GROUP 1_TATA NANO CASE STUDY

GROUP 1_TATA NANO CASE STUDY - GROUP 1: Ryan Bean, Ryan...

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GROUP 1: Ryan Bean, Ryan Herlan, Chinmay Joshi, Charles Daniel Bremnathan RIT: Strategic Management of Tech Innovation TATA NANO CASE STUDY Elevator Pitch – In order gain a true price advantage over its competitors, a company must compete on more than low prices. It must have a structural or fundamental cost advantage to justify such prices. Examples of a structural cost advantage might be favorable long-term price on raw materials contracts or reverse integration, low overhead or lower shipping costs due to geographic proximity to markets. BY offering a low-cost low-frills auto, Tata is undercutting traditional automobile cost but it is not disrupting a business model. Unfortunately, this strategy can be easily imitated and profit margins are not as attractive as, say, the luxury car market. What was Tata’s motivation for introducing the Nano? Tata Nano saw the growth of the lower middle class revenues in India, spurred by the raid expansion of the nation’s economy. Combined with 25% annual growth in the passenger car market, along with 30% exported growth to Asia and Africa (where they may have sensed secondary markets for the Nano), Tata Nano felt the market would react positively to a cheap “people’s car.” Is the contention that “modular” design and manufacturing justification for the profitable low cost introduction of the Nano? In the 1980s Fiat used modular design to combat labor problems, but by the late 1990s, Mercedes was using the modular design to help reduce asset costs in the production SMART car. Volkswagen was doing the same in the cargo truck sector. 1 As suppliers begin to consolidate into globally capable firms, Tata Nano has the additional advantage of having created a supplier park, allowing a just-in- time delivery system that can reduce inventory costs. 2 Although modular processes may justify a low cost introduction of the Nano, the potential for future increased supplier costs should not be ignored. A tradeoff is created between the decrease in broad R&D and asset costs technical innovation. The lack of ownership in the supply chain may shift design and technical capabilities outside of the car manufacturer’s competencies, leaving only the value of the brand. 3
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GROUP 1_TATA NANO CASE STUDY - GROUP 1: Ryan Bean, Ryan...

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