Running head: THE DECISION BY TATA MOTORS- LAUNCH OF NANO

The Decision by Tata Motors- Launch of Nano Formatted: Highlight

Khushbu Sapra

Royal Roads University

Author Note

This paper was prepared for Applied Research and Business Analytics MGMT580,

Cohort A, taught by Deb Linehan and Nidal Mousa. Word count- 1484.
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Contents

Introduction ......................................................................................................................................3

Tata Motors Limited ........................................................................................................................3

The Automotive Industry .................................................................................................................3

The decision, its background and significance ................................................................................4

Decision making approach by Tata Motors .....................................................................................5

Exploring the mess ......................................................................................................................6

Searching for the information......................................................................................................6
Identifying a problem ..................................................................................................................6
Searching for solution .................................................................................................................6
Evaluating the solution ................................................................................................................6
Implementing the solution ...........................................................................................................6

Consequences of the decision ..........................................................................................................7

Research problem and key Variables ...............................................................................................7

Conclusion .......................................................................................................................................8

References ........................................................................................................................................9

Appendix A- Sales of Nano ...........................................................................................................12

Appendix B- Comparison of Nano and its competitor ..................................................................13

Appendix C – The influence chart .................................................................................................14

THE DECISION BY TATA MOTORS- LAUNCH OF NANO 3

The Decision by Tata Motors- Launch of Nano

Introduction

This paper would focus on analysing the decision taken by Tata Motors Limited (TML),

the launch of Nano. The paper begins with the describing the business of TML and a glimpse of

automotive industry. The history behind the decision and its relevance is then discussed along

with the study of the decision tools used. The paper additionally describes the consequences of

the decision and it is further concluded with the overall analysis of the case.

Tata Motors Limited

TML is an India based global automotive manufacturing company. It has 11 subsidiary

companies in India, 66 in abroad and it is headquartered in Mumbai, Maharashtra (MarketLine,

2018). Its known for its gentle skills of mergers and acquisitions, that enhance its global presence

and improve its own capabilities (Manjeet & Moon, 2008). Its broad automotive portfolio

includes passenger cars, vans, sports cars, coaches, trucks, buses, construction equipment and

military vehicles (MarketLine, 2018). Its premium and luxury utility vehicles are sold under

brand names Land Rover and Jaguar across borders (MarketLine, 2018).

The Automotive Industry

Automotive Industry is witnessing immense increase in worldwide production of motor

vehicles. China, Japan, Germany and the United States are the biggest manufacturers of

passenger cars and commercial vehicles (Wagner, 2020). China’s alone market share accounts

for 30% of the worldwide auto production (Wagner, 2019). Investment in intangible resources

like flexibility, customization and personalized experience for customers are the driving factors

in the automotive industry as customers buy and consume experiences (Pitts, 2015). TML also

took a significant decision in 2008 to launch an innovative and differentiated product ‘Nano’,
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known as ‘the car for people’, serving the differentiated needs of middle-class families (Paul,

2009). “With 31 patents in design and 37 in technology, and the lowest emission levels among

petrol cars in India, the Tata Nano was heralded as the start of an era” (Deepika & Rajann, 2011,

para. 3).

The decision, its background and significance

In 2003, Tata Sons’ chairman Ratan Tata witnessed a family in the rainy night on a

scooter (two-wheeler). The father in that family was driving the scooter, a young kid was

standing in front of father, behind the handlebar, the wife was sitting with another baby in her

lap. Ratan Tata was so moved by this situation that he decided to come up with an idea of safe,

affordable and weather friendly vehicle for a family of four, this gave birth to a magnificent

decision in the history of automotive industry- the project of Tata Nano, a budget friendly car for

the world (Sharma, 2017).

The project announced a price of one lakh rupees (US$ 2500) for a car and it was

primarily targeting the scooter market, motorcycle and middle-class people (Ahuja, 2017). Soon

after the announcement of the car, it gained considerable public attention. Ratan Tata’s decision

raised the hopes in the lives of those Indian people for whom having a car is no less than a

dream. According to Bennett (as cited in Hansen and Nielsen, 2016), it was like a freedom

machine for the status conscious Indian customers who were excited to migrate from two-

wheeler or three-wheeler to a four wheeled vehicle. In January 2008, when first Nano was

unveiled to the public, the battling crowd in the Pragati Maidan (stadium in New Delhi) was

surprised to spectate the Nano package of beautiful interior, the affordable asking price and all

essential utilities (Hansen & Nielsen, 2016).

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Soon after the launch of Nano, the sales of used cars in India fell considerably. People

were not ready to spend money on used cars as they knew that they could buy Nano for much

less price if they wait till year end (Paul, 2009). Moreover, the price of a used Maruti 800,

arguably the Nano’s closest competitor, fell by 30% (Paul, 2009). Thus, the Tata Nano project

became the highlight of the world’s news in the year 2008 and gift to the exploding middle-class

population in India.

