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Title: The Tata Nano Promotion for Tata Motors

The planet and the peoples car united for Indonesias future

Assignment for MBA Paper: By Torrance Mayberry

Contents Executive Summary: ................................................................................................. 3 Market and Growth Opportunity:............................................................................... 4 Cost Advantages: ...................................................................................................... 5 Competition: ............................................................................................................. 5 SWOT Analysis: ....................................................................................................... 6 Promotion & Execution:............................................................................................ 6 Promotion risks: ........................................................................................................ 7 Television: ................................................................................................................ 8 Demonstrations: ........................................................................................................ 9 Terms and Conditions: ............................................................................................ 10 Conclusion: ............................................................................................................. 11

Executive Summary:

The demand for domestic car ownership is increasing in growth markets.

The

transition underway in growth markets include many countries that are situated in Asia. The automotive sector is estimated to experience an increase in car ownership between 2013 and 2050 by a forecast 2.3 billion. Of this growth, 1.9 billion is estimated to be driven from domestic demand in Asia. The Nano has the potential to meet domestic car ownership for first and second time buyers in middle class households. The ability of Tata Motors to slowly meet demand of a growing middle class in Asian markets hinges on attracting and targeting the right customer segments.

Indonesia is currently at the centre of growth in the Asian region. Indonesia stands out from its surrounding neighbours because of its larger, pent up demand for domestic car ownership being the 4th largest country in the world. Indonesias growth is being fuelled by increases in capital investment for infrastructure development, per capita incomes and urbanisation. These factors are connected to increased consumption by youth and the working middle class households in Indonesia.

Influencing domestic demand in Indonesia is about Tata Motors executing on a promotion to capture a share of the 2 million units per annum market by 2018. This paper recommends an eight month promotion of the Nano on Indonesias Nickelodeon Kids television. The kids in Indonesias middle class households play a significant role in influencing their parents buying decisions with a study showing that a large percentage requests coming from Indonesian children for parents to transport them to minimarts. In conjunction with the advertising on television,

demonstrations will be held at minimarts which have fast become the choice of shopping locations for the target audience.

The Nanos sustainability features are well recognised around the world as a planet friendly innovation. As Indonesias middle class reaches critical mass, cost

advantages favour the Nano. The Nanos price point is on par with Indonesian middle class incomes. 3

Market and Growth Opportunity:

Over the next 15 years consumers will reach 1.8 billion people. The increasing global growth in consumption will be driven primarily in Asia. Indonesia and Malaysia are both situated at the central point of economic opportunities for the automotive industry. However, the best outlook in the medium to long term for domestic car consumption is in Indonesia.

Between 2013 and 2050 the nations working age population is set to increase. In contrast, over the same period China and Russia will experience declines in their working age populations. On the back of an increase in population and income growth is the migration of people from rural communities into urban areas. The concentration of people in urban areas changes resource demands as people choose an urbanised lifestyle over a rural one. The percentage of Indonesians living in urban cities is expected to reach 71% in 2030. That equates to another 72 million

Indonesians living in urban areas. The impact during the same period will swell Jakarta into a larger city of more than 10 million people. Although Jakarta has accounted for 6.4 percent of urban growth since 2002, the lion share of future growth is expected to happen in urban areas like Medan, Bandung, and Surabaya as well as parts of greater Jakarta such as Bogor, Tangerang, and Bekasi. The spill over into other mid-sized urban centres creates more demand for car ownership as a further 2 million people will need transportation. An Indonesian Government official, Budi Darmadi, Director General for leading industry, forecasts domestic car ownership demand alone in 2018 will reach 2 million units per annum.

Indonesia is predicted to have the third largest middle class in the world.

The

Government of Indonesia has responded to forecast demographic changes with policies that promote infrastructure development. The governments recent Land Acquisition Bill in 2012 enables the government to pave the way for major investments in infrastructure projects. Approximately $250 billion of infrastructure projects are underway with a focus to increase paved roads to connect urban, suburban, rural and remote areas. The infrastructure development projects will

provide greater access for car use. The expansion of roading through government intervention is contributing to urban expansion and is facilitating car usage. 4

Cost Advantages:

Indonesia is ideally located being close to Tata Motors home county of India. It can harness the cultural similarities between the nations. Many Indonesians beliefs, opinions and general attitudes are shared by Indians. Indian and Indonesian

communities share religions such as Hindu, Muslim, Christian and Buddhism. The cultural similarities and its location provide cost advantages for Tata Motors.

