As emphasized by (Palmer and Hartley, 2006) the Macroenvironment of the company is composed of the External Determinants. This consists of factors such as political, economical, social, technological, environmental and legal. These factors have an indirect effect on a company or any business activity. The Microenvironment of a company is composed of the inner Determinants. This consists of factors such as suppliers, consumers, challengers.
Bringing this into point of view it's very significant for just about any company to analyse and analyze the business enterprise environment to make strategies, design strategies and take decisions. For example, a firm from the United Kingdom establishing its activities in India must focus on the Macro and Micro Environment in India to perform successfully. If they work according to the analysis of the business enterprise environment in the United Kingdom they are destined to fail in their businesses in India.
Thus to understand the Macroenvironments, companies and management students can make use of PEST examination which helps in critically assessing the political, cost-effective, social, scientific, environmental and legal determinants that have an indirect effect on any business entity. This critical analysis helps an enterprise company to strategise effectively and take justified decisions. After analysing the business enterprise environment using the Infestations tool, any company can utilize SWOT analysis to gain an understanding on the talents, weaknesses, opportunities and dangers to survive nowadays made up of severe competition.
According to (Day and Shoemaker, 2005) checking the Business Environment is like adapting a peripheral perspective. Companies with a peripheral eye-sight can realize the changes taking place available environment and accordingly take steps to confront potential threats and get the opportunities that can be of relevance moving ahead. Companies with a good peripheral perspective gain a competitive border over their competition if they behave positively to the changes happening around.
The company determined for this work is Tata Motors. Being a huge producer of automobiles, its periphery consists of all the accordant forces. Thus an research will be achieved taking into consideration the changes that have occurred over the last five years, how Tata Motors have reacted to these changes to be able to survive in today's world of fierce competition. On this work Tata Motors will be analysed using tools like PEST Research, Michael Porters five causes and SWOT Research, and along the way these tools should be of assist in deriving some conclusions and making some suggestions.
Organisation Information and Background
Tata Motors is India's largest manufacturer of cars. It was primarily known as Tata Anatomist and Locomotive Company. In 1954, the business signed a cooperation contract with Daimler Benz of Germany and started out the production of commercial vehicles. It has been a pioneer in this sector, especially in India. There is also their basic of operations in the united kingdom, South Korea, Thailand and Spain. Developing of passenger automobiles, utility vehicles, passenger buses and light, medium and heavy commercial vehicles are the primary areas of business of Tata Motors. [www. tatamotors. com]
The commercial line of Tata Motors has had its roots conditioning since several years in various market segments such as European countries, Africa, Australia, Southeast Asia, South Asia and the center East. Tata Motors have always presumed in acquisitions to develop their business and create a market share round the world.
Daewoo, a commercial vehicle company was the next largest truck manufacturer in South Korea. It had been acquired by Tata Motors in the year 2004 and this dominate gave Tata a substantial place in the Korean Market. Following this acquisition Tata Motors got into a joint venture with Thonburi Automotive in the entire year 2006 permitting them to operate in Thailand. Tata Motors thinks in increasing through Mergers and Acquisitions rather than spending several years in creating a business. [www. tatamotors. com]
The greatest acquisition created by Tata Motors was that of Jaguar and land Rover from Ford in March 2008. These two brands cost Ford 5. 3 billion us dollars while Tata paid Ford 2. 3 billion us dollars (Carty, USA Today). This was a substantial step for the company as it paved method for them in to the business of luxury automobiles.
Tata Motors, in the above mentioned journey has been subjected to the determinants in its environment. Going ahead an examination would be achieved onto it using tools such as Infestation Examination, Michael Porters five forces and Swot Examination.
PEST ANALYSIS
POLITICAL FACTORS:
As mentioned above Tata Motors has its operations in a number of countries round the world. In setting up these businesses it was vital for Tata Motors to analyse the Political Environment to be able to run the business smoothly. Over the last five years Tata Motors has already established a chance to venture in several Markets. When it got into in the UK, the options of stepping into USA and Russia were also available. But Tata Motors preferred UK over USA and Russia credited to favourable politics factors such as India being truly a preferred monetary agent, UK car market and potential and language similarity. USA market requires high quality and there are several non-tariff obstacles which will make it problematic for a fresh company to get into the market. The reason why Russia was dropped is basically because they lack a well-developed dealership network, there have been high entry obstacles, Language problem and lastly there is always the uncertainty of future economical express. As emphasized by (Hill, 2002) the cooperation between India and the UK comes in the regime of favourability which implies benefits being produced credited to less tariff and non-tariff obstacles. Thus Tata Motors' decision of getting into the united kingdom market is justified.
