Expert answer:Marketing homework
Answer & Explanation:Marketing management homework.Question 1: Read the case study and watch the video posted below. Tropicana turned this dilemma around by introducing a new type of juice for the new design, and returning the original flavor back to the beloved carton. Take a position on whether Tropicana did or did not make a major mistake in changing its product packaging. Suggest the next two (2) steps that you believe Tropicana should take in its branding strategy in order to use the “straw in the orange” as effectively as possible. Provide a rationale for your response and do not duplicate your classmates’ responses.http://x2.xanedu.com/course_packs/493573/article/a4navpoint-1/htmlid/null493573.pdfhttps://www.youtube.com/watch?v=Ny3kKNf1faU* Question 2: From the scenario, prioritize the attributes of Golds Reling’s brand from the brand map presented in the scenario according to the attributes that you believe would be most important to the new tablet’s target market. Provide support for your responseMKT500 Week 4 Scenario Script_11-21-13.docmkt500_w4_l1.pptmkt500_w4_l2_v2.pptI need 1-2 reference in a APA format
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CPID 493573
MKT 500
Strayer University−Online
Summer 2015
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MKT 500: Summer 2015
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MKT 500: Summer 2015
Table of Contents
“The Tata Nano: The People’s Car (A)” by Farris, Paul W.; Venkatesan,
Rajkumar; Kishore, N. Raghu; Lemley, Amy
“Tropicana: Social Media Teach Marketers a Branding Lesson” by Kirk,
Colleen P.; Berger, Karen A.
1
11
15
Bibliography
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UVA-M-0768
Rev. Feb. 1, 2013
THE TATA NANO: THE PEOPLE’S CAR (A)
It was one of the longest-awaited and most talked-about automobile debuts in India. On
January 10, 2008, Tata Motors unveiled its (U.S. dollars) USD2,500 car1 (also called “Rs1 lakh
car” or “the people’s car”) at the ninth Auto Expo in New Delhi. The Tata Nano brought a media
blitz and a crush of onlookers that required top-level security. Would the car live up to its hype?
And did its launch signal a new era for the small car market in India? How could Tata ensure the
product would be profitable?
Widely touted as the cheapest car in the world, the Nano was scheduled to be available in
September 2008. In addition to paying (Indian rupees) INR1 lakh—equivalent to INR100,000—
buyers would also have to pay 12.5% value-added tax along with charges such as road and
transportation taxes. The two-cylinder gasoline-powered version would debut first; the diesel
versions would soon follow.
The Nano was one of the world’s most fuel-efficient cars, getting 52 miles per gallon
(mpg) in the city and 61 mpg on the highway (22 km per liter and 26 km per liter, respectively).
Measuring 3.1 meters by 1.5 meters, it displaced Maruti Udyog’s Maruti 800 as the world’s
smallest car, yet its seating room was 21% greater than the 800’s—providing ample room for
four adults.
Company History
The Tata Group was a diverse conglomerate that had international interests in
engineering, energy, information systems and communications, materials, services, consumer
products, and chemicals. Its 96 companies employed 650,000 people on six continents.
For many casual observers, the May 2008 news that a British automotive icons Jaguar
and Land Rover had been acquired from Ford Motor Co. by a non-Western company came as a
1
As of September 8, 2008, USD 1 = 44.5 Indian rupees (INR); INR100,000 = 1 lakh; 100 lakh = 1 crore. Note:
“lakh” means 100,000, and its use is not restricted to a quantity of money.
This case was prepared by Amy Lemley, with the assistance of N. Raghu Kishore, under the supervision of
Professor Paul Farris and Associate Professor Rajkumar Venkatesan. It was written as a basis for class discussion
rather than to illustrate effective or ineffective handling of an administrative situation. Copyright ¤ 2009 by the
University of Virginia Darden School Foundation, Charlottesville, VA. All rights reserved. To order copies, send an
e-mail to sales@dardenbusinesspublishing.com. No part of this publication may be reproduced, stored in a retrieval
system, used in a spreadsheet, or transmitted in any form or by any means—electronic, mechanical, photocopying,
recording, or otherwise—without the permission of the Darden School Foundation.
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surprise. But new owner Tata Motors was in fact the sixth-largest commercial vehicle
manufacturer in the world and was among India’s largest automobile companies. In 2004, Tata
Motors became the first Indian manufacturing company to be listed on the New York Stock
Exchange.
Tata Engineering and Locomotive Co. Ltd, a train manufacturer, was established in 1945.
