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Positioning the Tata Nano (A) Case Solution
Tata Motor Limited, established in 1945, is a company of Tata Group, which was formed in 1868. The group had ninety eight companies, around the word till 2011. Tata Motors has launched car in all segments of the industry. Its passenger car ‘Indica’ has been considered its all-time best car, based on its sales. As the Tata Motors Limited (TML) plans to launch a new passenger vehicle, Tata Nano, it is faced with two options regarding the positioning of the new car. First option at hand is to launch this car as a family car, which is both safer and comfortable than two wheelers including bike. The second option available to the top management of the company is to target a particular segment i.e. college going students. The positioning of Tata Nano would directly affect sales of the new car; therefore, it is essential for the top management to get it right.
Following questions are answered in this case study solution:
Positioning the Tata Nano A Case Analysis
India is a huge country with an estimated population of 1.2 billion. Considering the increasing size of the middle class consumers, Tata Motors planned to launch the cheapest car of the country, priced at INR 1 Lakh only. Tata Motor Limited (TML) currently has two options regarding positioning of its new car Tata Nano.
First option is to launch Tata Nano as a means of family transport, which is not only safer than bike, but also considerable comfortable. Presently, per-capita ownership of automobiles in India is 12 car owners per 1000 people, which is considerably lower than both United States and the United Kingdom. In addition to this, more than three quarters of all vehicles present on India roads are two wheelers and bike. As the economic situation of the country progresses, increasing number of people are coming in the middle class segment who are aspiring to improve their quality of lives by availing new opportunities. If Tata Nano is launched as a family car at such a low price, then it would certainly attract millions of people, across India, who have dreamt of owning a car.
One downside of going head to head against two wheelers, particularly motorbikes is that motorbikes cost somewhere between INR 35,000 to 75,000 and need little maintenance, all year round. In addition to this, the petrol mileage is 70Km per litre, which is more than twice that of new Tata Nano. For a family on a tight budget, Tata Nano will have to do more than just focus on its safety and comfortability feature as many people tend to overlook these elements. Moreover, one major advantage of motorbike is its manoeuvrability and small size, which comes quite handy on crowded Indian streets.
The second option available to Tata Motors is of positioning its new Tata Nano as a stylish and manoeuvrable small sized car for college students. Though, this option would considerably limit the size of the potential target market but is still an attractive option. Currently, median age of Indian population is just under 25 years and a huge chunk of India’s population is young adults who prefer travelling via bike or public transport, which include public bus and trains. Considering the over-crowdedness of both means of public transport, Tata Nano could serve as a new mean of transport for college going, or office going people – middle class people.
Downsides of positioning Tata Nano as a specific segment car would mean creating a new market, altogether. Currently, there is no car in this focussed segment, which would mean that the top management will have to employ significant resources for creating awareness among the potential target market. In addition to this, a great concern is regarding the disposable income of college going students. This group of people usually prefer public transport and spend just under 7% of their total income on travelling. Pushing them to make an investment of INR 1 – 2 lakh for their travel would be slightly difficult for the company.
An ideal way of moving forward for the top management of the Tata Motors is to position Tata Nano as an ‘affordable family car’. The main reason behind this recommendation is that this segment is already flourishing in the Indian market considering the tremendous success of all low-end passenger vehicles, which include Tata Indica, Maruti 800, Alto, Swift etc. In addition to this, option of targeting college going students or young adults for the new car would considerably limit the target market, and would also increase the risk of failure because not only the target market is inexistent, but also pushing college going students to make an investment of minimum INR 1 lakh rupees is a difficult task. Moreover, if the company can manage to fulfil the promise of providing the cheapest car, it would attract millions of aspiring middle class car owners. It is estimated that Tata Nano if positioned correctly, would increase the Indian automobile market by 25%. Moreover, at present, there is absolutely no competition for Tata Nano because the next affordable family car, Maruti 800, is priced exactly double.
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