Description
The presentation describes on Strategic Analysis of Tatasteel, FMCG, and Tata motors.
TATA STEEL –Ankit Pawar(5) FMCG INDUSTRY-Astha Savyasachi(7) TATA MOTORS-Bandeep Jaswal(8)
? “Tata Steel moves into its next target to become the
world's second largest steel company by 2012 with the help of its most expensive bet worth $12.9 billion on Corus group”.
- Business Standard
Introduction
? Tata Steel, formely known as TISCO.
? World’s fifth largest steel company. ? Annual crude capacity of 32 million ton. ? Tata Steel is also India's second largest and second-
most profitable company in private sector. ? Presence in over 50 developed markets of Europe and Asia.
? Tata Steel`s Jamshedpur (India) Works has a saleable
steel capacity of 10.23 MTPA. The Company also has proposed three Greenfield steel projects in the states of Jharkhand, Orissa and Chhattisgarh in India with additional capacity of 23 MTPA and a Greenfield project in Vietnam.
? Through investments in Corus, Millennium Steel
(renamed Tata Steel Thailand) and NatSteel Holdings, Singapore, Tata Steel has created a manufacturing and marketing network in Europe, South East Asia and the pacific-rim countries.
GLOBAL STEEL INDUSTRY
? The current boom driven by the growth in the
developing world, particularly China,India and Brazil. ? China is clearly the engine that has driven steel consumption in the Asian region. ? Despite of so much growth, Steel industry is still fragmented.
INDIAN STEEL INDUSTRY
? Steel industry reforms of 1991-92 have led to strong
and sustainable growth in india’s steel industry. ? The steel industry in India has grown by about 10 per cent in the past two years, compared with the global growth rate of about 6 per cent a year. ? Currently, India is the largest sponge iron producer in the world and ranks fifth among steel-producing countries.
Company Strategy: value creation
? The Tata Steel Group set itself a target of increasing
the return on invested capital of its existing assets to 30% by 2012-13 and to generate selective growth. ? In order to increase the quality of earnings of its existing assets, the Group will pursue the optimisation of its European assets, restructure low profitability assets and continue to derive benefits through continuous improvement and synergies across the Group.
? In order to generate selective growth, the Group will
pursue capacity expansions and securing access to raw materials. The Group is increasing its capacity in India, through expansion of its current operations in Jamshedpur and through the construction of a greenfield site in Orissa, and assessment of raw material investment opportunities as and when they arise
Corporate Citizenship
? Corporate citizenship involves providing a safe
working place, respecting the environment, caring for its communities and demonstrating high ethical standards. ? The Group wants to be a part of the climate change solution and has set a target to reduce its CO2 emission from the current 2.07 tonnes of CO2 per tonne of liquid steel to 1.5 tonnes of CO2 per tonne of liquid steel by 2012 through process improvements, breakthrough technologies and development of new products and services.
Growth Strategy
? Making the European operations competitive by
hastening the speed of the “Weathering the Storm” and “Fit for the Future” program. ? Quick completion of the expansion plans in India. The 3 mtpa project will be commissioned by 2011 and will add significant value to the Group. Further expansion in India through the Greenfield project in Orissa and Chhattisgarh are ongoing and their commencing will depend on ground realities and iron ore allocation.
? Investment in raw material assets to provide better raw
material security especially to our European operations. ? Vigourous pursuit of continuous improvement across all our operations.
Present Strategic Issues
? Global Leader/presence both in means of Quality and
Quantity. ? Entering the new markets. ? Leadership crisis within the company. ? Security & procurement of raw materials.
Strategic focus
? The strategic focus of the Company has been to
increase the steelmaking capacity in excess of 50 million tons by 2015 through organic and inorganic growth.
Strategic Business Units
? Bearing division.
? Ferro alloys and mineral divisions. ? Agricon division. ? Tata growth shop. ? Tubes division. ? Wire division.
Application of Business Strategy Model’s to TATA Steel
? SWOT Analysis- SWOT analysis is done for a
company, to find out its overall Strengths, Weaknesses, Threats and opportunities leading to gauging the competitive potential of the company. The SWOT Analysis enables company to recognize its market standing and adopt strategies accordingly.
STRENGTHS ? Tata Steel’s Indian operations are self-sufficient in the case of its major raw material iron ore through its captive mines. ? Very advanced Research and Development wing which is carrying out researches and experiments in the areas of raw materials, blast furnace productivity, steel making, product development, process improvement etc.
? Tata had a strong retail and distribution network in
India and SE Asia. ? Upcoming greenfield and brownfield projects in various indian states. ? Tata Steel has been on a path of accelerated growth with foray into several geographies and markets through aggressive mergers and acquisitions.
? Tata Steel addresses the risk of cyclicality of the Steel
industry by marinating rich product mix and higher value added products whose volatility is lower.
WEAKNESS ? India's hard coal deposits are of low quality and the prices of coking and non-coking coal are ever increasing. ? Raw materials for steel production are rapidly depleting and are nonrenewable; company has to come up with sustainable methods in steel production.
? Steel production in India is also hampered by power
shortages. ? Insufficient freight capacity and transport infrastructure impediments to hamper the growth of Indian steel industry. ? Low Labour Productivity. ? High Cost of Basic Inputs and Services.
OPPORTUNITIES
? The biggest opportunity before Indian steel sector is
that there is enormous scope for increasing consumption of steel in almost all sectors in India. ? Unexplored Rural Market. ? It is estimated that world steel consumption will double in next 25 years. ? Corus acquisition bring in a tremendous technological advantage by access to best practices in global steel industry.
? Booming infrastructure has opened up high demand
for steel worldwide.
THREATS
? In the developed world, industries have been facing
rising environmental costs due to the increased concerns on Global Warming. ? Steel industries are significant contibutors to manmade greenhouse gases. ? High raw material input cost and scarcity of nonrenewable raw materials are a threat to the industry.
? Threat of Substitutes.
Porter Five Forces Model
? Threats of new entrants.
? Intensity of rivalry among existing competitors. ? The bargaining power of suppliers. ? The threat of substitute products. ? The bargaining power of buyers.
Entry barriers ? Huge capital requirement. ? Tata Steel has already made sufficient efforts to safeguard itself in this regard. ? Economies of scale. ? Government policies.
Competition ? The steel industry is truly global in terms of competition with large producing countries like China significantly influencing global prices through aggressive exports. ? Steel, being a commodity it is, branding is not common and there is little differentiation between competing products.
? The 4 major domestic rivals are SAIL, JSW, ISPAT &
ESSAR STEEL. Rest are all smallish mills which together accounts for 30 % of the total market share.
Bargaining power of suppliers
? Low quality cooking coal.
? Limited suppliers of raw materials globally. ? In order to safeguard itself from the high bargaining
power of the buyers, Tata Steel has forayed much earlier into the strategy of ‘Backward Integration’.
“Ownership of raw materials and a continuous improvement in production have been the key to Tata Steel’s profitability. In fact we’ve believed in owning raw materials for the past 100 years,” said managing director B Muthuraman.
? Raw material security.
? It is also evaluating several other mineral projects in
Brazil and Australia.
Threat of substitutes
? Plastics and composites pose a threat to Indian steel.
? Steel has already been replaced in some large volume
applications: railway sleepers (RCC sleepers), large diameter water pipes (RCC pipes), small diameter pipes (PVC pipes), and domestic water tanks (PVC tanks).
Bargaining power of Consumers
? Some of the major steel consumption sectors like
automobiles, oil & gas, shipping, consumer durables and power generation enjoy high bargaining power and get favorable deals. ? Small and retail consumers who are scattered and consume a significant part do not enjoy these benefits.
Fast Moving Consumer Goods Industry.
? Products which have a quick turnover, and relatively low
cost are known as Fast Moving Consumer Goods (FMCG). FMCG products are those that get replaced within a year. ? Examples of FMCG generally include a wide range of frequently purchased consumer products such as soap, cosmetics, tooth cleaning products, shaving products and detergents, as well as other non-durables such as glassware, bulbs, batteries, paper products, and plastic goods. ? FMCG may also include pharmaceuticals, consumer electronics, packaged food products, soft drinks, tissue paper, and chocolate bars.
? White goods in FMCG refer to household electronic
items such as Refrigerators, T.Vs, Music Systems, etc.
Indian FMCG Sector
? The Indian FMCG sector is the fourth largest in the
economy and has a market size of US$13.1 billion. Wellestablished distribution networks, as well as intense competition between the organised and unorganised segments are the characteristics of this sector. FMCG in India has a strong and competitive MNC presence across the entire value chain. It has been predicted that the FMCG market will reach to US$ 33.4 billion in 2015 .
