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Evaluation of Business Case for Tata Gensets

Undertaken at

Head Office, Spare Parts & Aggregates Business, Thane Under the Guidance of Mr. Sachin Simant Manager, Aggregates Business Tata Motors, Thane Prof. A. D. Raoot Professor NITIE

Submitted by Himanshu Gupta Roll No. 21 PGDIE, Batch of 2009 NITIE, Mumbai

About Tata Motors: Tata Motors Limited, the largest Automobile Company in India and fifth largest commercial vehicle manufacturer in the world operate through two main business units: Commercial Vehicle Business Unit and Passenger Car Vehicle Unit. Again Commercial Vehicle Business Unit focuses mainly on two different businesses: Vehicle business and Non Vehicle business. The Spare parts & Aggregates Business lies under Non vehicle business of Commercial Vehicle Business Unit of Tata Motors Limited henceforth will be referred as TML. Aggregates Business of Tata Motors consists of production and sales of Tipping Kits, axles and engines for Industrial as well as Power generation applications. Need & Scope of Project: Tata Motors is in the business of Engine sale for Industrial and Power generation segment. The current existence is through Cummins India Ltd (CIL), as we supply engines to Cummins India Ltd and then Cummins sells the same to market in the form of Genset under Cummins Brand. 60% of engines sales are through Cummins and hence dependability is very high on one customer. TML wants to evaluate of case for entering into Power generation segment on its own with a parallel range of products to safeguard its existence and to reduce the dependability on CIL. Venturing into new Genset Business also can help Tata Motors in boosting the top line and bottom line for the business by selling the entire Genset under Tata brand and can grow rapidly in the growing Business of Gensets Objective of Project: Following are main objectives of this project: 1. 2. 3. 4. Genset Industry Mapping with respect to current competitors, Volume, Prices and Business Models Pricing of Tata range of Gensets based on various cost inputs Recommendation of Business Model to be followed by TML Validation of Business Case with the detailed SWOT/NPV Analysis

Methodology Followed: Exhaustive Market Research was done in order to collect & evaluate complete information regarding Genset Industry. Following techniques were applied: 1. Visit to competitors Manufacturing sites 2. Surveys with Competitors OEMs 3. Approaching Competitors sale dealers as potential customer in order to understand pricing mechanism of Gensets 4. Surveys with potential Tata Channel partners 5. Discussions with suppliers and evaluating quotations 6. Industry Analysis using Porters Model of Competitive forces 7. Calculation of Break Even, ROI, Sales & Revenue Projections for 5 years Key Deliverables: 1. Genset Industry Mapping: Understanding the product & Industry 2. Assessing the Industry Potential for a range of 7.5 to 125 kVA segment and share of key players

3. Price Comparison of key players with standard product offering 4. Pricing of Tata Gensets with the cost inputs from key suppliers & manufacturers. 5. Positioning of Tata Gensets in the market and product validation along with Business Model 6. Business Case Evaluation for Tata Gensets with SWOT Analysis Analysis of Tata Genset Option:

Year 1 2 3 4 5

Sale to OEMs 6500 7000 7500 8000 8500

Projected Sales Sale of Revenue Tata Total (Rs. gensets volumes Crores) 1000 3000 6000 9000 12000 7500 10000 13500 17000 20500 86 151 252 364 486

Projected Gross profit (Rs. Crores) 11 17 27 37 46

Thus If Tata decides to enter the genset business, Gross profits would be 11, 17, 27, 37 and 46 crores over the period of 5 years, starting from FY 2009-10. On the other hand, if Tata continues to operate with present business model, these profits would be limited only to 14, 16, 18, 20 and 22 crores respectively. Suggested Product & Channel Strategy: Segment Sub Strategy Segment Domestic Retail Short term Strategy Product OEM Genset with Tata Engine Tata Gensets Tata Gensets Sales Channel Utilize OEMs present sales network Direct selling Tata owned sales offices Service Channel Utilize OEMs present service network Utilize OEMs service network Tata authorized genset


Short term Strategy Long term strategy



Long term strategy

Tata gensets


Retail Institutional

Tata gensets Tata gensets

service centers Direct Tata selling authorized genset service centers Distributors Distributors Distributors Distributors

Key Learnings: 1. Complete Understanding of Genset Industry, which is totally unorganized in India. 2. Understanding of various aspects in deciding Channel Partners for any new business to be started. 3. Practical Application of PORTERS MODEL OF COMPETITIVE FORCES model 4. Development of Future Sales Volumes & Revenues Projections (How to develop 5 years Strategic Business Plan) and utilization of them for decision making. Academic Relevance: This project has provided me excellent platform to apply the concepts of Brand positioning, Market Research, Product & Channel Strategy, Pricing Methodology for Capital Goods equipments, various taxation schemes in India and Porters Model in arriving at final Business Model for Tata Gensets.