ECONOMIC FACTORS:
This is one of many determinants that need to be analysed as it includes factors such as market progress potential, charges strategies, profits on return and various such financial aspects. Since 2004 Tata Motors is with an expansion role around the world. It has made its existence felt in over five countries world-wide through acquisitions and joint endeavors. Over the past five years there were changes in several economies. Tata Motors has been adapting to these changes effectively and jogging their business easily. To give an illustration when there is a hike in price of aluminium in Kenya, Tata Motors has the option of dropping back again on suppliers in European countries or Asia. There is also to keep a detailed eyesight on the fluctuation in the money rates. The rupee being strong up against the American Buck doesn't mean it will be strong against the Sterling Pound. This factor is directly related to Capital Investment thus posing an effort, Tata Motors operating in various economies which have been in a turmoil scheduled to recession.
SOCIAL FACTORS:
Demography is one of the significant social factors. It consists of lifestyle, consumer trends, income, spending vitality etc. The characteristic of demographic styles allows a corporation to make programs and strategise on the sort of products to be marketed. As emphasized by (Mintel, 2006) the effect of fashion and luxury is so strong that consumers disregard the hike in price of fuel. Wedding caterers to this Tata Motors launched Tata Safari and Tata Sumo Grande, India's leading SUVs. With that said, not all folks are in a position to afford these cars. Delivering this into point of view Tata Motors has continued to make and market Tata Indica, a minimal budget traveler car. A lot of motorcycle incidents taking place in India, Ratan Tata, the Chairman of Tata Group possessed a eye-sight of starting the worlds cheapest car and his eyesight did come true in the form of Tata Nano. Thus it is clearly obvious that Tata Motors will react to changes in the interpersonal factors.
TECHNOLOGICAL FACTORS:
Technology is one factor that enables a company to gain a competitive advantage and endure the fierce competition in the market. Tata Motors has presently employed 1400 Researchers and Engineers in their Research and Development Team. This has ensured they are forward or at par with the rivals in the local market as well as internationally. [www. tatamotors. com]. Within the last 5-10 years technology has been evolving at a very rapid space. There were foreign car giants like Hyundai, Toyota etc setting up businesses in India. Their cars were technologically far too advanced than Indian autos. They had vitality steering and windows, central locking, computerized transmission on gears etc. Considering these changes in the environment Tata Motors didn't lag behind. In addition they adapted and presented autos with this technology and survived the robust change and retained their position as a head in the auto sector.
MICHAEL PORTERS FIVE FORCES ANALYSIS:
http://www. valuebasedmanagement. net/images/porterfiveforces. gif
Source: www. valuebasedmanagement. net.
The above mentioned diagram shows the factors regarded as significant by Michael Porter in his research. Moving further we will have how this evaluation may be used to assess Tata Motors' task "Tata Nano".
Threat of New Entrants:
Tata Motors launched Tata Nano as the worlds cheapest car. It basically targeted the individuals who used motorcycles as their setting of carry. Indian vehicle sector is vibrant and emerging, bringing in international brands like Volkswagen, Toyota, etc all of whom are anticipated to unveiling new progressive products. Tata Nano is listed approximately at just Rs 1, 00, 000. Starting a product at such low priced implies that the maker needs to make a huge first investment and keep a low profit margin as well. The opponents are learning the strategies of Tata Motors tightly. But because of the above mentioned reasons Tata Motors does not have the threat of New Entrants immediately but yes it has to definitely face some fierce competition in the future. [www. scribd. com]
Threat of Substitutes:
Tata Nano encounters a threat from electric autos as a substitute. Reva car has already been present in the Indian market and Morbi centered Ajanta Group is thinking about manufacturing an electric car. Ajanta Group is thinking about charges its electric car at Rs 85000 which is even cheaper than the Tata Nano. Reacting to this threat Tata Motors has aleady considered making an electric car and called it the E-Nano. [www. scribd. com] The second hands market for automobiles is also flourishing in India. These second hand cars can become substitutes to Tata Nano as they are in the same price range, moreover they may have powerful engines. [www. jimthetrucker. com]
Bargaining Ability of clients:
Tata Nano is a car that is manufactured keeping in mind the people with low income. At present Tata Nano is really the only car in the Indian Market available at such a minimal price(approximately Rs 1, 00, 000). Delivering this into perspective the Indian consumers do not have many options. Therefore that there surely is not much bargaining electricity vested in the hands of the buyer. But as so when the competitors include similar cars the customer will have the power to switch vehicles, the power of choice etc. [www. tatamotors. com]
Bargaining Power of Suppliers:
There are about 60 companies operating as suppliers for Tata Nano. These suppliers jointly assimilated some about $112. 7 us dollars to set up base on the Singur Complex. Suppliers pointed out that the prevailing plants were equipped enough to support the introduction of Tata Nano provided the Tata Place shifts to Pantnagar or Pune. Other suppliers exhibited cooperation by demonstrating the will to utilize their sheds as warehouses for storing purposes. (www. scribd. com)
Tata Motors has created a bill marketing system vesting the interest of the suppliers. Through this Tata's lender makes the repayment to the suppliers and then Tata will pay the lender. Tata has also create a suppliers' council to identify and rectify issues such as delayed payments which were behaving as hindrance between the company and its suppliers. [www. tatamotors. com]
This implies that the suppliers conveyed utmost support to Tata Motors, thus somewhat than behaving as a hazard they acted towards the auto manufacturer. Tata Nano being the one make of its type the suppliers seem to be liberal but as so when competitors come up with similar vehicles the suppliers bargaining electric power will present as a threat.
