Tata company being India's largest motors company as the company generates around Rs.70,938.85 crores and around 14 billion U.S Dollar during the year 2008to 2009.India's 3% national income comes from tata company .It has been one of the main leading company in the sector of automobile .The company is on the second position in manufacturing bus and rankes on number 4 on manufacturing truck through out the world.(www.tatacarsworldwide.com/company/index.asp).The company produces itds own successful variety of scooters,buses,truck and three -wheeled rickshaws.
Although india comes on one of the world's largest country but majority of people are still below poverty line and even couldnot afford a bicycle. So,now tata company knowing the indian's economy announced to make a car worth of only “1 lakh Indian rupees”So that it can increase the standard of Indian people.
The company latest invention is Tata nano which is also called people car or a lakh car.The word nano is derived from Gujrati which means small as nano is also small. (http://en.wikipedia.org/wiki/Tata_nano).
Nano comprises 4 seats for 4 people,600cc engine,with a continous transmission without clutch box or gear box,one windscreenwiper. The important thing is that at such a small cost the car meets all india's safety standard and regulations. (http://en.wikipedia.org/wiki/Tata_nano)
Although tata company has already sold many motors in Europe nad America .So,the company is also going to launch nano an Nano Europa with slight modifications as to meet European standards and rergulations.which is very much strict.So,the cost will be increased sligthtly as per the modifications.
Pricing is one of the important functions that a manager has to perform. It is one of the important elements of marketing mix. Price is only one term of marketing mix which generates income. The company can set its price in many ways.There are mainly four types of pricing strategy which are penetration, skimming, premium and economy. The company sets price according to the situation.
· WHY TATA COMPANY IS USING PENETRATION PRICIG STRATEGY FOR THE LAUNCH OF NANO IN INDIA
Although there are many pricing strategies , I think TATA company used PENETRATION PRICING STRATEGY for the launch of TATA nano in India.
As according to the penetration pricing strategy, the marketer set price lower although the quality of the product or the service is good in order to capture the dominant market share. The main purpose behind using this strategy is just to increase the number of customers rather than earning profit. Penetration pricing strategy is often used to launch a new product.
TATA wil use penetration pricing strategy because the price of TATA nano is only 1 lakh Indian rupees, which is just around £1500 in u.k.the price of car is the cheapest in whole world.I don't think this price is sufficient to cover the labour and all other production cost. The brand name TATA is enough in india as it has been offering various motor vechiles .although they have targeted high clas customer towards them and there are so many companies in the market capturing high class people ,so,the only way to increase the market share was by targeting middle class people by producing a car which they can afford.
The company is using penetration pricing strategy to increase the goodwill of the company with more customers for long term existence in the market. so that consumers believe toward the company increases more in in the up coming days.as only profit doesn't matter for the company like tata as the company prestige, goodwill matters more.
As,car is a luxourious thing so to increase the living standard of the Indian people within low price. Moreover ,they set price knowing the people thinking as there are many people who has a dream to buy a car.Moreover,its a challenge to whole world to produce a car of Indian rupees 100000'
· ADVANTAGES OF USING PENETRATION PRICING STRATEGY
The main advantage Tata Nano's launch in India is both for the company and for the customers as the company can increase the market share by attracting more customer which its cheap price and can increase its market share. Whereas, the consumers are also getting car in one lakh which is very much cheap. So,the people with the income of 1 lakh annual income could afford the car and can use it with teir family members.By which the company can increase the living standard of Indian people and raise the economy as awhole. (www.wikipedia.com)moreover it has already maintained the record on the world's Guinness book as the world's cheapest car. Moreover the company name and goodwill is increased by making 1 lakh car which is not an essay task and it is not a simple thing for every motor company to make a car of one lakh.So,its like the company is giving challenge to the wholer world that TATA company can do it. So,it's the matter of great honour to tata company to accomplish 1 lakh car.
· DISADVANTAGE OF USING PENETRATION PRICING STRATEGY
Although there are many positive aspects behind using penetration pricing strategy we can not ignore some negative aspects also .As,we know in penetration the price is low only while introducing or launching a new product for short time period but later the company increases the price.So,it may be like cheating people. The second disadvantage is the cost of nano is low so ,definitely car lack's many safety features which is reduced by its cost so, there may be higher chances of being road accidents.
And the main disadvantage is there are already so many vehciles on the road and government couldn't manage the proper traffic system there are so many issue regarding air pollution, sound pollution .As, nano is cheap car so everybody can buy it so .Definately, vehicles will be crowded more creating more pollution and there may be higher chances of being accident as the road of India is very narrow.
Nano car will affect the sales rate of other motors company as the customers are eagerly waiting for nano instead of buying any other car like Suzuki or Maruti.
And lastly,car is known to be very much luxourios item in india,so definitely the value of car will be deprived from the people's mind.
