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Tata Motors entered within the UK market
The market entry of Tata
Despite the global trend to reduce significant car sales car there are certain segments that will experience dynamic growth. According to Datamonitor (2006b) sales of commercial vehicles and port utility vehicles were very healthy. Windecker (2005) emphasizes the influence of socio-cultural preferences were increased to more fashionable, sports cars equipped SUV. The extremely high growth of SUVs in the U.S. identified and the UK.
The focus of entry Tata will market the UK. There were several reasons for choosing the UK as the target market. These favorable factors were the status of India as economic favorable agent, UK Car Market Dynamics and the potential similarity of language. The other countries which were considered as potentially attractive were: U.S. – The largest in the world market, Russia – emerging market with significant sales potential. U.S. Choice as a destination market was rejected due to the requirements extremely high quality and other non-tariff barriers that make it hard for a new entrant to enter this market. Moreover, this market is very mature and experiences extreme competitive pressure. As for Russia, there were several unfavorable factors which made it less attractive then the UK – the uncertainty of the situation further economic, barriers to entry and there is no well-developed distribution network.
Environment Analysis Outside of the UK market
There are numerous number of factors that could be included into PEST analysis. However, due to various constraints (time, word limit), the factors that will be highlighted, while the main focus will be unique in several sub-factors (according to the Pareto Principle, it is likely that about 20% of the factors that account for 80% of the potential effects on the company (Wit and Meyer, 1998).
Political factors
The political and legal factors on the role of industry development. These factors shape the rules of competition, operating costs and the requirements of supply chain.
Oil prices resulting from international instability – The special attention to oil prices and its effect market demand. According to Mintel (2006) the increase in oil prices has created a strong trend toward smaller engines, hybrid engines and diesel. current high oil prices increase the pressure on sales of luxury and premium cars, most of which are equipped with large engines (More than two liters).
administrative barriers (quality control and operations requirements) (KPMG, 2004) – Administrative barriers have to be seriously concerned, several safety standards requirements and the level of emissions may increase production costs and reduce operating profit margin.
Car park legislation – According to Mintel (2006) the experience of the UK threat of large excess capacity to the volume of heavy traffic road network.
Political relations between countries of operations (schemes favorability / protectionism) (Hill, 2002) – Spain is cooperating with the United Kingdom within the concession system implies certain benefits such as reduced tariff and nontariff barriers.
Foreign ownership regulations (mode of market expansion (Hill, 2002) – Today the United Kingdom is considered as one of the most pro-FDI in the EU. The large number of industries, including automotive one, are liberalized. This means that external regulation provides foreign companies with the flexibility to choose among all possible inputs and modes of expansion.
Economic factors
One of the important determinants of choice is the location of current demand conditions and future it will affect the potential market growth, pricing strategy and operating margin and the potential return on investment.
The size of the target market – According to Mintel (2006) since 2001 has been a steady growth in market size and value. The current car park in the UK is estimated to accommodate 31 million units. The market value was contributed by the steady growth of average price level. The current market value is estimated to reach the level of £ 31000000000
The maturity of the target market – The UK market is viewed (Mintel, 2006) as very mature. The maturity of current excess capacity leads and sales significant issue particular segments of the car crash.
The growth potential of the target market – The UK global market experiences negative growth due to the issue of maturity. However, sales of certain car segments certain significant growth potential due to the impact of socio-cultural and technological.
PDI – According to Mintel (2006) the strong GDP growth (10% between 1998-2005), personal disposable income (PDI) (19%) and consumer spending (18%) reflect the high level consumer confidence. Mintel (2006) argues that, in terms of new car purchases consumer confidence has dropped significantly. At the present time to UK consumers have been reluctant to take the new debt and instead have chosen to service its existing debt. Moreover, the levels of mortgage equity withdrawal have decreased, suggesting that UK consumers do not seek alternative funds to buy expensive items like automobiles.
currency stability – The strong current state of sterling against other currencies has created many benefits for consumers manufacturers operating in the area of pounds as the predictability of operations and minimize the risk of currency fluctuations.
Labour costs – As the outlook of the automotive industry said, the cost factor and the ability of direct and indirect costs has become one of the key issues in maintaining competitive advantage. In the opinion of industry experts (KPMG, 2004) one of the key issues that will influence the decision to locate operations are the specific costs of labor. According to the survey (KPMG, 2004) specialists industry placed greater emphasis on cost savings of specific labor. In addition, 85% of respondents agreed that over the next five years there will be a large increase in specific labor costs (cost of pensions, healthcare and legal services) in the U.S. and the EU.