Decision making approach by Tata Motors

According to Barends and Rousseau (2018), the managers should make their decisions

based on evidences and those evidences should be sourced from the scientific literature,

professional experience, the organizational data and must consider stakeholders’ concerns.

Nano was a brainchild of Ratan Tata, and the entire company trusting his vision and

professional experience agreed to work for this Project. According to Ahuja (2017), the company

analyzed the statistics and data associated with various car designs and conducted appropriate

research before finalizing the Nano project. However, not all the stakeholders’ views were

considered. The interest of customers was prioritized as Ratan Tata believed in fulfilling his

promise of providing the cheapest car to public. Employees of Tata group revolted against the

price of US$ 2500, but the CEO denied and for him the cost of the car was concrete (Breuer &

Upadrasta, 2017).

The decision taken by Tata group can also be aligned with the Powell and Baker’s (2016)

six-stage problem solving model to a great extent. However, their failure in ‘evaluating the

solution’ reflects how the small mistakes can impact the most planned, researched and well

aimed decisions.
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Exploring the mess

The struggling situation in the rainy night for a middle-class family on scooter made the

chairman to explore the possible challenges that middle-class people faces (Hansen & Nielsen,

2016).

Searching for the information

The company did research and the chairman used his professional experience to identify

the actual problem. They tried knowing more about the taste and preferences of customers as

well as their needs (Ahuja, 2017).

Identifying a problem

After analysis, the company identified the problem of improving the transportation need

of middle-class family who have limited income and who want to avoid rain, wind and dust

(Paul, 2009).

Searching for solution

The company came up with various designs of two-wheelers and four-wheelers to solve

the problem. After rejecting many propositions, they finally decide to pursue Nano’s production

(Ahuja, 2017).

Evaluating the solution

This is the step which TML failed to execute effectively. According to them, Nano is the

safe, affordable and all-weather form of transportation (Sharma, 2017). However, it was later

proved that the cheapest car was not meeting the safety and emission standards (Paul, 2009)

Implementing the solution

TML implemented its solution and launched the first Nano in January 2008 (Hansen &

Nielsen, 2016).
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Consequences of the decision

From the beginning, Nano faced a lot of challenges. It was proposed by the company to

start its project from West Bengal, India but because of land acquisition protests by farmers and

political reasons, Nano plant had to shift to Gujrat, India (Paul, 2009). Additionally, soon after

the sale of Nano started, there were complaints of cars catching fire and usage of poor materials

in the car (Hansen & Nielsen, 2016). Appendix B shows in detail, the drawbacks of Nano when

compared with its competitor.

It was proved that Nano in its original form is not compliant with the safety regulations

and BS-VI emission norms (“Tata Nano ends”, 2020). Furthermore, inflation, political and other

macro factors were not accounted for while making the decision, causing the difficulty for the

company in the times of increase in input prices (Sharma, 2017). After several cases of Nano

catching fire, the company had to offer extended warranty and recall for updation to correct their

mistake (Deepika & Rajann, 2011). Tata kept his promise (of selling the cheapest car), but Nano

could not. As a result, the sales of the car declined year after year and now the Nano project is at

the verge of shutting down (Sharma, 2017).

Research problem and key Variables

Research Problem- How can the company better serve the transportation need of the

middle-class families (with average income and who want protection against harsh weather

conditions), while earning reasonable profit for the company?

Key variables – Cost of plant and equipment, cost of resources (material and human),

marketing cost, quantities sold, unit price of Nano. Consumer needs: budget friendly car, safe,

accommodate four people and protection against extreme weather conditions. Appendix C
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explains these variables in detail through influence chart. The chart also depicts the areas where

TML lagged.

Conclusion

Thus, the decision which was made to positively influence the lives of Indian masses and

was supposed to provide optimal transportation solution to the world, failed to meet its

expectations because of insufficient analysis and relying primarily on the intuition of the

chairman while making the decision. Moreover, because of chairman’s emotional attachment to

the project, it was not tested on risk and return parameters as well as cost-benefit analysis. The

case therefore necessitates the significance of decision-making process in each business. The

efficiency in decision making help in attaining the organizational goals as well as builds on the

trust and credibility of the company. It is therefore essential to critically assess all the alternatives

and source the evidences comprehensively while exercising the decisions.