In 1954, the company launched its first automobile; between 1954 and 1969, it collaborated with
Daimler-Benz to produce commercial vehicles known as Tata Mercedes-Benz trucks, later
produced independently as Tata trucks. By the 1990s, Tata had entered the passenger-vehicle
market with India’s first sport utility vehicles, called the Tata Sierra. In 1998, it hit the jackpot
with the Tata Indica—a name derived from “India’s Car,” an apt moniker given that the car had
become the most popular vehicle in the country’s economy car segment. Tata launched the
Indigo in 2002. In 2005, Tata launched India’s first indigenously developed mini truck, called
the Tata Ace.
In 2004, Tata Motors acquired the Daewoo Commercial Vehicle Co. Ltd., Korea’s
second-largest truck manufacturer. In 2005, it acquired a 21% stake in Hispano Carrocera SA, a
Spanish bus manufacturer.
The company had manufacturing plants in the Indian cities of Jamshedpur, Pune, and
Lucknow, and assembly operations in Malaysia, Kenya, Bangladesh, Spain, Ukraine, Russia, and
Senegal. Globally, the company served the European, African, Asian, Middle Eastern, and
Australian markets.
As the Nano’s expected launch date neared, Tata Motors was experiencing a downturn in
its stock price—from USD18.60 per share in September 2007 to USD9.53 in September 2008, a
drop of almost 50%.
India’s Automobile Industry
The automobile industry in India benefited significantly from liberalization in the 1990s
when the government eased regulations on foreign trade and restrictions on private companies.
International companies took advantage of India’s affordable yet highly trained engineers,
establishing manufacturing operations throughout the country. In 2005, experts predicted that
India would become the world’s third-largest economy by 2020.
In 2005–06, India was among the largest and fastest-growing car markets in the world.
The passenger car market was growing by almost 25% per year, and passenger-vehicle exports
were growing by 12.7% annually. India’s exports, which went mainly to Asia and Africa, were
growing at a rate approaching 30% annually and had already reached 850,000 units in 2005–06,
compared with 600,000 units in 2004–05.2 Some years saw as much as 65% growth in exports.
2
“Indian Auto Companies to be Showcased at SAE Congress,” Business Line Financial Review, April 1, 2006.
2
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According
A
to
o http://www
w.knowIndiaa.net, India exported “3331,539 passsenger cars, and
over one million two
o-wheelers.”1
Economy
E
carrs
In
ndian car buyers already
y had their ch
hoice of carss in the USD
D5,000 (INR
R195,000) maarket;
Maruti commanded more
m
than 50%
5
of that market
m
sharee. Estimatess of automobbile ownershhip in
India ran
nged from 8 to 25 per 1,000
1
peoplee, placing Inndia at the llow end of global per-ccapita
automobile rankings (Table 1).
Table 1. Numberr of motor veehicles per 11,000 peoplee, by countryy.
Country
y
United States
S
Australiia
Canada
German
ny
Japan
United Kingdom
K
India
China
Motor Veehicles per 1,,000
765
619
563
546
543
426
12
10
Source: United
U
Nations World Statisticcs Pocketbook and
Statisticall Yearbook, 200
07.
With
W a population of 1.1 billion, “a median
m
age oof just underr 25, and a rapidly expannding
middle class, India will
w overtakee China next year as the fastest-grow
wing car marrket, accordiing to
estimatess by CSM Worldwide,
an auto indu
W
ustry forecaasting servicce,” the Interrnational H
Herald
2
Tribune reported.
r
Fiigure 1 depicts sales tren
nds in the Inndian automoobile and mootorbike marrket.
Figure 1. Sales trend
ds of automo
obiles and m
motorbikes inn India, 20022–08.
Data so
ource: “Industrry Trends of Au
utomobiles,” C
Corporate Indiaa, May 15, 20008.
1
2
Timiir Mozinder, “IIndian Auto Ind
dustry: An Oveerview,” http://
//www.knowinndia.net (accesssed April 6, 2008).
Heatther Timmons, “In India, A $2,500 Pace Caar,” Internationnal Herald Tribbune, October 11, 2008.
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There were six major players in India’s passenger-vehicle segment (Table 2).
Table 2. Major players in India’s passenger-vehicle market, percentage of market share, number
of dealers, and sales per dealer, 2008.
Passenger Vehicles
Maruti Udyog
Hyundai Motors India Ltd.
Tata Motors
Honda Siel Cars India Ltd.
Ford India Pvt. Ltd.