Expansion of the current political and economic blocks (EU) – The importance of the recent further expansion of the EU is the enlargement of the EU single market. In case of successful expansion into the UK market, Tata may consider expanding in certain EU countries. According to estimates Nieuwenhuis & Wells (2003) the attractiveness of the EU and the target market for a car manufacturer will remain high. They assert that the attractiveness of the EU as a target market will be maintained by increasing market size and value as the result of the enlargement of the EU area. However, the current maturity of the market, excessive end trend demand suggests that Europe's share will be reduced.
Social factors
Demographic factors – population is one factor fundamental social factors. It affects lifestyle, consumer trends, the type of risk averse behavior, purchasing power and value per customer. The state of demographic trends allows the construction of projections for the use of certain types of products. The current demographics of the United Kingdom have been compromised sales family vehicle
Lifestyle – Changing lifestyles and habits have a direct impact on consumer spending. For example, Mintel (2006) notes the recent increase in preferences for second car ownership. Mintel (2006) adds that the impact of lifestyle factors such as luxury fashionability and preferences are so strong that it eliminates the negative effect of the maturity of the market and oil prices in certain car segments. Therefore, against all odds, all land and luxury vehicles will experience healthy growth, while sales in other segments of cars have fallen dramatically.
Factors technological
The development of information technology – The current development of Internet opens new transactional capabilities. Currimbhoy (2004) suggests that the continuing development of technological solutions, especially in the area of digital communication technologies and create new operating opportunities such as new channels marketing mix, new purchase environment (electronic commerce) and new market research tools. According to Mintel (2006) the number of major car dealers develop e-commerce to counter the problem of overcapacity.
The impact of new technologies in architecture the supply chain – Development of channels for exchange of mail between the agents of the supply chain becomes the source of strategic advantage (Currimbhoy, 2004) and created by the rapid response capacity in the market and better control of quality value chain.
The review of micro factors affecting UK companies hire
Competitors' bargaining power
The British car market is highly consolidated. The major rivalry involves Ford, GM (Vauxhall), VW, Renault, Peugeot, Toyota, BMW, Citroen and Honda. The presence of strong competitors with established brands to create a threat posed by intense price wars and strong s requirement of product differentiation. According to Mintel (2006) the pressure of stiff competition require increasing expenditures advertising, overcapacity introduces a significant price pressure. The current market conditions are so difficult that some manufacturers had to close some plants to cut costs and survive on the market.
For now, the main competition strategies are improving the supply chain, development of new products and meet the needs of emerging market segments (Mintel, 2006). Emerging opportunities will require the extremely high level of operational responsiveness and leaves little space to the market opportunity will be exploited by competitors.
Buyers' bargaining power
Due to the high intensity of global competition and increased buyers overcapacity issue of the UK experiencing the strong bargaining power. By Mintel (2006) buyers have expressed a high level of negotiation in search behavior.
Supplier bargaining power
Although vehicle manufacturers have consolidated the formation of large entities had no significant change in bargaining power in OEM-supplier relations. According to Veloso and Kumar (2002) consolidation in the OEM sector has led to the consolidation of related groups different supplier. chain partners in demand car dealerships, especially larger ones to experience substantial bargaining power in the light of the issue of overcapacity.
The Artificial threat
Apart from its direct competitors (public transport) cars to compete with other transportation services: air, rail and sea. The increasing importance of door-to-door transport and environmental concerns reduce the present threat of another means of transport as a substitute. One of the main substitute sources of threat comes from sales of used cars. According to Mintel (2006) the steady accumulation of used cars has become the reason principal of the dramatic drop in sales of new cars.
Threat of new competitors
The high level of entry barriers (Highly consolidated industry, value chain well developed, the ability of R & D, capacity to invest in promotions and new product development) minimizes the threat of new competitors. However, due to the global nature of the industry of the concept of new business is not so clear, because the existing players could enter into new geographic markets. Datamonitor (2006) underlines the future potential of Chinese manufacturers to flood the markets of the EU if no protective measures are introduced by EU countries.
