOVATIONS SYSTEMInnovation in Tata Motors is not a recent phenomenon, but is a part of itslegacy. The Company's culture of perpetual search for excellence is highly

attributed to the Tata's ethos and incessant efforts of its employees in the pastseveral decades to serve the customers by bringing continuous innovation inits products and processes.The three major areas to illustrate how Tata Motors has effected innovation inthe past few years.

Products

Processes


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People

3.1. PRODUCTS:Tata Motors created several breakthrough products in the past which changedthe market dynamics and helped in providing a new customer experience.

407 platform in 1980sJapanese LCV players had made inroads into the Indian automobile marketinthe 1980s. Tata Motors came out with its innovative 407 platform which wasdesigned to suit the Indian conditions. It quickly became the bestseller inLCVs and the platform still continues control 2/3rd of the market even in thethird decade of its existence.Indica in the late 90s-This was the first indigenously designed passenger car in India and it wasinnovative in the sense that it provided more value for money in terms ofinternal space (comparable to the

Ambassador which was the benchmark in the country for internal space),contemporary features (comparable to Maruti Zen) and all that at a verycompetitive price.

ACEAce was India's first mini-truck launched in 2005. While heavy trucks ply onthe Highways, research showed the need for a small sub one-ton truck forintercity and truck terminal-to-nearby locations connectivity. The vehicleoffered 4 wheeler functionality at 3 Wheelers price. The unconventionaldesign features used in the vehicle were:

Innovative 2 cylinder Indica engine

Semi-monocoque body to withstand abuse

Rigid front axle and rear wheel drive for low cost

Flat face vs. semi-forward face to enhance the loading space.

NANOThe target price itself became the source of innovation, as you all must haveread that the big names in the industry just rubbished it as false claims andcommented that it was impossible to make a CAR at that price. However,you all know that the promise was kept. This was made possible throughseries of innovative ideas which led to acquisition of 37 patents by TataMotors.

Engine was packaged on the rear side.

2 cylinder engine (conventionally there are 3-4 cylinder engines)

Identical handles and mechanisms for left and right side doors

Instrument cluster in the middle of the dashboard


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Unconventional seats

Interior space was maximized by pushing wheels to the corners and powertrain below the rear seat.

Product created was very contemporary and

It has sufficient Space inside to accommodate 4 persons comfortably. Highly fuel efficient

Exceeds the current Safety requirements

Complies with the current emission requirements.

WORLD TRUCKThe new generation range of trucks which would match with the best in theworld in performance at a lower life-cycle cost is being unveiled in just a fewhours from now. It will create a new benchmark in India in terms of power,speed, carrying capacity, operating economy and trims and a new experiencefor the drivers in terms of drivability and comfort.3.2. PROCESS:Sustainability of innovation in products needed to be complemented withinnovative changes in the organizational processes too. Some examples are:

Adoption of the Tata Business Excellence Model (TBEM)

It is based on Malcolm Baldridge Award for business excellence and BalanceScore Card. This has created a culture of exploring various innovative ways toachieve excellence in all the organizational processes.

Use of IT systems:

It has been a benchmark and highly leveraged in the organization throughoutthe VALUE CHAIN.

Supply Side

Free-Markets for e-Sourcing, Supplier Relationship Management (SRM).

Product Development Process.

Institutionalized Stage Gate process in the organization is a benchmark initself and ensures development of right product for the market and also aneffective and efficient program management. Transition from in-house product

development to a collaborative product development, utilizing the capabilitiesof suppliers, design houses, subsidiaries and associate companiesspecializing in different verticals. Internalization philosophyofTata Motorsmade some major global acquisitions like TDCV, JLR, Hispano, etc. Unlikemany other Japanese / US players, they followed an innovative approach tobe seen as a local company in the country of operation, i.e, as a SouthKorean player in South Korea and as a Spanish Player in Spain. This has


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helped them to appreciate the need and importance of all the stakeholdersand they achieved this in four stages. This involves - Initiating, byunderstanding the language and basic facts of the country, Familiarizationwith their culture, Harmonization and finally Synergizing by sharing the bestpractices and work ethics.3.3. PEOPLE:The changing business environment and increasing complexity of businessposed a huge challenge in achievement of business plans. Tata Group, ofwhich Tata Motors is a part of, is well known for identifying and nurturingleaders. Tata Motors in the past has adopted several innovative means toleverage its human resource capabilities for achieving extremely challenginggoals.