GM
Percentage
of Market Share
52.2
19.2
16.6
4.4
1.9
NA
Number
of Dealers
580
225
200
NA
125
100
Sales (Units)
per Dealer
1,275
800
1,000
NA
225
600
NA = Not available
Note: Dealer comparison numbers are approximate.
Data sources: http://Automobileindia.com (accessed August 10, 2008) and Emkay Research.
Cars were sold via dealer networks, and sales volume depended both on the extent of the
network and the sales per dealer (Table 2). According to a J.D. Power and Associates study of
the Asia Pacific market, Tata’s dealer margins across the various models ranged from 4% to
10%. Another study, by A.T. Kearney, estimated the profit margin of ultra-low-cost cars at 2% to
3%—about USD75 for the USD 2,500 Tata Nano.1 Dealers received further discounts if they
paid cash up front to Tata—amounting to about 1% of the full dealer cost. Although Tata Motors
did not disclose its contribution margins, the case writers’ estimate is about 15%.
Used cars
In the months leading up to the Nano’s highly touted launch, used car sales in India had
fallen considerably. The price of a used Maruti 800—arguably the Nano’s closest competitor—
fell 30%, Autoblog reported. “Indian car buyers apparently are not dumb,” the article stated.
“Why buy a new or used car today when you can wait until the end of the year and get a new
Tata Nano for much less?”2
Two- and three-wheelers
In 2007, India’s two-wheeler market was the second-largest globally, with almost eight
million in total units sold (Figure 1). By 2011, two-wheeler production was forecast to approach
18 million units. A typical motorbike cost about INR37,000 (one-third the cost of a Nano).
Manufacturers included Bajaj Auto, Hero Honda, TVS Motor, Yamaha Motor, and Kinetic.
Table 3 shows the types of vehicles in this class and their fuel efficiency, cost, and top speed.
1
Stephan Mayer and Ruediger Plaines, “Mega Market for Ultra-Low-Cost Cars: Focusing on Customers in
Developing Markets,” A.T. Kearney, Inc., 2008.
2
John Neff, “Tata Nano Tanking Used Car Market in India,” February 8, 2008, http://www.autoblog.com/
2008/02/08/tata-nano-tanking-used-car-market-in-india/ (accessed April 6, 2009).
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Table 3. Types of two-wheelers available in India.3
Vehicle
Moped, mokick, or
step-thru
Scooterette/mini
Gas mileage
(km/liter)
Cost (INR)
55–70
15,000–40,000
55
20,000–25,000
Scooter
40–60
25,000–50,000
Motorcycle
Up to 70
35,000–75,000
Enfields Diesel Bullet
(India’s only diesel
two-wheeler)
66
65,000
Market
Teens, the elderly,
and city riders
City riders, students
Popular with women,
city riders; longer
rides possible
Primarily a style
choice; more popular
with men
Seekers of “India’s
Harley-Davidson”
Speed (kph)
40–45
65
70 and up
80 and up
80 and up
Source: Created by case writer.
Bajaj Auto also dominated the market for passenger-carrying three-wheelers, commonly
called “auto rickshaws.” Often used for transporting small cargo loads, these vehicles had earlier
faced competition from the Tata Ace, as well as from Piaggio’s Ape Truk, a four-wheeled cargo
carrier. Just months before the Nano’s launch, rickshaw drivers had begun filing petitions
through their union requesting that they be allowed to drive the Nano under their existing threewheeler permits.
Even if Nano manages to convert 10% of the two-wheeler market of about seven
million, it will have almost 50% share of the car market [Figure 1]. Nano may
lead to a 20% reduction in prices of two-wheelers and a 35% decline in prices of
secondhand cars, according to industry chamber ASSOCHAM.4
Aman Verma, a Hero Honda showroom manager in East Delhi, expected two-wheeler
sales to remain strong. “Nano may give a lot of people a chance to own a car,” Verma said. “But
more than fixed price, it’s the variable cost of maintenance, fuel, and spare parts, where the twowheeler sector has an edge.”
“A car is much more suitable, safer, and a comfortable option than a two-wheeler, but in
a cost-conscious nation like India, there will always be a place for a two-wheeler,” said another
two-wheeler dealer. “There will not be a large-scale migration to the Nano. Both the bike and the
entry-level car segment would have its own niche customers in future.”
3
1 kilometer = 0.62 miles; 1 liter = 0.26 gallons; kph = kilometers per hour.
“Is the Two-Wheeler Segment Dreading the Nano Effect?” http://nanocar.wordpress.com/2008/01/15/is-thetwo-wheeler-segment-dreading-the-nano-effect/ (accessed April 6, 2009).