· Why nanao is chosing PENETRATION PRICING STRATEGY FOR THE LAINCH OF NANO IN EUROPE OR U.S.A
Although there are many pricing strategies available in the market, tata company will use penetration pricing strategy.
Penetration pricing strategy is often used to launch a new product with lower price in order to capture a dominant market share.
For the launch of nano in Europe, According to my view point, tata company will use Penetration pricing strategy because price for the nano is just supposed to be around £2000 which is the least cost for the car available in Europe. Moreover as the European market is new for nano they cannot attain the market share by setting price high.So to gain the market share, they will have to set the price of nano low. As people are affected psychologically by the price of the nano .People are eagerly waiting for the launch of nano. as the European people are just waiting for £2000 car, so however be the quality of nano, the company can increase their sales. Moreover, its not that every people are rich in Europe to afford the expensive car .So they have set the price targeting such person who cannot afford those cars. And the public bus fare is too expensive in Europe .So, many people would like to use it as it saves their income in a convient way and fast way and there are many people in Europe who wanted to buy a new branded car instead of second hand car. So people can have the benefit by buying such a cheap car. So, considering all these things I think penetration pricing is used for the launch of nano in Europe.
· ADVANTAGES OF USING PENETRATIN PRICING STRATEGY
Ø The company can capture market share by using penetration pricing strategy with low price rather than high price.As.europen market is new for tata company.so,it can increase the sales by using penetration pricing strategy.
Ø The customers have pshycological effect on their mind with the price of nano,as the price is only £1500 by using penetration pricing strategy.so,more customers are eagerly waiting for it.
Ø As, tata is known as world cheapest car so,it will act as an advertisement for the company.
IS PRICING STRATEGY OF NANO WILL BE SAME ACROSS EUROPE?
According to my view, the pricing strategy of tata Nano will be different across Europe as the taxation policy differ from one country to another. So, where the taxes rates are high, definitely price of Nano will be high whereas cost will be low if rate is low. And the second way will be price will be set according to demand and supply approach. So, higher the demand, lower the price of nano. And lower the demand higher will be the price of Nano will be opposite in the case of higher supply.
CRITICAL ANALYSIS OF NANO
· WHY NANO IS OFFERING LOW COST?
The cost of any product depends upon the product quality and its features. Tata company has reduced the cost of nano by using cheap materials like glue and plastic instead of steel. The company has also reduced the cost by reducing many features from Nano like using 1 wind screen wiper in place of regular pair. They have used smaller and lighter engine of 600cc.Moreover they have used small tyre with no tube and no frills interior of car.
Lastly, The company has reduced cost by taking advantage of indian's low wage rate to labour. Moreover, factory rent and raw materials are cheap in India than any other parts of the world like Europe or America .As,if Nano was produced in America or Europe the price of Nano would be high as the wage rate, factory rent and cost of raw materials is high. In this way nano has reduced its cost. (www.times online.co.uk)
· DRAWBACKS OF LOW CHARGING(www.wikipedia.com)
As mentioned before the cost of any product is based on its quality features. As, the cost of Nano is around £1500 so with this cost the company has to reduce many safetyfeatures of car and has resulted to the given below
Ø No proper safety measure
The car has no gear box , Nano's engine is only of 600c.c ,by which the engine will be weak and decreases the speed.Nano has only one wiper in stead of two.
Ø Ugly interiors
Nano interiors are made up of cheap materials like plastic and glue, the seats cannot be folded,lack of power steering, only one side view mirror.Nano lacks many extra features like A.C and F.m or radio.
Ø Negative effects on other motor companies
Nano cost is only around £1500 .So.it will affect negatively on the sales of other motor company like BMW or ford because of low price of nano.
Ø SCARCITY OF FUEL AND INCREASES POLLUTION
The cost of nano is only around £1500 by which the nuber of car user will be increased as anyone with income £1500 could afford the car,So the numbers of car will be increased causing more pollution and scarcity of fuel
· SOCIAL ACCEPTANCE OF NANO IN U.SA AND EUROPE
Both America and Europe are very much developed country in science, technology, education. Customers are very much sensitive towards the issue like global warming and pollution. Customer want quality of the product rather than quantity, inthe other words consumer awareness is very high. BMQ, Toyata, Honda, landrover are the name of some of the popular cars name, they all are famous for their distinct features and high quality but nano is only£1500 car so, it lacks so many features. I don't think American and European people will socially accept nano because Nano lacks so many basic and important safety features (www.wikipedia.com) no a.c or radio .Moreover the car has very lees power engine and no clutch or gear box, which ultimately reduces the speed of vehicle.But European and American people prefer high speed.Airbags is not part of base.so,its very difficult for nano to be socially accepted in Europe and usa.
* SWOT analysis of Europen market for tata (www.marketingteacher.com/)
SWOT analysis is generally used as a tool for measuring internal and external factors of environment which directly or in directly affects an organization.It measures the organization strength, weakness opportunity and weakness. Strength and weakness are two internal factors whereas,opportunity and weakness are external factors. A company always should increase the strength keep on trying to reduce weakness by utilising the available opportunity and challenging all the threats.