Identifying leaders through assessment centers -

This process has been effectively utilized by Tata Motors to identify young

managers with very high potential. This process was started some 20 yearsback and has progressively created a pool of very strong and effective leaderswho have proven their capabilities in some very challenging assignmentsgiven to them. This process has now been replicated by many otherorganizations too.

Putting them into challenging assignments and giving them Internationalexposure Key projects like ACE and NANO are examples of some challengingprojects which constituted of young leaders and engineers.

Breaking the functional silos by shifting from a hierarchical organization to a

more CFT approachAll these experiences have helped us to redefine the way we have looked atinnovation. And while innovation is normally understood as introduction of newand radical ideas in the area of products and services, our experience saysthere are several other areas that also require innovation in tandem, so as toeffect an innovation in a company. Three of them I have already mentioned,that is, product, process and people.Four other areas of innovationSource of inspiration/ Purposefrom which the concept emanated, whichstresses upon the fact that agility and understanding the unstated/ unfulfilled

need of customers is the most important source of innovation. Tata Nano: Inthis case the idea struck in the mind of our Chairman when he saw a family offour (a man, his wife and two kids) riding on a scooter on a rainy day. He feltthat there was an unfulfilled need of safe, affordable and an all weatheralternative.Price:


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The price of Nano got fixed at Rs 1 lakh (2500USD). The achievement of pricetarget was definite to create a major disruption in the car market as it fellmidway between the price of a scooter and the cheapest car available whichwas priced at Rs 2(5000USD) lakh. Product design was choked for optionsbecause of the price target. Hence the setting the price as target triggered a

series of innovation which involved:Target Cost approachwhich involved breaking down the cost targets to sub-system and then tocomponent level.Suppliers were challenged with the stringent cost target given to them, butthey accepted the same and the result is in front of you.Promotion:Innovation lies in reaching the right customers always and communicating in asimple and effective manner. Tata Motors in case of Nano developed a portal,which got as high 30 million hits even before the launch of the car. After thelaunch there were another 30 million hits in less than a month. This helped thecustomers in becoming more aware of the product features. They receivedaround 2 lakh(.2 million) applications, which is a good response by allstandards.Place/Reach:Conscious of the fact that demand for such cars would be substantial from theremotest corner of the country, the sale of form for booking were facilitatedthrough several banks. New insurance schemes were co-designed with theinsurance companies, and now we are in the process of enhancing the sales

and service network for better reach and service to the customers.To summarize the experience, path breaking ideas, conceived andimplemented in one or more of the 7 Ps, leads to INNOVATION.

Purpose

Product

Price

Place

Promotion

People

Process

4. INTRODUCTION TO THE NEW PRODUCT DEVELOPMENT:Before the introduction of a product into the market, it goes through severalstages of development. The stages of the product development includes thefollowing

idea Generation


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Idea Screening

Concept Testing and Development

Market Strategy

Business Analysis

Total Sales Estimation

Estimation Costs and Profits

Product Development

Test Marketing

As far as Nano is concerned, it falls new to the world products in the contextthat it has made a history for the cheapest car ever made withoutcompromising on quality. i.e. best way value analysis.

Category Players 2002 2003 2004 2005 2006 2007

A Maruti 800 28 24 21 14 10 7

B Alto,WagnorR,Santro,Indica 33 41 47 57 64 75

CEsteem, Swift,Indigo, Ikon, Ascent 12 15 18 22 26 33

D Mercedes-C, Skoda Superb 1 2 3 4

P/L Mercedes-E, BMw 1 1 1 1 1 1

74 81 88 96 104 120

Average Monthly Category Sales4.1. idea generationThe main idea behind TATA NANO was perceived by the chairman of TATAgroup himself who saw a family of four going on a scooter in rain he wanted todevelop a transport which was affordable, safe and could face all types ofweathers. This turned out to be the most ambitious project of Tata motors tilldate when Mr Ratan Tata told this to one of his managing directors Mr. RaviKant he was also interested about the idea. Mr. Ravi Kant had learned fromhis experience that People want to move from two-wheelers to four-wheelers

but they cannot afford it. More and more can, but Indian car buyers todayrepresent a tiny slice of a potentially giant market India has just seven carsper 1,000 people. India's auto industry has grown an average of 12% for thepast decade, but just 1.3 million passenger vehicles were sold in India in thefiscal year ending March 2006. That means a billion Indians buy about thesame number of cars in a year as 300 million Americans buy in a month. Iffour wheels cost as little as two wheels, that could change fast. About 7 million


