Positioning the Tata Nano (A)

The TATA Group has been founded by Jamsetji Tata in 1868 as a trading company. The company
was the first to initiate many businesses in India. It has its first steel mill. Power utility, luxury
hotel and international airline. In 2011, the company had about 98 companies in about 7 sectors.
The company has become very trustworthy and has a strong commitment to ethics, which can be
seen from the promise made by the company to improve its product development by improving
the quality of the products.

After liberalization the automobile industry flourished with an average growth rate of 17%. The
company has launched Nano in the year 2009. Ratan Tata has to decide on various problems like
Positioning of the brand and produce cars at a very low price. The goal was to price the car at Rs.
1 lakh without compromising quality. The company has produced more than 11 million vehicles
in 2009.

The company has two options for positioning Nano. They are
1. Family transport
2. Usage situation
Family transport positions Nano as a safer and more comfortable mode of transportation when
compared to motorbike. In the second option which is Usage situation, the company must focus
on a specific segment like college students who are very much attracted to the styling and
flexibility. Recently the company has started new initiatives which includes various efforts to
develop hybrid and electric cars inorder to save natural resources.

I. Sales goals recommended for Tata Nano

As we are setting the sales goal for the Tata Nano we must look upon the various factors and
aspects. We know that The Tata Nano is the cheapest car in the world, the market forecast is very
high for both the consumers as well as the producers. Seeing the current scenario, there are some
complication and restriction at singur plant of the company, so the production has to be shifted to
Sanad plant. But temporarily cars will be manufactured at pantanagar plant which has a capacity
of 50000 car/year. Because of this the planned production which was 3,50,000 in 1st year is
reduced to 50,000 per year.
As the total cost of the plant was around Rs.1500 crores i.e. 15000000000.

The average Sale price of 3 variants of Nano is Rs.1,46,415.33

Sale Price Nano + Sale Price Nano Cx + Sale Price Nano Lx/3
1,00,000+1,57,808+1,81,438/3

Dealer margin 4%
146415.33*4/100 = Rs.5856.61

Manufacturer margin 15%

140558.72*15/100 =Rs.21083.808
So,
By selling each Nano car they get Rs.21083/car
The total cost incurred in investment of plant = 15000000000
So,
15000000000/21083 = 711447 units of Tata Nano
So, Sales target of tata nano should be 7,11,447 units. By selling this units the company can
cover its capital invested. However, it will take some years, but it is achievable.

II. Positioning of Nano to achieve their goal: -

Positioning is about designing a company’s offering and image to occupy a special place by
locating the brand in the minds of consumers to maximize the potential benefit to the firm.

Company Should position itself as a family car which could be an alternative of 2-wheeler of
middle class and lower middle-class people.

POPS (Points of Parity)

Points of parity are those qualities which are considered mandatory for any brand to be a
legitimate competitor in the market in its specific category. In case of Nano it fulfilled every
point of parity that is required for any car in the automobiles market Until the release of Nano,
the most affordable car was Maruti 800. The current major competitor of Nano in the market
was Maruti Alto. And the company also has a huge future competition from ULC cars from
Hyundai, Maruti, Ford, Toyota etc.
PODS (Points of Differentiation)
Points of differentiation are those qualities that makes your brand different from other
competitors which make your brand unique. It’s your competitive advantage. The POD should
reflect your brand slogan. In case of Nano it was a low cost, fuel efficient car which was made
for capturing middle class market.

The value proposition was to build world’s cheapest, smallest and fuel-efficient car. The plan
was to build a low-cost car which was then named as “People’s Car”. The Car was launched
in three models namely:
1. The Nano (Basic)
2. The Nano CX
3. The Nano LX
Where, Nano was the basic car for the price of Rs.1 lakh which omitted air conditioning and
few other facilities. Nano CX and Nano Lx were the cars with more luxurious cars with
much more features at a higher price.
Nano car is most reliable car which is equivalent to the price of two wheelers. It serves the
purpose of customers in a better way when compared to two wheelers. The Main strategy
of the company is the Low pricing strategy. Pricing is the most important characteristic that
matters a lot when it come to the customers especially in India. Low price requires a little
bit of compromising in terms of quality but the company produced a product which does
not differ much with the products that are offered by the competitors. ,. The other level of
competitors for Nano are Two-wheeler segment which comprises of the following:
1. Low Pricing
2. Fuel efficiency and Low maintenance cost
3. Easy manoeuvrability
The company is giving a tough competition to the two-wheeler segment. Nano is creating more
value for money by considering the consumer behaviour by offering luxurious cars in the same
segment which are priced slightly high with better engine quality, more space and safety
features. The Nano CX and Nano LX were competing against Alto and such other companies.
The Distribution process was very flexible which includes:
1. Online Booking process
2. Lottery
3. Offline booking
Service fees is 200 for online booking and 300 for online booking at one of the Tata dealerships.
The companies have 214 dealerships across 28 states with dealer margin cut down from 4-10% to
2-3% and offers 1% discount if the dealer has paid cash up front.

III. why is the recommended positioning strategy superior to other positioning strategies
that might reasonably be considered?

Focusing upon the needs of the consumers and the market, broad market segment is
profitable for the company than narrow segment in terms of profit earning and return of
investment.
As the company’s segmentation have a choice of middle class income family (as family
class as alternative of 2-wheeler) , college student.
Initially the company thought that focusing on a specific segment and usage situation,
such as college students, who might be attracted to the Nano’s styling and
manoeuvrability, as their option but the college students may comprise of higher income
category who will not be going to purchase Nano and Also, the manoeuvrability of two-
wheelers made them a favourite with all college students.

So, instead of narrow segments like targeting college students, it should focus on
targeting the needs of middle class group as it is a broad segment and position itself with
its competitors.
The following are the supportive arguments for recommending the PRICE effective
positioning strategy as it would be focus on broad markets like middle class family
income categories.

 Fuel effective and low maintenance comparing competitors.

 safety features and more space comparing two wheelers.
 Targeting two-wheeler buyers who cannot afford 4-wheeler.

Also, After liberalization the Indian population living in poverty reduced which led to the
formation of a considerable middle class centered in cities. According to McKinsey global
Institute Report, this segment was 5% In 2005 and estimated that it would grow rapidly at the
rate of 19% by 2015 and 41% by 2025.The Tata Nano is solely made for this segment as it fulfill
their aspiring needs in low price along with the fuel efficiency As this segment has tough
customer so the company have to meet their high aspiration with their want of low prices. The
above positioning strategy meets the value proposition for different segment differently and
efficiently.