? The middle class and the rural segments of the Indian
population are the most promising market for FMCG, and give brand makers the opportunity to convert them to branded products. ? Most of the product categories like jams, toothpaste, skin care, shampoos, etc. in India, have low per capita consumption as well as low penetration level, but the potential for growth is huge.
Top 10 Companies in FMCG sector
1. Hindustan Unilever Ltd. 2. ITC (Indian Tobacco Company) 3. Nestlé India 4. GCMMF (AMUL) 5. Dabur India 6. Asian Paints (India) 7. Cadbury India 8. Britannia Industries 9. Procter & Gamble Hygiene and Health Care 10. Marico Industries
SWOT analysis of FMCG industry
Strengths 1. Presence of established distribution networks in both urban and rural areas 2. Presence of well-known brands 3. In recent years, organized sector has increased its share in the market vis a vis the unorganized sector. Opportunities 1. In India, the penetration level of white goods is lower as compared to other developing countries. 2. Unexploited rural market 3. Rapid urbanization 4. Increase in income levels, i.e. increase in purchasing power of consumers 5. Easy availability of finance Weaknesses 1. Demand is seasonal and is high during festive season 2. Demand is dependent on good monsoons 3. Poor government spending on infrastructure 4. Low purchasing power of consumers Threats 1. Higher import duties on raw materials 2. Cheap imports from Singapore, China and other Asian countries
Michael Porter’s Model
Threat of new entrants
Bargaining power of suppliers
Rivalry among existing firms
Bargaining power of buyers
Threat of substitute products
Threat of New entrants
Possible entry barriers: ? Product differentiation :-Companies like P&G which manufacture products like Tide , create high entry barrier through the high level of advertising and promotion. ? Capital requirements:-The need to invest financial resources for large distribution networks. ? Access to distribution channels :Small companies find difficulty in obtaining supermarket space for their goods since priority is given to established firms.
Rivalry among existing firms
? Number of competitors:- when the competitors are
roughly equal in size , they closely watch each other . ? Product or Service characteristics:-The location of retail stores of various firms depend on the nature of product. ? Diversity of rivals:-Rivals that have very different ideas of how to compete are likely to cross paths and challenge each other’s position.
? Threats of substitutes:- They limit the potential
returns of an industry by placing a ceiling on the prices firms in an industry can potentially charge.
? Bargaining power of buyers:- If the buyer purchases a
large proportion of the company’s products.
? Bargaining power of suppliers:-If the substitutes are
not readily available.
ENVIORNMENTAL FACTORS
? Political factor
? Economic factor ? Social factor ? Technological factor ? Legal factor ? Demographic factor
GROWTH OF FMCG INDUSTRY
? The Fast Moving Consumer Goods (FMCG) are likely to
make a major dent in Rural and Semi-Urban Segments by 2012 with their demand growing @ of about 60% to carry forward its total market size to around Rs.1,23,363 crore from present level with a projected CAGR of 12% ? The urban pockets which currently are the biggest market size for all FMCG products, in next 4-5 years will switch over their consumption patterns for organic products to keep better their health, thus making an erosion in their present consumption patterns for FMCG products. In urban pockets, the current demand for FMCG products may be stagnant by 2012 and force the FMCG manufacturers to shift their supplies with assured qualities towards rural and semi-urban folks.
? The FMCG products like toothpaste, skin and hair wash, talcum,
powder, branded Atta, dish wash, instant coffee, ketchups, deodorants, jams etc. which currently have less than 30% penetration out of 100 people in rural and semi-urban areas will grow at least by 50% in next 5-7 years because of their demand on account of rising per capita income of rural and semi-urban folks. The per capita income of rural and semi-urban populace will increase as the economic activities will grow their due to government focus for their industrialisation. ? Though the rural and semi-urban demand of FMCG products will grow larger and higher, it will put a severe pressure on the margins of manufacturers of FMCG products because of cutthroat competition. ? The above data is in accordance with the ASSOCHAM’s report on investments prospects in Indian economy(2008-09).
INCREASE IN RURAL DEMAND
? The FMCG industry is set to grow 20-30 per cent in
2009-10, up from 10-20 per cent in 2008-09. The growth would be driven by the launch of new products and increasing rural consumption. ? The beverage industry in India is being estimated to grow at 17 per cent this year, Food and beverages segment has not suffered despite the slowdown in the economy.
DURING THE PHASE OF RECESSION
? As the global economic crisis consumed nearly every
sphere of business, one industry held out against recession through 2009 by promising to help Indians look fairer, younger and their teeth whiter, kids stronger and taller. ? Looks-conscious consumers propped up sales of FMCG (fast moving consumer goods) companies, which in turn rewarded loyalty by not raising prices of fairness, antiageing creams, bathing bars and their likes, although input costs rose in an economy ravaged by drought and then floods. ? Instead, they downsized the packaging to balance costs and margins.
? Year 2009 also saw modern retail format stores and
aggressive marketing helped home-grown FMCG firms wrest market share from leader Hindustan Unilever Ltd (HUL), according to market research firm AC Nielsen. ? HUL’s share in the estimated Rs8,000 crore personal care market fell to 44.5% from about half last year, as others like ITC, Godrej and Wipro fought for space in markets like Uttar Pradesh, Bihar and Gujarat with a rural push, says AC Nielsen.
? As for foods and beverages (F&B), the Indian market
proved to be the growth driver for world’s biggest players like Coca-Cola and PepsiCo, even as their US parents grappled with falling sales. ? PepsiCo’s optimism in the Indian market was reflected in the global major holding its board meeting in India for the first time this year. ? The company has stepped up investments by another $100 million, from the $500 million announced last year for the next three years.
? Dabur and Emami completed consolidation and
restructuring post their respective acquisitions last year of Fem Care and Zandu Pharmaceuticals. ? While Wipro went premium with Yardley, FMCG firms went in for big push in rural areas, upbeat on the government’s thrust on agriculture and increase in allocation for rural jobs. ? Overall, the prospects of the FMCG sector remain good. According to Ficci, it has grown consistently during the last three to four years. The sector is expected to grow at 12-15% over the next three to four years.
IMPACT OF MODERN RETAIL
? SEVERAL BENEFITS: Modern retail can have many
benefits for different product categories, including greater penetration, wider product range, ability to display products attractively, direct interaction with the consumer, and the ability to run specific promotions. ? RAPID EXPANSION: Many FMCG players have increased their investments in modern retail. There is also greater acceptance from the consumer. The top ten Indian players alone are estimated to make an investment of $30 billion, while the rate of growth of FMCG modern retail is expected to rise from a current 6 per cent to 25 per cent by 2018.
INDUSTRY SEEKS GST IMPLEMENTATION
? The Indian FMCG industry is primarily seeking the
implementation of the GST (Goods & Services Tax) by April 1, 2010 in the Union Budget. Industry captains expect fiscal measures that will spur growth of the FMCG sector in rural as well as urban India. ? According to a market strategy survey report by ICICI Securities, analysts are optimistic about the prospects of FMCG sector going forward. With the economy growing at a rapid pace and organized retailing making greater inroads, analysts expect the domestic FMCG industry to garner huge benefits from the same. ? The data is according to monthly economic analysis done by Fortune in July, 2009.
OPPORTUNITIES
? Economic factors:
1- Many FMCG players have increased their investments in modern retail. There is also greater acceptance from the consumer. 2- Changes in the Personal Income Tax slabs are likely to drive higher consumption owing to rising disposable income levels. This is a key positive for FMCG companies. 3- A cut in Corporate Tax rate to 25% will benefit most FMCG companies which generally pay full tax rate.
? Demographic factors:
1-Untapped rural market: The Fast Moving Consumer Goods (FMCG) are likely to make a major dent in Rural and Semi-Urban Segments by 2012 . 2-Rising per capita income of rural and semi-urban folks due to government focus.
? Cultural factors:
1-Change in consumer profile: The consumers are becoming more inclined towards the green products. 2-Rapid urbanisation. Technological factors: The new FMCG businesses support the competitiveness, technology upgradation and market reach of over 170 Small and Medium Enterprises (SMEs).
THREATS
? Economic factors:
1- FMCG companies have a tough time in registering growth in earnings in the face of price cuts on products 2- A significantly higher spend on advertisement is yet another common feature. Companies typically spend close to 10 per cent of their revenues on advertisement. This proportion increased to around 13-14 per cent in the December quarter. 3- Rising food inflation is forcing consumers to down trade (i.e. shift from higher-priced product to a lower-priced one). 4-Higher import duties on raw materials.