SWOT Analysis
Assessing the external and internal environmental factors, the picture can be drawn the following:
Strengths
• Strong revenue growth – According to annual report to the company (Tata Motors, 2006), the company showed strong organic growth of 32.5%, while revenue from international operations grew by 149%.
• diversified portfolio Products – The company operates in different market segments including passenger cars, trucks, medium and heavy commercial vehicles, light commercial vehicles, utility vehicles and buses.
Weaknesses
• high dependence on Indian market – more than 80% of company revenue comes from sales the Indian market.
Opportunities
• Further expansion in the EU market;
• Increased global presence in the segment of the SUV;
Threats
• Increased pressure increased competition in the Indian market – At the moment the Indian market is shared between such strong competitors as GM, Ford, Toyota, Volkswagen and Honda. These companies are expected (Datamonitor, 2006) to increase its presence through licensing agreements, subsidiaries and joint ventures. threat Datamonitor (2006a) provide additional local companies from the automotive industry set to access the debt financing and equity.
• global liquidity problem – as highlighted the case study, Tata Group assigns a major investment in the sector flows. Failure to return this capital could put financial pressure on all areas of business, including Tata Motors.
• Slow pace of entry into the market – Due to high competition pressure from the UK market, the market window of Tata Motors is to close the entrance. The slow pace of entry and the decision wrong time could undermine the success of the company in this market.
Key success factors
With regard to overall success of Tata Motors, the analysis of environmental and internal factors study identified the following component parts:
• Rapid market entry of the United Kingdom;
• Implementation of strategies designed to protect your company in the share market of India;
Preventive measures in the market Indian
To protect its market share against the aggressive expansion of the company's competitors need to implement the defense strategy. In accordance with Veloso and Kumar (2002) one of the strongest tools available is increasing customer loyalty by offering value-added benefits such as affordable attractive terms of credit, post-purchase service. Veloso & Kumar (2002) reported that car maintenance may account for 70% of the value of overall length of the car is. The company should develop its service center network to maximize their geographical coverage and prevent the entry of competitors.
Strategy marketing
Market Entry election
To maximize input speed and minimize the risk of failure, Tata Motors must choose the input mode that provides quick access to customers. At the same time, the entry mode to ensure certain long-term benefits, including access to knowledge market and developing the company's presence in the new market. Given these requirements contractual joint venture was chosen as optimal entry mode. In contrast, wholly owned subsidiary which requires much less investment in the operational (Hill, 2002). In addition, this mode provides quick access facilities and customer of another contracting party. The other advantage of this mode of market entry is that it limits the possibility of technology or knowledge transfer.
Marketing mix
Product
Product advantage is the result "of the development process new products including the degree of unique benefits not previously available, to the extent that customer needs are better satisfied, on product quality and innovation, and the extent to which the new product solves customer problems better "(Craig & Hart, 1992). The advantage of the product is a key differentiator between success and failure in the development of new products and services alike. In order to market the company has manufactured the X1 model, which is the mini-vehicle environment SUV with 5-speed automatic transmission and 140 hp 1.8-liter hybrid engine with a relatively low consumption [1]. The company needs to emphasize the qualities to win the product to potential customers. The decision to enter the SUV segment was determined by the dynamics of growth of this segment during the period 2003-2005 – 10%. The product is designed to meet the quality preferences of the following customer segments: provision of targeted individuals, 25-45 years looking for affordable SUV type.
One of the essential aspects of the product mix will be the development of post-purchase service. The company will to develop contractual relations with the various networks of services and independent car workshops, faster adjustment specialist chains, mobile and services tuning and self-centered. The development of strong relationship with Kwik-Fit, Halfords Finelist and increase the attraction of the product in terms of availability and accessibility service facilities.
Price
The Mintel (2006) research indicates the relative importance of emission prices especially for customers looking to have a second car. The pricing strategy chosen will try to attract potential customers to buy affordable price – £ 10,000. This price is 2995 lower than the price of one of the best-selling cars – Daihatsu Terios. The aspect of pricing is related to the cost of service and accessories car. The main objective is to minimize the cost of services by entering into conditional agreements with service partners and offering low-quality accessories cost and spare parts.