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scooters and motorcycles were sold in India last year, typically for pricesbetween 30,000 rupees and 70,000 rupees, about $675 to $1,600. Tata istargeting a price of 100,000 rupees one lakh, in Indian 19 terms ofmeasurement or about $2,500 at current exchange rates, for its small car.That sounds impossibly cheap in the West but remains three times higher

than India's annual per capita income. The average pay for factory workers atTata Motors is just $5,500 a year.4.2. IDEA SCREENINGThe next step was screening of ideas. There were many ideas like to make ascooter with two extra wheels at the back for better stability, A three wheeledcar like a closed auto- rickshaw but the market requirement was a car, the carshould be such that it doesn't convey a message that it's just an extension ofa scooter it should be a proper car and likewise should also give the feel of aactual car. Trying to build a car cheap enough for motorcycle buyers seems tomake sense now but seemed unachievable several years ago when Mr.Ratan Tata, chairman of Tata Motors had first mentioned his dream of buildinga one-lakh car in2003 at that time the whole world thought that this gamble will never work outbut ironically the whole world is now talking of small cars as $5,000 or $7,000after TATA NANO was launched in 2009.4.3. CONCEPT TESTING AND DEVELOPMENT

After surveying customers the end result was that people wanted a fourwheeler which was cheap, dependable and strong enough to carry a load of 1ton additionally four wheelers also increased the social status of the person

who owns it .Four wheels not only practical appeal but also had a emotionalappeal. Thus the new product was now to be developed but the followingconsiderations would have to kept in mind when developing it-

The car should be built on a different platform than conventional ones.

It must be meeting all the safety and regulatory requirements.

It has to be built on a scale which shall be more than double the earlierlaunches of similar products and the ramp up must be smooth.

The car has to be designed so that it can be exported to other countries as thedomestic demand may not materialize as per projections.

There were three main requirement of the new vehicle: it should be low cost,adhere to the regulatory requirements, and achieve performance targets suchas fuel efficiency and acceleration capacity. Nearly 500 engineers wereinvolved in the development of the vehicle and everyday they had meeting sothat the decision taking and the problem solving process could beaccelerated. Each engineer represented a different part of the car: engine andtransmission, body, vehicle integration, safety and regulation, and industrial


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design. The body of the vehicle had to go under a number of iterationsbecause the Mr.Ratan Tata wanted that a person whose height is over six feetcan also fit into the car without any discomfort and finally the length of the carhad to be increased by 100mm but eventually. The hard work of designing thecar paid off and the designers were successful in their attempt to design an

actual car which did not look shabby and inexpensive but looked sleek andsophisticated.4.4. BUSINESS ANALYSIS:COST:Since the car had to be built within a cost of Rs. 1 Lac, no conventional designwould work as the costs shall be higher and so the entire car has to beredesigned.The design has to question the need of each and every component from thepoint of view of its necessity of existence and also the minimum requirementsof its functionality. Value Engineering concepts have to be deployed to finalizethe minimum requirements.DISRUPTIVE TECHNOLOGY:It's a technology which brings radical change by introducing new ways ofdoing things.Technology that is

Significantly cheaper than existing Technology.

Much higher performing?

Has greater functionality and

Is more convenient to Use. Brings to market a totally different Value proposition than the one available

and can change the Paradigm about a product.

The Guiding factor was that the cost has to be minimized for each componentyet maintaining its basic functionality. The Alternatives are:

Reduce Consumption of Material being used.

Alternate Suppliers to get same material at fewer prices.

Use alternate materials.

Eliminate use of Material.

Eliminate a process Or a Combination of the above.

COST REDUCTION PARADIGM:Value Engineering Alternatives:The target was very clearly defined that, within the given cost structure all thecomponents have to be allocated and the same had to be achieved using theavailable alternatives.


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The Guiding factor was that the tax structure on materials and manufacturingmust support the final cost. Decisions were

Establish factory in a tax free zone.

Get the tax advantages on infrastructure development.

Get the suppliers to establish base near the factory. Get special concessions from State Govt.