? Customer: The customers can switch from one product
to another due to unavailability. Also,demand is seasonal and is high during festive season. ? Suppliers: If the suppliers are not providing the materials at the right time.
STRENGTHS
1- Presence of established distribution networks in both urban and rural areas. 2. Presence of well-known brands. 3. In recent years, organized sector has increased its share in the market vis a vis the unorganized sector… 4- Intense advertising, price cuts, discounts and freebies.
CORPORATE SOCIAL RESPONSIBILITY
? ITC:
1-ITC’s businesses generate livelihoods for over 5 million people. 2-ITC’s globally recognised e-Choupal initiative is the world’s largest rural digital infrastructure benefiting over 4 million farmers. 3-ITC’s Social and Farm Forestry initiative has greened nearly 96,000 hectares, creating an estimated 43 million person-days of employment among the disadvantaged.
CADBURY: ? Pioneering cocoa cultivation in India. ? Non-formal school set up by Cadbury for children of migrant workers in Baddi. ? Cadbury in tie-up with Bharti-Walmart to support education needs of underprivileged children. ? Cadbury India has partnered with Vatsalya Foundation, an NGO working with underprivileged street children in Mumbai. Vatsalya's motto is to give the child a supportive environment to live and study in and gain skills so that they become contributing members of society.
? MARICO INNOVATION FOUNDATION:
Spheres or processes which if strengthened enable business to prosper and uplift the status of the whole society. Setting up of the Marico Innovation Foundation reflects on Marico's belief in innovation as a process. The Foundation's objective is to fuel Innovation in India. Initiatives undertaken by the Foundation are: 1-Researches in the areas of cutting edge innovations in the Business and Social Sectors. 2- A unique partnership between top Indian Business Schools and the corporate world in Applied Innovation . 3- Innovation For India Awards to reward Business and Social Innovation.
? Enviornmental:
1-ITC has been ‘Carbon Positive’ four years in a row ( storing twice the amount of CO2 that the Company emits). 2-‘Water Positive’ seven years in a row (creating two times more Rainwater Harvesting potential than ITC’s net consumption). ? Technology Absorption: Dabur has also made continuous efforts towards technology absorption and innovation, which have contributed towards preserving natural resources. These efforts include: 1-Minimum use of water in process by pre-concentration of herbal extract and reduction in concentration time. 2- Development of in-house technology to convert fruit waste into organic manure.
WEAKNESSES
1-Human resource and corporate planning :-If the goals of the people in the organisation vary from the firm’s goal, the objective cannot be achieved. The corporate planning should be done according to the capacity of firm and demand in the market.
2-Distribution channels: It is the most important area of FMCG industry and should be taken care off properly.
Contents
? Michael Porter’s Five Force Model ? About Tata Motors ? SWOT Analysis of Automotive Industry in India ? SWOT Analysis of Tata Motors ? TSEP Analysis of Tata Motors ? Tata Motors Competitors ? Application of Michael Porters 5 Force Model to Tata Nano
Michael Porter’s Five Force Model
History – Tata Motors
? Tata Motors Limited is a part of Tata Group.
? Founder - Jamshedji Tata (TELCO). ? The company was established in 1945 as a locomotive
manufacturing unit.
? It tied-up with Daimler-Benz and entered Commercial
vehicle segment in 1954.
? In 1992, it entered Small vehicle segment.
Manufacturing units are located at: Jamshedpur, Pune, Lucknow, Uttarakhand
Research and Development: World-class automotive research and development are key factors that contribute to the leadership of the Company. Engineering Research Centre (ERC): Jamshedpur and Pune
Milestones Achieved Over the Years:
?1945 : Tata Engineering and Locomotive Co. Ltd. was
established to manufacture locomotives and other engineering products.
?1991 : Launch of the 1st indigenous passenger car Tata
Sierra. ?1994 : Launch of Tata Sumo - the multi utility vehicle. ?1995 : Mercedes Benz car E220 launched. ?1998 : Tata Safari - India's first sports utility vehicle launched.
Milestones(Contd..)
?1998 : Indica, India's first fully indigenous passenger
car launched. ?1999 : 115,000 bookings for Indica registered against full payment within a week. ?2000 : Launch of CNG buses. ?2001 : ? Indica V2 launched - 2nd generation Indica. ? 100,000th Indica wheeled out. ? Launch of CNG Indica.
Milestones(Contd..) ?2002 : Launch of the Tata Indigo.
?2003 : Tata Engineering becomes Tata Motors Limited.
?2004 : Tata Motors completes acquisition of Daewoo
Commercial Vehicle Company 2004 : Tata Motors lists on the NYSE ?2005 : ? Tata Motors acquires 21% stake in Hispano Carrocera SA, Spanish bus manufacturing Company ? Tata Ace, India's first mini truck launched
Milestones(Contd..)
?2005 : Tata Motors launches Indica V2 Turbo Diesel.
?2005 : Indica V2 Xeta launched ?2007 : ?
Construction of Small Car plant at Singur, West Bengal, begins on January 21 ? Launch of Magic, a comfortable, safe, four-wheeler public transportation mode, developed on the Ace platform ? Launch of Winger, India’s only maxi-van
Milestones(Contd..)
2008 : ? Indica Vista – the new generation Indica, is launched. ? Tata Motors' new plant for Nano to come up in Gujarat. ? Indigo CS (Compact Sedan), world’s first sub fourmetre sedan, launched. ? Tata Motors completes acquisition of Jaguar Land Rover.
Milestones(Contd..)
2009 : ? Tata Motors launches the next generation all-new Indigo MANZA ? FREELANDER 2 launched in India ? Tata Motors launches Nano - The People's Car ? Launch of premium luxury vehicles - Jaguar XF, XFR and XKR and Land Rover ? Discovery 3, Range Rover Sport and Range Rover from Jaguar and Land Rover in India.
Product &Profile Passenger Cars Utility vehicles
» Tata Sumo/Spacio
» Tata Safari » Tata Indica » Tata Indigo » Tata Winger » Tata Magic » Tata Nano
Commercial Vehicles
» Tata Ace
» Tata Starbus » Tata Globus » Tata Marcopolo Bus » Tata Novus » Tata 407 EX
Military Vehicles
» Tata LSV
» Tata 407 Troop Carrier » Tata Winger Passenger Mini Bus
» Tata Xenon XT
» Tata Xover (2009) » Tata Manza (2009)
Company’s Sales and Growth in 2008-09
? Tata Motors had a consolidated revenue of Rs.70,938.85 crores ($ 14 billion) in 2008-09. ? The Tata Motors Group global sales, comprising of Tata, Tata Daewoo and Hispano Carrocera range of commercial vehicles, Tata passenger vehicles along with distributed brands in India, and Jaguar and Land Rover for the fiscal (April – November 2009) are 521,059, higher by 4% compared to the corresponding period in 2008-09. ? Growth of sales of commercial vehicles: 16 % ? Tata passenger vehicle sales, including those distributed for the fiscal are
160,405 nos, a growth of 16%.
? Cumulative sales of Jaguar Land Rover for the fiscal are 115,844 nos., lower by
32%.
Company’s Mergers and Acquisitions
? In 2004, the acquisition of Daewoo Commercial Vehicle of South Korea. ? In 2005, Hispano Carrocera – Spanish bus manufacturing company.
? In 2006, TML has formed 51:49 Joint Venture with Marcopolo, Brazil-based
global leader in bus body building.
? In 2007, TML also formed a joint venture with Fiat. ? In 2008, the acquisition of British Jaguar Land Rover (JLR) business.
?
SWOT Analysis of Automobile Industry
Strengths: ?Large Domestic Market ?Sustainable labor cost advantage ?Government incentives for manufacturing plants ?Strong Engineering skills in design Weakness: ?Low labor productivity ?High interest costs and high overheads ?Rising cost of production ?Low investment in research and Development
Opportunities : ?Commercial Vehicles ?Increase in income level ?Cut in excise duties ?Rising rural demand
Threats: ?Cut throat competition ?Lack of technology for Indian companies
SWOT Analysis of Tata Motors
Strengths: ?Strategy in place for the next stage of its expansion. ?Intensive management development ?Successful Alliances and joint ventures (eg with fiat, jaguar) ?Strong Market Position ?Robust sales growth ?R & D Activities Opportunities : ?World's luxury car brand have been added to its portfolio of brands ?The range of Super Milo fuel efficient buses are powered by super-efficient, eco-friendly engines. ?Increasing Car Penetration in India ?Product Launches – Tata nano, Weakness: ?Weak Presence in luxury segment ?In English the word 'tat' means rubbish ?Employee Productivity – Revenue per employee
Threats: ?Sustainability and environmentalism could mean extra costs for this low-cost producer. ?Rising prices in the global economy( prices of raw materials) ?Increasing Competition
TSEP Analysis
? ?