With car ownership only at 4% in Indonesia, driving domestic demand to ensure production volumes expand over time needs to be the focus of any promotion. The Tata Motors Jakarta-based operation will play a significant role in converting promotional leads that enable target households to experiment with the Tata brand. More than 80 percent of Indonesians indicate they want to have the flexibility to experiment with brands and the recommended promotion caters to this preference.

The promotion also focuses on what the Tata Motors brand stands for. For instance, the Tata Motors brand symbolises quality, safety and environmentally friendly technological automotive innovations. The attributes underpinning the meaning of these words are also reflected in the Indonesian Governments policies and initiatives to create an Indonesian society that is built on sustainable development and growth. With the recommended promotion Indonesian households will judge the Tata Nano product from the same perspective they use when judging local products.

Competition:

Competitors are already well established in Indonesia. Japanese car manufacturers have a 95% market share and have been able to retain this position even in the aftermath of the 2011 Thoku earthquake and tsunami. The Japanese have stuck with Indonesia as other car manufactures bailed out. They have been rewarded for their perseverance. The Toyota affiliate, Daihatsu, has about 51% of the market and

Mitsubishi 15%, followed by Suzuki, Honda and Nissan1. All of these manufacturers are planning new production lines and models.

The other competitors attempting to get a foothold in Indonesia include General Motors. This American firm closed its Indonesian plant in 2005 and now has plans to reopen this plant in West Java, Indonesia. The German car firm, BMW, is in

Indonesia and is expanding its production. The Ford Motor Company is in Indonesia with less than 2% market share.

SWOT Analysis:

Promotion & Execution:

A well-executed, planned promotion is critical for achieving a market share of first and second time car buyers in Indonesia. This promotion aims to gain the attention of Indonesias middle class. The plan is to use advertising and product demonstrations to drive domestic car ownership demand. In addition, during the promotion period a

The Economist: Indonesias car market Stuck in fifth gear. http://www.economist.com/node/21561907

focus will be on capturing the feedback of customers, translating it, where possible, into specifications which personalise the Nano for each market segment. It is

expected that this promotion will enable Tata Motors to organically grow in Indonesia.

The promotion aligns with the consumption patterns of Indonesias growing middle class incomes of R48,810,000 to R146,430,000. The promotion is tailored at this market segment to first attract their attention and then secondly, convert them to sales according to their preferences. The promotion includes advertising on television and holding product demonstrations at local minimarts. The promotion will run for eight months. The product demonstrations will be held at strategic locations like minimarts where people frequently gather to socialise.

Minimarts in Jakarta, like the 7-Eleven, is where many Indonesians shop. These locations capture more middle class household traffic than supermarkets. In 2011 minimarts in Indonesia experienced a 63% increase in sales compared with 2008.

Middle class households in Indonesia have decided to shop for their household goods and services at minimarts instead of supermarkets because of convenience. The shift in consumption by Indonesians for food and beverage categories has reshaped a $42 billion sector. The product demonstrations for the Tata Nano take advantage of this trend.

Promotion risks:

The following risks have been identified that need to be managed throughout the promotion period. Risk Causes Mitigation Change locations for demonstrations. Ensure manufacturing division have sufficient notice of promotion. 7 Impact Probability H L

Demonstrations are Shopping location ineffective. preferences change. Product unavailability.

Risk

Causes Sales representatives do not demonstrate the produce well Children do not connect with the message. Sales exceed planned expectations. Manufacturing experience unexpected delays Perception that price means poor quality.

Mitigation Extensive training for representatives. Identify another television channel. Ensure manufacturing division have sufficient notice of promotion. Product on hand at Jakarta or in India. Promote the Nanos quality, safety and other features at the demonstrations.

Impact Probability

Advertising does not reach its intended audience. Demand cannot be met.

Nanos low price could deter buyers.

Customer segment do not consider it a status symbol. Government policy Leadership change. Promote the Nanos changes reducing environmentally planned investment Financial crises friendly features. in infrastructure. affects Indonesia. Promote the low price and low running costs.

Television:

Between 1 December 2013 and 1 July 2014 a commercial aired on Indonesias Nickelodeon Kids will reach parents through their children. The commercial that is to be aired shows the usefulness of the Tata Nano from the eyes of children. The kids in Indonesias middle class households play a significant role in influencing their parents buying decisions. More than 90% of requests come from Indonesian children for parents to transport them to minimarts2.