Place
The distribution is crucial in the final acceptance and sales of a new product on the market in which regulates the availability of the new product to customers (Calantone and Montoya-Weiss, 1993). Needless to say, the distribution channels chosen must reflect the market performance takeover target and allow the maximum availability to the target market. The chosen distribution channels can reinforce or dilute the intended message of the product positioning market. To maximize product availability Tata Motors will choose the counterpart to the strong distribution network. In addition, the electronic distribution strategy be carried out using the capacity of this channel of distribution.
Promotion
Promotion decisions include the range of communication tools and motivation needed to raise awareness and trigger the purchase of new product (Lilly and Walters (1997).
The Mintel (2006) study gives the following possible advertising channels:
– TV;
– Print advertising
– Internet Advertising
Mintel (2006) states the ATL (above the line) for the expense account most of all spending on promotional activities, while the share of television advertising could exceed 50% of the total cost. KPMG (2004) noted that the promotion budget usually contains 1% -2% of expected sales. Anticipated that the initial target of Tata Motors sell 25 000 units in the first year of operation, the marketing budget will be £ 3,750,000 [2]. In addition, the similar contribution expected from the counterparty Tata Motors. 50% of marketing budget will go to TV ads, 25% – advocacy in the car and Lifestyle Magazine. 25% – was allocated to point of sales promotions, events and co-marketing activities. To increase the level of coverage the company will seek partnerships that can strengthen its promotional appeal.
Conclusion
He suggested that the role of Tata Motors must enter the UK market. This country was chosen because the presence of the number of favorable business and environmental factors such as economic stability, relatively medium barriers to entry, the positive growth of certain Car market segments and future growth potential within the EU while the UK can be used as a base for expansion. The analysis of factors business indicates the importance of choosing the quick mode of entry and the development of contractual relationships with market players to manage the UK. To address this issue the document suggests that the company must use contractual joint venture mode of entry into the UK market. This strategy will provide Tata Motors with a fast market penetration, access to market knowledge and reduce financial stress. At the same time, possible negative aspects of this choice must be countered. The analysis of internal factors revealed that the company's performance depends largely on the success of operations in the Indian market may be adversely affected with increasing competitive pressure. To strengthen its position against the aggressive tactics of the competitors of Tata Motors is suggested focus in building relationships with customers and employ marketing tools designed to increase the level of customer loyalty.
On the basis of the analysis the current market dynamics of Tata Motors was advised to enter the SUV market with the model, designed for people both sports oriented travelers seeking a relatively inexpensive, environmentally friendly, high quality car. The price will be an attractive factor, especially for people sensitive to prices. The company will launch advertising campaign designed to raise awareness about cars, to communicate its benefits and persuade customers to buy it. On the plaza Mix, the company will to cooperate with car dealers and develop various e-commerce services to maximize product availability.
References
Calantone, RG and Montoya-Weiss, MM (1993), "Product launch and follow up on", in Souder, WE, Sherman, JD (1993) Management New Technology for Development, pp. 217-48.
Craig, A. Hart, S. (1992), "Now in the investigation of new product development?" European Journal of Marketing, Vol. 26, iss. 11, pp. 1-49.
Currimbhoy, Z. (2004), "Prospects for E-Business in the automotive industry", Reuters Business Insight – strategic management reports
Datamonitor (2006a), "Tata Motors: Company Profile", Datamonitor, 17.07
Datamonitor (2006b), "Global Automotive Industry", Datamonitor, 01.10
Hill, C. (2002), International Business: Competing in the global market, ed room.
KPMG (2004) "Automotive Industry Survey KPMG, the momentum in the automotive industry
Lilly, B. & Walters, R. (1997) "Towards a model of new product pre-announcement periods", Journal of Management Product Innovation, vol. 14, pp. 4-20
Mintel (2006) 'Cars – UK ", Mintel Group, October.
Nieuwenhuis, P. & Wells, PE (2003), The Automobile Industry and Environment: A technical, commercial Social and future, Cambridge: Woodhead Publishing
Tata Motors (2006), "Annual Report", Tata Motors, available http://ir.tatamotors.com/
Veloso F. & Kumar, R. (2002), "Supply Chain: Global Trends and Asian Perspectives", Asian Development Bank, Working Paper 3 ERD
Windecker, R. (2005), "The exclusive lead and make the way", automotive, June, vol. 184, No. 6, p. 18
Wit, B. and Meyer, R. (1998), Strategy: process, content, context: an international perspective, second ed., London: International Thomson Business
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