Tata Motors - Innovation Strategy
INNOVATION STRATEGY
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OCTOBER 2010
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TABLE OF CONTENTS
1. EXECUTIVE SUMMARY3 2. TATA NANO: LESSONS FROM AN INNOVATOR4
History of Tata Motors4
The Indian Automotive Industry 5
The Origin of the Nano 7
Tata’s Unique Business Model 8
Activities at Tata Motors 11
Effects on India’s Ecology and Economy 12
Risk of Imitation 13
Sustaining Competitive Advantage 13 3. REFERENCES16 4. EXHIBIT 117
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EXECUTIVE SUMMARY
After years of research and development, Tata Motors stunned the worldwide automotive industry by manufacturing a USD 2.500 car, against expectations of market participants and consumers who argued that a car with these characteristics would never succeed or comply with safety and environmental regulations.
This car is nowadays highly demanded in the Indian market, and soon will be offered in many other emerging countries. These less affluent countries represent the base of the pyramid where the needs of billions of unsatisfied people can be met by this disruptive innovation.
The purpose of this case study is to evaluate the innovation strategy of Tata Motors, exploring their approach to the needs of the Indian market and the advantages and disadvantages Tata’s strategy yields.
2. -------------------------------------------------
TATA NANO: LESSONS FROM AN INNOVATOR
3.1. -------------------------------------------------
History of Tata Motors
Tata Motors’ long history started as a manufacturer of locomotives and engineered products in 1945. Tata is part of a well diversified group of businesses, Tata Group, which is active in industries including energy, information systems and communications, materials, services, consumer products, and chemicals. This industrial scope demonstrates a competitive strength of Tata Motors, which benefits from a well integrated and diversified parent company (see Eaton and Lemche, 1991).
_________________
OCTOBER 2010
-------------------------------------------------
TABLE OF CONTENTS
1. EXECUTIVE SUMMARY3 2. TATA NANO: LESSONS FROM AN INNOVATOR4
History of Tata Motors4
The Indian Automotive Industry 5
The Origin of the Nano 7
Tata’s Unique Business Model 8
Activities at Tata Motors 11
Effects on India’s Ecology and Economy 12
Risk of Imitation 13
Sustaining Competitive Advantage 13 3. REFERENCES16 4. EXHIBIT 117
1. -------------------------------------------------
EXECUTIVE SUMMARY
After years of research and development, Tata Motors stunned the worldwide automotive industry by manufacturing a USD 2.500 car, against expectations of market participants and consumers who argued that a car with these characteristics would never succeed or comply with safety and environmental regulations.
This car is nowadays highly demanded in the Indian market, and soon will be offered in many other emerging countries. These less affluent countries represent the base of the pyramid where the needs of billions of unsatisfied people can be met by this disruptive innovation.
The purpose of this case study is to evaluate the innovation strategy of Tata Motors, exploring their approach to the needs of the Indian market and the advantages and disadvantages Tata’s strategy yields.
2. -------------------------------------------------
TATA NANO: LESSONS FROM AN INNOVATOR
3.1. -------------------------------------------------
History of Tata Motors
Tata Motors’ long history started as a manufacturer of locomotives and engineered products in 1945. Tata is part of a well diversified group of businesses, Tata Group, which is active in industries including energy, information systems and communications, materials, services, consumer products, and chemicals. This industrial scope demonstrates a competitive strength of Tata Motors, which benefits from a well integrated and diversified parent company (see Eaton and Lemche, 1991).
References: Eaton, B. C., & Lemche, S. Q. (1991) “The Geometry of Supply, Demand, and Competitive Market Structure with Economies of Scope”, American Economic Review, 81, 901-911. Farris, P. Kishore, N. Raghu; Lemley, Venkatesan, Rajkumar (2009) “The Tata Nano: The People 's Car” Darden School of Business. Hagel, J., & Seely Brown, J. (2010) “4 Lessons to Learn from Tata’s Nano”, Business Week, 3/25/2008, 11:43 IST. Hoang, D. T., Igel, B., & Laosirihongthong, T. (2010) “Total Quality Management (TQM) Strategy and Organisational Characteristics: Evidence from a Recent WTO Member”, Total Quality Management, 21, 931-951. Ray, S., & Das, S. (2009) “Corporate Reporting Framework (CRF): Benchmarking Tata Motors against AB Volvo and Exploring Future Challenges”, Decision, 36, 101-129. Schmidt, G. M., & Druehl, C. T. (2008) “When is a Disruptive Innovation Disruptive?”, Journal of Product Innovation Management, 25, 347-369. Tata Motors Website, accessed on September 25, 2010, http://www.tatamotors.com/ our_world/ profile.php Vijayraghavan K