Technology : ? Tata Motors and its parent company, the Tata Group, are ahead of the game in the technology field. The company today has R&D centres in Pune, Jamshedpur, Lucknow, Dharwad in India, and in South Korea, Spain, and the UK Among Tata’s firsts are “the first indigenously developed Light Commercial Vehicle, India's first Sports Utility Vehicle and, in 1998, the Tata Indica, India's first fully indigenous passenger car,” as well as the increasingly famous Tata Nano, which is projected to be the world’s cheapest production car (Tata), Tata Ace, India's first indigenously developed mini-truck.
Social: The beliefs, opinions, and general attitude of all the stakeholders in a company affects how well a company performs. Tata Motors uses an integration and rarely separation technique with foreign companies they acquire.
TSEP Analysis
Economic: Operating in numerous countries across the world, Tata Motors functions with a global economic perspective while focusing on each individual market. They have experience and resources from five continents across the globe, thus when any variable changes in the market they can gather information and resources from all over the world to address any issues. Tata Motors also has to pay close attention to shifts in currency rates throughout the world.
Political : Since Tata Motors operates in multiple countries across Europe, Africa, Asia, the Middle East, and Australia, it needs to pay close attention to the political climate of the region in which it operates. Laws governing commerce, trade, growth, and investment are dependent on the local government . Tata’s headquarters in Mumbai, India, strictly controls and regulates operations in all dealerships and subsidiaries, in addition to knowing and abiding by all labor laws in the multiple countries where they have manufacturing plants it has to watch political change.
Tata Motors Competitors
? Mahindra and Mahindra: JV with ITEC, North American leader in heavy trucks. M&M has formed a 51:49 JV called Mahindra International with ITEC, USA (parent Navistar International), to manufacture commercial vehicles and to bolster its position in the CV business. ITEC is the leader in medium and heavy trucks and buses in North America, and is the world's largest manufacturer of medium-duty diesel engines. Mahindra International aims to have a presence across the CV market (635 tonnes GVW) with variants of passenger transport, cargo and specialised load applications and is likely to start producing medium/heavy commercial vehicles from FY09 ? Force Motors Ltd: JV with MAN for manufacturing high-tonnage vehicles Force Motors has paired up with MAN in a 70:30 JV to manufacture high-tonnage and specialty vehicles, such as long-haul trucks, tippers, tractor trailers and multi-axle vehicles in the 16-32 tonne range at its Pithampur plant, with an initial capacity of 24,000 units per annum and at an investment of Rs7bn. The JV plans to sell nearly half of its production in the domestic market, while the rest is to be exported to the Middle East, Turkey, Russia, Asia and Africa. Further, the two companies have formed another JV to manufacture buses in India from end-2007
Tata Motors Competitors
.•Ashok Leyland: Acquisition of Czech Republic-based Avia. Ashok Leyland (ALL) recently acquired the truck unit of Czech Republic-based Avia for US$35m. Avia manufactures 6-9 tonne LCVs and has a capacity of 20,000 units per annum. The acquisition has given ALL direct access to an entire range of Avia trucks, Avia’s press shop with dies and tools, welding lines, state-of-the-art paint shop and R&D facilities. ALL has also entered into technology agreements with Hino Motors of Japan and ZF of Germany to complement its in-house R&D efforts and developing complementary components and aggregates.
•Suzuki: Suzuki through its subsidiary, Maruti Suzuki in the Indian market may also be alarming. Maruti has aggressively launched family cars to undermine the Tata models.
Environmental Analysis of Tata Nano
“I observed families riding on two-wheelers - the father driving the scooter, his young kid standing in front of him, his wife seated behind him holding a little baby. It led me to wonder whether one could conceive of a safe, affordable, all-weather form of transport for such a family.” – Ratan Tata
This led to conceiving the dream and birth of one lakh car, Tata Nano
Michael Porters' 5 Force Model for Tata Nano 1. Threat of the Potential New Entrants:
? Capital Requirements is high(plant, services, distribution, technology) ? Economies of Scale : New Entrant needs to produce on a large scale
? Product Differentiation and Cost Advantage
? Government Policy : provided land and tax rebates to Tata Nano for
plant setup.( People’s Car)
? Access to Distribution Channels
? Cost Disadvantages : Experience, specialist expertise ? High Switching Cost
Michael Porters' 5 Force Model for Tata Nano
2. Bargaining Power of Buyers:
? Switching Costs ? Number of customers/ Volume of sales ? Brand Image ? Differentiated Product: Low cost and high quality
Michael Porters' 5 Force Model for Tata Nano
3. Bargaining Power of Suppliers:
? Number and Size of Suppliers : Suppliers control price
of the car.
? No substitutes for supplies ? Supplier’s prices form a large part of total costs of the
organization
Michael Porters' 5 Force Model for Tata Nano
4. Threat of Substitutes ? Price Band ? Buyers willingness : Nano is a new product as against Maruti 800 5. Extent of Competitive Rivalry : ? The small car market in India is very competitive with players like Maruti Suzuki, Hyundai which was earlier dominated solely by maruti. ? Price Competition : slash rates of existing models and make new models ? Exit Barriers : Due to large amount of investment ? Product Differentiation : Increasing rivalry
CONCLUSION
? Products which have a quick turnover, and relatively
low cost are known as Fast Moving Consumer Goods (FMCG). FMCG products are those that get replaced within a year. ? It has been predicted that the FMCG market will reach to US$ 33.4 billion in 2015 . ? The middle class and the rural segments of the Indian population are the most promising market for FMCG, and give brand makers the opportunity to convert them to branded products.
? The FMCG industry is set to grow 20-30 per cent in
2009-10, up from 10-20 per cent in 2008-09. ? Many FMCG players have increased their investments in modern retail. There is also greater acceptance from the consumer.
? Strengths of automobile industry include large domestic market, sustainable labor cost advantage, government incentives. But the weaknesses include low labor productivity, rising cost of production and low investment in research and Development ? Various opportunities of automobile industry include increase in income level and rising demand. Whereas threats include fierce competition and lack of technology. ? Strengths of Tata motors include strong Market Position, Robust sales growth, R & D Activities ,successful Alliances and joint ventures . Whereas the weaknesses include week presence in luxury segment and low employee productivity. ? As far as TSEP analysis of Tata Motors is concerned, Tata Motors and its parent company, the Tata Group, are ahead of the game in the technology field. Tata motors uses integration technique with their foreign alliances. They function with a global economic perspective while focusing on each individual market. Tata’s headquarters in Mumbai, India, strictly controls and regulates operations in all dealerships and subsidiaries, in addition to knowing and abiding by all labor laws in the multiple countries
? Application of Michael Porter's to Tata Nano states that there is relatively little threat of new enterants due to economies of scale, high capital costs, high experience and expertise of this leading automobile group, product differentiation and cost advantage. ? Bargaining power of the buyer is low due to high switching costs, large number of buyers, strong brand image of Tata and due to differentiated product advantage
? Bargaining power of the suppliers is high because of less number of suppliers, less number of substitutes of the supplies,
? Threat of substitutes is low and all depends of the price of the car. If it increase, threat of substitues is certainly there.
? Extent of competitive rivalry is low as of now due to price competition, high exit barriers and due to product differentiation but the intensity of rivalry is in an increasing stage facing competition from maruti and Hyundai.
References
Internet References: http://www.tatamotors.com/ http://en.wikipedia.org/wiki/Tata_Motors news.outlookindia.com/ www.autoindiaforum.com Book References: Strategic Management By Stephen P Robbins Marketing Management By Kotler Management by Stephen P Robbins
Business enviornment by Shaikh Saleem(2nd edition). ASSOCHAM’s report on investments prospects in Indian economy(2008-09). Economic analysis report by Fortune, July 2009. Weekly economic bulletin, June 16-22,2009. www.livemint.com www.economictimes.com Business Line
? http://www.tatasteel.com/newsroom/financial-result-
09.pdf ? www.metaljunction.com ? http://www.tatasteel.com/investorrelations/main-q408-09.asp ? http://www.tatasteel.com/investorrelations/annualreport-2008-09/annual-report-2008-09.pdf
doc_507233386.ppt
The presentation describes on Strategic Analysis of Tatasteel, FMCG, and Tata motors.