· Purpose of performing SWOT analysis (Wood,B.M, (2007). ‘Essential Guide To Marketing Planning,)
The main purpose of performing SWOT analysis is mainly to find out the actual position of Tata nano in American or European market. As, the swot analysis as an aid for decision making and problems solving.(Mullins .j .L,(1996)
Strength ( Wood,B.M, (2007). ‘Essential Guide To Marketing Planning), www.marketingteacher.com
A STRENGTH may be an organization internal ability or factor that can help the organization to achieve its objective. The main strength of Nano is the cheapest price ever in the history of car. with the low price it can capture large market share within Europe and America.
The second strength of the company is the strong goodwill of the tata company. As, Tata company had been known worldwide for their new innoviative ideas for the launch of their goods and services. The company motors are with high quality and affordable by all.
The third strength is fuel efficiency of the car as compared to other cars in Europe and America. looking at this feature the company can attract more customers towards themselves as fuel efficency is one of the most important features that so many other company'
A WEAKNES is an internal capability or factor that may prevent the organization from achieving its objective or effectively handling opportunities and threats within the competitive context. The main weakness of tata nano is it lacks many safety features like there is only one wind screen wiper instead of two, no airbags, no power streering,which may cause accidents and may be dangareous.
The second one is ugly interior design and overall look as it has only one side mirror inplace of two,use of cheap materials like plastic and glue inplace of steel.moreover the interior of nano is very ugly as the seats cannot be folded. As,car is a luxorious item so people will expect many features like airconditions and other. the seats cannot be folded.
Opportunity is an external factor that the organization can use to exploit for higher performance. According to my view,nano can increase the market in Europe and usa by giving more focus on its quality and installing some modern features the probable opportunity for nan is to increase the price of nano and install some modern featuresin it so,that it can increase more customers towards it and could increase the market share.
Threat is an external circumstance or factor that could affect organizational performance, if not addressed properly on time.. The probable threat that the company may face in the future is as there are many other motor company in Europe and America well known for their innotative featuers.so,the car will face a tough competions as the quality of nano is not as good as other company.
· SHOULD TATA MODIFY NANO TO MEET THE VEHICLES STANDARD IN EUROPE AND U.S.A?
Definitely, Nano lack so many features to meet the vehicle standards and regulation of Europe and the USA. So, definately there should be modification on Nano to be launched on America and Europe. First, nano 600cc engine should be at least increased to minimum of 800cc,which makes the engine strong and finally increases the speed of the car as the speed of the vehicle matter the most in USA and Europe. Moreover, there should be clutch or gear box as they hadn't installed any clutch or gear box on nano, which results to pressure on the engine and finally decreases the speed. And passenger mirror should be installed. So, that they can see back and have a safe driving. They should increase one more wiper .so, that the rain or snow can be easily cleared in order to have a clear sight. And as car is a luxorious item. So, there should be air condition and heating facilites. And radio should be there for the entartinment.
The interior of nano is not attractive as they had use cheap materials. as ,I had mentioned already car is a symbol of luxury, status .so, they should use welded steel in place of plastic and glue to make car attractive. The window should not be manually generated. As, the nano's car boot doesn't open instead the rear seat can be folded down to access boot so ,they should make the boot to open easily instead of folding down to acess. Lastly, they should insert air bag in the car as it is essential for prevention of accidents.
· ARE THESE MARKET SUITABLE EXPORTS FOR TATA AND THE NANO CAR
I don't think USA and Europe market are not suitable market for nano as there is a strict vehicles standards, regulations and emissions. So, after modifying as per the emission law of America and Europe I think nano, price will be doubled. People can buy second class car with more standard and feature in the same price instead of buying nano. Moreover legal procedures to launch a new vehicle in America and Europe is very difficult and takes long time. As, the people have already too many choices of car. It's not that people prefer cost here in America and Europe but they prefer features, which nano lacks . So, I think nano is good for people of India only not for Europe
* (http://en.wikipedia.org/wiki/Tata_nano)accesed on 11/1/2010
* (www.times online.co.uk/tol/driving/article 3164205.ece) accessed oon 21/1/2010
* .(www.tatacarsworldwide.com/company/index.asp accessed on11/1/2010
· www.marketing.com/pricing/penetration pricing accessed on 12/1/2010
· www.marketing.com accessed on13/1/2010
· www.tatanano.com accesed on 1/2/2010
· www.marketingteacher.com/Lessons/lesson_swot.htm) accessed on 3/2/2010
· Wood,B.M, (2007). ‘Essential Guide To Marketing Planning,Copy right Licensing Agency Ltd,Saffron House,6-10 kirby street ,London EC1N 8TS
· Mullins.J.L,(1996).'Management and organizational Behaviour,Fourth E
Dition,PITMAN publishing, 128 LONG Acre ,London Wc2E 9AN