You are on page 1of 8

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

Aces 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 Gears 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 Ps 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

You might also like