TATA STEEL –Ankit Pawar(5) FMCG INDUSTRY-Astha Savyasachi(7) TATA MOTORS-Bandeep Jaswal(8)
? “Tata Steel moves into its next target to become the
world's second largest steel company by 2012 with the help of its most expensive bet worth $12.9 billion on Corus group”.
- Business Standard
Introduction
? Tata Steel, formely known as TISCO.
? World’s fifth largest steel company. ? Annual crude capacity of 32 million ton. ? Tata Steel is also India's second largest and second-
most profitable company in private sector. ? Presence in over 50 developed markets of Europe and Asia.
? Tata Steel`s Jamshedpur (India) Works has a saleable
steel capacity of 10.23 MTPA. The Company also has proposed three Greenfield steel projects in the states of Jharkhand, Orissa and Chhattisgarh in India with additional capacity of 23 MTPA and a Greenfield project in Vietnam.
? Through investments in Corus, Millennium Steel
(renamed Tata Steel Thailand) and NatSteel Holdings, Singapore, Tata Steel has created a manufacturing and marketing network in Europe, South East Asia and the pacific-rim countries.
GLOBAL STEEL INDUSTRY
? The current boom driven by the growth in the
developing world, particularly China,India and Brazil. ? China is clearly the engine that has driven steel consumption in the Asian region. ? Despite of so much growth, Steel industry is still fragmented.
INDIAN STEEL INDUSTRY
? Steel industry reforms of 1991-92 have led to strong
and sustainable growth in india’s steel industry. ? The steel industry in India has grown by about 10 per cent in the past two years, compared with the global growth rate of about 6 per cent a year. ? Currently, India is the largest sponge iron producer in the world and ranks fifth among steel-producing countries.
Company Strategy: value creation
? The Tata Steel Group set itself a target of increasing
the return on invested capital of its existing assets to 30% by 2012-13 and to generate selective growth. ? In order to increase the quality of earnings of its existing assets, the Group will pursue the optimisation of its European assets, restructure low profitability assets and continue to derive benefits through continuous improvement and synergies across the Group.
? In order to generate selective growth, the Group will
pursue capacity expansions and securing access to raw materials. The Group is increasing its capacity in India, through expansion of its current operations in Jamshedpur and through the construction of a greenfield site in Orissa, and assessment of raw material investment opportunities as and when they arise
Corporate Citizenship
? Corporate citizenship involves providing a safe
working place, respecting the environment, caring for its communities and demonstrating high ethical standards. ? The Group wants to be a part of the climate change solution and has set a target to reduce its CO2 emission from the current 2.07 tonnes of CO2 per tonne of liquid steel to 1.5 tonnes of CO2 per tonne of liquid steel by 2012 through process improvements, breakthrough technologies and development of new products and services.
Growth Strategy
? Making the European operations competitive by
hastening the speed of the “Weathering the Storm” and “Fit for the Future” program. ? Quick completion of the expansion plans in India. The 3 mtpa project will be commissioned by 2011 and will add significant value to the Group. Further expansion in India through the Greenfield project in Orissa and Chhattisgarh are ongoing and their commencing will depend on ground realities and iron ore allocation.
? Investment in raw material assets to provide better raw
material security especially to our European operations. ? Vigourous pursuit of continuous improvement across all our operations.
Present Strategic Issues
? Global Leader/presence both in means of Quality and
Quantity. ? Entering the new markets. ? Leadership crisis within the company. ? Security & procurement of raw materials.
Strategic focus
? The strategic focus of the Company has been to
increase the steelmaking capacity in excess of 50 million tons by 2015 through organic and inorganic growth.
Strategic Business Units
? Bearing division.
? Ferro alloys and mineral divisions. ? Agricon division. ? Tata growth shop. ? Tubes division. ? Wire division.
Application of Business Strategy Model’s to TATA Steel
? SWOT Analysis- SWOT analysis is done for a
company, to find out its overall Strengths, Weaknesses, Threats and opportunities leading to gauging the competitive potential of the company. The SWOT Analysis enables company to recognize its market standing and adopt strategies accordingly.
STRENGTHS ? Tata Steel’s Indian operations are self-sufficient in the case of its major raw material iron ore through its captive mines. ? Very advanced Research and Development wing which is carrying out researches and experiments in the areas of raw materials, blast furnace productivity, steel making, product development, process improvement etc.
? Tata had a strong retail and distribution network in
India and SE Asia. ? Upcoming greenfield and brownfield projects in various indian states. ? Tata Steel has been on a path of accelerated growth with foray into several geographies and markets through aggressive mergers and acquisitions.
? Tata Steel addresses the risk of cyclicality of the Steel
industry by marinating rich product mix and higher value added products whose volatility is lower.
WEAKNESS ? India's hard coal deposits are of low quality and the prices of coking and non-coking coal are ever increasing. ? Raw materials for steel production are rapidly depleting and are nonrenewable; company has to come up with sustainable methods in steel production.
? Steel production in India is also hampered by power
shortages. ? Insufficient freight capacity and transport infrastructure impediments to hamper the growth of Indian steel industry. ? Low Labour Productivity. ? High Cost of Basic Inputs and Services.
OPPORTUNITIES
? The biggest opportunity before Indian steel sector is
that there is enormous scope for increasing consumption of steel in almost all sectors in India. ? Unexplored Rural Market. ? It is estimated that world steel consumption will double in next 25 years. ? Corus acquisition bring in a tremendous technological advantage by access to best practices in global steel industry.
? Booming infrastructure has opened up high demand
for steel worldwide.
THREATS
? In the developed world, industries have been facing
rising environmental costs due to the increased concerns on Global Warming. ? Steel industries are significant contibutors to manmade greenhouse gases. ? High raw material input cost and scarcity of nonrenewable raw materials are a threat to the industry.
? Threat of Substitutes.
Porter Five Forces Model
? Threats of new entrants.
? Intensity of rivalry among existing competitors. ? The bargaining power of suppliers. ? The threat of substitute products. ? The bargaining power of buyers.
Entry barriers ? Huge capital requirement. ? Tata Steel has already made sufficient efforts to safeguard itself in this regard. ? Economies of scale. ? Government policies.
Competition ? The steel industry is truly global in terms of competition with large producing countries like China significantly influencing global prices through aggressive exports. ? Steel, being a commodity it is, branding is not common and there is little differentiation between competing products.
? The 4 major domestic rivals are SAIL, JSW, ISPAT &
ESSAR STEEL. Rest are all smallish mills which together accounts for 30 % of the total market share.
Bargaining power of suppliers
? Low quality cooking coal.
? Limited suppliers of raw materials globally. ? In order to safeguard itself from the high bargaining
power of the buyers, Tata Steel has forayed much earlier into the strategy of ‘Backward Integration’.
“Ownership of raw materials and a continuous improvement in production have been the key to Tata Steel’s profitability. In fact we’ve believed in owning raw materials for the past 100 years,” said managing director B Muthuraman.
? Raw material security.
? It is also evaluating several other mineral projects in
Brazil and Australia.
Threat of substitutes
? Plastics and composites pose a threat to Indian steel.
? Steel has already been replaced in some large volume
applications: railway sleepers (RCC sleepers), large diameter water pipes (RCC pipes), small diameter pipes (PVC pipes), and domestic water tanks (PVC tanks).
Bargaining power of Consumers
? Some of the major steel consumption sectors like
automobiles, oil & gas, shipping, consumer durables and power generation enjoy high bargaining power and get favorable deals. ? Small and retail consumers who are scattered and consume a significant part do not enjoy these benefits.
Fast Moving Consumer Goods Industry.
? Products which have a quick turnover, and relatively low
cost are known as Fast Moving Consumer Goods (FMCG). FMCG products are those that get replaced within a year. ? Examples of FMCG generally include a wide range of frequently purchased consumer products such as soap, cosmetics, tooth cleaning products, shaving products and detergents, as well as other non-durables such as glassware, bulbs, batteries, paper products, and plastic goods. ? FMCG may also include pharmaceuticals, consumer electronics, packaged food products, soft drinks, tissue paper, and chocolate bars.
? White goods in FMCG refer to household electronic
items such as Refrigerators, T.Vs, Music Systems, etc.
Indian FMCG Sector
? The Indian FMCG sector is the fourth largest in the
economy and has a market size of US$13.1 billion. Wellestablished distribution networks, as well as intense competition between the organised and unorganised segments are the characteristics of this sector. FMCG in India has a strong and competitive MNC presence across the entire value chain. It has been predicted that the FMCG market will reach to US$ 33.4 billion in 2015 .
