The International Strategy of Tata Motors

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1.3 Brief introduction to TATA Motors

Founded in 1945, TATA Motor is one of a member of TATA group. It’s India’s largest automobile company, also the fourth largest truck manufacture and second largest bus manufacture in world. The product range of company includes passenger cars, utility vehicles, trucks and commercial passenger carriers.

1.4 The development of TATA motors in domestic and global

Charter 4 reflects that the industry sales in India grow at a rate of 8.0%, commercial vehicles and passenger vehicles keep a balanced growth. TATA Motors occupies nearly 50% of the market share in commercial vehicles, at growth rate of 2.8%. But for the passenger vehicles, it is decreasing rapidly from last year, and that results in a slightly decrease of market share in total. So although TATA Motors still takes the leading position of India’s automobile market, it is facing with other competitors from domestic.

Charter 4 Company’s sales in Fiscal 2015-16

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(Data resource: Annual Report 2015-16 of TATA Motors)

In a global scale, TATA motors has expanded its footprint to 163 countries and has over 6000 sales and service touch points.

- The international strategy of TATA Motors

2.1 Why TATA Motors go abroad--- from the perspective of five forces

2.1.1 Competitive rivalry

Although automobile market growth in India has been impressive in the last years(about 8%), it relies on aggressive pricing strategy, and as the development of Hindustan, Mahindra, Maruti and other brands in India, the domestic competition becomes more intense. In commercial vehicles market, TATA Motors has occupied nearly 50%, it’s hard to make a progress based on the law of diminishing marginal returns. The automobile industry has a high fixed cost, the firm must sell large quantity to attain low unit cost, so it’s critical to open international market.

2.1.2 Threat of new entrants

In passenger vehicles, TATA Motors only occupies about 5%, so there is no economic scale to stop new entrants from entering. For government policies, the passenger car industry was delicensed in 1993, and government boosts FDI and import of technology.

2.1.3 Threat of substitutes

As it referred before, the products in TATA Motors could be replaced by existing domestic vehicles producers and other foreign companies. Within vehicles, high value-added, high technology passenger and commercial vehicles are replaced by low value-added, low technology two or three wheelers.

2.1.4 Bargaining power of suppliers

Nowadays, for the principle raw materials, parts and components ,the company mainly relies on external companies to supply them. And some of these resources are supplied on a single source. So any adverse economic condition, man-made accidents or natural disasters would badly affect the performance of suppliers, thereby causing time-consuming and cost-raising.

2.1.5 Bargaining power of customers

Customers have a quantity of sellers to choose from, and with booming of automobile industry in India, most of them have good amount of knowledge about the product. And vehicles don’t have high differentiation within its class, so the transaction cost for customers isn’t very high.

So with the push of domestic market and pull of global market, the TATA Motors begins its journey of globalization.

2.2 SWOT analysis of TATA Motors

2.2.1 Strengths

Product diversity and complete product portfolio.TATA Motors has positioned itself as a multipurpose vehicles producer, in order to satisfy needs of people from various social status, jobs. From its official website, the two main portfolios of this company are cargo and passenger transportation. The cargo includes Prima, M&HCV Construck, Light trucks, Super ACE MINT and so on, the passenger transportation includes bused, winger, TATA Venture, Magic Iris and so on.

The ability to seize customer needs in emerging markets and customize products and services to satisfy them. Because TATA Motors has been a leading company in India for 70 years, it has produced more than 3 million vehicles.

Recognized brand. In a long term, the company aims to associate the TATA name with reliability, trust and ethical values, although it is not famous around Europe and US, the people in neighbor countries have seen or used TATA’s products more or less, and due to some joint venture cases, acquisition cases, the company has gained high brand recognition little by little. In 2016, TATA Motors loyalty programs was recognized by the DMA Asia ECHO™ Awards and PMAA Dragons of Asia in December 2015. So the brand recognition is the second advantage.

Intellectual property. TATA Motors has over 4500 engineers and scientists, working to push new product development, and it has applied abundant of patents, trademarks, designs and other intellectual property rights.

2.2.2 Weakness

Low-end cars. TATA Motors is known as low-cost and medium quality, nowadays, the company still gains its profits mainly from low-end cars, but for luxury car market, it’s hard for the company to compete in premium market segment.

The competitors of TATA Motors who are especially from western countries, like Ford, Honda and Toyota, these competitors have gained much international experience, advanced technology, and decades of financial resources from the way of internationalization.

TATA Motors doesn’t have strong international marketing policies to promote market sales globally.

2.2.3 Opportunities

In emerging markets, the purchasing power of people is increasing, there are looking forward to cars with fuel efficiency and low cost, which is coordinated with the strength of TATA Motors.

In developed markets, because the acquisition of Jaguar Land Rover, the company makes it through to the premium car market, it is opening the markets in Europe and US gradually.

2.2.4 Threats

The rising of fuel price and