In short select a manufacturing location where all the advantages could beachieved.4.5. TOTAL SALES ESTIMATION:The total sales had been estimated based on the following decisions

It was estimated that the demand for the people's car shall be at least twicethe demand for Maruti 800, the lowest end car.

Initial projections were at about 500,000 cars per year.

The basic reason was the conviction that the target price shall redefine the 4 -wheeler segment.

The price decision of Rs 1 lakh is definitely going to make a lot many peopletransit to

4-wheeler fold and that shall explode the demand.

Only 10% customers of 9 Million two wheeler market transit to 4-wheelers itshall amount to 50% of the passenger car market share.

It was decided to set up plants with 5 lakhs cars per annum capacity and ramp

the same up in stages, in line with increase in market demand.4.6. MARKETING:Product:Tata has a very wide range of products it has passenger cars, utility vehicles,Trucks, Commercial passenger Carriers and Defense Vehicles.

Nano received media attention due to its targeted low price.

The Tata Nano is a rear-engine, four passenger ,city car built by Tata Motors,

It was first presented at the 9th annual Auto Expo on 10 January 2008, atPragati Maidan in New Delhi, India.

Aimed primarily at the Indian market.

Price:The prices of Tata motors are generally affordable acceptable by the generalpublic at large. Tata always have something for the lower class people withNano being their trump card. Giving discount every month and specialpromotion for certain type of vehicle also one of the strong strategy use by


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Tata Motors. Discount can be made from Company's profit or from dealer'sprofit at certain range.Pricing strategies:

Penetration pricing

Low pricing policy with minimum profit margin. Though the one lakh price tag is not fixed by TATA group, it was the word of

mouth of people which fixed that range. This expectation of people creates abig challenge for the company.

Place:Tata Motors has an extensive dealer network covering Indian andInternational markets. Wherever you are, there is a Tata Motors Sales andService dealership close to you. The channel of distribution, physical location,and dealership method of distribution and sales is generally adopted. The

distribution of vehicle must be in a very systematic way, from the plant todealership and to end user. This is not only in India itself but also to the world-wide dealership.Promotion:Tata motors promote their products via Advertising and after sales services.

Enough use of one of the most important element of promotion mix, publicityreduces the necessity of other promotional devices for Nano.

Publicity as One lakh car by mouth to mouth.

Auto expo 2008,New Delhi & Geneva

Publicity through print & electronic mediaFor other type of promotional activities, cost factor that is 1 lakh price tag is tobe keep in mind, nano watches, nano T-shirts available in retail clothingstores. Advertising: - TV & other mass media will be less effective, thus toomuch money will not be invested in this regard. Mainly word of mouthadvertising will get more emphasis. Internet will be a major media foradvertising.People:Tata Motors owe their success to the highly motivated and talented staff.There recruitment division picks the crme-de-la-crme from premier

universities, management and engineering institutes in India. They put themthrough rigorous training programmes to hone their entrepreneurial skills andimpart comprehensive product knowledge.Processes:Tata motors follow Balanced Scorecard Collaborative, Inc for achievingexcellence in overall Company performance.Physical Evidence:


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The management of the company has managed to keep their hopes aliveeven in this recession and hoped that the worse is behind Tata Motorsrecently launched the most awaited car of the year, Tata Nano and thecompany had already received 203,000 booking that are fully paid and 70percent of the applicants are ready to wait till the end of 2010 for the car to be

manufactured.5. INNOVATIONS INCORPORATED IN TATA NANO:

At this moment, a fair amount of information on how the Nano was brought toits intended price tag without compromising its design brief - 'a proper car'.The report attempts to study the tactics and policies adopted by Tata's underthe enlightened approach to innovation.

Strategic Innovation

Focused Innovation

Holistic Innovation

5.1 Strategic Innovation:Some of the innovations that Tata Motors followed during the process ofcoming out with Nano were not only concerned with the only the car as theproduct, but extended itself to the whole organizational thought process.Starting from the team formation to product delivery, everything was thoughtkeeping in mind the promise of bringing out a quality car within a price tag ofRs. 1 lakh that would fulfill the latent demand of the Indian middle class whocould not afford even the lowest priced car at that time.

The whole idea was radical and required fresh thinking and challenging of age

old principles of product designing and manufacturing technologies. Inline withthis, the engineering team in charge with the designing and production ofNano was very young with the average age being only 28.