? The middle class and the rural segments of the Indian
population are the most promising market for FMCG, and give brand makers the opportunity to convert them to branded products. ? Most of the product categories like jams, toothpaste, skin care, shampoos, etc. in India, have low per capita consumption as well as low penetration level, but the potential for growth is huge.
Top 10 Companies in FMCG sector
1. Hindustan Unilever Ltd. 2. ITC (Indian Tobacco Company) 3. Nestlé India 4. GCMMF (AMUL) 5. Dabur India 6. Asian Paints (India) 7. Cadbury India 8. Britannia Industries 9. Procter & Gamble Hygiene and Health Care 10. Marico Industries
SWOT analysis of FMCG industry
Strengths 1. Presence of established distribution networks in both urban and rural areas 2. Presence of well-known brands 3. In recent years, organized sector has increased its share in the market vis a vis the unorganized sector. Opportunities 1. In India, the penetration level of white goods is lower as compared to other developing countries. 2. Unexploited rural market 3. Rapid urbanization 4. Increase in income levels, i.e. increase in purchasing power of consumers 5. Easy availability of finance Weaknesses 1. Demand is seasonal and is high during festive season 2. Demand is dependent on good monsoons 3. Poor government spending on infrastructure 4. Low purchasing power of consumers Threats 1. Higher import duties on raw materials 2. Cheap imports from Singapore, China and other Asian countries
Michael Porter’s Model
Threat of new entrants
Bargaining power of suppliers
Rivalry among existing firms
Bargaining power of buyers
Threat of substitute products
Threat of New entrants
Possible entry barriers: ? Product differentiation :-Companies like P&G which manufacture products like Tide , create high entry barrier through the high level of advertising and promotion. ? Capital requirements:-The need to invest financial resources for large distribution networks. ? Access to distribution channels :Small companies find difficulty in obtaining supermarket space for their goods since priority is given to established firms.
Rivalry among existing firms
? Number of competitors:- when the competitors are
roughly equal in size , they closely watch each other . ? Product or Service characteristics:-The location of retail stores of various firms depend on the nature of product. ? Diversity of rivals:-Rivals that have very different ideas of how to compete are likely to cross paths and challenge each other’s position.
? Threats of substitutes:- They limit the potential
returns of an industry by placing a ceiling on the prices firms in an industry can potentially charge.
? Bargaining power of buyers:- If the buyer purchases a
large proportion of the company’s products.
? Bargaining power of suppliers:-If the substitutes are
not readily available.
ENVIORNMENTAL FACTORS
? Political factor
? Economic factor ? Social factor ? Technological factor ? Legal factor ? Demographic factor
GROWTH OF FMCG INDUSTRY
? The Fast Moving Consumer Goods (FMCG) are likely to
make a major dent in Rural and Semi-Urban Segments by 2012 with their demand growing @ of about 60% to carry forward its total market size to around Rs.1,23,363 crore from present level with a projected CAGR of 12% ? The urban pockets which currently are the biggest market size for all FMCG products, in next 4-5 years will switch over their consumption patterns for organic products to keep better their health, thus making an erosion in their present consumption patterns for FMCG products. In urban pockets, the current demand for FMCG products may be stagnant by 2012 and force the FMCG manufacturers to shift their supplies with assured qualities towards rural and semi-urban folks.
? The FMCG products like toothpaste, skin and hair wash, talcum,
powder, branded Atta, dish wash, instant coffee, ketchups, deodorants, jams etc. which currently have less than 30% penetration out of 100 people in rural and semi-urban areas will grow at least by 50% in next 5-7 years because of their demand on account of rising per capita income of rural and semi-urban folks. The per capita income of rural and semi-urban populace will increase as the economic activities will grow their due to government focus for their industrialisation. ? Though the rural and semi-urban demand of FMCG products will grow larger and higher, it will put a severe pressure on the margins of manufacturers of FMCG products because of cutthroat competition. ? The above data is in accordance with the ASSOCHAM’s report on investments prospects in Indian economy(2008-09).
INCREASE IN RURAL DEMAND
? The FMCG industry is set to grow 20-30 per cent in
2009-10, up from 10-20 per cent in 2008-09. The growth would be driven by the launch of new products and increasing rural consumption. ? The beverage industry in India is being estimated to grow at 17 per cent this year, Food and beverages segment has not suffered despite the slowdown in the economy.
DURING THE PHASE OF RECESSION
? As the global economic crisis consumed nearly every
sphere of business, one industry held out against recession through 2009 by promising to help Indians look fairer, younger and their teeth whiter, kids stronger and taller. ? Looks-conscious consumers propped up sales of FMCG (fast moving consumer goods) companies, which in turn rewarded loyalty by not raising prices of fairness, antiageing creams, bathing bars and their likes, although input costs rose in an economy ravaged by drought and then floods. ? Instead, they downsized the packaging to balance costs and margins.
? Year 2009 also saw modern retail format stores and
aggressive marketing helped home-grown FMCG firms wrest market share from leader Hindustan Unilever Ltd (HUL), according to market research firm AC Nielsen. ? HUL’s share in the estimated Rs8,000 crore personal care market fell to 44.5% from about half last year, as others like ITC, Godrej and Wipro fought for space in markets like Uttar Pradesh, Bihar and Gujarat with a rural push, says AC Nielsen.
? As for foods and beverages (F&B), the Indian market
proved to be the growth driver for world’s biggest players like Coca-Cola and PepsiCo, even as their US parents grappled with falling sales. ? PepsiCo’s optimism in the Indian market was reflected in the global major holding its board meeting in India for the first time this year. ? The company has stepped up investments by another $100 million, from the $500 million announced last year for the next three years.
? Dabur and Emami completed consolidation and
restructuring post their respective acquisitions last year of Fem Care and Zandu Pharmaceuticals. ? While Wipro went premium with Yardley, FMCG firms went in for big push in rural areas, upbeat on the government’s thrust on agriculture and increase in allocation for rural jobs. ? Overall, the prospects of the FMCG sector remain good. According to Ficci, it has grown consistently during the last three to four years. The sector is expected to grow at 12-15% over the next three to four years.
IMPACT OF MODERN RETAIL
? SEVERAL BENEFITS: Modern retail can have many
benefits for different product categories, including greater penetration, wider product range, ability to display products attractively, direct interaction with the consumer, and the ability to run specific promotions. ? RAPID EXPANSION: Many FMCG players have increased their investments in modern retail. There is also greater acceptance from the consumer. The top ten Indian players alone are estimated to make an investment of $30 billion, while the rate of growth of FMCG modern retail is expected to rise from a current 6 per cent to 25 per cent by 2018.
INDUSTRY SEEKS GST IMPLEMENTATION
? The Indian FMCG industry is primarily seeking the
implementation of the GST (Goods & Services Tax) by April 1, 2010 in the Union Budget. Industry captains expect fiscal measures that will spur growth of the FMCG sector in rural as well as urban India. ? According to a market strategy survey report by ICICI Securities, analysts are optimistic about the prospects of FMCG sector going forward. With the economy growing at a rapid pace and organized retailing making greater inroads, analysts expect the domestic FMCG industry to garner huge benefits from the same. ? The data is according to monthly economic analysis done by Fortune in July, 2009.
OPPORTUNITIES
? Economic factors:
1- Many FMCG players have increased their investments in modern retail. There is also greater acceptance from the consumer. 2- Changes in the Personal Income Tax slabs are likely to drive higher consumption owing to rising disposable income levels. This is a key positive for FMCG companies. 3- A cut in Corporate Tax rate to 25% will benefit most FMCG companies which generally pay full tax rate.
? Demographic factors:
1-Untapped rural market: The Fast Moving Consumer Goods (FMCG) are likely to make a major dent in Rural and Semi-Urban Segments by 2012 . 2-Rising per capita income of rural and semi-urban folks due to government focus.
? Cultural factors:
1-Change in consumer profile: The consumers are becoming more inclined towards the green products. 2-Rapid urbanisation. Technological factors: The new FMCG businesses support the competitiveness, technology upgradation and market reach of over 170 Small and Medium Enterprises (SMEs).
THREATS
? Economic factors:
1- FMCG companies have a tough time in registering growth in earnings in the face of price cuts on products 2- A significantly higher spend on advertisement is yet another common feature. Companies typically spend close to 10 per cent of their revenues on advertisement. This proportion increased to around 13-14 per cent in the December quarter. 3- Rising food inflation is forcing consumers to down trade (i.e. shift from higher-priced product to a lower-priced one). 4-Higher import duties on raw materials.