The promotion takes a family on a journey as they do their part to help Indonesia maintain an ecological balance with its countrys natural resources. For instance,
2

The Nielsen Company. Reaching Indonesia's Middle Class:

http://www.nielsen.com/us/en/newswire/2012/reaching-indonesias-middle-class.html

imagine for a moment, a journey that starts off at breakfast in an Indonesian household. The children share a vision of the future for all Indonesians with their parents. The childrens image presented in the first scene is of increased yields in Indonesia agriculture like fruit, rice, vegetables and other food crops. The childrens image presented at the second scene quickly shifts to a view of them playing on low lying coastal areas where flooding is no longer a concern. The childrens image presented in the third scene involves a view of their parents watching them get ready to snorkel at one of Indonesias coral reefs, which are full of fish. The parents faces are full of smiles, exhibit laughter and joy toward the childrens vision. The parents actions encourage their children to enjoy the natural bounty Indonesia has to offer. The commercial with the childrens view quickly breaks away from the final scene in which their parents are presented with a choice. The children make a request to be transported to the local minimart. It is at this moment the parents make the right choice. The children look up into their parents eyes with a smile to say are we doing our part? The parents respond, Yes we are! We are doing our part as Indonesians. The parents open the door of the Tata Nano as the children climb into their new car to be transported to the minimart.

The trailer of the commercial ends by saying The planet and the peoples car united for Indonesias future. Experience the Tata Nano at demonstrations for a limited time at minimarts near you.

The television advertising will be supported on the ground with Tata Motor representatives conducting demonstrations at local minimarts.

Demonstrations:

From 1 December 2013 to 1 July 2014 Tata Motors representatives in locations like Jakarta demonstrate the environmentally friendly features of the Nano at minimarts. The representatives place an emphasis on terms like economical, safety, quality and style. Tata Motor representatives will demonstrate to potential customers the environmentally friendly features in the Nano and emphasise that the Nano has been built with Indonesias sustainable development and growth interests in mind. 9

The representatives will highlight the Nanos renewable fuel source of compressed air and its ability to transport families comfortably. The minimarts will have various Nano models, like the electric version, for households to see, touch, smell, sit-in and test drive. The representatives will draw attention to the Nanos roomy passenger and luggage compartments. All of this is about educating households face-to-face and aligning the Tata Motors brand with the Indonesian Governments sustainability message.

In addition, the representatives emphasise how owning a Nano makes their way of life easier. Representatives at minimarts will discuss terms and conditions of the

promotion. They will be empowered to make personalised sale deals on the day.

Representatives will ask prospects at minimarts where they heard about the Tata Nano. The representatives will also be equipped with tools to capture prospective customers contact details. They will specifically identify households that were

introduced to the Nano through Indonesias Nickelodeon Kids.

Terms and Conditions:

The promotion is valid for the period 1 December 2013 to 1 July 2014.

All

Indonesian households will be eligible to participate in the general promotion. However, households that are first or second time car buyers get their first year motor insurance coverage for free. Tata Finance will issue lines of credit on credit card products for Indonesians eligible to purchase a Nano through Tata Finance. Tata Finance will spread the instalment payments over 12 months to help customers manage their cash flow.

The Nano Basic customer will pay a monthly amount of $208USD or R11,397.36. The offer will also apply to households that have lines of credit available on their personal credit cards.

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Households that are first or second time car buyers are eligible to win R489,500 to R1,468,500 of Nano cash. Winners can use their Nano cash on Nano accessories or towards the future purchase of the Nano. The Nano cash can only be used on Tata Motors products but is transferrable to other households when they purchase a Nano.

The terms and conditions are only valid during the promotion period. Afterwards, the number of sales generated through Indonesia Nickelodeon Kids will be counted to measure the success of the promotion.

Conclusion:

The Tata Motors Indonesian promotion strategy focuses on spreading the word about the Tata Nanos features. It is targeted to middle class households that are either first or second time car buyers.

The increased incomes of Indonesias middle class, urbanisation, infrastructure development and concentration of consumption at minimarts are an opportunity for Tata Motors to benefit from increased domestic car ownership demand. The

advertising and demonstrations combined with incentives centres on brand promotion and conversion to sales. The approach is about reaching Indonesia children to

influence their parents consumption choices.

The change in a consumption pattern of Indonesian households has already reshaped a $42 billion dollar supermarket sector in Indonesia. The promotion taps into this existing momentum. It will generate interest through Indonesia Nickelodeon Kids and by placing Tata Motors representatives at minimarts to hold demonstrations emphasising the economical, safety, quality and stylish environmentally friendly features of the Nano. Representatives at minimarts will align their

demonstrations with the governments intent to create an Indonesian society built on sustainable development and growth.

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Although, only 4% of Indonesias 240 million people own cars, increasing car ownership domestic demand with this promotion ensures production volumes grow slowly overtime. This promotion targets the middle class to capture a share of car ownership market that is forecast to reach 2 million units per annum in 2018.

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