Tata Motors were not shy to unlearn and re-learn the processes and theywere open to take in ideas from their strategic partners also. Duringdevelopment, the company reinvented and minimized the manufacturingprocess, brought in innovative product design, and asked componentmanufacturers to look at current work and design approaches in a differentperspective to produce logical and simple solutions.

The strategy behind the project was the awareness of the number of Indianfamilies who had two wheeled transport, but couldn't afford a four wheel car,and was based on the company's success in producing the low cost 4wheeled Ace truck in May 2005. The company management learnt andimproved on the design procedure of Ace truck and used this know-how tocome up with the best design for Tata Nano. Also, since both the vehicles


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were similar in their basic design and component requirement, the supplierbase was also easier to be put in place.

Even after successfully launching the petrol and diesel variants of Nano, TataMotors have not rested on the laurels. They have taken one step further in

coming out with an electric version which enables them to position it as anenvironment friendly car of the future. This shows the foresightedness of themanagement to sense future demand and also the company culture tocontinuously innovate and improve.

Tata Motors set their retail price target before they designed the car. Doing solet them establish their demographic. Setting the price and working backwardsalso required a fundamental shift in the way the car was designed, since manycosts are fixed once the design is set.

Workers at the Tata Motors factory have been trained in Japanesemanufacturing techniques that call for continuous improvement.

5.2 Holistic Innovation: Tata Motors worked in collaboration with their suppliers very early in the

process - so early in fact that they were able to provide functional goals formany parts rather than technical specs (i.e. wipe water from windshield vs.windshield wiper must be x mm by y cm and work at z cadence). Thisapproach tapped the ingenuity of the supply chain, who delivered parts thatmet the functional requirements and extremely low prices.

Another cost cutting strategy - Tata Motors' distributed assembly model,where they ship the parts to local manufacturers for final assembly. The next

strategic thinking Tata Motors have to undertake to check if the policy can beapplied to all the other car models to allow them to be customized as per thelocal customer needs.

Working closely with the sourcing team led to many interesting inputs on whatwas possible and what was not. The driving instrument cluster is uniquelyplaced in the centre, giving the car an open look and enabling everyone in thecar to look at it. It also makes the dashboard equally amenable to left handand right hand driving.

The top management, even Mr. Ratan Tata was actively involved in the

designing phase of the car. Inputs from all the teams were taken to come upwith the best design.

Manufacturing planning: The interesting challenge here was that aiming for avery low cost car meant the entire organisation had to be leaned down - not

just manufacturing, but materials, design, human resources, and so on. Theteam has taken the benefit of best practices from other industries such as


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cycle manufacturing or PC manufacturing that involves mass manufacture andassembly.

Quality systems have been thought about, put in place and well documentedwell in advance; so implementation becomes easier. The maintenance

practices - failure mode analysis and development - had all been completed.This ensured all this during the planning phase itself and this reduced thebreakdowns when the project started and cut down unexpected challengesonce the actual implementation started.

Suppliers located within 50 kms of the main manufacturing plant whichreduces transportation cost and fosters just in time procurement strategy.

5.3 Focused Innovation:

The Nano has 21% more interior space and 8% smaller exterior, whencompared with its closest rival, the Maruti 800. The car will come in different

versions, including one standard and two deluxe variants. The deluxe versionwill have air conditioning, but no power steering.

The use of a rear mounted engine to help maximize interior space.

The Nano complies with Bharat Stage-III and Euro-IV emission standards.

Fuel economy : 20 kilometres per litre

The car conforms to environmental protection, and will have the lowestemissions in India. Thus it douses the fear in the mind of theenvironmentalists about it being the reason of shooting up emission limits formass adoption as well as the perceived notion of cheap products being of bad

quality. The Nano will also replace many overloaded and worn-out two-strokepolluting vehicles, both two and three-wheeled.

With a length of 3.1 metres, width of 1.5 metres and height of 1.6 metres, withadequate ground clearance, it can effortlessly manoeuvre on busy roads incities as well as in rural areas.

Its mono-volume design, with wheels at the corners and the power train at therear, enables it to uniquely combine both space and manoeuvrability, whichwill set a new benchmark among small cars.

The lean design strategy has helped minimise weight, which helps maximise

performance per unit of energy consumed and delivers high fuel efficiency. With an all sheet-metal body, it has a strong passenger compartment, with

safety features such as crumple zones, intrusion-resistant doors, seat belts,strong seats and anchorages, and the rear tailgate glass bonded to the body.