? Customer: The customers can switch from one product
to another due to unavailability. Also,demand is seasonal and is high during festive season. ? Suppliers: If the suppliers are not providing the materials at the right time.
STRENGTHS
1- Presence of established distribution networks in both urban and rural areas. 2. Presence of well-known brands. 3. In recent years, organized sector has increased its share in the market vis a vis the unorganized sector… 4- Intense advertising, price cuts, discounts and freebies.
CORPORATE SOCIAL RESPONSIBILITY
? ITC:
1-ITC’s businesses generate livelihoods for over 5 million people. 2-ITC’s globally recognised e-Choupal initiative is the world’s largest rural digital infrastructure benefiting over 4 million farmers. 3-ITC’s Social and Farm Forestry initiative has greened nearly 96,000 hectares, creating an estimated 43 million person-days of employment among the disadvantaged.
CADBURY: ? Pioneering cocoa cultivation in India. ? Non-formal school set up by Cadbury for children of migrant workers in Baddi. ? Cadbury in tie-up with Bharti-Walmart to support education needs of underprivileged children. ? Cadbury India has partnered with Vatsalya Foundation, an NGO working with underprivileged street children in Mumbai. Vatsalya's motto is to give the child a supportive environment to live and study in and gain skills so that they become contributing members of society.
? MARICO INNOVATION FOUNDATION:
Spheres or processes which if strengthened enable business to prosper and uplift the status of the whole society. Setting up of the Marico Innovation Foundation reflects on Marico's belief in innovation as a process. The Foundation's objective is to fuel Innovation in India. Initiatives undertaken by the Foundation are: 1-Researches in the areas of cutting edge innovations in the Business and Social Sectors. 2- A unique partnership between top Indian Business Schools and the corporate world in Applied Innovation . 3- Innovation For India Awards to reward Business and Social Innovation.
? Enviornmental:
1-ITC has been ‘Carbon Positive’ four years in a row ( storing twice the amount of CO2 that the Company emits). 2-‘Water Positive’ seven years in a row (creating two times more Rainwater Harvesting potential than ITC’s net consumption). ? Technology Absorption: Dabur has also made continuous efforts towards technology absorption and innovation, which have contributed towards preserving natural resources. These efforts include: 1-Minimum use of water in process by pre-concentration of herbal extract and reduction in concentration time. 2- Development of in-house technology to convert fruit waste into organic manure.
WEAKNESSES
1-Human resource and corporate planning :-If the goals of the people in the organisation vary from the firm’s goal, the objective cannot be achieved. The corporate planning should be done according to the capacity of firm and demand in the market.
2-Distribution channels: It is the most important area of FMCG industry and should be taken care off properly.
Contents
? Michael Porter’s Five Force Model ? About Tata Motors ? SWOT Analysis of Automotive Industry in India ? SWOT Analysis of Tata Motors ? TSEP Analysis of Tata Motors ? Tata Motors Competitors ? Application of Michael Porters 5 Force Model to Tata Nano
Michael Porter’s Five Force Model
History – Tata Motors
? Tata Motors Limited is a part of Tata Group.
? Founder - Jamshedji Tata (TELCO). ? The company was established in 1945 as a locomotive
manufacturing unit.
? It tied-up with Daimler-Benz and entered Commercial
vehicle segment in 1954.
? In 1992, it entered Small vehicle segment.
Manufacturing units are located at: Jamshedpur, Pune, Lucknow, Uttarakhand
Research and Development: World-class automotive research and development are key factors that contribute to the leadership of the Company. Engineering Research Centre (ERC): Jamshedpur and Pune
Milestones Achieved Over the Years:
?1945 : Tata Engineering and Locomotive Co. Ltd. was
established to manufacture locomotives and other engineering products.
?1991 : Launch of the 1st indigenous passenger car Tata
Sierra. ?1994 : Launch of Tata Sumo - the multi utility vehicle. ?1995 : Mercedes Benz car E220 launched. ?1998 : Tata Safari - India's first sports utility vehicle launched.
Milestones(Contd..)
?1998 : Indica, India's first fully indigenous passenger
car launched. ?1999 : 115,000 bookings for Indica registered against full payment within a week. ?2000 : Launch of CNG buses. ?2001 : ? Indica V2 launched - 2nd generation Indica. ? 100,000th Indica wheeled out. ? Launch of CNG Indica.
Milestones(Contd..) ?2002 : Launch of the Tata Indigo.
?2003 : Tata Engineering becomes Tata Motors Limited.
?2004 : Tata Motors completes acquisition of Daewoo
Commercial Vehicle Company 2004 : Tata Motors lists on the NYSE ?2005 : ? Tata Motors acquires 21% stake in Hispano Carrocera SA, Spanish bus manufacturing Company ? Tata Ace, India's first mini truck launched
Milestones(Contd..)
?2005 : Tata Motors launches Indica V2 Turbo Diesel.
?2005 : Indica V2 Xeta launched ?2007 : ?
Construction of Small Car plant at Singur, West Bengal, begins on January 21 ? Launch of Magic, a comfortable, safe, four-wheeler public transportation mode, developed on the Ace platform ? Launch of Winger, India’s only maxi-van
Milestones(Contd..)
2008 : ? Indica Vista – the new generation Indica, is launched. ? Tata Motors' new plant for Nano to come up in Gujarat. ? Indigo CS (Compact Sedan), world’s first sub fourmetre sedan, launched. ? Tata Motors completes acquisition of Jaguar Land Rover.
Milestones(Contd..)
2009 : ? Tata Motors launches the next generation all-new Indigo MANZA ? FREELANDER 2 launched in India ? Tata Motors launches Nano - The People's Car ? Launch of premium luxury vehicles - Jaguar XF, XFR and XKR and Land Rover ? Discovery 3, Range Rover Sport and Range Rover from Jaguar and Land Rover in India.
Product &Profile Passenger Cars Utility vehicles
» Tata Sumo/Spacio
» Tata Safari » Tata Indica » Tata Indigo » Tata Winger » Tata Magic » Tata Nano
Commercial Vehicles
» Tata Ace
» Tata Starbus » Tata Globus » Tata Marcopolo Bus » Tata Novus » Tata 407 EX
Military Vehicles
» Tata LSV
» Tata 407 Troop Carrier » Tata Winger Passenger Mini Bus
» Tata Xenon XT
» Tata Xover (2009) » Tata Manza (2009)
Company’s Sales and Growth in 2008-09
? Tata Motors had a consolidated revenue of Rs.70,938.85 crores ($ 14 billion) in 2008-09. ? The Tata Motors Group global sales, comprising of Tata, Tata Daewoo and Hispano Carrocera range of commercial vehicles, Tata passenger vehicles along with distributed brands in India, and Jaguar and Land Rover for the fiscal (April – November 2009) are 521,059, higher by 4% compared to the corresponding period in 2008-09. ? Growth of sales of commercial vehicles: 16 % ? Tata passenger vehicle sales, including those distributed for the fiscal are
160,405 nos, a growth of 16%.
? Cumulative sales of Jaguar Land Rover for the fiscal are 115,844 nos., lower by
32%.
Company’s Mergers and Acquisitions
? In 2004, the acquisition of Daewoo Commercial Vehicle of South Korea. ? In 2005, Hispano Carrocera – Spanish bus manufacturing company.
? In 2006, TML has formed 51:49 Joint Venture with Marcopolo, Brazil-based
global leader in bus body building.
? In 2007, TML also formed a joint venture with Fiat. ? In 2008, the acquisition of British Jaguar Land Rover (JLR) business.
?
SWOT Analysis of Automobile Industry
Strengths: ?Large Domestic Market ?Sustainable labor cost advantage ?Government incentives for manufacturing plants ?Strong Engineering skills in design Weakness: ?Low labor productivity ?High interest costs and high overheads ?Rising cost of production ?Low investment in research and Development
Opportunities : ?Commercial Vehicles ?Increase in income level ?Cut in excise duties ?Rising rural demand
Threats: ?Cut throat competition ?Lack of technology for Indian companies
SWOT Analysis of Tata Motors
Strengths: ?Strategy in place for the next stage of its expansion. ?Intensive management development ?Successful Alliances and joint ventures (eg with fiat, jaguar) ?Strong Market Position ?Robust sales growth ?R & D Activities Opportunities : ?World's luxury car brand have been added to its portfolio of brands ?The range of Super Milo fuel efficient buses are powered by super-efficient, eco-friendly engines. ?Increasing Car Penetration in India ?Product Launches – Tata nano, Weakness: ?Weak Presence in luxury segment ?In English the word 'tat' means rubbish ?Employee Productivity – Revenue per employee
Threats: ?Sustainability and environmentalism could mean extra costs for this low-cost producer. ?Rising prices in the global economy( prices of raw materials) ?Increasing Competition
TSEP Analysis
? ?