Rivalry among existing organizations:
The competition is very fierce among car manufacturers in India, especially the tiny car manufacturers like Maruti Suzuki, Hyundai, Chevrolet etc. Tata Motors acquired come up with the Tata Indica to contend with the Maruti Suzuki 800, Maruti Suzuki Zen etc. Maruti in those days was the leader in the small car market in India. Being a counter strike to the Tata Indica, Maruti developed cars like Alto plus some brand extensions like the Zen Estilo. The scene completely changed with the start of Tata Nano. The price tag on Tata Nano was half the price of Maruti 800, which then was one of the least expensive car in the Indian Market.
In response Maruti Suzuki discussed slashing down the costs of Maruti 800 and Maruti Alto. There have been also speculations about Maruti Suzuki redesigning the 800 to present an issue to Nano but this received scrapped as the expenses involved were high. The release of Nano also hurt the retailers of second hand vehicles. These sellers in response acquired in tie-ups with finance institutions and finance institutions to entice consumers towards buying used automobiles. Thus the unveiling of Nano intensified the rivalry amongst existing companies. [www. driveinside. com]
VALUE String ANALYSIS
http://gscmotion. files. wordpress. com/2009/08/a-value-chain-analysis1. jpg
Source - http://gscmotion. wordpress. com/2009/08/07/using-value-chain-analysis-for-customer-satisfaction/
The diagram shown above explains the key components and sub-components of the value chain. In the years ahead in this project an research will be achieved on the value chain of Tata Motors.
Inbound Logistics:
Tata Motors has a very strong setup of Inbound Logistics. Thus giving the company attain a competitive advantage on the other players in the market. Following will be the factors which permit the company to keep a strong setup on Inbound Logistics. Tata Motors enters Long term agreements with its service providers in transport and different other activities. It does the same with the agencies interacting with it. It utilizes special workers at regional office buildings to supervise the whole process. The business has made use of SAP business softwares to improve its IT section through which it is able to monitor the activities. The safe-keeping facilities are very reliable which lead to easy stuffing and retrieval of materials. [www. tatamotors. com]
Operations:
Over the past few years Tata Motors has established a Capital Equipment Creation Division which assists the company in development capabilities of international standard. It also has designed Apprentice trainee programs which ensure balance in the way to obtain skilled manpower. Tata Motors also offers a team looking at Kaizen and TPM which profoundly works towards enhancing efficiency. The company has an robotic manufacturing process. Furthermore the manufacturing is well distributed not merely within India but globally. The company tactics optimum usage of capacity. An example to support this may be that of Mercedes Benz which uses Tata Motors' color shop facilities.
Outbound Logistics:
Stockyards all across the country and also in the countries overseas where Tata Motors has its procedures set up means that they have a strong Outbound Logistics. As stated above the business gets into permanent contracts with transporters, provides high and continuous business to them which ensures it gets the best deals. SAP programmes ensure that all the offices and different areas are well linked which ensure timely execution of responsibilities. Pilferage is avoided, thanks to a fantastic security system being enforced.
Marketing and Sales:
Tata Motors is at a pact with large number of dealers and agencies to aid the function of marketing and sales of its products. Tata Motors follows a systematic procedure towards understanding the needs and choices of customers. Within the last five years Tata Motors has been analysing the market dynamics and accordingly manufacturing progressive products or stretching existing brands. Some examples of the would be Tata 207, Tata 407 and Tata Ace. Tata Motors caters to different segment of customers like the common man, farmers, Defence, Express Transport etc. It has specific groups developed to handle the needs of the customers respectively. Their strategy in Marketing and sales has allowed these to impose a Pan India and Global occurrence. A fact to support this statement is that Fiat which is an international brand got into a pact with Tata Motors on 13th January 2006 to use the dealership of Tata Motors to sell its vehicles and Tata Motors would use Fiat's technology and unutilized capacity. [www. tatamotors. com]