Tubeless tyres further enhance safety.


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The high fuel efficiency also ensures that the car has low carbon dioxideemissions, thereby providing the twin benefits of an affordable transportationsolution with a low carbon footprint.

The mono-volume design establishes a sea of change from the two-box layout

of the 800. What it ensures the Nano with is extremely short overhangs andtight packaging. For a car of this size and image, the Nano is an extremelysexy looking car with futuristic design cues. The bonnet line is steep andunites together with the bumper in a seamless way.

How could Tata Motors make a car so inexpensively?

No Radio, Power windows, air conditioning, anti lock brakes, air bags, remotelocks or power steering.

Rear wheel drive: manually actuated 4-speed trans axle that gives the carbetter fuel efficiency

Wheel Bearing: Wheel bearing is strong enough to drive the car at 72kmphbut would quickly wear out at higher speeds.

Analogue speedometer, odometer and fuel gauge.

Single windscreen wiper

Fundamentally, the engineers worked to do more with less. The car is smallerin overall dimensions than the Maruti, but it offers about 20 per cent moreseating capacity as a result of design choices such as putting the wheels atthe extreme edges of the car.

Car Maker Introduction HP Price(USD)

Model T Ford 1908 20 19700

Beetle VW 1956 24 11333

Mini Cooper 1961 34 11777

Nano Tata 2008 33 2500

Nano-Lowest ever

Modular Design Revolution:

One of the most significant dimensions of innovation is its modular design.The Nano is constructed of components that can be built and shippedseparately to be assembled in a variety of locations. In effect, the Nano isbeing sold in kits that are distributed, assembled, and serviced by localentrepreneurs. The company could produce the mass items and ship it tothem as kits.

Open Distribution Innovation:


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Tata have called this 'open distribution' innovation because it mobilizes largenumbers of third parties to reach remote rural consumers, tailor the productsand services to more effectively serve their needs, and add value to the coreproduct or service through ancillary services. Three innovations in productsand processes come together to support open distribution':

o Increased modularity (both in products and processes)

o Aggressive leveraging of existing third-party, often non-commercial,institutions in rural areas to more effectively reach target customers

o Creative use of information technology, carefully integrated with socialinstitutions, to encourage use and deliver even greater value

o Modular designs combined with creative leverage of local third-partyinstitutions help participants to get better faster.

o Welcoming users back into the design loop:

The Tata Motors/Nano approach contrasts with the strategy of most othermanufacturers. For more established automakers each new model representsan advance in tight integration, with more and more of the functionality deeplyembedded in electronics that truly represent a 'black box' to the customer. Thedays of customising cars to personalise them and push their performancelimits are rapidly receding into distant memory for the average customer.

Vendor Management Policy:

Tata Nano got some car parts from vendors who did their own research anddevelopment for them to reduce cost. Some vendors developed products with

Tata Motors, and quite a few were given designs by Tata Motors. Thecompany even helped some vendors find international partners to makeproducts that met the company's requirements. Some vendors who suppliedparts to Tata Nano did competitive buying of material from countries likeChina and Thailand. This is very similar to leveraging an onsite offshoremodel in IT.6. Challenges Faced During the Development of Tata Nano:

After much speculation, Tata Motors announced on May 19, 2006 that it willbe manufacturing Tata Nano fromSingur, Bengal. However, within a weekprotests were started by a few farmers in the area against the acquisition of

their lands by Tata. The cause was taken up byMamata Banerjee, the leaderofCongress. The situation escalated with Tata's threatening to pull out anddisruption of compensation for farmers who had volunteered to sell their landby anti-acquisition activists. This was followed by a state-widestrikebyTrinamool Congress in October. The government banned political parties fromholding meetings or processions at Singur and installed a huge police force


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there. There was widespread violence in the clashes between the police andthe farmers on December 2, 2006.The Key concerns are

Safety

Emissions Congestions

1. Question of SafetyThe Nano has an all sheet-metal body made fromJapaneseandKoreansteel,with safety features such as crumple zones, intrusion-resistant doors, seat-belts, strong seats and anchorages, and the rear tailgate glass bonded to thebody. Tires are tubeless2. Mass Motorization