Technology : ? Tata Motors and its parent company, the Tata Group, are ahead of the game in the technology field. The company today has R&D centres in Pune, Jamshedpur, Lucknow, Dharwad in India, and in South Korea, Spain, and the UK Among Tata’s firsts are “the first indigenously developed Light Commercial Vehicle, India's first Sports Utility Vehicle and, in 1998, the Tata Indica, India's first fully indigenous passenger car,” as well as the increasingly famous Tata Nano, which is projected to be the world’s cheapest production car (Tata), Tata Ace, India's first indigenously developed mini-truck.
Social: The beliefs, opinions, and general attitude of all the stakeholders in a company affects how well a company performs. Tata Motors uses an integration and rarely separation technique with foreign companies they acquire.
TSEP Analysis
Economic: Operating in numerous countries across the world, Tata Motors functions with a global economic perspective while focusing on each individual market. They have experience and resources from five continents across the globe, thus when any variable changes in the market they can gather information and resources from all over the world to address any issues. Tata Motors also has to pay close attention to shifts in currency rates throughout the world.
Political : Since Tata Motors operates in multiple countries across Europe, Africa, Asia, the Middle East, and Australia, it needs to pay close attention to the political climate of the region in which it operates. Laws governing commerce, trade, growth, and investment are dependent on the local government . Tata’s headquarters in Mumbai, India, strictly controls and regulates operations in all dealerships and subsidiaries, in addition to knowing and abiding by all labor laws in the multiple countries where they have manufacturing plants it has to watch political change.
Tata Motors Competitors
? Mahindra and Mahindra: JV with ITEC, North American leader in heavy trucks. M&M has formed a 51:49 JV called Mahindra International with ITEC, USA (parent Navistar International), to manufacture commercial vehicles and to bolster its position in the CV business. ITEC is the leader in medium and heavy trucks and buses in North America, and is the world's largest manufacturer of medium-duty diesel engines. Mahindra International aims to have a presence across the CV market (635 tonnes GVW) with variants of passenger transport, cargo and specialised load applications and is likely to start producing medium/heavy commercial vehicles from FY09 ? Force Motors Ltd: JV with MAN for manufacturing high-tonnage vehicles Force Motors has paired up with MAN in a 70:30 JV to manufacture high-tonnage and specialty vehicles, such as long-haul trucks, tippers, tractor trailers and multi-axle vehicles in the 16-32 tonne range at its Pithampur plant, with an initial capacity of 24,000 units per annum and at an investment of Rs7bn. The JV plans to sell nearly half of its production in the domestic market, while the rest is to be exported to the Middle East, Turkey, Russia, Asia and Africa. Further, the two companies have formed another JV to manufacture buses in India from end-2007
Tata Motors Competitors
.•Ashok Leyland: Acquisition of Czech Republic-based Avia. Ashok Leyland (ALL) recently acquired the truck unit of Czech Republic-based Avia for US$35m. Avia manufactures 6-9 tonne LCVs and has a capacity of 20,000 units per annum. The acquisition has given ALL direct access to an entire range of Avia trucks, Avia’s press shop with dies and tools, welding lines, state-of-the-art paint shop and R&D facilities. ALL has also entered into technology agreements with Hino Motors of Japan and ZF of Germany to complement its in-house R&D efforts and developing complementary components and aggregates.
•Suzuki: Suzuki through its subsidiary, Maruti Suzuki in the Indian market may also be alarming. Maruti has aggressively launched family cars to undermine the Tata models.
Environmental Analysis of Tata Nano
“I observed families riding on two-wheelers - the father driving the scooter, his young kid standing in front of him, his wife seated behind him holding a little baby. It led me to wonder whether one could conceive of a safe, affordable, all-weather form of transport for such a family.” – Ratan Tata
This led to conceiving the dream and birth of one lakh car, Tata Nano
Michael Porters' 5 Force Model for Tata Nano 1. Threat of the Potential New Entrants:
? Capital Requirements is high(plant, services, distribution, technology) ? Economies of Scale : New Entrant needs to produce on a large scale
? Product Differentiation and Cost Advantage
? Government Policy : provided land and tax rebates to Tata Nano for
plant setup.( People’s Car)
? Access to Distribution Channels
? Cost Disadvantages : Experience, specialist expertise ? High Switching Cost
Michael Porters' 5 Force Model for Tata Nano
2. Bargaining Power of Buyers:
? Switching Costs ? Number of customers/ Volume of sales ? Brand Image ? Differentiated Product: Low cost and high quality
Michael Porters' 5 Force Model for Tata Nano
3. Bargaining Power of Suppliers:
? Number and Size of Suppliers : Suppliers control price
of the car.
? No substitutes for supplies ? Supplier’s prices form a large part of total costs of the
organization
Michael Porters' 5 Force Model for Tata Nano
4. Threat of Substitutes ? Price Band ? Buyers willingness : Nano is a new product as against Maruti 800 5. Extent of Competitive Rivalry : ? The small car market in India is very competitive with players like Maruti Suzuki, Hyundai which was earlier dominated solely by maruti. ? Price Competition : slash rates of existing models and make new models ? Exit Barriers : Due to large amount of investment ? Product Differentiation : Increasing rivalry
CONCLUSION
? Products which have a quick turnover, and relatively
low cost are known as Fast Moving Consumer Goods (FMCG). FMCG products are those that get replaced within a year. ? It has been predicted that the FMCG market will reach to US$ 33.4 billion in 2015 . ? The middle class and the rural segments of the Indian population are the most promising market for FMCG, and give brand makers the opportunity to convert them to branded products.
? The FMCG industry is set to grow 20-30 per cent in
2009-10, up from 10-20 per cent in 2008-09. ? Many FMCG players have increased their investments in modern retail. There is also greater acceptance from the consumer.
? Strengths of automobile industry include large domestic market, sustainable labor cost advantage, government incentives. But the weaknesses include low labor productivity, rising cost of production and low investment in research and Development ? Various opportunities of automobile industry include increase in income level and rising demand. Whereas threats include fierce competition and lack of technology. ? Strengths of Tata motors include strong Market Position, Robust sales growth, R & D Activities ,successful Alliances and joint ventures . Whereas the weaknesses include week presence in luxury segment and low employee productivity. ? As far as TSEP analysis of Tata Motors is concerned, Tata Motors and its parent company, the Tata Group, are ahead of the game in the technology field. Tata motors uses integration technique with their foreign alliances. They function with a global economic perspective while focusing on each individual market. Tata’s headquarters in Mumbai, India, strictly controls and regulates operations in all dealerships and subsidiaries, in addition to knowing and abiding by all labor laws in the multiple countries
? Application of Michael Porter's to Tata Nano states that there is relatively little threat of new enterants due to economies of scale, high capital costs, high experience and expertise of this leading automobile group, product differentiation and cost advantage. ? Bargaining power of the buyer is low due to high switching costs, large number of buyers, strong brand image of Tata and due to differentiated product advantage
? Bargaining power of the suppliers is high because of less number of suppliers, less number of substitutes of the supplies,
? Threat of substitutes is low and all depends of the price of the car. If it increase, threat of substitues is certainly there.
? Extent of competitive rivalry is low as of now due to price competition, high exit barriers and due to product differentiation but the intensity of rivalry is in an increasing stage facing competition from maruti and Hyundai.
References
Internet References: http://www.tatamotors.com/ http://en.wikipedia.org/wiki/Tata_Motors news.outlookindia.com/ www.autoindiaforum.com Book References: Strategic Management By Stephen P Robbins Marketing Management By Kotler Management by Stephen P Robbins
Business enviornment by Shaikh Saleem(2nd edition). ASSOCHAM’s report on investments prospects in Indian economy(2008-09). Economic analysis report by Fortune, July 2009. Weekly economic bulletin, June 16-22,2009. www.livemint.com www.economictimes.com Business Line
? http://www.tatasteel.com/newsroom/financial-result-
09.pdf ? www.metaljunction.com ? http://www.tatasteel.com/investorrelations/main-q408-09.asp ? http://www.tatasteel.com/investorrelations/annualreport-2008-09/annual-report-2008-09.pdf
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