Number of words: 1476

• Business Case: identified and selected a showcase business case appropriate for the
assignment: A+
• Decision case, company, industry, and context: You were able to properly inform the
reader of the context and situation and successfully outlines the decision. outline of the
decision and issues within the organizational and industry context. A+
• Analyse decision, approach used, and the organizational impact: you were able to
Critically analyzes the decision approach and argues for alternate course of action: A
• Construct the research problem and its variables: you listed the problem clearly;
Drawn an alternate and methodical decision proposal effectively aligned to the problem
and its components: A+
• Discussion and conclusions: Strong conclusion and discussion of relevance to global
management: B+
• Writing and technical specifications: APA formatting is used and the paper is free of
grammatical, spelling, and punctuation errors: A+
Overall Mark: A+ (92) Formatted: Font color: Auto
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References

Ahuja, A. (2017). Case study on Tata Nano. Amity University. Retrieved from

https://www.slideshare.net/amanahuja3766/case-study-on-tata-nano

Barends, E., & Rousseau, D. M. (2018). Evidence-based management: How to use evidence to

make better organizational decisions. London, England: Kogan Page Publishers.

Breuer, H., & Upadrasta, V. (2017). Values-based product innovation – The case of Tata

Nano. ReserachGate. Retrieved from

https://www.researchgate.net/publication/317369548_Values-

Based_Product_Innovation_-_The_Case_of_Tata_Nano

Deepika, & Rajann, S. (2011). Case study on Tata Nano. Amrita Vishwa Vidhyapeetham School

of Business, Bangalore. Retrieved from https://www.amrita.edu/news/case-study-tata-

nano

Hansen, A., & Nielsen, K. B. (2016). The rise and fall of the people's car: middle-class

aspirations, status and mobile symbolism in New Delhi. In Cars, automobility and

development in Asia: Wheels of change. London, England: Routledge.

Inzamam. (2019). Tata nano failure case study. Bking.in. Retrieved from https://bking.in/tata-

nano-failure-case-study/

Manjeet, K., & Moon, I. (2008). Tata: master of the gentle approach. Business Week. Retrieved

from

http://web.b.ebscohost.com.ezproxy.royalroads.ca/ehost/pdfviewer/pdfviewer?vid=3&si

d=5fb0df03-6547-487a-b6b6-d938139b2f65%40pdc-v-sessmgr05
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MarketLine. (2018). Company profile: Tata Motors Limited. MarketLine. Retrieved from

http://web.b.ebscohost.com.ezproxy.royalroads.ca/ehost/pdfviewer/pdfviewer?vid=3&si

d=a0eb9d77-ebec-44a8-b097-48cafcaa8ffa%40pdc-v-sessmgr04

Paul, P. (2009). The Tata Nano: The people's car. University of Virginia, 1-9. Retrieved from

https://www.researchgate.net/publication/228143324_The_Tata_Nano_The_People's_Ca

r/link/55af80fc08ae7cdc32e2bed4/download

Pitts, F. H. (2015). Creativity and the commodity in the automobile industry. University of

Bristol, 2(2), 32-41. Retrieved from https://research-

information.bris.ac.uk/files/122526462/Pitts_FH_2015_Creativity_and_the_Commodity

_in_the_Automobile_Industry.pdf

Powell, & Baker, K. R. (2016). Business analytics: The art of modeling with spreadsheets, 5th

Edition. Hoboken, NJ: Wiley Global Education.

Sharma, S. (2017). How a scooter on a rainy day turned into Ratan Tata's dream project

Nano. Business Today. Retrieved from https://www.businesstoday.in/current/economy-

politics/how-a-scooter-on-a-rainy-day-turned-into-ratan-tatas-dream-project-

nano/story/239035.html

Tata Nano ends 2019 with zero production, sales of 1 unit. (2020). The Economic Times.

Retrieved from https://economictimes.indiatimes.com/industry/auto/cars-uvs/tata-nano-

ends-2019-with-zero-production-sales-of-1-unit/articleshow/73120259.cms

Wagner, I. (2019, December 19). Motor vehicle production- Statistics & facts. In Statista.

Retrieved February 5, 2020, from https://www.statista.com/topics/975/motor-vehicle-

production/
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Wagner, I. (2020). Worldwide automobile production through 2018. In Statista. Retrieved

February 5, 2020, from https://www.statista.com/statistics/262747/worldwide-

automobile-production-since-2000/
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Appendix A- Sales of Nano

2017- Oct Nov Dec Jan Feb Mar Apr May Jun
2018 2017 2017 2017 2018 2018 2018 2018 2018 2018
Tata Nano
(Sales in 57 121 94 62 52 29 42 20 3
Units)
Adapted from Inzamam (2019)
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Appendix B- Comparison of Nano and its competitor

Adapted from Ahuja (2017)

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Appendix C – The influence chart

The variables that are displayed in red reflect the areas where TML made the mistakes.

TML did not pay enough attention to safety features in the car, several casualties were later

experienced because of that. Moreover, their biggest mistake was to ignore the macro economic

forces of inflation and politics. Without considering these factors, they declared the fixed product

price of one lakh rupees. As a result, the company’s product failed to serve its purpose and its

sales stalled.