As the Nano was conceived and designed around introducing the automobile

to a sector of the population who are currently usingeco-friendlybicycles andmotorcycles, environmentalists are concerned that its extraordinarily low pricemight lead to mass motorization in countries like India and therefore possiblyaggravatepollutionas well as increase the demand foroil. TheecologyfocusedGerman newspaperdie tageszeitungfeels that such concerns are"inappropriate" as the Tata Nano has lower emissions compared to theaverage Volkswagen, and that developing countries shouldn't be denied theright to motorized mobility when industrialized countries should be looking toreduce their emissions and usage of cars. Die Weltre ports that the carconforms to environmental protection, and will have the lowest emissions in

India.In crowded metropolitan cities likeMumbai, Ratan Tata has conceived ascheme to only offer the Nano to those individuals who do not have anautomobile already. The Nano will also replace many overloaded and worn-out two-stroke polluting vehicles, both two and three-wheeled. AccordingtoAnumita Roychowdhury, associate director of theCentre for Science andEnvironmentin New Delhi, "the low-cost cars will be disastrous" in the currentpolicy and regulatory framework.3. Used car market effects:The Nano is alleged to have severely affected theused carmarket in India, as

many Indians opt to wait for the Nano's release rather than buying used cars,such as theMaruti 800(a rebadgedSuzuki Alto), which is considered as theNano's nearest competitor. Sales of new Maruti 800s have dropped by 20%,and used ones by 30% following the unveiling of the Nano. As one automotive

journalist summarizes; People are asking themselvesand uswhy theyshould pay, say, 250,000 Rupees for a Maruti Alto, when they can wait and


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get a brand new Nano for less in a few months' time, a car that is actuallybigger.4. Cases of FireThere have been 7 cases where the Nano caught fire, with the first threeattributed to an electrical fault in the steering column. Tata Motors has since

replaced the OEM supplying the fire retardant material as well as the steeringcolumn assembly. In March 2010, a new case of a Tata Nano catching firewas reported, in which the car was being delivered from the dealership to theowner's house. This case is currently under investigation.5. CompetitorsRival car makers includingBajaj Auto,Fiat,General Motors,FordMotor,HyundaiandToyota Motorhave all expressed interest in building smallcars in India that are affordable to more middle-class consumers inemergingmarkets. The bulk of demand there is forsmall carsbecause people are muchmore sensitive tofuel prices.Honda and Toyota are leading the way on socalled cleanergasoline-electric hybrids, and some environmentalists arguegetting prices down on these technologies is where efforts should beconcentrated. Inexpensive and eco-friendly electric-cars likeTara Tiny(whichhas an engine producing 4 hp compared to Nano's 33 hp),Oreva Super(bothreportedly even cheaper than Tata Nano) andREVApose even moresignificant danger to Nano. There are also rumors ofMaruti Suzukiintroducinga lower priced version ofAltoto counter Tata Nano.

Maruti 800 Tata Nano bike

Engine 796 cc 623 cc 100 cc

Price(OTR) Rs 225,000 Rs 120,000(88%) 45,000

DP Rs 10,000 Rs 10,000 Rs 5000

EMI(60m) Rs 3583 Rs 1833(95%) Rs 667

Kmpl 15 20 50

Nano vs Maruti 800 Vs Bike- Ownership Cost7. FUTURE OF TATA NANO:

Emerging markets are a fertile ground for innovation. The challenge of

reaching dispersed, low income consumers in emerging markets often spurssignificant innovation.

As customers gain more power, they will demand more tailoring and valueadded services to meet their need. Companies which innovate on thisdimension are likely to be richly rewarded.


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World is getting tougher day by day being unique is a competitive advantage.Expectations to Tata Nano have proved this.

After 100 years to Henry Ford, Tata has not only proved him again not only hecame out of the expectations but also came out with a platform for Indian auto

sector.CONCLUSION:In the conclusion we can say that Nano has truly lived up to its expectationsand shattered the following myths

Cheap means unsafe- physically validated crash test results on 1 vehicle andplans more tests in the future

Rear- engine cars are unsafe- Ferrari, Porsche, VW and Lamborghini do itwhy can't Tata?

The Nano will pollute the planet- 623cc engine produces less CO2 than

average Eu small car. The Nano will have no storage space-Sufficient storage space, under the

bonnet and over the rear parcel tray, rear seats fold to dramatically increasestorage space.

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