4
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The Tata Nano
Nano is expected to change the automobile market in India. It would cater to a
typical middle-income Indian family of four who wants to avoid rain, wind, and
dust … It’s freedom for four.
—Dilip Chenoy, Society of India Automobile Manufacturers
What must you forgo for USD2,500? Air-conditioning. Power steering. Power windows.
A tachometer. Dual windshield wipers. But the cost savings in creating a USD2,500 car did not
result only from such omissions. Rather, Tata sought the bulk of its cost savings in a streamlined
modular design in which many components served more than one function. Perhaps most
notably, the car’s component parts could be built at separate facilities and shipped for local
manufacture. Even village garages could assemble it, creating a unique distribution channel for
rural areas. In that way, the Nano was a kit car, said Tata Group Chairman Ratan Tata:
A bunch of entrepreneurs could establish an assembly operation, and Tata Motors
would train their people, would oversee their quality assurance, and they would
become satellite assembly operations for us. So we would create entrepreneurs
across the country that would produce the car. We would produce the mass items
and ship it to them as kits. That is my idea of dispersing wealth. The service
person would be like an insurance agent who would be trained, have a cell phone
and scooter, and would be assigned to a set of customers.5
At the start of the launch, Tata expected that its new 1,500-crore plant at Singur in West
Bengal would handle the bulk of the manufacturing; but construction was put on hold after
significant protest from area farmers whose land the government had appropriated for the project
without compensation. In response, Tata elected to shift production to another facility, and to
reduce its initial run from 40,000 to 10,000 cars per month during the first few months of
production.6
Between 2003, when development began, and mid-2008, the cost of raw materials to
assemble the Nano had risen from 13% to 23% of retail selling price, compared with a 7% cost
for the average U.S. automobile.7 Even before this cost spike, however, the company had
planned to use reverse auctions to lower parts costs. It set a rejection rate of less than 100 parts
per million and expected to reduce warranty costs tenfold. (Note: Automobile margins were
typically 10% to 15% on spare parts for dealers and 20% to 25% for Tata Motors; for normal
servicing, the dealer margin was about 4% to 10%).
5
John Hagel and John Seely Brown, “Learning from Tata’s Nano,” BusinessWeek, February 27, 2008,
http://www.businessweek.com/innovate/content/feb2008/id20080227_377233.htm (accessed April 6, 2009).
6
Irwin Greenstein, “Steer Clear of Tata Motors,” September 8, 2008, http://seekingalpha.com/article/94424steer-clear-of-tata-motors (accessed April 6, 2009).
7
Nelson Ireson, “Rising Costs Could Eat Tata Nano’s Profits,” Motor Authority, August 5, 2008.
6
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In all, 90% of the Nano’s components were outsourced, and about 75% were singlesourced. Tata engaged 100 subcontractors, signing them to long-term volume contracts rather
than annual contracts. Half these vendors were to be co-located in a manufacturing park adjacent
to Tata’s Singur plant—occupying a portion of the 950-acre property the government had made
available to the cooperative enterprise.
Critics questioned whether the low price meant the vehicle was of low quality. But one
Tata vendor credited the company with designing from scratch, saying it precluded “dumbing
down” the engineering: “There are so many legacy costs built into a design, and trying to
engineer those out is difficult. It’s better to start with a clean sheet of paper and engineer low
costs in.”8
Tata’s original plan was to produce 350,000 Nanos the first year; it had plans to set up
three additional plants to achieve its goal of selling one million units annually.
Competitive Response
“Small cars have always been popular in India, even when oil prices were low,” said
automobile industry analyst Ashvin Chotai.9 Indeed, previous low-cost, high-efficiency car
launches had met with success: The Indian government had collaborated with Japanese auto
giant Suzuki Motor Corporation to release the mini Maruti 800 in the 1980s; in 2008, at the time
of the Nano’s release, the Maruti 800 retailed at USD5,000. Hyundai and Suzuki each
manufactured up to one million subcompact cars in India in 2007, and they had plans to expand.
Renault, Nissan, and Bajaj Auto were already exploring whether a USD3,000 automobile was
possible.
But Maruti was in no rush to reach lower than its Maruti 800 at USD5,000. “Our thinking
is that a consumer who is looking to buy a Maruti 800 or Maruti Alto will never settle for the
Tata car because of the difference in value propositions that the respective cars offer,” said
Maruti Suzuki India Ltd. Managing Director Shinzo Nakanishi. “In any case, the impact of the
car will be felt more in the two-wheeler segment, and every Tata 1 lakh owner will be a potential
buyer of our cars.”10
“India …
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